[sob727]

Yellen supposedly told Greenspan & co in the mid 90s that 2% was a good way for companies to be able to adjust labor costs down if needed (if you don't give someone a raise when inflation is 2%, you're effectively lowering their salary). It was the only way to have some flexibility there. If you admit that this is a desirable thing, this is defeated by wage negotiations (or say, benefits) than tend to be indexed to inflation.

Another interesting thing that happened under Greenspan is how inflation is computed (hedonics, replacements, etc... conceptually, think "if I can't buy a porterhouse steak anymore, I'll get the lesser hanger", meaning inflation is underreported). I'm not suggesting this was intentional or coordinated, but this had the huge benefit for federal and local governments that it lowered the benefits they had to pay out that were linked to inflation. Issue is it hurts the poor more.

[FactKnower69]

>2% was a good way for companies to be able to adjust labor costs down if needed (if you don't give someone a raise when inflation is 2%, you're effectively lowering their salary)

This is EXACTLY the issue. The economy is rigged such that in the absence of any positive action, workers' purchasing power goes down over time by default. This obviously isn't a problem for the rich, whose money is stored almost entirely in assets which by definition rise in value with inflation. Meanwhile, everyone else whose income comes primarily from a wage must constantly struggle for more concessions just to earn the same real amount they did last year.

[itsoktocry]

>The economy is rigged such that in the absence of any positive action, workers' purchasing power goes down over time by default. This obviously isn't a problem for the rich, whose money is stored almost entirely in assets which by definition rise in value with inflation.

Look, I'm sensitive to the struggles of the less well off, and that we are in a particularly rough part of a cycle. I don't believe the economy is at all optimal.

But your comment implies that people are getting poorer over time, and it flies in the face of reality, doesn't it? Society has become significantly wealthier, despite the absurdities of inflation and interest rates.

[chipdart]

> But your comment implies that people are getting poorer over time, and it flies in the face of reality, doesn't it? Society has become significantly wealthier, despite the absurdities of inflation and interest rates.

I think you are confusing two entirely different things. You can have a society that's getting wealthier and still people getting poorer. In fact, you have just that in the real world. It's as simple as seeing how the median salary and average salary compare and evolve. It's as simple as comparing how minimum wages evolved with inflation.

It's no coincidence that even in the US, humanity's apex in economic development and wealth, the average Joe cannot afford a house while a few decades back it could.

[throwawaymaths]

People are not getting poorer because productivity has been going up to compensate. As in, we're milking more and more out of the labor and middle classes. (Ok also technology papers over the problem as commerce becomes somewhat more efficient)

The family is not too much less wealthy but also we have families with two incomes, breadearners working overtime, stressed out family dynamics, and student going into deeper and deeper debt to be credentialed enough to participate in the sophisticated workforce.

If you look at the "wtf happened in 1970" chart, the y axes are productivity and real wages.

It turns out 2% inflation is enough to steal the productive increase of labor and middle classes and transfer it to the politically connected, wealthy, and financial sectors. At some point it's just going to be impossible to wring more gains out of labor and technology improvements. We're probably really close.

[may_mccheese]

I don't think we're "really close" insofar as I feel that's been side continuously since the 1600s say. Always another thing comes.

People say "everyone is richer" because the cost "nice things" generally drops with time due to efficiency. So nobody is in fact financially richer, just richness from a quality of life perspective versus someone living in a cave - it's kind of a cop-out and a twist on words.

Indeed the top 1% of the top 1% of the top 1% of the US holds over 95% of the wealth, it's actually completely insane. most people are poor, relatively and comparatively. A common sense wealth / net worth tax, 5% per year for 5 years, 2% per year thereafter, would ameloriate this.

[Aerbil313]

This was so insightful, thanks.

[oblio]

Are you talking about a timescale of 100 years or 30? People are poorer than they were in 1990, especially the mid to lower classes.

[milesskorpen]

This is not true: https://fred.stlouisfed.org/series/A939RX0Q048SBEA This is real GDP per capita

[Retric]

GDP says almost nothing about what individuals lives are like, just look at the various petroleum states. As to poor people’s lives in the US, it’s basically flat with wage growth or loss depending on how you calculate inflation over the last 40 years.

The median income earners in Q1 1990 made 408$/week, one inflation source puts that at 951.17$/week in Q1 2023, vs 1095$ so is what the actual dividing line was. https://fred.stlouisfed.org/series/LES1252881500Q https://www.usinflationcalculator.com/ So 0.3% annual growth over that timeframe with many ups and downs so numbers also look different depending on what exact dates are chosen.

The line between 1st and 2nd quartile is again basically flat, though the data doesn’t go before 2000. https://fred.stlouisfed.org/series/LEU0252916100A

Though again there’s many ways of calculating inflation, and many of them show that hypothetical person worse off. And of course individuals aren’t going to stay at exactly the same income band so many many people really are significantly worse off.

[patmcc]

This doesn't address the claim oblio was making - 'People are poorer than they were in 1990, especially the mid to lower classes' - real GDP per capita could double but it all be captured by the top quartile, for example.

(I think the claim is still wrong, and that all quartiles are doing better in real terms, but that's a tougher thing to measure)

[lumost]

https://wtfhappenedin1971.com/

Annual wages are about 15% higher today compared to 1971 in real terms. Real terms is a bit suspect in this case as wage earners are more likely to pay nominal rent then owner equivalent rent. It may well be accurate that the average wage earner is worse off today then they were in 1971.

I'd venture a speculation that this is reflected in media, sitcoms of the 70s rarely had roommates - and the 80s/90s poked fun of those who lived in their parents basements. Roommates are relatively common in shows today.

[GeneralMayhem]

Mean GDP per capita, real or nominal, is a useless metric for almost all purposes. When we're talking about average people's lives, it's worse than useless.

[exmicrosoldier]

As someone alive 30 years ago, it isn't as clear cut as the biased graph.

Gasoline was roughly 1/3rd the price, but 4 years of state college was 20k, not 100k.

A house I grew up in, while 30 years newer, cost 80k compared to 300k now, even though it needs a lot more work.

Minimum wage there went from 4.25 an hour 30 years ago to 7.5.

Health care costs have gone up way more than double.

So maybe people make twice as much cash, but their costs for the things they actually need, without bullshit fake adjustments, cost 3 to 4 times more than they used to.

One could argue for better, lik how react is "better" than html forms. But it isn't really worth the cost to me.

Excite was about as good at getting me search results for what I am looking for as google has enshittified itself to now.

[treyd]

GDP per capita is a poor measure of general wellbeing since it doesn't account for changes in the cost of living and is skewed by funny business in stock markets.

[npoc]

Most importantly, it's measured using something that is halving in value every ten years.

https://fred.stlouisfed.org/series/M2SL

[solumunus]

GDP is a terrible metric to illustrate your point. People have less disposable income because living costs have increased far quicker than wages, it’s really that simple. The majority of adults know this through lived experience, it’s extremely obviously that people are poorer on average than in the 90’s. That you’re having to search for statistics to answer this question reveals something about your living situation.

[npoc]

You're measuring GDP in something that's being devalued by half every ten years through supply expansion.

https://fred.stlouisfed.org/series/M2SL

[qeternity]

What data are you drawing this conclusion from?

[harimau777]

While society has gotten wealthier, have average people, at least in America, gotten wealthier? Technology has advanced so there's things that people can own now that they couldn't before, but if you look at things that are constant (e.g. housing) then it looks to me like people have gotten poorer.

[randomdata]

> but if you look at things that are constant (e.g. housing) then it looks to me like people have gotten poorer.

If housing were constant then people would not be any poorer with respect to housing. They would be in the exact same position. But housing is not a constant. The average US house has have more than doubled in size over the past 50 years. The average US home also has one less person living in it as compared to 50 years ago. People today are way richer in housing.

[harimau777]

How can people be richer in housing if they can't own a house. That doesn't make sense to me.

[harryh]

Homeownership rate over time has moved around within a fairly narrow range.

https://fred.stlouisfed.org/series/RHORUSQ156N

[randomdata]

You can't own social interaction, but some people are rich socially. Rich is not defined by ownership.

[throwawaymaths]

> have average people

You mean median person. If society gets wealthier the average nearly definitionally gets better (modulo population increase)

[schrodinger]

FYI average is actually an ambiguous term that can mean mode, median, or mean.

[okr]

I can agree with that. It is like the frog in slowly boiling water, just the other way around, people don't realize and appreciate, in what wealth they live and that we all make it constantly better for everyone, consciously or unconsciously.

But people look at other people who are visibly better off, compare themselves against those and get tricked into believing, that it is no just. How he can have more? Must be evil! Stolen from the people! Typical divide and conquer, to play with ego and greed, that causes misery and anger among our fellows. It makes me sad to see the same scheme being played out everytime.

[carlosjobim]

If you mean what you say, I'll trade you all my modern conveniences in return for a small patch of land with a house in 1970s standard or 1960s standard. Deal? If offered this, a large majority of young people and people without real estate would gladly accept and happily live without iphones or AC.

[tasuki]

I believe that's what they'd say but they actually wouldn't want to do that.

Do you know the size of houses in 1960s and how many people lived in how much space? Today people are priced out of the housing market because everyone expects opulent luxury.

[carlosjobim]

No, that's not true. And I don't think you really believe that yourself either. It's just an easy cop out to not have to think about a very serious issue that is crushing your fellow man right now.

It is the home sellers who put "opulent luxury" prices on worn down homes in need of repair. It is the sellers who renovate homes for 100 000 to increase the asking price with 500 000.

