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Old 05-07-2018, 04:32 PM
 
2,360 posts, read 1,026,502 times
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Quote:
Originally Posted by Aredhel View Post
Nope. Individuals (and countries, for that matter) can't be compelled to make or take out loans. Absent that compulsion, either the potential lender or the potential borrower will choose another option if the loan becomes too unfavorable.

As I said earlier, there are no Illumanti controlling either the national or the global economy. That's the major reason economic forecasting is so complicated and unreliable: too many moving parts.

ok point taken..

Back to the basics.. what would need to happen to get our wages higher then COL? to make goods cheaper to afford?
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Old 05-07-2018, 05:09 PM
 
Location: Ohio
17,998 posts, read 13,238,246 times
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Quote:
Originally Posted by hitpausebutton2 View Post
If your sitting on alot of money in the bank or couch, are you the partial reason for inflation?
No.

Monetary Inflation is the result of a decline in the currency's inherent value. Ideally, you want your currency to equal your GDP: the goods and services you produce.

We can show this mathematically:

1,458,300,000 GDP Units / 1,458,300,000 Currency Units in Circulation = 1 GDP/Currency

That's what you want.

What if we reduced the amount of Currency Units?

1,458,300,000 GDP Units / 1,000,000,000 Currency Units = 1.458 GDP/Currency

That is Monetary Deflation.

One Currency Unit now buys almost 1.5 GDP Units.

Think of it this way: $2 USD buys 1 gallon of gasoline, but now due to Monetary Deflation, $2 USD buys 3 gallons of gasoline.

We have arrived at one of the most difficult concepts for people to understand.

The gasoline is not worth less, rather the currency is worth more. That makes it appear that the price of gasoline has decreased, when in fact it is the currency that has increased in value, yet the increase in value of the currency is reflected through lower prices.

What if we increased the amount of Currency Units?

1,458,300,000 GDP Units / 2,000,000,000 Currency Units = 0.73 GDP/Currency

That is Monetary Inflation. The Currency is worth less, making it appear that products and services cost more, when in reality they do not, yet the lower value of the currency is reflected through increased prices.

It simply requires more currency to acquire the products and services. The M2 is currently $13.9 TRILLION. The US no longer publishes M3. That stopped a long time ago. More than 10 years ago. It was during the Bush Administration that they stopped publishing it, but I can't remember exactly when.

Note that this affects the price of everything, as in every single thing, meaning every single product or service sold in the US, and it also includes wages/salaries.

If you ever lived in a country that has rampant Monetary Inflation you can see that. The Inflation rate in Romania since 1991 has been 45% per year.

The price of every single thing goes up an average of 45% per year. Granted, the last several years have been tame with Inflation rates in single digits, but it was hell for a while there. I think the worst year approached 300% and quite a few years were 100% to 200% and it was especially bad in the 1990s and then again in the early part of this Century.

You name it, the price went up: look around the room you're in...light switches, doors, hinges, door knobs, curtains, curtain rods, windows, carpeting, tile, all furniture, ball point pens, pencils, paper, all electronics, your cell phone, all kitchen utensils and plate-ware, cups, appliances, food, water, electricity, gasoline, all services, all clothing and shoes, alcoholic beverages, non-alcoholic beverages....everything.

Wages/salaries rise, too, unless you happen to be in a union with a contract that dictates wage increases (some contracts have clauses that permit renegotiation in the event of sustained hard-core Inflation), but the problem is there's always a lag-time of 6 to 12 months, and you never get that very last raise, so you lose your shirt.

Note that this has absolutely nothing to do with the value of the US Dollar as it is traded on the World Market or as it compares to other currencies.

When the value of the US Dollar decreases against foreign currencies, it may cost more to import those items, and that is usually reflected in a price increase for those specific items, but that is not Inflation per se.

When the Supply of a specific item decreases while Demand remains constant, or Demand increases while Supply remains constant, it creates Demand-pull Inflation. This is often the case with crude oil, where Supply is flat and Demand rises and falls over time for many different reasons.

