this post was submitted on 29 Dec 2023
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For anyone who thinks a couple months of wage inflation beating core inflation means the cost of living crisis is over... You should know that food isn't measured in core inflation and inflation isn't a static thing. You don't get your ability to buy things back because you beat inflation for one month, or even one year. It's a measure of how fast something is growing.
Now time to do the accounts. Core inflation (much less food, housing, and education) has been beating wage inflation for 50 years. Just the recent 2021-2023 period locked in 8 percent more inflation than wage growth. That's accounting for the "miracle" financial news is reporting.
Let's also not forget that inflation is a rate of change. Even at zero, goods and service won't return to their old prices. That'd be a negative rate of inflation, also known as deflation. If you think the Feds fucked the common person when inflation was high, just wait to see what they'd do to stop deflation (seen as far worse than inflation because it hurts those who hold goods and services - aka the rich).
And before someone comes in here shouting that deflation would be the end of us all; Japan has had mild deflation for decades and they're not a post apocalyptic hellscape. Go spread that propaganda somewhere else.
IDK, I think deflation hurts those that need to borrow money (i.e. credit cards, car, house), since they'll have to pay more in real value as time goes on. Japan's deflation is probably caused by the aging and now declining population?
No, it was monetary policy and the busting of speculative bubbles in their stock market. With their demographic crisis in the last decade they've been going about 1 percent on average and just this year hit 3 percent.
As far as borrowers, there's really only a problem for home owners looking to sell. They will likely be under water for a little bit. There's no reason new loans shouldn't be available because our banks are healthy and loans already come with a cost.
The biggest difference is in how value is grown. Instead of huge mutual funds that follow the market, you have to invest in something that's actually creating value. Which is, of course, more difficult. And yes many people will decide to pull out of the stock market because of that, which might create a liquidity trap. The thing is, we know how to get out of a liquidity trap if one does develop. You just give people money. And since this is a digital economy, you can make sure it gets spent by giving them money with an expiration date.
As for the under water home owners? There's no reason we couldn't institute a government buy out program.
We have the ability and the tools available. We lack only the will and the imagination.
If money has an expiration date, wouldn’t that reduce its value to zero immediately?
Nope. You're thinking of a physical dollar with a date on it. This is digital, so once it hits a business license it just unlocks.
What I meant in regards to borrowers is that during deflation wages will tend to decrease (because money is worth more as time goes on), while the payments will stay the same.
In this proposal we'd be taking measures to keep wages at least stagnant. The entire reason some people want deflation is to bring wages back in line with prices.