*Opinion* What comes first, supply or demand?

When I was a kid minimim wage was $1.58 and a new Corvette was $5000. Today it is about the same ratio.
Yes it would be better for price signal comparisons sake if there was no inflation but its not much of a big deal as old world Austrians would have you believe.

 

I think my first minimum wage paying job paid me about .45 cents per hour. For this, I as a boy chopped cotton on the property my uncle was managing at the time. We were expected to work as hard as an adult.

 

Today we have millions growing up never having worked really hard at a job or at school. We seem to be surviving well enough though which is a little surprising, but then again all would say our country in more on the decline than incline.

 

And prices, especially of things which the quantity of is finite, or cannot be easily increased also rise as the value of money declines.

 

It's an MRE. A mystery wrapped in a riddle inside an enigma.

 

While salaries have risen by 6600% since the Fed was introduced.

What you are talking about is money that makes a good investment, not necessarily a good medium of exchange.

Inflation. Now you seem to view inflation as evil, and theft, but a little inflation, when demand is exceeding supply, presents the opportunity to grow your business to meet that demand.

If the money is increasing in value, the people that benefit most from that are people with large stores of money. Where is the incentive to invest, if the money itself is an investment?

There are consequences to every system of money. Some good and some bad.

All systems of money effect those that have more of it the most. The real question shouldn't be its effect on the wealthy and the poor but on society.

That's great for you, but most Americans can't pay cash for a new transmission, or a broken heat pump.

Why should it eliminate it?

 

Yes, but average pay has increased much faster than the dollar has declined.

 

And that appears to be what we constantly complain about.

Sound money isn't a good medium of exchange?

I have no problem with a little inflation, and a little deflation following makes bubbles less likely to reach bursting point, or those that do have less impact on the economy and people as a whole.

Are you then implying that when the value of money is decreasing , the people who benefit most are people with little or no money? If money remained constant in value it wouldn't be considered a profitable investment but simply more or less a nest egg to be used at some future date.

I agree.

If everyone was contributing an equal amount of productivity to the amount they consume from what society as a whole produces, I might agree.

And that might be a case for someone to take out a loan.

If the dollar is devaluing at an average rate of about 3% per year, does that make government bonds a good investment if they're paying much less interest? And unpaid government debt results in perpetual interest payments in our budget being passed on to each successive generation.

 

You're showing the purchasing power of a single dollar all the way back to 1913. You're not showing the number of dollars each person makes or the quality of life each person has realized over that time.

 

Not if money acts as an investment. It discourages large purchases required to finance via long-term debt, some of which are choices, e.g buying a house or car and others which are not, property destroyed by an "act of god", suffer a medical emergency that requires expensive surgery.

Again, there is nothing that prevent's you from doing that now simply by trading your money for investments.

In order to keep the value of the dollar constant since 1980, would the amount of money circulate in the economy decrease, stay the same or increase?

I'm going to enjoy the little things.

If there were jobs for everyone that wanted one, I might agree.

Here is where you and I are going to go sideways.

You know I don't believe that taxes pay for spending in a fiat economy.

Let me explain it like this. I think we can agree that the government has, in the past, created money out of nothing to pay for things it wanted. I believe Lincon's Greenback was such an example. Money created and used to make purchases, what could be easier? But we know the long-term result, you can't create money forever. People expect prices to stay reasonably constant and adding dollars in an economy that cannot continually grow will eventually cause prices to rise beyond expectations. The instability caused by continually rising prices will cause a decrease in confidence in the money being issued by the government.

Would you agree with that?

If the government could create dollars, like the Greenback, what would happen if it imposed a tax? The tax could be used to remove and destroy dollars at a rate similar to the rate it spent them in depending on the economy to maintain the level of scarcity. If the economy had spare capacity, it might spend a little more than it taxes away. If inflation was increasing, a sign that the economy had more demand than it had supply, the government could create scarcity in its dollar by taxing a little more away than it spent.

In this example, the government doesn't have to "pay for it's spending" via taxes, it only needs taxes to create the scarcity needed to prevent inflation.

This is how the economy works today with the exception that the government has added the Fed, which is much, much more nimble and can react to the economy on a daily basis rather than the Congress whose changes come very slowly.

 

The other chart show hourly wage in constant 2014 dollars since 1964. Compared that to the chart you quoted, since 1964, and it demostrstes the error in your statement. At one time only one spusw had to work and families did fine, and now that just isn't the case. The Fed siphons money from middle class. Quality of life really hasn't increased, just the effort to maintain it.

 

In other words, sound money disincentivizes us from living beyond our means.

Yes, that's true of both commodity and fiat currencies. Many people have always spent their money in ways that produced a return greater than their spending.

The value of a dollar when exchanged for a good or service remains the same.
While the demand for a good or service may increase/decrease the price of that particular good/service it does not change the value of the dollar relative to all other goods/services.

Indisputable facts, on occasion, do arise in some threads; sadly not frequently enough.

There are plenty of jobs, but not always a job that someone wants. But life depends on fulfillment of needs more so than wants.

You know I don't believe that taxes pay for spending in a fiat economy.

Let me explain it like this. I think we can agree that the government has, in the past, created money out of nothing to pay for things it wanted. I believe Lincon's Greenback was such an example. Money created and used to make purchases, what could be easier? But we know the long-term result, you can't create money forever. People expect prices to stay reasonably constant and adding dollars in an economy that cannot continually grow will eventually cause prices to rise beyond expectations. The instability caused by continually rising prices will cause a decrease in confidence in the money being issued by the government.