Imagine if this was the market for cars or any other goods.

[xnx]

This seems extremely unlikely. I'd rather give up indoor plumbing than my phone.

[PretzelPirate]

> Society has become significantly wealthier, despite the absurdities of inflation and interest rates.

Are you two talking about different time scales? Individuals in the workforce get poorer as their buying power drops, but each generation lives in a wealthier society as more innovation improves life.

[plaguuuuuu]

People are demonstrably poorer, medical bankruptcies, the homeless pile up in fetid camps, but everyone has access to multiple lifetimes worth of social media content and fake AI waifus.

[Yiin]

Your comment ignores that "richer" in this context mean basically breadcrumbs in comparison to all the other assets poor people can't realistically invest in. If economy in general goes up 20x and your own wealth increases 1.5x, yeah you got wealthier compared to before, but poorer compared to everything else.

[dgoldstein0]

This sounds fine to me if "your own wealth increases 1.5x" means an increase in purchasing power as opposed to the 1.5x being wiped by inflation. E.g. if housing costs quadruple you can't use that extra cash to buy a nicer house/rent a nicer apartment than before, and probably you want to save the extra money as a result of the higher housing costs rather than buying better food (assuming it didn't also rise significantly in price)

We like to hand wave and approximate costs via a single "inflation" number but smart phones are infinitely more cheap than 20 years ago - they didn't exist back then - whereas they don't solve basic needs like food & shelter. So we need better metrics.

So I have to hand wave a bit but if the economy grows such that everyone has better purchasing power, but the top 5% or 1% benefit 100x more than everyone else, I think that's a win; it'd of course be better if the new wealth was spread closer to equally, but the main thing is to make sure as much as practical that everyone is better off.

I'm not actually sure we know what the right economic policies to promote this sort of goal are.

[rmbyrro]

Considering how difficult it has become (even pre-COVID) for young people to buy a home, your argument flies in the face of reality, doesn't it?

[okr]

Buy a home where? In the area of a thriving city? Where everyone wants to live?

[carlosjobim]

Anywhere. Young people have to move to thriving cities to get better paying jobs and education for better paying jobs, because they cannot afford homes where they were born with the salaries and opportunities there.

[kbelder]

Because there is no absence of any positive action. That's one of the main benefits of the free market.

[derangedHorse]

What do you mean "Society has become significantly wealthier"? When I think of wealth I think of an individual's assets to liabilities. If we look at the total value of an individual's assets with respect to the labor it can purchase, I don't think society has gotten all that wealthier. Maybe you're conflating quality of life with wealth?

Better quality and more abundant goods with decreasing marginalized labor costs is what we should expect since technology is naturally deflationary. If anything, the oddity is that food prices ever increase over time when quality is stagnant. The book "The Price of Tomorrow" does a good job giving a perspective on this.

There's also the problem of misguided/fraudulent capital investment which is when governments and corporations raise costs under the guise of technological improvements. This is when they say they add in extra processes for quality when they're really just lining their pockets. Think medical schools and doctors (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6288618/), the FDA processes(https://en.wikipedia.org/wiki/Criticism_of_the_Food_and_Drug...), etc.

[roenxi]

> Society has become significantly wealthier, despite the absurdities of inflation and interest rates.

That is the issue with the absurdities of inflation and interest rates - how do you tell whether we're better off if the yardstick for measuring value is being purpose fully distorted? And the way we measure the distortion seems to be unreliable;I don't see how inflation is supposed to rise faster than wages but asset prices seem to be inflating substantially faster than the inflation rate making it harder to save. GDP also disassociated from energy use in the 1970s so I don't see why it going up means I'm better off either - I need cheap energy to be comfortable. All the stuff GDP measures is nice, but rising energy prices are a massive problem that we don't focus on as much as we did when they were driving GDP growth despite the fact that they are still a major part of existing.

Asia is better off in real terms. A friend of mine was talking about how he went home to his ancestral village and they had toilets now which is a massive QoL step change. So if "society" is global, yes.

If we're talking English speaking countries, you can tell me I'm better off, but I'm not sure what metrics you're using or why we believe they matter. I have access to much better electronic equipment than my parents, and our ability to cure ailments has improved markedly. But a bunch of people I know had to leave the city because they literally couldn't afford to live here. Debt seems to be out of control. We're seeing political discontent in the UK and US that seems to be linked to people who don't believe that they are becoming better off, and I tend to believe people when they say that.

TLDR; maybe. But you're making a claim that is vaguer than you might think. We're a much smarter society than we were 50 years ago, but it is less obvious who it is that is "significantly wealthier" and what that means.

[jrmg]

But a bunch of people I know had to leave the city because they literally couldn't afford to live here.

Haven’t people always done that though? America’a history is one of constant migration.

Searching for general stats on labor mobility, it seems that Americans are moving to find work (surely the same thing as moving because the place they are is unaffordable for the lifestyle they want?) _less_ now:

E.g. https://www.philadelphiafed.org/the-economy/regional-economi...

In recent decades, as land across the U.S. filled with development—particularly along the coasts—highly mobile cities became increasingly populated by people born there. As an example, in 1960, 20 percent of U.S.-born residents of Los Angeles were from California, while by 2010, 70 percent were. At the same time, population growth rates have converged and are now similar across all regions. Coate and Mangum theorize that these two trends are connected by home attachment, or “rootedness”—that is, people prefer to live near family and social connections.4 Despite individual differences in the intensity of home attachment, the authors find a preference for home among the young and the old, and for both college- and noncollege-educated workers.

[chii]

> We're seeing political discontent in the UK and US that seems to be linked to people who don't believe that they are becoming better off

I think there's a section of people in this demographic who have been seeing how much better off _others_ are (thru social media etc), and thus feel discontent. This is exacerbated by the fact that such type of discontent inducing content is clickbait and gets people emotional (therefore, engagement).

There's some truth, perhaps, to the idea that some people were better off in the seventies than today, but the majority of people are likely living a wealthier life today. They just dont feel it, because there exists an even wealthier class that is now very visible, and it has been ingrained into the youths that modern society has moved past feudalism and classism.

[ajkjk]

Their comment is about the math, which has to be true. There can still be countervailing effects, but the math still works out the way it works out.

[bsdpufferfish]

its really not. the math is a distant abstraction of a social subject

[datavirtue]

And inflation is a result of an increasing money supply, which if it were not the case the poor would be absolutely subjugated.

[djtango]

There was this great chart that I wish I could find which kind of explained it well for me.

Things we consume have gotten cheaper - flights, electronics.

Things related to wealth - assets but also things like education have all gotten more expensive.

So we all get to live a more "experiential" life but good luck passing anything on, if you care about those kinds of things...

EDIT here we go - similar (if not the same) chart:

https://www.washingtonpost.com/news/wonk/wp/2016/08/17/the-s...

[graeme]

You haven't understood the issue. If a firm needs to lower costs, the alternatives to mild inflation are:

* Negotiating actual salary cuts, or * Job losses

Ideally in a market, prices adjust up and down freely. Obviously this is not a sensible approach to salaries. Given the bias towards loss aversion, having mild inflation make mild losses is preferable to having, say: 5% deflation, 7% salary cut.

This concept is from Econ 101. And it doesn't mean everyone's wage drops. It means struggling firms can adjust wages less painfully.

Your alternatives to 2% are:

* active deflation, with actual wage cuts

* higher inflation, where you have active salary negotiations each year to predict inflation and negotiate higher or lower than inflation, like in the 70s

[ponow]

Why should firms get a free 2% cut in salaries paid? Generally, firms are in a stronger negotiating position about salary, especially for the lowest skill labor and poorest people.

If there's a downturn, then everyone will have to tighten belts, and firms can make that case to employees.

Making a real 2% salary cut the universal default is cruel, and if your typical hourly wage-earner understood clearly the choice being made on their behalf, they'd be pissed.

Deals shouldn't be altered without agreement, but that's what 2% inflation targets do. If you agree to a salary, then nobody should be specifically putting their thumb on the scale one way or the the other.

Professionals and job-hoppers have less problem negotiating to keep up with inflation. It's the poor people who get screwed.

Also, inflation is less steady the farther away from zero it is, I'd wager. So we have inflation spikes sometimes, like we've seen. There's always a time lag between spikes in price increases on goods, and wage increases (which require negotiation). During that lag period before a compensating wage increase, savings get used and real loss is suffered. I highly doubt that the loss in savings is generally recovered, and the Fed never even aims to recover that loss. The most vulnerable people lose the most, and are impeded from building wealth as a result, and probably come to depend on government more.

[Rexxar]

It's not a "free 2% cut in salaries", it apply to everything else. If there is 2% inflation the company will have to pay everything more and will have probably have to negotiate to get higher price from its client too or it will not get its 2% more revenue to compensate the increase of everything.

Additionally, usually workers have too take debts too buy their house. If there is a little inflation and the salaries are following inflation the debts becomes comparatively lower every year.

It's not just against workers. There are upsides and downsides for everybody.

[graeme]

You’re imagining every firm gets 2% savings every year. That isn’t how it works.

Most firms have rising real wages: real wages rose during the 2% inflation period.

But sometimes a firm needs to lower costs. Having a small bit of inflation lets a firm do so without either firing people or actually cutting nominal wages.

[derangedHorse]

> real wages rose during the 2% inflation period

There is no consistent "2%" inflation period. If a year were to have 6.5% inflation (like with year 2022-2023), most firms will not raise real wages to match it. Over the last decade we've had a 2.82% average inflation rate with 4.41% variance showing how much we overshot both metrics.

source: https://www.usinflationcalculator.com/inflation/consumer-pri...

