[roenxi]

If this perspective carries the day - which is plausible - then all it will reveal is that basically nobody in the voting public should care about inflation:

1) Inflation is not a useful metric for financial planning. If your investments are keeping pace with inflation then you have completely failed to position yourself correctly relative to the massive money creation going on. The gold price trend is posting consistent real returns vs the CPI - which is stupid (if you believe the CPI measures inflation, anyway).

2) Inflation isn't a fair metric for referencing on wage raises. Again, we can see that wage earners are slowly getting crushed as a % of the economy [0]. If they are focusing on keeping up with the CPI then they'll get distracted from the fact that they could be doing a lot better if they could re-link wages with productivity.

3) Nobody knows how the CPI is calculated. If someone can find out the actual methods, weights and inputs then report back you get a virtual gold star. I did it once and it is a labyrinth to work out what they are actually measuring - I don't believe more than a small fraction of the people debating inflation understand or care about the details of what it measures.

To cap off a mild rant; it is not obvious why we care about what the truth about inflation is. Few people understand the number and it is unclear what use it is for decision making.

The more concerning factor is that the government is creating money on a grand and accelerating scale and that is going to end badly, like it always does. Cite some examples where it has led to a golden age? Printing money literally does not and cannot plausibly solve real problems.

[0] https://www.weforum.org/agenda/2020/11/productivity-workforc...

[TheOtherHobbes]

Inflation is covert politics. As everyday items - especially including housing - become less and less affordable, the political system looks more and more like a plutocracy with power concentrated within an oligarchy, and less and less like a democracy.

That's the baseline reality. The rest is just misdirection and handwaving.

If this seems implausible, consider that the governor of the Bank of England recently said that workers should be "consider carefully" whether they wanted to pursue pay rises, while at the same time the energy monopolies in the UK are threatening to put 40% of the population into fuel poverty by massively hiking prices during a time of record profits.

And the Bank's own senior staff are receiving huge pay increases.

[makomk]

The baseline reality is that there is not enough fuel being produced globally to support people's current levels of consumption, for reasons that have nothing to do with energy monopolies in the UK. Years of environmental campaigning in western countries and optimistic beliefs about a green revolution meant that new production hasn't been coming online. Then a couple of years of Covid lockdowns followed by nasty whiplash as factories tried to make up for lost production and consumed more energy than usual ate up the remaining slack, and everyone trying to switch away from Russian gas after they invaded Ukraine made things even worse. There's some reason to believe that fuel producers in totalitarian dictatorships are deliberately making this worse for profit and political gain, but there's not much that can be done about that.

This explains everything that you're chalking up to some conspiracy by plutocrats. The massive price hikes which make fuel unaffordable are because there's not enough being produced to satisfy demand at the original pricing, and fuel demand is price inelastic enough mean that large price increases are required to get fuel consumption down to a level that can actually be supplied. Profits are at record highs because the money has to go somewhere, and it's going to those who did invest in fuel production (an action we probably do want to reward, since having more production makes us all better off). The Bank of England is worried about workers pursuing pay rises on a large scale since this won't make people better off in real terms - it does nothing about the underlying supply limitation that actually affects how much people can afford to consume - and it will make inflation worse, which is something they'll have to deal with, probably with consequences that will make workers worse off in real terms judging from past experience.

[pjc50]

> Inflation isn't a fair metric for referencing if wage raises

Arguably this is the only one that the voting public really do care about - the relation between wages and the cost of living is one that historically produces unrest, and that's because it's not related to abstract figures but to each individual's cash flow which they experience directly.

It's also one where decades of political effort have gone into making sure there's no mechanism for people to demand higher wages.

The alternative to printing money would be to raise money through taxation, which is also politically infeasible.

[roenxi]

> The alternative to printing money would be to raise money through taxation, which is also politically infeasible.

The scary thing, looking back on the 20th century, is that is probably what was said in a lot of places that then went through extreme political turmoil.

There have been a lot of instances where the only politically feasible road was printing money. That is typically the introduction in stories that end in poverty and/or war. No examples are leaping to mind of case studies where extreme money creation led to happiness and tranquillity. Possibly someone should try one of these infeasible options.

Someone has to do without when the government goes spending. We can pretend that nobody is paying, but if that becomes policy option #1 - as seems to be happening - then that sort of wilful ignorance on the part of the elites leads to real anger.