Would you agree with that?[/QUOTE]
Basically, yes.

However, it does NOT prevent inflation only hyper-inflation.

And again, I agree.

 

Forgetting for a second that what you've described is a very individualistic look at what "means" are and their limits on them.....

That just assumes that borrowing is living beyond our means.

The other side of this is that borrowing drives consumption and consumption drives demand and demand drives employment. In the world you profess, people don't spend what they don't have. Since spending=income, there is a lot less income in the country and since spending drives the creation of real things, sounds like there is a lot less of that as well.

The point of my statement was that saying the currency declines in purchasing power over time is a poor reason to scrap it since anyone with lots of currency can easily avoid losses to inflation.

I think you misunderstood, probably because I didn't ask the question very well.

All other things being equal, in order to maintain the purchasing power of the dollar, would the number of dollars have to change over time (again, let's say between 1980 and today).

That's simply not true. If we take all of the people capable of work and the number of jobs in the economy, especially after downturns, the number of people looking for work and the number of jobs employers are looking to fill, differ by millions.

If you are suggesting that people just don't want to "work at McDonald's", I would agree with that to some extent, but if everyone was willing to do any job that was available, there would still be people who are unemployed. Entitlements, Social security, and other benefits definitely make it possible so some people do very little if any work, but in an economy without enough good paying jobs for everyone, that sounds like a good thing.

There are two other problems the statement you've made about people just not being willing. Like it or not, consumption drives our economy. It is responsible for the strength of our nation. Telling people that if they lose their job there are no benefits, no safety nets will definitely change their behavior (something I suspect you'd see as a good thing), however, I'd suggest that purchases that required debt would induce too much risk. People wouldn't borrow money to buy anything but the least expensive cars. Most of us would live in extremely modest homes. That might sound "responsible" to you but think about all the goods and services that come with the creation and maintenance of those items. All of that labor unneeded because as a nation people are just too afraid to take the risk. There would be fewer opportunities for entrepreneurs and businesses that create things that, while luxuries, increase our standard of living.

I realize how important personal responsibility is to you. My other brother shares your sentiment and we have this argument all the time. However, I'd simply argue that a world of maximum accountability and responsibility would fear the risks of obtaining the kinds of things that drive large scale production. An economy like that would be a fraction of the one we have today and as a nation we would have very little influence in the world and perhaps we would the target of aggression by other nations looking to exploit our weaknesses.

There is nothing that would prevent the Fed and the Congress from targeting zero or even negative inflation.

 

I made no such assumption, simply that a devaluing currency promotes more borrowed spending based on the fact that the repayment is made with money worth less than what was originally spent, reducing the effect of the loan interest rate.

No, only that people only spend what they can repay as a result of their own efforts.

Or any excess currency put to good use, giving us a population to complain about as not paying their fair share. But the decline in purchasing power of our currency imposes the greatest negative effect upon the poorest.

The value of a dollar when exchanged for a good or service remains the same.
While the demand for a good or service may increase/decrease the price of that particular good/service it does not change the value of the dollar relative to all other goods/services.
If someone in New York spent a dollar and the person who received that dollar walked Westward spending that same dollar with another person, and that same process continued until the dollar arrived in California, would the purchasing power have changed as a result? Assuming this took place very quickly of course.

I can't agree as there are no facts compiled Nationally of employment opportunities, only of unemployment numbers. Early 2009 I checked my home town newspaper ads and found more jobs available than the number unemployed in the town, but many of the jobs were not jobs I would have cared to fill on a permanent basis.
Our Federal government currently has a total debt of $20,529,210,216,668.85 and a $266B interest payment on the Public portion of $14.7T was made in FY2017. Thats only a minuscule 1.8% and I've not found the interest cost of the remaining nearly $5T debt not yet held by the public.
Should there be benefits to losing ones job?
You appear to promote irrational risk taking with government responsible for collectivizing
the costs of failure upon those who make more rational choices and are successful as a result.
Does your brother post here? I'd really like to see what he has to say.

Perhaps the Federal debt would be one thing.

 

Did you receive training? That's the argument for the sub minimum wage given to youngsters (it hypothetically incentivizes workplace training)

 

I was taught what weeds were. I was taught how to correctly sharpen hoes used to chop cotton.

Notice they differ from the home style of hoe

 

you mean except their knowledge of monetary history which says price stability is best for growth because it allows consumers to comparison shop wisely thus making most efficient use of our scarce resources.

 

our currency does not decline in purchasing power obviously. That clearly implies we are getting poorer rather than richer, that we can purchase less. The purchasing power of a dollar may decline due to inflation but as long as we have more dollars our purchasing power goes up not down.

 

I'm in rare agreement.

 

Two in a row!

 

Ok, you're allowed to agree on Thanksgiving I suppose, but tomorrow I want you to think of a good argument in support of your libcommieism.

 

Given "libcommieism" is a term associated only with ignorance of economics, how would you compose a 'good argument' from it? Would you have to reinvent political economy? (Yep, you would)

 

both(liberalism and communism) are statism according to Friedman, and Friedman was not ignorant. Friedman and our Founders did not distinguish between different kinds of statism, they made them all illegal here. Welcome to your first lesson in American history!

 

Friedman failed. You think a long term vertical Phillips Curve, when Keynes didn't make any reference to such a curve, is high powered? The problem is that you don't understand Friedman's economics. You don't understand economics. Anyone using the term "libcommieism" is irrelevant