It has long been a rule of thumb to have $1 million saved for a comfortable retirement; but, thanks to inflation, the youngest generation of workers likely will need three times as much. According to...
Businesses were willing to charge more before, and have always been greedy. So what changed?
It’s the result of Fed creating trillions of dollars and then immediately using that money to prop up the stock market by adding to their balance sheet.
This is essentially giving cash to stockholders. Since 10% of the population owns 90% of stocks, that’s a big cash handout to the richest segment of society.
Stock owners can sell their stocks, and get the inflated price thanks to Fed cash. Or they can use the inflated price for collateral on loans.
Meanwhile this money does not go to workers, they instead deal with the consequences: their real wages drop, and the minimum wage now buys much less than it used to, erasing labor protections.
The recent inflation is caused by government controlled by capital giving welfare to the richest. It’s not so simple as “they suddenly realized they should raise prices”.
If the main cause is increased monetary supply, it’s going to get far worse as the world de-dollarizes.
The USD enjoys an exorbitant privilege because its the world’s premier reserve and trading currency. Under the old rules, if the Fed printed more money, other countries would buy it to settle their international trade and as a safe harbor for their wealth.
The extraordinary sanctions against Russia have caused countries to shift to other currencies to settle trade since they still want/need to buy oil, gas, and food from Russia. That means that there’s going to be a lot more USD with no foreign escape valve.
The US could export it’s inflation, and many countries have just agreed to use the dollar less at the same time the US has rapidly increased its money supply.
Combine that with a debt-to-GDP ratio that hasn’t been this high since WW2 and you have the perfect storm for an economic collapse.
It should go without saying that if you have people already on the edge, and suddenly the entire economic system starts to crack there is going to be violence. Likely a war as the US tries to save itself rather than passively sliding into financial ruin.
I think it’s telling that even during the worst period of US-Chinese relations in recent memory, the US sent Yellen over to Beijing to beg China to buy more dollar bonds.
There’s a faction in Washington that knows the US economy is on the ropes but their appeals for cooperation are being drowned out by the other faction just chanting “WAR! WAR! WAR!”
I don’t think WW3 would actually help the US economy. WW2 pulled the US out of the Depression because the manufacturing capacity was there but there wad a crisis of confidence and liquidity. The government pumping tons of money into military spending solved both of those problems.
Nowadays, the US doesn’t have enough manufacturing. Even the weapons America supposedly builds are riddled with imported Chinese parts. Go to war with China or any major power and the US Government will flood weapons makers with money but that money has nowhere to go so it’ll just drive up inflation even more.
Nothing really changed, business have been jacking up prices while suppressing wages this whole time. It’s not really a new phenomenon. The fed printing money created more liquidity, but that doesn’t directly create inflation which is the rise in prices of goods and service. That’s done by people who control pricing which are the business owners.
. The fed printing money created more liquidity, but that doesn’t directly create inflation which is the rise in prices of goods and service. That’s done by people who control pricing which are the business owners.
It absolutely affects inflation because there’s more money chasing the same number of goods/services.
If business owners don’t raise their prices at all, the real price of those goods would drop, because each dollar is worth less when you pump up the money supply.
It absolutely affects inflation because there’s more money chasing the same number of goods/services.
Since the money is going predominatly to the wealthy then there isn’t more money chasing goods and services. The average consumer is not benefiting from QE as you yourself pointed out.
If they do some big ego projects, the people they hire take that money and increase their own consumption.
If they park it in investments, some company takes the capital injection and increases their spending.
All that money chases labor, and labor can be reapportioned to meet different needs. A billionaire can buy a slightly bigger yacht with their share of the Fed printing. That bigger yacht needs a little more labor, and someone ends up building more cabinets for the interior rather than building housing for the poor.
The billionaire doesn’t blame themselves for inflation, and someone at the bottom can’t figure out why suddenly a full time job doesn’t pay for housing. But that Fed decision moved labor from benefiting the poor, to benefiting the 1%.
