True or False? Inflation devalues wages.

Of course there are always individual exceptions and periods that don't conform.

The point is, it is not inflation that devalues wages, but the relative change in wages to the price of other goods and services.

Say you make $50k and a scooter costs $2500. You can buy 20 scooters.

A few years later, because of inflation, a motorcycle costs $2750. But you are making $60k. You can now buy almost 22 scooters.

We've had inflation, the dollar has devalued, but your wage has not devalued. It has to the contrary, increased in value as you can buy more stuff. Your relative wage has increased as has your purchasing power.

That is why the simplistic notion that inflation devalues wages is not accurate. It is what happens to wages relative to the price of other things that is meaningful.

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Relative to what? The purchasing power of a dollar has decreased.

 

It's all relative. Even though inflation was incredibly high, so was interest rates and yields on treasuries. So people investing/saving money at that time were not as bad off as they seem. Plus I love how you only use that short period of time in our transition to a completely fiat economy. You don't think we learned anything during the late 70s that we can use to prevent that stagflation again? I guarantee you one thing, the Fed will never raise interest rates to 15% again during a recessionary period regardless of inflation.

 

We have been waiting for 4 years, when is it going to start heating up??? And if we start the inflation cycle before the economy starts heating up we are in real trouble.

 

That's kind of what we want, lol. And with that explosion will also be an explosion of growth and employment.

 

That is true if an only if the wage has not increased equal to or more than inflation.

If wages increase less than inflation, you have a real decrease in income. Which I agree can effect the economy and in a bad case cause a recessionary spiral.

 

What if you did get a raise that was higher than inflation, but not by much? Just saying...

 

Unless the Fed reduces the money supply.

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Ok.

..............

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A small real increase in income.

 

And the inflated costs of consumer goods will more than negate any increase in wages....

 

You need another response: "Depends"

 

But still a devalued Dollar.

 

Why do you say that?

 

Then you are better off. Fear mongerers only talk about inflation in regards to consumer prices. They fail to mention that inflation includes, rising wages, asset prices, higher real estate/home prices, investments, cheaper debt, etc. Inflation encourages the doers in this country to keep producing and increasing their net worth. The only people that are hurt by inflation are those that can not find ways to increase their value to the country.

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What about the people who produce these consumer goods? You mean they don't hire people or spend money on other things?

 

no problem, the fed has tools to reduce inflation

have you ever noticed that we haven't had a depression in over 70 years?

 

But still with more of them.

 

Funny you should say that Iri. Back in the 50's it took only one wage earner to support a family, if both worked that was the exception. Today if only one works that's the exception. And you sit there and think inflation hasn't changed anything??? Care to debate that issue?? Gold cost $36 dollars an oz. in 56', today it's $1,662.37. Working in a saw mill at $1.97 1/2 an hour (that's what my father made in 1956) you made the price of over 2 oz. of gold in a week, today you would have to make $41.559 an hour to just buy 2 oz. . I don't know about you but I don't make that type of money an hour.

 

You know what is one of my favorite ironic statements ever... is people complaining about inflation and than bragging about how much the price of gold has increased, lol. Talk about comedy!!!

 

Why do you assume it is because of inflation, and not because more women entering the workforce, weaker unions, lower minimum wages, more constricted overtime, outsourcing, automation, or any of the other things that affect the relative earning power of men?

Inflation does not affect relative earning power.

 

you're using the price of an inelastic, volatile commodity to measure inflation?

that's just as ridiculous as saying things were better in the 1950's, than they are today

 

Because you cannot saturate an economy with mountains of debt saddled fiat currency during protracted periods of stagnant growth, and expect the purchasing power of the currency to remain the same when it accelerates through a hot economy. The FED will step in, like always, and start raising interest rates to hopefully cool it off. (right now, they're keeping interest rates low to *allegedly* inspire folks to borrow and spend....but the REAL reason, IMO, is to keep national debt service and the national debt figure artificially low)

 

You never know what you're talking about, do you? Inflation isn't good for anyone - deflation is good for the wealthy. Deflation means that the purchasing power of a dollar increases, and for those that have millions and billions, deflation is a good thing. It's funny how little you know. No matter what, every stupid post you make somehow comes back to "blah blah blah - fat cats - blah blah blah"

 

They'll be paid with devalued dollars. and the cycle repeats

 

Why can't you "saturate the economy with mountains of debt saddled fiat currency"?

So what you are saying is when people stop spending money causing our productivity to decrease that we should make it harder for people to acquire credit and we should not increase our debt? Sounds like a recipe for a massive deflationary depression. I wonder why they don't do it! The Great Depression looked like such a fun time!

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Prove it. How do you know their profits aren't increasing at a rate higher than inflation? So that would mean your statement has the potential to be 100% false yet you say it with such confidence, lol.

 

I think people who sell their houses more than they bought them for or get an increase in wages/compensation would disagree with your statement that "inflation isn't good for anyone".

 

Inflation is good for the debt holders, for the value of their debt decreases. Hence why our indebted state supports a policy of continuous inflation and devaluation of the dollar. Inflation functions as a hidden tax as a result.

Also, inflation does not effect everyone in the same way. When inflation is a result of an increased supply of money (quantitative easing), the bankers and initial receivers of the new money will benefit greatly before the market adjusts to the new amount of money. Those on fixed incomes who do not get an increase in wages or money of any form are hurt the most. Clearly this type of inflation directly benefits the banking elites at the expense of the working and middle classes.

 

Pssst... I'd like to help out here. We're not talking about what can happen in the minds of pointy-headed Keynesians like Paul Krugman and other neanderthals. We're talking about what DOES and IS happening.

Perhaps first you should consider that wages have decreased 8.2% under Barack Obama. And in case you haven't heard, we still have inflation. Please feel free to join the rest of here in REALITY.