[pjc50]

> said in a lot of places that then went through extreme political turmoil

Well, yes; inequality and shortages that the elite refuse to address lead to a lot of the classic Latin American revolutions, as well as the earlier Chinese revolution and Russian revolution. This is the concept referred to as "redistribution is insurance against pitchforks".

> wilful ignorance on the part of the elites

This really characterises a lot of the post 2016 era. The amount of incredibly stupid and incoherent nonsense. But no matter how comfortable the narrow elite are, no matter how much surplus money is sloshing around for crazy startup projects and asset price inflation, they're not going to tolerate higher taxes.

(I hereby propose the least politically feasible project ever: confiscatory taxes on billionaires, but the money is simply deleted in an effort to bring down the money supply)

[dividedbyzero]

> but the money is simply deleted

What an interesting idea. Is there any historical precedent for actually deleting/destroying money?

[pjc50]

Yes, all sorts; an example which comes to mind is the Indian demonetization. https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...

It was pretty disruptive: "The move reduced the country's industrial production and its GDP growth rate. It is estimated that 1.5 million jobs were lost." and it seems to not have been very effective in its stated aim to move the "black economy" back into visibility.

The Cyprus "bank haircut" could count as another example, in that it's deleting secondary money - bank deposits which had become unbacked and unbackable - rather than primary money. https://www.ft.com/content/4a1bb1d6-9926-11e2-af84-00144feab...

[yxhuvud]

Banks do it every day. It is what happens when someone repays a loan. Likewise money is created when that loan is created.

[denton-scratch]

> What an interesting idea. Is there any historical precedent for actually deleting/destroying money?

Bitcoin?

[quickthrower2]

I find it interesting that house prices are kept out of inflation. But if you are forced to rent forever due to unaffordable housing, in your later years you might be paying $3000/m rent instead of $0/m mortgage interest. But that fact is conveniently left out.

[amacneil]

Article you may enjoy:

Why the government took home prices out of its main inflation index

https://fullstackeconomics.com/why-the-government-took-home-...

[quickthrower2]

Interesting: I think a key point about that is in the US your long term fixes allow you to really have a higher house price and lower interest rate and show it costs no more. In Europe etc. this isn’t the case so you can pay the boom price then get hit by interest rate rises.

It is always better to get the lower price higher interest combo though if you can afford to overpay as it reduces the term more effectively due to compounding.

Also the lowering interest rates are a one way street so the people getting in at the older higher interest rates get more equity for doing nothing as the lowering interest rates increase house prices. The latecomers just get more risk of negative equity.

Nimbyism and insufficient new building is another topic!

[lottin]

If you want to make an informed decision, you have to consider the entire period not just the later years.

[onlyrealcuzzo]

37% of the 65% of homeowners own their home free & clear.

That's 24%. You're obviously at a huge advantage if you're in this 24% - but it's kind of like saying that the top 10% of people have >$1M in assets (they also happen to predominantly be old).

[quickthrower2]

The point is that the concentration of housing wealth becoming more concentrated means the average person (median) is worse off and their cost of living has increased accordingly.

[amacneil]

Surely the people who are leveraged with a fixed rate mortgage at an even bigger advantage to those who own a home outright? (debt will get inflated away over time)

[quickthrower2]

If you have 500k house outright vs. 500k equity in 1M house then probably yes I imagine that is correct on average.

But that is orthogonal. Both people in the comparison have the home equity to begin with. How? Either they paid $500k from earnings or they got it a lot cheaper in the past. A lot cheaper in the past == inflation.

[throw0101a]

> I find it interesting that house prices are kept out of inflation.

> The reason, as I understand it, is that shelter costs are kinda funny in how they are added to this statistic.

Housing prices are not considered in the CPI ("cost of living") because houses are mostly an asset:

> House prices are an interesting case. Houses are considered capital investment by the [US] BLS. So, when the value of your home increases that's a good thing as you didn't consume the house. In other words, you don't need to replace the house. Consumption goods are different in that you need to replace the thing you bought. Inflation is very bad for consumption goods because it costs you more to replace that thing each time you need it (food, for instance).

