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by lamontcg 1369 days ago
> In real terms

Nominally they are increasing, that is a component of inflation. Inflation-adjusting the nominal rise of prices that are causing inflation just hides the inflation. You can't analyze it that way.

> For some reason that's unacceptable.

I'm not the Fed, I don't support what they're doing, I'm just explaining it.

EDIT: research from the Fed:

https://www.frbsf.org/economic-research/publications/economi...

Wage growth is over 6%. The fact that inflation overall has been running higher than that so real wage growth has been negative doesn't mean there's been no wage inflation.

Inflation is just the rise in prices. You're thinking about the overall effect on society, but that is second/third/fourth order effects.

Nominal wages rising 6%, even though real wages are rising 0% still means an environment with 6% overall inflation, which exceeds the Fed's target of 2%.
2 comments
paulmd 1369 days ago
> Inflation-adjusting the nominal rise of prices that are causing inflation just hides the inflation. You can't analyze it that way

Actually you can not just analyze but neutralize it that way. If everyone agrees to a wage that is indexed to inflation, and then starts numerating prices in that inflation-indexed currency... suddenly you don't have inflation anymore.

https://en.wikipedia.org/wiki/Plano_Real

Maybe the US is starting to get to the "inertial inflation" situation, with workers demanding wages accounting for expected future increases and companies starting to structure costs along those expectations as well.

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thunky 1369 days ago
Yeah, just because wages are a component of inflation doesn't mean we can't talk about them in real terms. Same for housing, also a component of inflation: if house prices rise/inflate 2% while inflation is 10%, it's fair to say that housing declined 8% in real terms.
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lamontcg 1368 days ago
You can talk about wages in real terms in order to see what their impact is on the actual buying power of the average worker.

But if you're trying specifically to discuss and talk about the wage component of inflation it is nonsense to talk about that in real terms. Adjusting to eliminate the effect of inflation on wages is not the way to measure wage inflation. It should be intuitively obvious that is nonsense.

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thunky 1368 days ago
I guess I'm not thinking like an economist then. It's still not clear to me why "wage inflation is the one that has the Fed worried".

We've seen absurd asset inflation (equities, housing, crypto!) due to easy money, and the Fed just sat on their hands. So now, wages are going up and workers are finally getting a raise? No, because their wage increases aren't keeping up with their higher expenses. But wages are going up, in nominal terms, so now the Fed jumps up and rings the alarm?

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theropost 1369 days ago
In Canada, Ontario was forecasting a $30 billion dollar deficit for the current fiscal year. When the final numbers were in, they reported a $2 billion dollar surplus - even with higher expenses. The nominal revenue growth was 11.9% - inflation boosts the coffers.
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