High housing prices and rents are the result of Demand-pull Inflation. In certain cities, the Demand for housing far exceeds the available Supply. That's a localize phenomenon. Where I live, you can pay $30,000 to $3 Million for a home. One neighborhood, namely Indian Hill where rock-star Peter Frampton lives, the homes are in the $Millions. Two or three swanky neighborhoods offer homes from $350,000 to $500,000, but for the vast majority of neighborhoods, home run $75,000 to $190,000. If you're willing to do a little work you can get them for $30,000 to $75,000, and if you're willing to commute about 30-40 miles to work, you can buy a 3 bedroom ranch on 4 acres of land for $59,000 like my nephew just did two months ago.

Again, Demand-pull Inflation only affects select products or services, just like Cost-push Inflation, which is an increase in prices due to regulatory actions by governments at various levels. You might use the same amount of water or electricity as someone else, but pay more (or less) simply due to government regulations and not due to Supply & Demand.

Wage Inflation occurs when rising wages result in rising prices for goods and services. Wage Inflation was widespread and rampant twice in recent history, once in the early 1940s and again in the early 1970s. In both cases, FDR and Nixon established a Wage & Price Freeze to halt the damage.

Why didn't they simply freeze prices and allow wages to continue to rise?

I don't know.

Understand that in both cases, not every worker was getting a pay raise. In both cases, only certain classes or groups of workers were getting pay raises, and they numbered in the Millions, but at the same time, agricultural workers were not getting pay raises, and neither were office workers, retail and food service workers, sales people, managers or others, including a lot of licensed professionals local government employees who also numbered in the Millions and were getting pinched by the higher prices.

You should know that FDR's Wage & Price Freeze is the reason employers lord over your healthcare plans.

Since employers were barred from giving pay increases, employers opted to pay for healthcare benefits as a way of attracting and maintaining good people in their work-force.

Health insurance was almost exclusively offered solely by hospitals, or in large cities, groups of hospitals. You went to a hospital, signed up for a plan, then took the information to your employer who would pay all or part of the cost as your benefit.

Those hospitals were aligned with two larger groups, either the American Hospital Association (AHA) or the American Medical Association (AMA). The AMA plans allowed you to obtain care anywhere, but the AHA plans would only allow you to use their member-hospitals. That's how the "Out-of-Network" idea arose, and when the AHA created the Blue Cross in 1946, the "Out-of-Network" clause was a hallmark of their plans. The AMA created the Blue Shield in response. After the Supreme Court's 1949 In Re: Inland Steel decision, insurance companies jumped into healthcare.

The AHA's Blue Cross eventually took over the Blue Shield, but the damage was done, and you're stuck with the "Out-of-Network" nonsense and your employer controls your healthcare, all thanks to FDR.

While we haven't seen wide-scale Wage Inflation, it still occurs locally and regionally.

The main argument for raising the minimum wage, is that workers cannot afford housing, yet increasing the minimum wage ultimately results in rising rent prices, so the workers are no better off than they were before.

The solution to high rents is to meet the Demand, and assuming a city is fiscally sound, it can issue 20 year or 30 year bonds to pay for the construction of multi-family units to increase the Supply of housing and stabilize the price of rents. The city can hire a private company to manage the units, and use the rent paid to pay off the bonds. Everyone wins, but cities are too stupid to do that.

Anyway, no, one person sitting on some money is not going to cause any type of Inflation.

Quote:
Originally Posted by hitpausebutton2 View Post
As a consumer inflation is the evil, but as a business its a good thing?
somebody made comment..

The bold is what i cant grasp. Just rise the debt of the person?

Inflation also makes it easier on debtors, who repay their loans with money that is less valuable than the money they borrowed.
That's a bizarre statement you found.

The whole purpose of contracts is to obtain guarantees.

Whoever made that statement is apparently unfamiliar with the term "amortization."

My parents bought our home in 1965. Their monthly mortgage payment was $79.

I rented my first apartment in 1980 for $150/month. Obviously one can see the value of owning a home, as it fixes certain expenses, like housing, because my parents were still paying $79/month in 1980.

