[beachwood23]

> Further, wage growth not matching production efficiencies or even decelerating is not a monetary policy issue (or anything to do with inflation) but a social policy issue. Specifically, minimum wage not tracking inflation, and in my opinion, a broad-based rejection of unions.

It can be both a monetary policy issue and a social policy issue.

Entities that are close to the money-creation spigot that is the Fed have a decreasing cost of money and debt. Anyone / thing further from the cheap supply of money have seen less benefit. The people working for minimum wage are very far from the cheap supply of money.

Social policy, as you point out, has not kept up with monetary policy. But the problem is initiated from monetary policy.

[arcticbull]

The "money creation spigot" is lending. Anywho who borrows money is at the spigot - that's how fractional reserve lending works, and that's where money comes from. This means anyone with a mortgage, anyone with a credit card, anyone with a post-paid phone plan.

Indexing minimum wage to inflation substantially solves the problem.

Can you quantify the spread you claim exists here? I feel like just pointing to the "cantillon effect" and blaming it for everything without actually quantifying the magnitude of the issue you think exists is harmful to the discourse.

The charter of the central bank is to maintain low predictable inflation and maximize employment. That's the function of monetary policy.

[andriesm]

I wonder if a big part of the allleged theft from the little guy isn't due to dishonest CPI statistics that manipulate officially reported inflation to be lower than the cost of living increases most people experience.

Also perhaps fractional reserve banking does create the issue thatp those who can borrow money and buy assers have an advantage over those at the bottom who strugglle to buy assets and cannot borrow.

I am certainly a fan of modern day capitalism compared to socialist redistribution, but a lot can maybe be fixed with "honest" money of some sort that is not easy to inflate at will. (Algorithmic money perhaps like a carefully designed crypto or some variation of gold backing)

The challenge with honest money, is you cannot really control monetary policy (the free market will set interest rates) , but the benefit is, nobody can debase it too easily.

i. e. no bailing out wallstreet during recessions, but also if you gonna bailout consumers with stimmies they will pay for it later in higher taxes.

[imtringued]

A lot can be fixed with demurrage currency. Eternal currency inspired by the gold standard does not work because time doesn't stand still when you don't spend your money, there are people on the other side waiting for you to spend your money so they can buy food.

"Printing" money is a side effect caused by people delaying their spending eternally. You can have an fixed supply inflation free 0% interest currency with an annual fee on excess liquitiy (often known as negative interest). All you need to do is implement the demurrage fee on cash via expiration dates. Expired notes require a fee to be exchanged, the expiry date is printed on a replaceable sticker.

[arcticbull]

> I wonder if a big part of the allleged theft from the little guy isn't due to dishonest CPI statistics that manipulate officially reported inflation to be lower than the cost of living increases most people experience.

The thing is, the breakdowns, source materials, algorithms, data - they're all published. This isn't Joe Biden goes to the podium and bestows unto us that the CPI was 7% annualized this quarter and doesn't take follow-up questions. Everything is tracked, measured and published by the BLS. [1] People don't take it at face value, think tanks run their own assessments too. Then you have crackpots that just "add 7.5%" to the number and call it a day. [2]

But intuitively we know that "just add 7.5%" is way too high, because if the annualized inflation had been 10% since the year 2000, that means prices would have to be a minimum of 8X higher than they were in 2000.

- In the year 2000 an iMac cost $799. The latest iMac is $1299, not $7000. That would be 2.2% inflation.

- In the year 2002 a Big Mac cost $2.39. Today a Big Mac is $3.99, not $19.12. That would also be 2.6% inflation.

This whole conspiracy theory around a wildly different "shadow" CPI is just that.

You can even compute your own based on receipts you have lying around. I suspect you'll find it not materially different from the published numbers.

> Also perhaps fractional reserve banking does create the issue thatp those who can borrow money and buy assers have an advantage over those at the bottom who strugglle to buy assets and cannot borrow.

I'm not rejecting the cantillon effect wholesale, I'm asking for a quantification, which I have yet to see anyone provide. Folks tend to point at it and blame it for everything but then not have any substantiation of its size.

However, I strongly suspect poor folks and especially middle class folks, have far more debt as a percentage of net worth than rich folks do and so spend more time at the spigot so to speak - relatively, not in absolute terms.

> The challenge with honest money, is you cannot really control monetary policy (the free market will set interest rates) , but the benefit is, nobody can debase it too easily.

Debase is a poor term to use because modern economics shows us that supply and value are not tied in the way folks intuit. For instance, Japan has 3X'd their money supply since 1990 but their CPI is literally dead-ass 0% and has been for 30 years. Their prices for anything and everything on average remain exactly the same as in 1990. This is why we reject the Austrian school.