[dxbydt]

Econ 101: index to 2% inflation, tolerate mild losses.

Elon 101: hire aggressively until product finds PMF, then fire aggressively.

[killjoywashere]

It’s the old county fair analogy: the rich kids get shots on goal until they hit. Middle class kids get one shot. The poor get no shots, they’re working the fair. There are progressively fewer middle class kids getting their one shot. And some of them used to get two.

[throwawaymaths]

So you're saying that it's government's responsibility to let firms be shitty to their employees with stealth pay cuts?

I would MUCH rather a firm have to face the music and reputational damage of cutting employee pay or firing employees. It's far more honest and the actual other option is gasp don't cut your employees wage and instead take a hit to your margins.

[BehindBlueEyes]

Layoffs still happen, sometimes from healthy companies too, I doubt they’d think twice about any reputational damage over margin cuts.

[chii]

if you were the one whose jobs' being cut, would you make that very same argument?

[ponow]

Firms can do uniform pay cuts (say 2%) instead of targeted layoffs. That way all employees are in it together, and yet there's still market discipline in whether to cut.

[throwawaymaths]

I've been let go. It was fine.

The premise of your quip is nonsensical, since people are let go anyways. You wouldn't know that you were the marginal human that was cut because we are in inflation or not.

[oatmeal1]

You haven't understood the issue. The issue is involuntary dilution created by fractional reserve banking. When a new loan is created, the bank and (especially) the borrower benefit from the increased money supply. That increased money supply dilutes everyone else. The rich get loans to pay for college, buy houses, expensive cars, and own stock in companies that use leverage to grow faster, whereas the poor get loans to buy mobile homes and cheap cars. Overall, the poor wage earners experience a net dilution compared to the rich.

[ponow]

But isn't that money multiplier due to fractional-reserve banking essentially a one-shot deal, and doesn't continue to expand over long time periods?

So if banks keep 10% in reserves, then a cash deposit gets multiplied by 1/.1 = 10 times, and that factor does not grow with time. Even if there were no law against continually lowering reserve ratios (and therefore increasing this multiplier), the market would tend to create a bound, for otherwise the bank would have greater risk of collapse from runs and unexpected loan defaults.

By contrast, if the central bank (Fed) keeps increasing its balance sheet (by buying assets using money it created from thin air), we have continual growth in the money supply (since the folks who sold the assets have new money in their accounts, granted magically by the central bank).

In fact, if we had a law that banned fractional-reserve banking for all commercial banks, so that all commercial banks had to have 100% / full reserves, eliminating your dilution, the central bank could still perform open market operations and buy assets with printed money, and thereby continue to increase the money supply. Full reserve for private/commercial banks is still compatible with money printing by a central bank.

So I know fractional-reserve gets a lot of heat by sound money folks, but the continual inflation observed since the 70s is not primarily a fractional-reserve problem, but a central bank money printing problem.

[317070]

> The economy is rigged such that in the absence of any positive action, workers' purchasing power goes down over time by default.

In Belgium, nearly all wages and salaries are "indexed" automatically in order to avoid social unrest [0]. If the government notices that prices of an index of goods have increased with 2% or more since the last increase, all wages, benefits and rents go up with the same number. The exact details could fill whole books though.

Indeed, if it weren't for such a mechanism, you would need to see strikes way too regularly in order to fix the runaway inflation against fixed wages (which is bad for productivity, which causes even more inflation).

It creates a setting where most people (who don't understand inflation anyway) don't need to care about inflation too much either. In fact, I have found most Belgians react incredulous when you point out it's pretty much the only country that handles inflation this way.

[0] https://en.m.wikipedia.org/wiki/Consumer_price_index_(Belgiu...

[zigman1]

If you check some annual studies on well-being and similar, last year Belgium jumped quite significantly in most of these lists simply because it is the only country that indexed the 10% inflation for everyone's salary.

[throwaway14356]

I have this picture burned on my retina with the union reps toasting champagne after successfully negotiating 2% this while my rent went up by 5% using the same arguments.

[kypro]

I'm highly critical of the Federal reverse and I think they suppress wages in other ways, but the 2% inflation target in my opinion has no impact on wages broadly.

Assets don't automatically rise in value with inflation. If you own shares in a business generating $100,000 in profit in the current year, then it won't automatically generate $102,000 the next year. In fact, because of inflation it will probably generate less profit because costs are always going up. And if profits are decreasing then so should the value of the company.

Hard assets are slightly different, they will generally go up with inflation, but notably the same is true in the reverse. If you're very poor and have a lot of debt, inflation is great because the value of that debt will be devalued.

And for these two reasons I'm not sure it's as simple as saying inflation is good for the rich. Inflation is bad for companies with high variable costs.

Finally one of the core drivers of inflation is wages. It's very hard for inflation to rise without wages rising, because demand in an economy is ultimately a product of the purchasing power of consumers which is tightly coupled to wages. Without wage growth to get inflation you'd probably need some other driver of demand such as demographics (immigration, high birth rates, etc), fiscal deficits (more public borrowing), or accommodative interest rates (more private borrowing).

[chii]

> It's very hard for inflation to rise without wages rising

for inflation caused by external factors - such as a war and spiralling high energy prices - it can rise without wages rising.

[adriand]

An under-appreciated benefit of inflation is that it reduces the value of debts. All things being equal (and of course they aren’t), inflation is good for debtors and bad for debt-holders. If you owe $500k on your mortgage, inflation at 5% annually is reducing your debt load substantially without you needing to do anything.

[mitthrowaway2]

But all things are not equal; lenders take expected inflation into account when evaluating the interest rate they'll demand on their loans. Only unexpected inflation is good for debt holders.

[IggleSniggle]

Another important distinction to make for those that might not be aware: in the US, mortgages mostly are a set-rate when the loan is issued, usually either at 15-years or 30-years. In most of the rest of the world, I'm told, mortgages are typically variable rate

[koolba]

> In most of the rest of the world, I'm told, mortgages are typically variable rate

They also tend to be shorter than the standardized USA 30-year fixed.

[b112]

Yes in Canada for example most people have 5 year renewals, which means a renegotiation, at that time, at existing rates.

[bjacokes]

This is a bit like saying earnings going up isn't good for stockholders, because they would have been charged a higher price to buy the stock if people had known the earnings were going to go up.

Once you've taken out a fixed-rate mortgage, inflation absolutely has the effect of reducing the value of the debt you owe. It's more if you're about to take out a mortgage that you're rooting against (expectations of) inflation, as lower inflation will also serve to decrease the prevailing interest rate.

[ponow]

Excessive debt is not good. Encouraging debt by the effective subsidy of inflation tends to be coupled with varying interest rates to control that inflation, and therefore there are periods of low interest rates. Savvy investors try to borrow heavily during these low interest periods creating a boom, even though the enterprises they might invest in are no more worthy of investment. This is malinvestment, because real physical capital (including skilled labor) becomes reallocated into more risky ventures because of the influx of easy money. When reality returns and it's clear that many of those risks don't pan out, there is upheaval, bankrupcy, layoffs, etc., a "bust". This is a bad thing for economic stability and human happiness.

Debt should not be encouraged nor discouraged. Interest rates should be natural, based on market forces about the time value of money.

Homeowners don't deserve a mortgage subsidy paid via inflation. If there is a subsidy, make it explicit through law.

[carlosjobim]

That's only true if wages keep up with inflation. Which they haven't done in decades.

[rpcope1]

Honestly, it wouldn't be surprising to see the US government manipulate inflation in such a way that once the debt load becomes unbearable, it just simply inflates away the debt rather than do austerity or a debt jubilee.

[anonuser123456]

I hate to break it to you, but the rich are taxed on nominal gains, not real.

Holding assets during inflationary periods means paying a higher percentage of your real gains as taxes.

[npoc]

Not if you borrow against your assets, using nominal gains to obtain more and more loaned money. That's tax free and with hard assets such as real estate, the nominal gains far outweigh the interest.

[ponow]

I wish I knew how to play that game. It's a game primarily played by the rich, and is part of the reason that the primary losers from inflation are poor.

[npoc]

Yes, the printed money (whose value is "sucked" from the ones in your pocket) is given to those closest to the money printer, and they tend to be the very richest in society. It's called the Cantillon effect.

[tithe]

Well, let's ask, shall we?

npoc, how do you play that game?

[aorloff]

America is rigged to benefit the business owner. This used to make more sense where in the first couple hundred years the end goal of a profession was being the head of your own shop.

But it is still true that a lot of people, including all stripes of middle class, are self employed or have income other than wages (I shared a chairlift recently with someone who spent 1/3 of the year ranching his cattle, 1/3 of the year farming a crop with his grandfather and a hired hand, and 1/3 of the year as a ski bum - 3 types of seasonal hard labor that gave him the freedom he wanted)

[simonh]

You’re missing the ‘if needed’. The idea is not that wages will permanently lag inflation, we can see from the figures that this has not been the case. Workers know what the inflation rate is and what it means when they negotiate wages. It’s that if there is an economic downturn employers can mitigate some of the impact by freezing wages instead of having to sack employees (or as many, anyway). If needed.

This is also not the only reason for targeting inflation at some low but positive level. Another is that you _really_ don’t want persistent deflation, so aiming for modest inflation reduces that risk. Inflation also erodes unproductive savings, encouraging investment, which supports jobs and growth.