They don’t put it under their mattress, but the projects they invest into aren’t resulting into wealth being generated by the working class. When these people create a new business ventures, they still pay subsistence wages. So, you get more employment, but it’s low quality employment. Any actual wealth produced ends up going to the capital owning class.
So again, people who own capital are the ones who decide the prices and the wages. These are the people in control of what we call inflation.
Again, they have raised prices before. Inflation didn’t just start yesterday. I’m really not following the argument you’re trying to make here. You still haven’t actually explained the causal chain between the increase in money supply and inflation, nor have you provided any counter argument to my point which provides a clear and direct explanation of what’s happening.
Again, they have raised prices before. Inflation didn’t just start yesterday.
Rapid inflation did start at the same time the money supply was increased.
We always had inflation, but it’s false equivalence to act like the 1-2% from before is the same that we’ve seen over the past two years.
You still haven’t actually explained the causal chain between the increase in money supply and inflation
If there’s more money circulating, there’s more businesses can ask for.
Whoever has the extra cash that’s been created can spend more now, and businesses will charge more to those who can pay, rather than keep their old prices.
That’s ECON101, more money chasing the same supply of goods = prices increasing. After all, someone has more money now, and the point of having money is to get what you want.
So they spend the new cash, paying marked up rates because they can afford to now. Businesses realize they can ask for more, and now someone is willing to pay more than just a 2% increase, where before customers weren’t willing/able.
nor have you provided any counter argument to my point which provides a clear and direct explanation of what’s happening.
I asked you why inflation suddenly spiked, if businesses/capital always had this power. You made the false equivalence of the previous low inflation to the current high inflation.
If grocery bills were going up 2% a year for decades, and then suddenly start going up more than 10% a year, what happened?
Do you think they weren’t greedy before? Do you think it’s a coincidence this inflation happened the same time the Fed suddenly pumped trillions into the money supply?
Businesses were willing to charge more before, and have always been greedy. So what changed?
It’s the result of Fed creating trillions of dollars and then immediately using that money to prop up the stock market by adding to their balance sheet.
This is essentially giving cash to stockholders. Since 10% of the population owns 90% of stocks, that’s a big cash handout to the richest segment of society.
Stock owners can sell their stocks, and get the inflated price thanks to Fed cash. Or they can use the inflated price for collateral on loans.
Meanwhile this money does not go to workers, they instead deal with the consequences: their real wages drop, and the minimum wage now buys much less than it used to, erasing labor protections.
The recent inflation is caused by government controlled by capital giving welfare to the richest. It’s not so simple as “they suddenly realized they should raise prices”.
If the main cause is increased monetary supply, it’s going to get far worse as the world de-dollarizes.
The USD enjoys an exorbitant privilege because its the world’s premier reserve and trading currency. Under the old rules, if the Fed printed more money, other countries would buy it to settle their international trade and as a safe harbor for their wealth.
The extraordinary sanctions against Russia have caused countries to shift to other currencies to settle trade since they still want/need to buy oil, gas, and food from Russia. That means that there’s going to be a lot more USD with no foreign escape valve.
Yes, I agree.
The US could export it’s inflation, and many countries have just agreed to use the dollar less at the same time the US has rapidly increased its money supply.
Combine that with a debt-to-GDP ratio that hasn’t been this high since WW2 and you have the perfect storm for an economic collapse.
It should go without saying that if you have people already on the edge, and suddenly the entire economic system starts to crack there is going to be violence. Likely a war as the US tries to save itself rather than passively sliding into financial ruin.
I think it’s telling that even during the worst period of US-Chinese relations in recent memory, the US sent Yellen over to Beijing to beg China to buy more dollar bonds.
There’s a faction in Washington that knows the US economy is on the ropes but their appeals for cooperation are being drowned out by the other faction just chanting “WAR! WAR! WAR!”
I don’t think the US knows any other economic recovery options besides war.
We haven’t really changed it up since WW2.