> ... but also if you gonna bailout consumers with stimmies they will pay for it later in higher taxes.

Money has a value and a duration. Stimulus bills pull future money into the present. You don't pay for it later in taxes, per se. If the stimulus creates economic activity yielding revenues in excess of the stimulus itself then it can be 'free.'

A stimulus is an investment and it is a common mistake to look at the liabilities line without looking at the assets line.

[1] https://www.bls.gov/cpi/

[2] http://www.shadowstats.com/alternate_data/inflation-charts

[ephbit]

> However, I strongly suspect poor folks and especially middle class folks, have far more debt as a percentage of net worth than rich folks do and so spend more time at the spigot so to speak - relatively, not in absolute terms.

It reads as if you put some kind of blame on those poorer people who borrow money .. or do I get this wrong?

You do realize that taking on debt doesn't make these poorer people the ones who create the money, right?

The banks lending out the money are the creators of fresh money. And likewise it's not the debtors but the banks who collect the interest. The interest, which represents the exact (and only) amount of money that'll effectively have been created out of nothing after everything will have been payed back. The much bigger credit sum which the banks hand out to the debtors, that's just lending from the future, not money creation.

[arcticbull]

Not trying to blame anyone for anything here! My point was that in isolation, if wages keep pace with inflation, inflation benefits debtors (especially long term structured debt like mortgages) because you take out the debt in today dollars and can repay them with future dollars worth less.

For instance I have a 2.75-ish% APR 30 year fixed rate mortgage but inflation was 7%, so I made a ton of money by having that debt - factoring in tax breaks, I made nearly 6% return by having that mortgage over paying off my house.

I’m suggesting that lower and middle class folks have far more debt as a percentage of net worth and therefore benefit more as a percentage of net worth than wealthy folks from inflation (“being at the spigot”).

This is roughly right, as inflation rates go up to 12% inequality actually declines. Rich folks lose money on equities due to DCF modeling and folks with debt see it inflate away. I can find the study if you like.

But this is all conditional on wages keeping pace.

[ephbit]

> I’m suggesting that lower and middle class folks have far more debt as a percentage of net worth and therefore benefit more as a percentage of net worth than wealthy folks from inflation (“being at the spigot”).

Agree. This is one effect of inflation that's beneficial for debtors.

There's another effect that lets especially lower wealth/income groups look not so good: the structure of net worth. Wealthy and high income group people typically have assets that will be more or less inflation neutral. I don't need to make a list: real estate, stocks, ... the big fortunes consisting of these won't care one bit about inflation. Low income people mostly don't have these. If they own anything at all, it's mostyl cash, so hit 100 % by inflation.

> But this is all conditional on wages keeping pace.

Here's the catch ... according to [1]:

> Research by the McKinsey Global Institute found that between 65% and 70% of people in 25 advanced countries saw no increase in their earnings between 2005 and 2014.

You might say, hey, we didn't have much inflation according to CPI from 2005 to 2014. Well, then just take housing prices, which make up a big chunk of most peoples' expenses and have increased significantly over this period according to OECD data [2].

[1] https://www.theguardian.com/business/2016/jul/14/up-to-70-pe... [2] https://data.oecd.org/chart/6yZt

[ephbit]

> If the stimulus creates economic activity yielding revenues in excess of the stimulus itself then it can be 'free.'

In a growing economy (where more tangible goods and services are delivered to customers) this can be true, yes.

Kind of off-topic: I very much doubt this concept/aspiration/narrative/foundation or principle of planning/budgeting worldwide economy/expenses will remain viable for more than 20 years from now.

Why? Because humankind would be well advised to regard consumption of fossil energy as peak value, from where it continuously needs to decrease (rapidly so). The one driver of economic growth - energy, key to any human activity - ought to better have a lid on for decades to come. Not a good outlook for growth (of said tangible goods and services).

[ephbit]

> I'm not rejecting the cantillon effect wholesale, I'm asking for a quantification ..

You might as well ask for a quantification of the Matthew Effect [1] ... you won't get one. Would it be helpful? Yes, probably.

But more important than having a quantification is, that people register the fact that such effects exist. Depending upon how most people would define fairness, the conclusion from the existence of these effects could then be: there need to be measures taken (taxes, subsidies, ...) so there's some degree of compensation, otherwise society will find itself in an (unnecessarily) instable dynamic.

[1] https://en.wikipedia.org/wiki/Matthew_effect

[imtringued]

You should worry about the federal tax "spigot" instead. It does not take very many brain cells to understand that taxes are collected everywhere and paid out wherever politicians want leading to geographical inequality.

Interest rates and capital gains kinda act like a tax as well because wealthy people concentrate in a few high profile cities and are not spread out like local bank branches.

Oh and land is a natural monopoly so land owners get their cut as well.