[gentleman11]

Hasn’t it been the case? Most people make the same or less than 50 years ago, except the upper class, which has captured almost everything

[simonh]

I’m not arguing there isn’t increased inequality at all. There is. But it’s not due to the 2% inflation target. It’s mostly down to the high returns on investments.

[nickff]

>"This obviously isn't a problem for the rich, whose money is stored almost entirely in assets which by definition rise in value with inflation."

This isn't true (at least not by definition); no common measure of inflation uses the assets of the rich as a primary input. The closest thing you will find is OER, but that's unrelated to the stock market or other common assets used by the rich to park wealth.

[hayst4ck]

The issue is much more complex than devalued wages.

It's worth asking where the inflated money goes. It doesn't go to your bank account, it doesn't get sent out in checks to every citizen. It goes directly into the pockets of people who take out loans to fund business ventures -- capitalists/owners. That's what the interest rate is, interest on loans. When you have socialism for the rich as we do in America, that further compounds the corruptive damage of inflation, because those loans that are given out are then not defaulted on, so inflation then becomes a direct handout to the rich free from the consequences of risk. This makes both the rich richer and the poor poorer.

Inflation fuels wealth inequality, which fuels corruption, which destroys rule of law, which destroys innovation, which shrinks the economy, which requires more inflation.

Ray Dailio's Principles for Dealing with the Changing World Order talks about why the problem is so much more complex and worse than you think it is (45min): https://www.youtube.com/watch?v=xguam0TKMw8

[ponow]

Yeah, it angers me to hear people argue that inflation is good because it encourages people to invest instead of hoarding cash.

1. It's your money, so it's not for others to control.

2. You may have a good reason for keeping money under your mattress. For example, you're poor and inexperienced with investing and have heard how people lose their shirts if they don't know what they're doing. There is a lot of complexity to investing, and scary contracts and qualifiers, and then you find out that you don't really own clear title to the stocks you've bought, and hear stories that brokerage firms transfer stock that they don't even have, but will protect favored rich clients if push comes to shove.

3. Maybe there's real risk in the economy, so recklessly investing despite that danger shouldn't be forced one someone with the threat of stealing value.

4. The rich can afford advisors who will help them invest so that they don't have to hold onto inflating cash, and know of ways to preserve value. Only the poor have a sizeable portion of their wealth in cash.

[dventimi]

This is backward. Workers' benefit from (wage) inflation. The rich do not.

[sarmike31]

You are viewing inflation narrowly from a worker perspective. Inflation is there to also spur economic activity in a way that encourages people to keep their cash moving and invest their money in a similar way to how companies start losing out if they slow down and rest on their laurels (e.g. stop innovating or growing). In any other case people would just start hoarding their cash. So it’s a way to keep the economy chugging just like purposefully keeping a couple of percent of unemployment always there (even if full total employment would be possible). It tends to keep people on the edge, active and moving.

But there are other useful reasons for inflation too. It enables stable expansion of currency and funding of deficits, money printing and overall economic expansion (or funding of wars for political ends) despite all the inconsistencies when allocating this added money supply, and particularly the outright morally bankrupt socialistic rescue of large ”systemically important” banks etc. The same governments that create and manage the money supply may also introduce millions of large deviations and problems with the price formation on goods and services or investment such as IRA sucking the world dry to get all the investment and manufacturing capacity back to the US.

It’s a complex topic, but you have to keep in mind that central banks are the mystical force that keeps this whole game running. If you corrupt this system too much it tends to fail and I’d like to remind that the US Fed is the third central bank attempt in the US alone. It’s just crazy how it is all set up this way and people remain fascinated by it.

In the end it comes down to trust and military firepower and compulsion (as well as tax collection in that currency, i.e. legal tender) to keep everything legitimate and workable… I could go on and on but you get the point. You are just a cog in the machine, so don’t worry too much if your salary buys you a tad less than before, we gotta work with it somehow and that’s the intention. If you upskill and work hard enough, you can ask for more salary. Or if you’re closer to the source, then you have have nothing to worry about (govt. contracts, even something like large venture capital during the zero interest rate time, or just close and cozy with banks).

[afpx]

Just put most of your liquid money in a gold ETF.

[saagarjha]

A lot of people don’t have much liquid money they can afford to put in an ETF.

[username332211]

> The economy is rigged such that in the absence of any positive action, workers' purchasing power goes down over time by default.

It's not rigging. Here's a few observations from a study in 1776.

> It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labor.

> China has been long one of the richest, that is, one of the most fertile, best cultivated, most industrious, and most populous countries in the world. It seems, however, to have been long stationary. [...] The accounts of all travellers, inconsistent in many other respects, agree in the low wages of labor, and in the difficulty which a laborer finds in bringing up a family in China. If by digging the ground a whole day he can get what will purchase a small quantity of rice in the evening, he is contented. The condition of artificers is, if possible, still worse.

> The liberal reward of labor, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the laboring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition that they are going fast backward.

At risk of derailing the conversation, your post is an excellent demonstration of how conspiracy theories come about. You notice some basic social truth, and since it's a harsh and unpleasant one, you blame it on some sort of deliberate action.

[throw0101d]

> Another interesting thing that happened under Greenspan is how inflation is computed (hedonics, replacements, etc... conceptually, think "if I can't buy a porterhouse steak anymore, I'll get the lesser hanger", meaning inflation is underreported).

Inflation calculations (in the US) did not happen under Greenspan, or under any other Federal Reserve chair, because the calculations are not done by the Fed, but by the Bureau of Labour Statistics (BLS: https://www.bls.gov/cpi/).

The 1990s change to the CPI were done under the auspices of the US Senate Boskin Commission:

* https://en.wikipedia.org/wiki/Boskin_Commission

* https://www.ssa.gov/history/reports/boskinrpt.html

One of the conclusions was (AIUI) that the CPI then-methodology actually resulted in numbers too high.

This is true in many (most?) countries: e.g., in Canada CPI is calculated by StatCan and various types are used by the Bank of Canada (BoC):

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

* https://www.bankofcanada.ca/rates/indicators/key-variables/k...

* https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=181002...

[transcriptase]

StatsCan under-reports to a hilarious degree.

Your rent went up by 30%, groceries went up by 20%, but fuel went down by 10% and a new TV went down by 30%. Also people stopped buying steak because it went up 50% so we'll drop that from the basket. Let's see... if we run the numbers by dropping goods that are experiencing rapid inflation, and then weight things in a way that has no correlation with the increase in cost of living experienced by 99% of the population we get... oh look at that! 4.1%! Great news for the person who buys a new TV with their groceries every week!

[throw0101d]

> Your rent went up by 30%, groceries went up by 20%, but fuel went down by 10% and a new TV went down by 30%. Also people stopped buying steak because it went up 50% so we'll drop that from the basket.

Do you understand how StatCan calculates the CPI? What their methodology is?

The CPI you see in the headlines is made of of various components (Shelter, Food, Transportation, etc), the proportions of which are determined by spending surveys:

* https://www.statcan.gc.ca/en/survey/household/3508

As people change their buying habits the items that are tracked also change to reflect what consumers are spending. Here are the items in each category:

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

You can see the list of changes going back to 1913 at:

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

Do you think the CPI should reflect reality—i.e., track what people actually buy—or be some arbitrary list of stuff that has no relevances to people's actually basket of goods (e.g., coal and lard were removed/replaced in 1956; 35mm film removed in 2013; video rental removed in 2015).

It should also be noted that the number reported in the headlines is the national average, while the prices can vary widely depending on your location. So in the report for February 2024, the national number was 2.8%, but Alberta had 4.2% while Manitoba had 0.9%:

* https://www150.statcan.gc.ca/n1/daily-quotidien/240319/dq240... (Chart 5)

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

* https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=181000... (searchable by province)

StatCan has a "Personal Inflation Calculator" where you can enter your own numbers/budget and find a number that may be closer to what's happening around you:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...

Remember: the CPI is a model of reality, and not reality itself. It is used as a guide, and to use the words of [Alfred Korzybski](https://en.wikipedia.org/wiki/Alfred_Korzybski):

* [The map is not the territory.](https://en.wikipedia.org/wiki/Map–territory_relation)

* https://fs.blog/map-and-territory/

Or those of statistician George Box:

* [All models are wrong but some are useful.](https://en.wikipedia.org/wiki/All_models_are_wrong)

> Great news for the person who buys a new TV with their groceries every week!

If you don't like televisions being a part of the 2.25% of the CPI that is "Household equipment":

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

Then tell the average Canadian to stop buying televisions so that it does not show in spending surveys. If people stop consuming televisions it will stop being part of the Consumer Price Index, QED.

Meanwhile Food is 11% of the CPI because that is on average what the average Canadian spends on their average basket of goods per the spending surveys that StatCan gets.

[tsimionescu]

The OP and your reports agree: the Boskin committee changed the way inflation is calculated. The new way says there is less inflation than the old measure said.

So, if the new measure is actually wrong, then inflation is underreported now, when it used to be correctly reported before. The Boskin committee believes it was overreported before and it is now correctly reported.

[sob727]

You are absolutely correct that the BLS publishes CPI, but this still happened in the Greenspan era (and that's what I meant by "under Greenspan"). I remember reading (IIRC, in Bill Fleckenstein's book), that the Boskin commission was not free of interference and/or had an intent going in.

Either way, especially in recent years, it's pretty clear that CPI has been a flawed metric. I remember this episode fondly: https://www.wsj.com/articles/SB10001424052748704893604576199...

[OnlineGladiator]

> One of the conclusions was (AIUI) that the CPI then-methodology actually resulted in numbers too high.