* https://www.pragcap.com/forum/topic/assflation/#postid-2165

> The BLS views housing as a mostly “investment” item as opposed to a consumption item. So, for instance, when you consume a hot dog and have to replace it then the cost of replacement is a direct reflection on your well-being. A $1 hot dog that costs $2 one year later is a material change in living standards, all else equal, since the hot dog is an asset that you literally consume. A house is much more complex. […]

> Of course, anyone who owns a house knows that it’s not that simple. You do basically consume your house over time. For instance, my home has appreciated substantially since I purchased it just 5 years ago and underwent a hellish remodel. At that time the cost of replacement was roughly $300 per square foot. But in the ensuing years the cost of replacement has increased to $400 per square foot. As my physical home falls apart over the years I will need to replace it. But the key point is that, as I replace these components the housing market is likely to revalue the total home value to account for this investment. So even though I am consuming my house over time I am very likely to recoup those costs.

* https://www.pragcap.com/should-house-prices-be-in-the-cpi/

The "C" in CPI stands for consumer. Houses aren't in the CPI for the same reasons stocks and bonds are not: we don't consume them to live.

'Shelter' is considered in the CPI generally though:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc...

And in that you have mortgage payments: yes prices are up, but rates were going down recently, and are low by the standards of the last ~40 years.

> But if you are forced to rent forever due to unaffordable housing, in your later years you might be paying $3000/m rent instead of $0/m mortgage interest. But that fact is conveniently left out.

Rent is often cheaper than mortgage payments, and is very more often cheaper than mortgage payments plus the cost of maintaining a home. If you take the difference and investment you can have just as must equity in a few decades. Preet Banerjee goes over the math in this ten minute video:

* https://www.youtube.com/watch?v=KAMeI4uHAFE

He rents:

* https://www.speakers.ca/2013/10/preet-banerjee-sold-his-hous...

If you want to know when it makes financial sense, the "5% Rule" by Ben Felix is a decent place to start:

* https://www.youtube.com/watch?v=q9Golcxjpi8

* https://www.youtube.com/watch?v=Uwl3-jBNEd4

Until recently he was a renter, but purchased a house 1-2 years ago. Not exactly happy with the decision:

* https://www.youtube.com/shorts/L5SAF0SHD1w

[refurb]

Not sure why your reference looks at hourly wage and not total compensation. Seems like a selective choice of metrics.

"But between 1979-2019, whilst net productivity has continued to increase by an expected 70%, hourly compensation in the country is less than a fifth of that at just 12%."

[kcatskcolbdi]

I assume because hourly wage is easier to track and provides a more direct comparison.

What difference would switching to total compensation make?

[refurb]

Because non-wage compensation has made up a bigger and big part of total compensation - healthcare, 401k match, fringe benefits, bonuses, etc.

My dad worked as a teacher and got a super fat pension - that’s not included.

Total compensation has risen much more than hourly wage.

[BlargMcLarg]

Do you think those increases truly make up the huge gap between productivity increase and hourly wage increase? What's more, do you think most of near median earners get any significant benefits?

I don't think article is necessarily wrong in pointing out the huge gap when most big total comp increases only seem to apply to the upper middle class. At the very least, I don't think Pizza Friday is going to make up that huge gap.

[refurb]

I think you’re underestimating the impact of non-wage compensation, even for normal, middle class jobs. Your “pizza Fridays” is a pretty flippant way to describe things like health insurance, retirement benefits, etc.

When you add up the share of income that goes to employees, total compensation growth keeps up with productivity growth.

https://www.nber.org/digest/oct08/total-compensation-reflect...

[BlargMcLarg]

The source you cite goes up to 2006 and related paper was published in 2008. Surely I don't have to point out the many changes that happened in the last 15 years. I could find a few papers past 2008 saying the exact opposite.

I agree total comp is the better metric, but your source doesn't really do anything to dispel skepticism when many current day anecdotes lament the lack of secondary benefits beyond said Pizza Friday. A fair number of Americans are given contracts which skirt the border of having to be paid secondary benefits. At the same time, those are primarily the Americans who are most sensitive to price increases in food, gas, rent, real estate (even if this isn't part of inflation), utilities and more. If there is are decisive sources talking about pre- or even post-COVID, that'd be another story.

[kn0where]

There are tons of employers out there that don’t match 401k contributions, make employees pay their healthcare premiums out of their salary, and don’t give meaningful bonuses.

[refurb]

Sure, but does that mean you just ignore non-cash compensation when looking at employee compensation? Of course not.