this post was submitted on 19 Sep 2023
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Work Reform

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[–] Jake_Farm@sopuli.xyz 47 points 1 year ago* (last edited 1 year ago) (5 children)

That is something I wonder about. Inflation makes the poor poorer but when asked, economists are like "trust us, inflation is good".

[–] Cethin@lemmy.zip 23 points 1 year ago (6 children)

A small amount is good. Deflation makes it so not spending money is more beneficial. The longer you wait to spend the more the money is worth. This causes fewer products and services to be purchased, which pays for wages. Inflation makes the opposite true. The longer you wait to spend your money the less it's worth. It encourages spending, not saving. Inflation that outstrips increases to pay is obviously very bad though.

[–] jj4211@lemmy.world 13 points 1 year ago

Note that a critical part of that equation is that wages are included in the inflationary trend.

But other than that explicit detail, that's spot on. Ultimately money is a "trick" we use to influence our productive behavior. So a slightly creeping number works best to make the "money" move instead of sit still, and the whole point of the mathematical model is that the things need to move around.

[–] Buddahriffic@lemmy.world 8 points 1 year ago

With all of the credit balances being carried, I question the whole "people will just wait instead of spending because it will be more financially advantageous". I'm also not so sure we really need an economic system that encourages and depends on increased consumption. It would be nice if we had a system that could handle inflation, stagnation, and deflation without imploding on itself.

To me, the biggest factor is that it means debt burdens get lighter over time, assuming you are at least covering interest (if not then interest will outpace inflation, though even the growing debt will be cheaper over time vs what it would be without inflation). Oh, also assuming wages match inflation, which is the other big factor. Your employer can save money over time just by being stingy with raises.

[–] bennieandthez@lemmygrad.ml 6 points 1 year ago (1 children)

This is just plain wrong. The majority of people don't get to "decide" to spend/save, they live paycheck to paycheck. The people that can make that decision are actually incentivized to NOT spend but to "invest" (aka loan) because interest rates are higher, and thus get better returns.

Inflation is really a wealth transfer from the poorest to the wealthy since wages don't keep up with inflation.

Now you can figure out why deflation is considered a bad thing by mainstream media.

[–] Cethin@lemmy.zip 3 points 1 year ago (1 children)

Most of the time most wages do keep up with inflation. Minimum wage should in a reasonable country as well. Also, most people can totally defer spending some money. Not for food and rent and other necessities, but for other things, like getting your car fixed or things like that that can be pushed off for later.

[–] bennieandthez@lemmygrad.ml 2 points 1 year ago (1 children)

Ignore rent inflation and sure, wages are keeping up 😅

[–] Cethin@lemmy.zip 2 points 1 year ago

True, yeah. Rent inflation is making things real bad. The past little while almost no wages have kept up with regular inflation even. Generally though, most wages have kept up with both, but recently in particular things have gotten fucked.

[–] Jake_Farm@sopuli.xyz 1 points 1 year ago (2 children)

Does deflation decrease all spending or just luxury and investments?

[–] nybble41@programming.dev 10 points 1 year ago

Just luxury spending and underperforming investments. Essential spending can't be deferred, and worthwhile investments will outpace any natural rate of deflation. Forced inflation drives conspicuous consumption and malinvestment, but in doing so it increases monetary velocity, which helps bankers and tax collectors extract higher rent from the economy.

[–] Trainguyrom@reddthat.com 5 points 1 year ago

This is something you can think about from a micro economic level! think of your next big dollar purchase. Maybe its a car, or a TV or a computer or a kayak. Whatever it is, you probably have to save up to buy it, you probably spend a lot of time researching and thinking about which one to buy, and you wait for a good time to buy. If you know that simply waiting another few months means you can get it for cheaper, would you? If the answer is yes, then that's how deflation would effect every luxury and other non-necessity purchase

[–] bennieandthez@lemmygrad.ml 10 points 1 year ago

Yea, because its good for them 😅

[–] matlag@sh.itjust.works 7 points 1 year ago

Inflation reduces the value of money at the bank: the money saved as well as the money borrowed.

In an ideal world, wages are indexed on inflation (way of calculating inflation in this context can be discussed), and inflation is kept above present targets levels (central banks try to keep it at 2% these days).

That makes your debts easier to reimburse, and limits returns on savings. Have you ever noticed that people who keep talking about the "value of work" actually push for low wages and no or low taxes on capital gains, so actually wants the capital to make more money than work?

A low inflation allows big money to hoard more and more. Higher inflation means money that's not actively contributing to the economy will lose its value over time, and that's exactly what you, at the bottom of the ladder, want (and considering top of the ladder is hundreds of billions of $, ever 6 figures employees are bottom of the ladder).

Too high inflation leads to an uncontrolled spiral. Deflation is also very bad (no investment will ever happen if your money just appreciate by doing nothing). But the 2% target is not to protect you. It's made for money to make more money.

But about the link between wages and inflation: what we have today is a situation where we let cost of life dramatically outpace wage growth. So where did the inflation come from? Profits! That needs to be rebalanced.

From 1945 to the early 80's (before the €), France and some other countries minmum wages were indexed on inflation. If doing so would instantly crash an economy, we would have noticed...

[–] SpaceCowboy@lemmy.ca 3 points 1 year ago

Inflation makes debt worth less. Generally the working class buys homes and cars by borrowing money.

Of course banks will charge more interest to compensate for this so a high amount of inflation isn't good. Deflation is bad because the banks are going to continue charging interest even while the value of the debt principle is increasing.

So ideally you want a small amount of inflation so there's some wiggle room before dipping into deflation territory.

There's too much inflation so central banks have to raise interest rates which makes people less likely to borrow money which shrinks the money supply. This is how inflation is controlled, but also not a good situation as it can lead to a recession. So it's a delicate balancing act.

Economics is called the dismal science for a reason. Nothing is intrinsically "good" there's a cost to everything. And no socialism isn't some cheat code that allows people to escape the dismal realities of economics. Best you can ever do is balance things well enough that everyone can have a decent life.

[–] random65837@lemmy.world 2 points 1 year ago

You saying it isn't? How isn't bankrupting the working class not going to make the working class thrive? LOL!