How is this any different from saying they changed the methodology to make the numbers look better? In my opinion the old methodology was better, but I realize this is a complex issue and there is no "correct" answer.

[baronswindle]

The way I read it, it’s actually the opposite of what you wrote. You suggested that the Fed relied on inflation numbers that it knew to be too low — i.e. that inflation was understated due to failure to account for substitution effects and the like. In fact, the Boskin commission concluded the opposite — i.e. that inflation figures were overstated in aggregate due to failure to account for things like quality changes and the substitution effect.

[tsimionescu]

No, they suggested it now relies on inflation numbers that it knows to be too low. They said that inflation numbers used to be more realistic, but they have recently been lower than real inflation that consumers experience.

[throw0101c]

> How is this any different from saying they changed the methodology to make the numbers look better?

Define "better": is a higher CPI better, or is a lower CPI better?

Because the Boskin Commission found that the CPI numbers out of the BLS were too high and they changed the methodology to lower them after the Commission's report. Pre-Boskin CPI was being overstated.

[OnlineGladiator]

A lower CPI is better for the government because it makes it look like inflation is a smaller problem than it is. So you're agreeing with me - they changed it to make the numbers look better.

[mrep]

You didn't answer their question: Define "better": is a higher CPI better, or is a lower CPI better?

Why is a lower CPI better for the government?

In what way does the CPI calculation translate to a "problem" and why does lower CPI = "smaller problem"?

[OnlineGladiator]

I did answer the question - I said a lower CPI is better for the government because it makes it look like inflation isn't as bad as it is. Do you think it's better to report 5% inflation or 10% inflation? Regardless of what you report, the inflation is what it is. Modern politics is about pretending to solve problems, not actually solving them.

[throw0101c]

> […] they changed it to make the numbers look better.

They changed the number because the number was not modelling reality as accurately as it could have.

Perhaps actually read the Boskin Report:

> 5. Changes in the CPI have substantially overstated the actual rate of price inflation, by about 1.3 percentage points per annum prior to 1996 (the extra 0.2 percentage point is due to a problem called formula bias inadvertently introduced in 1978 and fixed this year). It is likely that a large bias also occurred looking back over at least the last couple of decades.

> 6. The upward bias creates in the federal budget an annual automatic real increase in indexed benefits and a real tax cut. CBO estimates that if the change in the CPI overstated the change in the cost of living by an average of 1.1 percentage points per year over the next decade, this bias would contribute about $148 billion to the deficit in 2006 and $691 billion to the national debt by then. The bias alone would be the fourth largest federal program, after social security, health care and defense. By 2008, these totals reach $202 billion and $1.07 trillion, respectively.

> 7. Some have suggested that different groups in the population are likely to experience faster or slower growth in their cost of living than recorded by changes in the CPI. We find no compelling evidence of this to date (in fact just the opposite) but further exploration of this issue is desirable.

* https://www.ssa.gov/history/reports/boskinrpt.html

* https://en.wikipedia.org/wiki/Boskin_Commission

Feel free to point out any errors in the methodology and logic that they used.

Here's a paper from 2006 to get you started:

> This paper provides a retrospective on the 1996 Boskin Commission Report, Toward a More Accurate Measure of the Cost of Living, and its famous estimate that the CPI in 1995-96 was upward biased by 1.1 percent per year. The paper summarizes the report's methods, findings, and recommendations, and then reviews the criticisms that appeared soon after the Report was issued. Post-Boskin changes in the CPI are summarized and assessed, as is recent research on related issues. The paper sharply distinguishes two questions. First, with what we know now, what should the Commission have concluded about CPI bias in 1995-96? Second, what is the bias now after the many improvements introduced into the CPI since the Commission's Report?

> About the first question, my own recent research on apparel and rental housing indicates a substantial downward bias in the CPI over much of the twentieth century, diminishing in size after 1985. Incorporating these findings into the Boskin matrix would reduce its 0.6 percent annual upward bias due to quality change and new products to a smaller 0.4 percent bias. However, this is more than offset by the stunning discrepancy over 2000-06 in the chain-weighted C-CPI-U compared to the traditional CPI-U, indicating that the Commission greatly understated the magnitude of upper-level substitution bias. This retrospective evaluation suggests that the Boskin bias estimate for 1995-96 should have been 1.2 to 1.3 percent, not 1.1 percent.

> Current upward bias in the CPI is estimated to have declined from the revised 1.2-1.3 percent in the Boskin era to about 0.8 percent today. Yet the Boskin report, like most contemporary studies of quality change, failed to place sufficient value on the value of new products and on increased longevity. Allowing for these, today's bias is at least 1.0 percent per year or perhaps even higher.

* https://www.nber.org/papers/w12311

[spaceman_2020]

This is why I think CPI numbers are all hogwash

All the younger people I know in less than stellar jobs are really hurting. These people were never well off but were comfortable before the pandemic.

But now they’re making hard decisions for basic necessities and grinding down the quality of their lives.

[esoterica]

The lowest income workers have seen the largest wage gains over the course of the pandemic.

[ses1984]

But the lowest income workers are also hit hardest by rising costs.

[itsdrewmiller]

I suspect the person you’re responding to is not really talking about truly low paying jobs - more likely entry level out of college jobs. (Not that I expect those are in aggregate underwater either.)

[AtlasBarfed]

I remember from even better days than today, but the entry job out of college had become an unpaid internship.

Which effectively limited them to people that already had very stable and financially supportive family situations.

Part of the reason that class mobility is going down. Although I think most of the production in class mobility is due to the disappearance of the high paid blue collar job in manufacturing

Supposedly manufacturing will be re- onshored in the next decade depending on who you talk to. So the tide may be turning?

[testacpwoek]

Meaningless when housing costs have soared. They've made wage gains because it's literally not worth it to work for $8/hr anymore and companies were unable to find workers.

[esoterica]

Wages for the lowest quintile have gone up in real terms, meaning adjusted for inflation (including shelter costs). None of your economic beliefs are grounded reality, you just make up beliefs that flatter your politics and downvote everyone who disagrees with you.

[rileymat2]

It would be good to get real numbers, the problem is inflation does not hit everyone equally; for example my house is paid off, the housing components do not affect me at all. So if they are growing faster than the rest of the basket it does not reflect in my life.

So real gains may or may not exist without looking at the individual or individual cohort you are talking about.

[testacpwoek]

I never downvote, your ad hominem is false and shows your emotionally charged mentality.

> None of your economic beliefs are grounded reality

If you think reality is defined in economic reports I have a bridge to sell you.

[VirusNewbie]

right but they're still made poorer due to M2 increasing and not being able to leverage into assets with debt.

[infamouscow]

The meaningless rhetoric of imbeciles.

If you're drowning in the ocean 100 ft below the surface, saying you managed to go 80 ft so you're still 20 ft below the surface is remarkably stupid and fails to appreciate the gravity of the situation.

[hammock]

Have they? Or are they all just taking on multiple part time jobs?

[wolverine876]

So what do you use that's better? Your personal experiences don't tell us much about the other 320+ million people.

[jonplackett]

They’re making a valid point, don’t shout them down by calling it a one off.

Quality of living is plummeting and inflation on things you actually care about is way more than the headline rate. Housing, for example takes up a vast proportion of income and the increase has been way over inflation.

I don’t think it’s headline news to state that the headline rate of inflation is not all that reflective of reality.

[dlp211]

> Quality of living is plummeting

Massive citation needed.

[jonplackett]

Go ask literally anyone you know that doesn’t work in tech and isn’t rich.

Or read any one of many articles about it.

https://www.theguardian.com/business/2022/jul/19/uk-living-s...

https://www.theguardian.com/business/2022/nov/17/obr-confirm...

https://www.cnbc.com/id/44962589

https://www.economist.com/graphic-detail/2022/09/08/global-l...

[FactKnower69]

Who are you gonna trust: the government report, or your own lying eyes? No one I know outside of tech will ever be able to afford a home, but the TV says things are fine, so...

[throw0101c]

> Who are you gonna trust: the government report, or your own lying eyes?

The CPI is a national average for an average basket of goods; your local conditions may be different. It has zero connection to your personal budget.

In Canada the headline national number was 2.8%, but the province of Alberta (as a 'whole') had 4.2%, while Manitoba had 0.9%:

* https://www150.statcan.gc.ca/n1/daily-quotidien/240319/dq240... (Chart 5) * https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc... * https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=181000... (searchable by province)

StatCan has a "Personal Inflation Calculator" where you can enter your own numbers/budget and find a number that may be closer to what's happening around you:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...

Remember: the CPI is a model of reality, and not reality itself. It is used as a guide, and to use the words of [Alfred Korzybski](https://en.wikipedia.org/wiki/Alfred_Korzybski):

* [The map is not the territory.](https://en.wikipedia.org/wiki/Map–territory_relation) * https://fs.blog/map-and-territory/

Or those of statistician George Box:

* [All models are wrong but some are useful.](https://en.wikipedia.org/wiki/All_models_are_wrong)

[spaceman_2020]

My personal experience makes me miserable because I see so much misery around me

I couldn’t care less what’s happening in some government statistical bureau. That doesn’t affect the quality of my day to day life.

But when I catch up with old friends, see young colleagues, talk to cashiers at the store, and they all have tales of misery, I feel miserable.

[pdonis]

> So what do you use that's better?

If the government would stop trying to micromanage the economy, then it wouldn't need to find some aggregate statistic to use, no matter how misleading or counterproductive it was.

[NikolaNovak]

>>government would stop trying to micromanage the economy

Right, but some of us are not religious, so proposals needs a little bit more than the blind faith of "take your hands off the wheel and I'm sure everything will magically be better for everybody, particularly the poor".