I don’t think WW3 would actually help the US economy. WW2 pulled the US out of the Depression because the manufacturing capacity was there but there wad a crisis of confidence and liquidity. The government pumping tons of money into military spending solved both of those problems.
Nowadays, the US doesn’t have enough manufacturing. Even the weapons America supposedly builds are riddled with imported Chinese parts. Go to war with China or any major power and the US Government will flood weapons makers with money but that money has nowhere to go so it’ll just drive up inflation even more.
I agree that WW3 won’t save the economy this time, I just think the US doesn’t have another answer.
Although I’m sure they’ll keep throwing money at consulting companies to research the issue and give them the same answer back.
Nothing really changed, business have been jacking up prices while suppressing wages this whole time. It’s not really a new phenomenon. The fed printing money created more liquidity, but that doesn’t directly create inflation which is the rise in prices of goods and service. That’s done by people who control pricing which are the business owners.
It absolutely affects inflation because there’s more money chasing the same number of goods/services.
If business owners don’t raise their prices at all, the real price of those goods would drop, because each dollar is worth less when you pump up the money supply.
Since the money is going predominatly to the wealthy then there isn’t more money chasing goods and services. The average consumer is not benefiting from QE as you yourself pointed out.
Business owners are raising prices in way that’s increasing their profits, they’re not doing it to keep up their rate of profit steady. https://thehill.com/business/3756457-corporate-profits-hit-record-high-in-third-quarter-amid-40-year-high-inflation/
The wealthy don’t just put it under the mattress.
If they do some big ego projects, the people they hire take that money and increase their own consumption.
If they park it in investments, some company takes the capital injection and increases their spending.
All that money chases labor, and labor can be reapportioned to meet different needs. A billionaire can buy a slightly bigger yacht with their share of the Fed printing. That bigger yacht needs a little more labor, and someone ends up building more cabinets for the interior rather than building housing for the poor.
The billionaire doesn’t blame themselves for inflation, and someone at the bottom can’t figure out why suddenly a full time job doesn’t pay for housing. But that Fed decision moved labor from benefiting the poor, to benefiting the 1%.
They don’t put it under their mattress, but the projects they invest into aren’t resulting into wealth being generated by the working class. When these people create a new business ventures, they still pay subsistence wages. So, you get more employment, but it’s low quality employment. Any actual wealth produced ends up going to the capital owning class.
So again, people who own capital are the ones who decide the prices and the wages. These are the people in control of what we call inflation.
Irrelevant, because I never claimed it did. I only said that money ends up competing for labor and other resources.
If they could just raise prices, they would have done it before. So why didn’t they?
Because what actually changed was an increase to the money supply.
Again, they have raised prices before. Inflation didn’t just start yesterday. I’m really not following the argument you’re trying to make here. You still haven’t actually explained the causal chain between the increase in money supply and inflation, nor have you provided any counter argument to my point which provides a clear and direct explanation of what’s happening.
Rapid inflation did start at the same time the money supply was increased.
We always had inflation, but it’s false equivalence to act like the 1-2% from before is the same that we’ve seen over the past two years.
If there’s more money circulating, there’s more businesses can ask for.
Whoever has the extra cash that’s been created can spend more now, and businesses will charge more to those who can pay, rather than keep their old prices.
That’s ECON101, more money chasing the same supply of goods = prices increasing. After all, someone has more money now, and the point of having money is to get what you want.
So they spend the new cash, paying marked up rates because they can afford to now. Businesses realize they can ask for more, and now someone is willing to pay more than just a 2% increase, where before customers weren’t willing/able.
I asked you why inflation suddenly spiked, if businesses/capital always had this power. You made the false equivalence of the previous low inflation to the current high inflation.
If grocery bills were going up 2% a year for decades, and then suddenly start going up more than 10% a year, what happened?
Do you think they weren’t greedy before? Do you think it’s a coincidence this inflation happened the same time the Fed suddenly pumped trillions into the money supply?