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InvisibleAsante
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inflation in the USA
    #6092920 - 09/23/06 11:08 AM (17 years, 7 months ago)

Without frills:

Given current and possible future events as you see them, what will the effects on inflation in the US be?
Increased inflation ofcourse means that money will use its value more rapidly than it does now.


.
Your inflation prognosis for the USA in the near future
You may choose only one


Votes accepted from (09/23/06 11:07 AM) to (No end specified)
You must vote before you can view the results of this poll



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Edited by Asante (09/23/06 11:10 AM)

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InvisibleAnnapurna1
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Re: inflation in the USA [Re: Asante]
    #6093270 - 09/23/06 01:23 PM (17 years, 7 months ago)

maybe the price on the shelf wont go up that much...but much of the increase in the CPI is being eaten up by productivity growth that we dont get paid for...such productivity gains should be added in order to get a better picture of the actual rate of inflation...

ill try to explain how it works ..inflation is too many paper dollars chasing after too few goods...so if the (CPI) inflation rate is 12%..that means that theres 12% more dollars than goods...but if productivity increases by 10%..without a corresponding increase in wages or other cash..then the gap closes to 2%...as such..the price on the shelf only goes up 2%..but workers now have to work 10% harder (barring any miraculous new technologies) at the same annual income (which might mean 10% longer hours an a corresponding cut in hourly wages)..so from a worker perspective..thats the same thing as prices going up 12%...


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OfflineEconomist
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Re: inflation in the USA [Re: Annapurna1]
    #6093338 - 09/23/06 01:50 PM (17 years, 7 months ago)

Quote:

Annapurna1 said:
ill try to explain how it works ..inflation is too many paper dollars chasing after too few goods...so if the (CPI) inflation rate is 12%..that means that theres 12% more dollars than goods...but if productivity increases by 10%..without a corresponding increase in wages or other cash..then the gap closes to 2%...as such..the price on the shelf only goes up 2%..but workers now have to work 10% harder (barring any miraculous new technologies) at the same annual income (which might mean 10% longer hours an a corresponding cut in hourly wages)..so from a worker perspective..thats the same thing as prices going up 12%...



Good Lord, you don't seem to have any idea about how this works at all...

If worker productivity increases then there are MORE GOODS available, driving prices down.

The CPI is calculated by taking a basket of goods (food items, housing, transportation) finding their average prices throughout the nation and comparing them year over year. It doesn't take the money supply or anything else into account. Thus, if the prices of the goods increase by 12%, a 12% inflation rate is reported, if they increase by 2% a 2% inflation rate is reported.

Thus, the "worker's view" is the same as anyone else's, because they're only actually paying 2% more.

When you hear reports on the news that CPI was held down because of productivity increases, it means that more goods became available, driving prices down, and thus preventing the measured goods from experiencing hire price increases: meaning workers do not actually pay a higher price.

Also, another important note:

Low inflation does not necessarily mean a "golden age" for the US economy. If you look at the performance of the Japanese economy, which experienced deflation during its most recent recession, you can see that a lack of increasing prices is actually bad for economic growth.

Ideally we want to see stable low-ish (medium is okay, stable is the most important bit) inflation. I'm also pretty sure we'll see stable inflation, since Bernanke seems to be very good at his job.

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Offlinezappaisgod
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Re: inflation in the USA [Re: Economist]
    #6093555 - 09/23/06 03:48 PM (17 years, 7 months ago)

Did she really think she was going to get away with that nonsense with a guy with the screen name Economist lurking here? Holy shit. What's next? Some social scientist expounding on string theory?


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OfflineThe_Red_Crayon
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Re: inflation in the USA [Re: Asante]
    #6093568 - 09/23/06 03:55 PM (17 years, 7 months ago)

What needs to be worried about is a black swan event, something that can not be predicted like 9/11. These events always rule the world economy as far as investing goes.

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InvisibleAnnapurna1
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Re: inflation in the USA [Re: Economist]
    #6093574 - 09/23/06 03:59 PM (17 years, 7 months ago)

Quote:

If worker productivity increases then there are MORE GOODS available, driving prices down.




thats correct...