[AtlasBarfed]

Deregulation has not lead to a utopia of competition in free markets, rather virtually every market is a cartel or monopoly with heavy regulatory capture.

This is probably the best example of government lack of regulation, considering that their ample laws against monopoly's, cartels and duopolies from the days of Teddy Roosevelt's administration

They are effectively not enforced, or if enforcement is attempted corporate legal departments now have an effective means of defeating them since the Microsoft trial

[pdonis]

> Deregulation has not lead to a utopia of competition in free markets, rather virtually every market is a cartel or monopoly with heavy regulatory capture.

You're contradicting yourself. You can't have "regulatory capture" and "deregulation" at the same time.

As a matter of actual fact, we do have lots of regulatory capture, which has resulted in huge swaths of regulation that favors large corporations who can afford lobbyists, and disfavors smaller business that actually are the most productive part of our economy. With what results, we see.

> They are effectively not enforced

Antitrust law enforcement has indeed been irregular since they were passed--but what enforcement has been done has done more harm than good. The classic cases of antitrust enforcement, such as Standard Oil or Alcoa Aluminum, resulted in higher prices and scarcer products for consumers--i.e., a negative impact, not a positive impact.

However, antitrust laws are a very small part of the total body of regulations that affect businesses. It's just that most of those regulations are written by executive branch bureaucrats instead of Congress. The Federal Register is much larger than the United States Code, and includes much more detailed micromanagement of all kinds of business activities. Which, again, favors the large corporations that bought those regulations in order to hamstring their competitors, smaller businesses who are more productive but less able to absorb the costs of compliance with that huge mass of regulations.

[wolverine876]

It worked really well historically, before central banks, Keynes, Friedman ...

[NikolaNovak]

I genuinely don't know if that's extremely snarky sarcasm or extremely earnest opinion.

(if I said it it would be completely sarcastic, but some people do idealize the far past and probably mean it honestly, presumably because they mentally imagine / assume they wouldn't be in one of the sucky classes of society)

[pixl97]

We've done that before... the boom bust cycles were far worse.

[bsdpufferfish]

Yep, societies just don't function until you establish a central bank with fiat currency and fractional reserve banking. It's a law of human nature.

[pdonis]

> the boom bust cycles were far worse.

No, they weren't. The worst depression in history, the Great Depression of the 1930s, occurred after the Federal Reserve was in place in the US, and similar central banks were in place in other developed countries.

[throw0101c]

> All the younger people I know in less than stellar jobs are really hurting.

And? It has always sucked to be poor / have less. That doesn't mean that the measurement of prices via CPI is inaccurate.

The fact that capitalism has run amok and income inequality is growing doesn't mean the statisticians at the BLS are wrong or are cooking the books.

[spaceman_2020]

That would have been true if CPI was a purely economic issue. But it’s also a political issue and once politics is involved, there is vast incentive to fudge and massage the data to fit a narrative.

[throw0101c]

> But it’s also a political issue and once politics is involved, there is vast incentive to fudge and massage the data to fit a narrative.

[citation needed]

The CPI has been verified over and over again. There's open source software where you can do things yourself:

* https://en.wikipedia.org/wiki/MIT_Billion_Prices_project

It is probably the most looked at number that the government releases. There are economics professors/researchers, statistics professors/researchers, economists at hedge fund, economists at pension fund, economists at labour unions, bond traders, equities traders, etc, looking at the numbers every month. No one professionally involved with it thinks it's fudged.

There are certainly different methodologies, and that is often debated (e.g., how best to measure Shelter for homeowners versus renters), but for the current system, I'd like to see which non-tin foil hat wearing people (i.e., not Shadowstats.com) think it is being fudged and how.

[jokethrowaway]

I don't believe leading economists didn't see this coming. Even if they didn't originally, it's been clear now, for decades.

This is the system working as intended, making government spending easy and gradually worsening poor's people lives.

[cjbgkagh]

One neat feature of ignorance is the ability to hold incorrect ideas with sincerity, I not only think economists are generally wrong, but the most dim amongst them are the most likely to be promoted to prominence.

[wolverine876]

> One neat feature of ignorance is the ability to hold incorrect ideas with sincerity, I not only think economists are generally wrong, but the most dim amongst them are the most likely to be promoted to prominence.

As you reject ignorance (which I applaud), what knowledge is that based on?

[rootusrootus]

Are poor people's lives objectively worse now than they were, say, 40 years ago?

[cjbgkagh]

Technology and innovation has made people’s lives better at the same time that politicians and bankers have made them worse. Just because the politicians and bankers failed to totally eclipse technology does not mean they are not a severe detriment.

[wolverine876]

> Technology and innovation has made people’s lives better at the same time that politicians and bankers have made them worse.

That's the SV fantasy!: I'm awesome and a super-genius, everyone else is useless, dumb and annoying, and therefore I should be all-powerful!. It's like they're all still 13 year olds hacking on their computers, where they finally feel really powerful. It's almost as if they've never learned anything more about the world - humanities are just entertainment for the wealthy - leaving themselves vulnerable to the most obvious self-deception.

One might say that technology and innovation have turned our world into a hellscape, with massive social and political breakdown, massive mis/disinformation, and climate change. Maybe some innovation can build us new supersonic jets, better oil extraction, more effective automated online persuasion, or some snazzy financial tech - like CDOs, crypto, and private equity.

On the other hand, our political institutions did an amazing job of getting the US through a global pandemic without even a recession. There are serious problems, such as housing and education prices, but I don't think anyone could have predicted how well things went economically.

[kortilla]

Technology is the only reason the economy could somewhat continue during the pandemic. Did you hear about working from home?

Technology is how we got a vaccine so quickly.

Technology is how we tracked the spread. Technology is how we notified of potential exposure.

Nobody with a humanities background did anything meaningful to help compared to the last pandemic. It was all technology, engineering, medicine, and science that let us approach this one differently.

[wolverine876]

> Nobody with a humanities background did anything meaningful

If you learned a bit about it, you wouldn't show off rigid tunnel vision or you might express yourself clearly and without the blind destruction of hyperbole.

Why did people make or not make vaccines? Humanities (and social science). How were they funded, regulated, etc.? Ditto. What is the scientific method? Humanities (really). Why did the US and EU as expected, but not, e.g., Russia make the most effective vaccines? Humanities. Why did people take or not take vaccines? Humanities, or not enough humanities, or they were owned by people who mastered messaging and mass political communication, which is humanities.

[cjbgkagh]

I can't tell if this is satire, either way I had a good laugh.

[WinstonSmith84]

Yeah, I was torn but his last paragraph is 100% satire

> On the other hand, our political institutions did an amazing job of getting the US through a global pandemic without even a recession. There are serious problems, such as housing and education prices, but I don't think anyone could have predicted how well things went economically.

Just wait lol ..

[wolverine876]

So no debate on the merits? We agree! :)

Feel free to laugh, if that's what makes you happy.

[Jensson]

They can objectively afford less housing, education, healthcare and such things than 40 years ago. They can afford better computers, but that is just thanks to technology, other than technology making things cheaper their lives are worse.

[inglor_cz]

"Housing" ... mostly a NIMBY problem. AKA not a small group of capitalists ruining it for everyone else, but a bunch of soccer moms who hate any densification and insist that their neighborhood must stay the same forever, weaponizing environmental laws to stop any development. Notably, cities that build nonetheless, be it Austin, TX, or Warsaw, Poland, buck this otherwise very widespread trend.

"Education, healthcare" ... depends on the country involved, plus the extent of healthcare you can now get is vastly bigger due to scientific progress. Forty years ago, HIV infection was a death sentence and most cancers too.

[FactKnower69]

At any given time of year there are ~23 empty housing units for every single homeless person in the US, even close to 3 per homeless person in Los Angeles and New York City; somehow the constant, coordinated line of "supply constraints" and "grr NIMBYs!" doesn't hold up to the actual data

[ianburrell]

Vacant doesn't mean available. Apartments that are being shown to renters are vacant. Houses for sale are vacant. Houses that have sold or rented but haven't been moved into are not available.

It would be impossible to house homeless in vacant houses. Sellers and landlords would never accept it because would make it hard to find people. The short-term rentals would be hard to mange, not good for the homeless to always be moving, and easily go wrong. Is the government going to compensate for damages? For delayed moving into new house? It is almost certainly cheaper to build the homeless housing.

[pastor_bob]

Certainly in their ability to buy homes.

> Since 1963, inflation has risen 896%, while housing prices have risen by more than 2,350%.

> For example, between 1984 and 2021, home prices in Massachusetts rose by 469.89% while incomes increased by 221.10%.

ETC, ETC

https://www.investopedia.com/ask/answers/correlation-inflati...

[inglor_cz]

Land zoned for development is the one thing you cannot produce in factories. No wonder that densely populated areas feel the shortage.

Zone more land for denser development, and you will see the rents and home prices fall, or at least stagnate. That is why people started building skyscrapers immediately after reasonably developed lift technology was available.

[greedo]

40 years ago I could work a summer job at minimum wage and earn enough to pay a full year's tuition at UCSD. Doing the same thing in 2023 paid for less than 1/3 of the tuition.

[Aloisius]

That has more to do with California not funding the UC system as well as they used to.

Prop 98 in 1988 shifted funding away from UC and CS systems towards community colleges. The UC system went from about 6% of the budget to a bit over 2%.

That amounts to a loss of ~$15,000 per student in today's dollars.

[tsimionescu]

That's still inflation. It doesn't matter why the prices went up, it matters that they did.

[Aloisius]

Yes, but a summer of minimum wage today would be enough to pay for tuition at UCSD had funding been maintained at prior levels.

Notably, minimum wage in California has increased faster than inflation since 1984.

[ejb999]

People don't compare how well they were off 40 years ago vs today, they remember how things were in recent history - i.e. 3-4 years ago and then decide if they are better or worse off.

Inflation is a killer for the poor and most of the middle class - and a boon for the wealthy (who own appreciating assets) - everyone I know who is not wealthy enough to not care, is feeling it.

[andrewmutz]

The only way to answer this question is with data, not anecdote. And the people in this discussion thread are saying they don't trust the inflation data.

I trust the data, and the data shows their lives are better. If you don't trust the data, it's impossible to know.

[ponow]

A read of the data shows that, but it's not the only read nor the only data.

So we can say wages have increased to keep up with inflation, but left out is all the money lost during the time lag before wages caught up. And whose wages caught up? If you use average wages, then you can hide the details. You really need to look at different income levels, or at least the median wage and the inflation experienced for that median person, bare minimum.

[spaceman_2020]

What was the middle class’ rate of home ownership then vs now?

[smegger001]

you need to make adjustments for the question to make since, was the lowest earning quartile of the population worse off relative to the upper quartile 40 years ago verses the lower compared to the upper today.

[ponow]

Yes, for living arrangements.

[theteapot]

Pretty sure they have a steady poor people target rate as well (unemployment rate roughly) so no need to worry.

[alfalfasprout]

This is key. Due to hedonics/replacements inflation hasn't reflected what people actually feel for a while now.

[throw0101d]

> Due to hedonics/replacements inflation hasn't reflected what people actually feel for a while now.

The hedonics/replacements occur in the data because what is looked is taken from surveys of what people buy:

* https://www.bls.gov/respondents/cpi/

I just happened to answer a question on the CPI in Canada in another forum: The CPI you see in the headlines is made of of various components (Shelter, Food, Transportation, etc), the proportions of which are determined by spending surveys:

* https://www.statcan.gc.ca/en/survey/household/3508

As people change their buying habits the items that are tracked also change to reflect what consumers are spending. Here are the items in each category:

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

You can see the list of changes going back to 1913 at (coal and lard were removed/replaced in 1956):

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

It should also be noted that the number reported in the headlines is the national average, while the prices can vary widely depending on your location. So in the report for February 2024, the national number was 2.8%, but Alberta had 4.2% while Manitoba had 0.9%:

* https://www150.statcan.gc.ca/n1/daily-quotidien/240319/dq240... (Chart 5)

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

* https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=181000... (searchable by province)

StatCan has a "Personal Inflation Calculator" where you can enter your own numbers/budget and find a number that may be closer to what's happening around you:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...

Remember: the CPI is a model of reality, and not reality itself. It is used as a guide, and to use the words of [Alfred Korzybski](https://en.wikipedia.org/wiki/Alfred_Korzybski):

* [The map is not the territory.](https://en.wikipedia.org/wiki/Map–territory_relation) * https://fs.blog/map-and-territory/

Or those of statistician George Box:

* [All models are wrong but some are useful.](https://en.wikipedia.org/wiki/All_models_are_wrong)

[rhelz]

Well, no matter how the 2% figure was arrived at as a matter of historical happenstance, 2% is actually a very good number to shoot for.

First of all, a rate of zero would be ideal, but, lets face it, like any measurement, this is going to have some error. So, if you are going to err, on which side do you want to err? In favor of a little bit of inflation, or a little bit of deflation?

Well, inflation is painful, sure, but it's not nearly as bad as deflation. Let's exaggerate the numbers to make this point: if we had 50% deflation, your paycheck--the dollar amount you brought home--would be cut in half. However, your car payment, your mortgage, and your credit card bills would stay at the same nominal value.

So all of a sudden, you'd be financing twice as much debt, in real terms. A Calamity. You'd lose your car, your house, your credit. Cf with 50% inflation. You'd be paying back your debts with inflated dollars, which is hard for banks--but remember, they are also paying back their creditors with inflated dollars too...

So, given that inflation is bad but deflation is worse, and given that the Fed probably can't measure and-or even control the inflation rate to a sub 1% precision, shooting to keep inflation at 2% is a good strategy.

[ncivkcndixbdbx]

> if we had 50% deflation, your paycheck--the dollar amount you brought home--would be cut in half. However, your car payment, your mortgage, and your credit card bills would stay at the same nominal value.

Society doesn’t need to operate with so much debt. Usury is a financial tool that benefits the rich.

[rhelz]

We do have way too much debt---and when we have too much debt, the inevitable result is inflation. Thank you, President Trump, for adding $8.4 trillion to the national debt and for financing the deficit by printing money.

But that doesn't mean that debt is intrinsically bad, or must always benefit the rich at the expense of the poor. Like any other tool, it depends on how you use it.

[diego_sandoval]

> your paycheck--the dollar amount you brought home--would be cut in half. However, your car payment, your mortgage, and your credit card bills would stay at the same nominal value.

Not necessarily. If the transition to a deflationary economy is slow and planned, then expected deflation would start to be considered in the interest rates of your car payment, mortgage, etc. i.e. interest rates would become negative not long after inflation becomes negative.

If employers are capable of negotiating deflation adjusted salaries, then market pressure is capable of forcing companies to adjust their prices and interest rates to deflation.

[rhelz]

> If the transition to a deflationary economy is slow and planned,

If your money is guaranteed to grow in value--and without the risk of actually investing it--that would starve the economy of investment, which would reduce economic growth. People would hold back on their consumption (why buy it today, when tomorrow it will be cheaper??), further reducing demand, which would further depress prices, etc in a doom cycle.

That conclusion wasn't reached by extensive investigation of economists belly-buttons. Its observed fact and lived experience in every deflational economy ever observed.

And if you think Banks are just going to forgive your debt if your salary decreases, you are nuts.

[ponow]

We should use debt only as much as necessary. Normalization, promotion, even subsidy of debt leads people to make poorer choices and to think in the short term. It destabilizes the world, and sets up traps for the many naive people, traps that benefit lenders.

[rhelz]

Well, an influx of money can be a bad thing too: 1/3rd of lottery winners go bankrupt within 5 years of winning...I knew somebody who gave their kid a sports car on his 16th birthday...a week later he and his car were pulled out from under a semi truck...

Whether something is good or bad depends on how well or how poorly you use it. Its not intrinsically good or bad.

[living_room_pc]

On a individual level, your examples may not representative of younger generations who have less liabilities. This demographic of course are more likely to rent and buy a cheaper car (or no car at all), consequently they would likely have a higher liquid/non-liquid asset ratio and therefor would probably benefit in the short term to deflation. In the long term they would fair better than older generation for the reasons you mention, plus the fact they can change their living situation faster (new location, rental, job etc) at the detriment of their landlord or other leasing companies.

Regarding inflation, I would argue that younger people are more susceptible. Their free cash flow will drop, and at higher rates could lead to negative flow which over an extended period would be financially deadly especially for NEETs or other people at risk.

[rhelz]

> your examples may not representative of younger generations

Well, first of all, let me heartily agree with you that the young adults are being and have been being screwed for about 20 years now.

But remember in 2008, when middle aged and old farts like myself were being thrown out of their houses by the millions? That had absolutely no ill effect on young adults?

> plus the fact they can change their living situation faster

Yeah....but isn't that pretty much saying "lets screw the younger generation--they can take it better than we can!!" I mean, the younger generation shouldn't be always scrambling to find a new job at a lower salary, moving out of apartments they can no longer afford, etc etc. They should have the security to enable them to build a wonderful future for themselves.

> Regarding inflation, I would argue that younger people are more susceptible.

True. Inflation is bad. But it's important to realize that the inflation we are currently suffering didn't come about by the Federal reserve mucking around with interest rates. It was caused by Trump adding $8.5 trillion to the deficit, and financing that largely by printing money.

The young, of course, are screwed both ways: they have to endure the present inflation, and then they have to pay back that debt, while they are trying to keep their parents in a decent nursing home at the same time they are trying to pay for their kids college education.

The only reason they aren't rioting in the streets demanding better from us is that most of them are too young to even remember an economy which works the way it should.

[ThePowerOfFuet]

>if we had 50% deflation, your paycheck--the dollar amount you brought home--would be cut in half. However, your car payment, your mortgage, and your credit card bills would stay at the same nominal value

If your contract says you make $5000/month in salary, then why would the number of dollars decrease? They wouldn't increase due to inflation unless the employer chose to "give you a raise" (just adjusting for inflation perhaps), but they can't unilaterally decrease your salary (in countries that don't suck, anyway).

[rhelz]

> If your contract says you make $5000/month in salary, then why would the number of dollars decrease?

Well, deflation means everything costs less. And "everything" includes wages and salaries, even yours. If we had 50% deflation, that means the boss could hire somebody who was as productive as you for 50% less. This is elementary, right? That's what deflation means.

So either you are going to renegotiate that contract, or the boss will just fire you and hire somebody else.

"But I have a contract--how can he fire me??" Do you have a contract with your employer? If so, take another look at it--it will say you can be fired at any time for any reason.

There was a time in America when unions were strong enough that they could demand contracts for you which limited the conditions under which you could be fired. But (thank you, Ronald Reagan) those days were half a century ago. Some call it bullshit, some call it "efficient capitalism".