Quote:

The CPI is calculated by taking a basket of goods (food items, housing, transportation) finding their average prices throughout the nation and comparing them year over year. It doesn't take the money supply or anything else into account. Thus, if the prices of the goods increase by 12%, a 12% inflation rate is reported, if they increase by 2% a 2% inflation rate is reported.




thats also correct..if your only looking at the CPI...

Quote:

Thus, the "worker's view" is the same as anyone else's, because they're only actually paying 2% more.




incorrect...because your not getting paid any extra for that productivity increase (ie to do more work)..so another way to look at it is that theres a hidden form of inflation that adds in the difference between productivity growth and income growth...


--------------------


"anchor blocks counteract the process of pontiprobation..while omalean globes regulize the pressure"...

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OfflineTrepiodos
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Re: inflation in the USA [Re: Economist]
    #6093781 - 09/23/06 05:41 PM (17 years, 7 months ago)

The CPI is a pretty crappy indicator of what's going on in the market. It is a politically contrived number, seriously massaged to serve the purposes of keeping the masses thinking that everything's okay. 'Volatile' items such as food and fuel are currently kept out of the core CPI (ignoring the fact that no one lives without using food and fuel). However, food and fuel can be included (and are) when their prices are dropping. The CPI does not include stocks, bonds, real estate, and life insurance. Items in 'the basket' are switched out in order to moderate the figures. For instance, should steak become too expensive, it will be switched out for ground beef under the rationalization that consumers will alter their behavior in a similar manner. Of course this ignores the fact that prices are in fact rising which is what the CPI is supposed to give an indication of. Since the CPI is also used for cost of living adjustments, it is in the government's interest to compile the statistics in such a manner as to minimize government expenditures related to the cost of living index, such as social security and government pensions.

Inflation is an increase (or inflating of) the money supply. Rising prices are a consequence of monetary inflation.


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And as things fell apart,
Nobody paid much attention...

- David Byrne, '(Nothing But) Flowers' from the Talking Heads' album, 'Naked'

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InvisibleNoetical
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Re: inflation in the USA [Re: Asante]
    #6094229 - 09/23/06 08:24 PM (17 years, 7 months ago)

Did anyone read the emerging markets survey in the economist this week?

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OfflineEconomist
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Re: inflation in the USA [Re: Annapurna1]
    #6097484 - 09/25/06 01:41 AM (17 years, 7 months ago)

Quote:

Annapurna1 said:
thats also correct..if your only looking at the CPI...



I only mentioned CPI because that's what you were talking about in your post...

Quote:

Annapurna1 said:
incorrect...because your not getting paid any extra for that productivity increase (ie to do more work)..so another way to look at it is that theres a hidden form of inflation that adds in the difference between productivity growth and income growth...



But if the productivity increase is actually due to labor, then yes, you are always compensated.

Productivity increases due to labor occur in one of two ways: either workers work more (in which case they are paid more) or they increase their human capital (i.e. get a degree, recieve training, etc.) and we all know that people with degrees and special training are paid more.

If productivity increases due to capital (i.e. investments in robots and computers) then workers aren't actually doing more work, so they aren't experiencing any inflation. If you work 8 hours and produce 5 cars, and then suddenly a new robot allows you to produce 7 cars in the same 8 hours, you've still only put in 8 hours worth of labor, so you aren't working more.

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InvisibleAnnapurna1
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Re: inflation in the USA [Re: Economist]
    #6098337 - 09/25/06 12:04 PM (17 years, 7 months ago)

according to these numbers..we are in fact working harder and getting less as productivity and profits increase...and college graduates are actually falling behind faster...if thats so..then there is a hidden rate of inflation...


--------------------


"anchor blocks counteract the process of pontiprobation..while omalean globes regulize the pressure"...

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OfflineEconomist
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Re: inflation in the USA [Re: Annapurna1]
    #6098585 - 09/25/06 01:28 PM (17 years, 7 months ago)

Quote:

Annapurna1 said:
according to these numbers..we are in fact working harder and getting less as productivity and profits increase...and college graduates are actually falling behind faster...if thats so..then there is a hidden rate of inflation...



What are you talking about?