But the more efficient capitalism is, the faster your salary would decrease in lockstep with deflation. You would very rapidly not be able to pay your car payment, mortgage and credit cards. And if you think the banks are going care about your sob story, remember in 2008, the last time that large numbers of people couldn't pay their mortgages, they were kicked out into the street by the millions.

> (in countries that don't suck, anyway).

Well, two points, 1) America is a country that sucks, in that sense, and 2) Countries that don't suck do not let themselves fall into a deflationary trap.

[ponow]

Secular deflation existed in the late 19th century during growth periods.

Deflation associated with debt deleveraging can be bad. But the problem is that we got into debt. Debt was not nearly as high in the 19th century. Debt addiction is relative modern.

Our inflationary 2%++ regime tends to encourage debt, and the Trumps of the world can leverage their lives to the hilt. Poor people have much more difficulty juggling debt and fail spectacularly. Debt growth increases economic instability.

[analog31]

Ah, but if inflation is underreported with a 2% target, it's also likely to be underreported with a 0% target.

On the other side, fiscal hawks have an incentive to overreport inflation.

[bsdpufferfish]

fiscal hawks, like who? and with what power?

[jmyeet]

That's not new or controversial (in economics circles).

This really took off in the Reagan years where real wages stagnated [1]. It was from the 1980s where you started to hear statements like "wage incresaes should be tied to productivity increases" [2]. If you parse that statement, it means no cost-of-living increases ie a decrease in real wages.

All of this is wealth transfer to the very rich and entirely intentional.

[1]: https://www.epi.org/publication/charting-wage-stagnation/

[2]: https://www.epi.org/productivity-pay-gap/

[adam_arthur]

"Real" wages are driven by the "real" supply and demand of labor, not by nominal numbers.

If the number of qualified workers increases significantly, you will end up with lower real wages. There were three major factors increasing labor supply around this time in the US. Immigration from Mexico, women continuing to enter the labor force, and reduction in demand/increase in (global) supply for lower skill labor via globalization of manufacturing

Not casting any judgment on whether these things are good, but they are far more likely to be the primary factor than inflation.

[nicoburns]

> women continuing to enter the labor force.

One thing that's occurred to me recently is that demands for a 4 day working week seem entirely reasonable in the context that the labour force has, if not quite doubled, dramatically increased (due to more women participating) over the last few decades (and that time has been taken away from time that was previously available for the completion of domestic chores).

[lupire]

This is the solution to the "two-income trap".

[from-nibly]

Wouldn't a 2.5 day work week actually be the solution to the "two-income-trap"?

[chii]

but you would be out-competed by people who work 5 days. The reason things like housing is expensive is because there are lots of people willing to pay higher. This implies that those people _have_ become wealthier. You would not hear them complain about being poorer (or it's an insincere form of complaint).

[tacocataco]

Oh look, enough time in the week for 2 jobs!

[mrkstu]

That only works if it is a global change in work practices.

[nicoburns]

I don't think that's true. We already have significantly varied working hours between countries. China has 996. The US has a 40 hour standard work week and the culture is such that people often work longer hours. Whereas in Europe 35 or 37.5 hours or even less is common. Different countries have different numbers of public holidays, etc.

[smegger001]

and we didn't even get the productivity increase, if we had the computer revolution should have massively increased everyone wages due to increased efficiency.

[chii]

> massively increased everyone wages due to increased efficiency

a computer won't increase the wage of someone whose work is unrelated to the procurement of the computer/system (even if their work was made more efficient).

For example, a checkout clerk now dont need to compute, because of the efficient Point-of-Sale system (when previously they'd need to recall prices). So even if the output of the clerk is now higher, they could be less skilled and so the supply increases, leading to lower wages.

The people whose job is to procure the computer systems _do_ get increased wages. That's why so many software engineers are rich.

[throwaway14356]

One can always argue the computer is doing more of the work. Sitting there watching the production line doesn't look very productive or challenging?

[Alpha3031]

Labour productivity in economics is output per labour hour, it doesn't matter what is doing the work. As an extreme example, if robots took over and human labour is no longer required for anything then (human) labour productivity would be infinite, it doesn't matter if no humans are actually doing any labour.

[Ekaros]

Enabling or keeping productivity going is also important. That is what people watching line and fixing minor things are paid for. Alternative is that someone would be pinged from home and they would drive to line each time. While during time productivity of line was lost.

[apelapan]

Did the computer revolution really make things that much more efficient? Great savings and new possibilities on many fronts, but also enormous expenses and a whole lot of lost flexibility and individual agency.

I'm sure it is an efficiency win on the total, but perhaps not as gigantic as often assumed.

[smegger001]

Do you see typing pools in every large office anymore? Nope, word processors replaced all of them. Do accountants spend several weeks calculating desk sized spreadsheet by hand anymore? no because excel and other digital spreadsheets are able to tabulate data automatically. that's all major efficacy savings

[apelapan]

Yep, major savings from those two things. But then someone in this efficient office decides to automate a few more workflows and spend 200k building a digital paper form that is used four times per year and misses a crucial field so that is not "supposed to be needed", so that every use of the form requires a phone call or five. This would not have happened with a paper form and human first recipient.

There is an efficiency gain in total, but a lot of losses that eat at the actual wins.

[lebean]

I mean, how much we talking here? We're not in Atlantis with flying cars, but there's immense efficiency gains in logistics.

[throwaway14356]

That is a tricky one. I've been told early on that in most discussions one may not ask netzen to do anything for you.

We could have been mowing your lawn or filling my taxes. That is how I remember it anyway. If you just help drink my beer we both get things out of it.

[lebean]

GOOD point!

[esoterica]

Why are inflation truthers so resistant to spending even the tiniest amount of time learning how inflation is computed instead of repeating nonsensical conspiracy theories that match their ideological priors? Replacing porterhouse with hanger steaks in the basket simply means giving the change in price of hanger steaks a higher weight than the change in price of porterhouse steaks in the basket. It does not mean recording the difference in price between a porterhouse and hanger steak as a decrease in the price index. If porterhouse and hanger steaks both go up by 5% then switching from porterhouse to hanger steaks will not lower inflation, even if hanger steaks are cheaper. And of course that’s the correct way to compute inflation, if people stop using typewriters and start using computers why would you still include typewriters in the consumer basket.

It’s not even true in general that the trend has been switching towards lower quality products. Despite all the ahistoric whining about how much better the old days were, Americans have gotten richer over the past several decades and have been buying bigger cars, dining out instead of eating at home, spending more on travel etc.

[testacpwoek]

> nonsensical conspiracy theories that match their ideological priors

People's lived experiences in many parts of the country don't match what they're being told. If macro trends go one way but microtrends all over the country go the other way, then the macrotrend analysis is functionally meaningless for millions of people. That's not a conspiracy theory, and hand-waving so many people's lived experiences away because it doesn't match YOUR ideological prior is not taking the discussion seriously and fundamentally and possibly wilfully misunderstanding the issue. Insisting that people everywhere saying life is harder than it was pre-pandemic or 10 years ago or whatever are wrong "because the charts say so" is silly.

[itsdrewmiller]

I think people get too hung up on the aggregate numbers which can hide large populations experiencing things differently. Wage growth may have been higher than inflation for some quintiles overall, but for literally millions of people in those quintiles who didn’t job hop and got typical raises or got laid off or whatever, the average experience wasn’t their experience. And when prices are obviously going up, most people will feel like they are falling behind even if they objectively are treading water.

[esoterica]

The official inflation numbers have shown high inflation over the past few years. If you feel like prices have gone up a lot the CPI does not contradict your lived experience in any way.

[gopher_space]

I'd argue that talking about averages at all is arguing in bad faith; there are only a few economic buckets people fit into and they're well defined.

Is there a point of view where not primarily discussing "bucket 1" even makes sense, given everyone's stated intentions?

[lebean]

They must be the 7% of the population not covered by BLS stats when working out the CPI, assuming they're from US, or living in a remote area. Agree that overall, the population has been growing richer for several decades. But what about us folks who subsisted off of GPUs and used cars in 2021-2022? The reality for us is way different.

[wodenokoto]

Inflation is meaningless if you don’t include substitutes as part of defining your basket.

The price of typewriters, film or rotary phones are completely irrelevant to the cost of living today and would be meaningless to include.

You don’t substitute beef with beef. You substitute elk with beef, if elk used to be a stable but now isn’t.

[jcarrano]

Those monetary tricks only work for a short time, in this case until workers realize that not getting a rise roughly matching inflation is effectively the same as a getting paid less (i.e. Rational Expectations).

[RustyRussell]

This argument goes back to Keynes IIRC: inflation was good to keep wages reduced.

It's hard to imagine a deflationary world where bosses had to negotiate with workers to reduce their salary annually, which kind of shows how powerful this idea is...

[brikym]

Exactly. By changing the composition all the time of the CPI you're underreporting inflation. We all know about shrinkflation being common as well but shitflation is the worst one of them all because now you can't even spend a few more cents for the quality your favourite products have been turned into shit by means of substituting ingredients, worse customer service, tricks like subscription seat-heaters and so on. One of example of many is dairy products. The common yoghurt brands in my locale have started taking all the fat out of their so-called yoghurt, adding thickening agents and in a very small font labelling it 'low-fat'. Well that's not really yoghurt which is milk+culture is it? I can see why Germany has their beer purity law maybe a yoghurt purity law is in order too.

[rufus_foreman]

The word supposedly is doing a lot of work there.

Did that actually happen? What's the evidence that Yellen told Greenspan that?

[ludwigislaugh]

Ludwig Von Mises is laughing, he was so right. It's not even funny.