According to the website you linked, average number of hours worked per year DECREASED from 2000 to 2005 ( http://www.stateofworkingamerica.org/news/SWA06Facts-Work_Hours.pdf ). So, Americans are actually working LESS while earning MORE (average wages were up, again according to the same website)

Productivity also has nothing to do with inflation, and I honestly don't understand why they constantly try to compare the two on that website. Personally, I could make a chart comparing my roommate's number of girlfriends year over year and my number of girlfriends, and then bitch about his high turnover rate, but it wouldn't mean anything in real terms.

They are seeming to suggest that for some reason increases in productivity should equate to increases in pay, but this is clearly false. If your job is to push a button all day long so that a robot builds cars, and they hook up a second robot to respond to your button-pushing, your productivity has increased 100%, but you're not working any harder at all, you're still just pushing the same button.

I would honestly encourage you to spend some time in factories, talk to people and find out precisely what their jobs entail. I'm often shocked at what GM is paying someone $35/hr to do (push a button, watch a dial, pull a lever).

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OfflineSeussA
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Re: inflation in the USA [Re: Economist]
    #6099665 - 09/25/06 06:50 PM (17 years, 7 months ago)

Quote:

I'm often shocked at what GM is paying someone $35/hr to do (push a button, watch a dial, pull a lever).




Is there a name for the above? Basically, when a person is getting paid much more than their job would be worth on a free supply/demand basis (i.e. without union/labor law intervention). Is this not a form of inflation? Artifically increasing the worth of an employee? (Speaking in the abstract here. I mean no disrespect to anybody... just trying to understand.)


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OfflineEconomist
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Re: inflation in the USA [Re: Seuss]
    #6099740 - 09/25/06 07:05 PM (17 years, 7 months ago)

I don't know any "official" terms for overpaid employees (though some terms like vested or tenured come to mind, they're the cause, not the result).

Overpaying employees rarely causes inflation usually because the scale is just too small in the short run. The guy making $35/hr at GM started off making $7/hr back in 1970 and has recieved the union-negotiated minimum pay-raise every year for the past 30, perhaps slightly larger in some years, but nothing outlandish. GM was probably gambling on him retiring after 20 years, or at least moving to another company. This kind of wage raise is usually "just part of the business cycle".

Where you really see wage-based inflation is when the unemployment rate goes into a sudden decline. If thousands of people suddenly start to make money, none of whom were making much/anything beforehand, that's the dangerous bit. Usually that wouldn't be allowed because the Federal Reserve would begin hiking rates once unemployment dipped below 4%.

As an interesting side-note, prior to 2000, there was a theory referred to as NAIRU (Non-Accelerated Inflationary Rate of Unemployment) where economists thought that if unemployment ever dipped below 5% America could experience hyper-inflation. This was mostly based on work done during the 70s and 80s when there was inflation despite unemployment rates hovering around 10%.

Since 2000 the theory's been revised, and it's thought the value before hyper-inflation kicks in is closer to 3% or even 2%.

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OfflineBrAiN
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Re: inflation in the USA [Re: Economist]
    #6100492 - 09/25/06 09:22 PM (17 years, 7 months ago)

Quote:

Economist said:
I don't know any "official" terms for overpaid employees




I do... they're called GOVERNMENT WORKERS

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OfflineBrAiN
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Re: inflation in the USA [Re: Asante]
    #6100500 - 09/25/06 09:26 PM (17 years, 7 months ago)

I say small decrease because things have gone up so much lately it's bound to slow down. gas prices really aren't that much more than they were a year ago.. if at all. Anyone in socal should remember in January when a gallon of gas went from over 3 bucks to just over 2 within a SINGLE MONTH. It slowly went back up over the next few months. We're on the decrease again.

The housing market has cooled off. Prices have been skyrocketing the past few years. In 5 years a lot of neighborhoods in LA doubled in price and they're topping off now, probably going down soon. There were a shitload of old farts from cali throwing in the towle and moving to NW gulf coast of florida the past few years because they knew the bubble would burst.

That's just my opinion though. Inflation will always be on the rise.. I just don't see it being as bad for the second half of this decade as it was the first.

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