When banks set interest rates, they account for future Inflation, and when my parents paid their $79/month, that $79 wasn't going toward the principal. Only $17 was paid on the principal and the other $66 went straight to the bank, so it's not like the lender is being screwed.

The write also ignores the reality that while wages rise when there is Monetary Inflation, it's only long after prices have risen and totally gouged the debtor that wages rise, and the debtor never gets that very last pay raise, so the debtor ends up on the losing end of the stick.

When the debtor sells the home to buy another home, the debt doesn't necessarily benefit there, either, since the debtor may not be able to sell his home for a profit that will allow him to effectively pay cash for another home.

In the case of revolving credit, people should read their card-holder agreements, since many contain clauses that allow for an escalation of interest rates in the invent of Monetary Inflation, so the debtor doesn't necessarily benefit.
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Old 05-07-2018, 06:43 PM
 
2,360 posts, read 1,026,502 times
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Quote:
Originally Posted by Mircea View Post

Wage Inflation occurs when rising wages result in rising prices for goods and services. Wage Inflation was widespread and rampant twice in recent history, once in the early 1940s and again in the early 1970s. In both cases, FDR and Nixon established a Wage & Price Freeze to halt the damage.

Why didn't they simply freeze prices and allow wages to continue to rise?

I don't know.

Understand that in both cases, not every worker was getting a pay raise. In both cases, only certain classes or groups of workers were getting pay raises, and they numbered in the Millions, but at the same time, agricultural workers were not getting pay raises, and neither were office workers, retail and food service workers, sales people, managers or others, including a lot of licensed professionals local government employees who also numbered in the Millions and were getting pinched by the higher prices.

You should know that FDR's Wage & Price Freeze is the reason employers lord over your healthcare plans.

Since employers were barred from giving pay increases, employers opted to pay for healthcare benefits as a way of attracting and maintaining good people in their work-force.



When banks set interest rates, they account for future Inflation, and when my parents paid their $79/month, that $79 wasn't going toward the principal. Only $17 was paid on the principal and the other $66 went straight to the bank, so it's not like the lender is being screwed.

The bold is what i dont understand how can they legaly price freeze a wage, but allow cost of goods to continue to rise? Should have and always be the other way around. Freeze goods if the wages are not keeping up with demand prices. ( yes they can lower the price but remeber they are not a charity speech).

Dont you want the GDP to be same and we be singing in the rain? What process needs to happen to make them even, according to your post and good one! The consumer wants deflation to happen more then inflation to get better deal and spending to be encourage. I remember gas was 40 cents, and ecomomy was thriving, we had more to spend and we did. But soon as it went to 2+ in a matter of a few years, it tanked and we saw this back in 2000 when market was inflated. Correct?

Underline, no the lender was banking and your parents was getting screwed. Should been other way around honestly.%66 toward principle and rest on interest. Payment of the house would been paid in full lot quicker if they (lender) would have done that. ( Keeps you in debt shorter)
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Old 05-07-2018, 09:09 PM
 
Location: Omaha, Nebraska
6,297 posts, read 3,477,426 times
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Quote:
Originally Posted by hitpausebutton2 View Post
Back to the basics.. what would need to happen to get our wages higher then COL? to make goods cheaper to afford?
Start with basics: the world has limited need for unskilled laborers, and that need will be steadily decreasing in the future as automation continues to advance. We need to greatly improve the education of the average American, so they are capable of successfully competing for high-skilled jobs (instead of competing for sweatshop jobs).

We need to continue to modernize and improve our infrastructure, so that our country remains an attractive place to carry out business. (Improving access to high-speed internet services is especially critical if we want companies to be able to site their businesses in lower-cost areas, which acts as a countervailing force to Demand-pull Inflation of housing.)

We need to simplify both our tax code and our regulatory environment. (Note that I did not say reduce taxes, or eliminate regulations. Taxes should probably go back up to Clinton-era levels. But excessive complexity, both of taxes and of regulations, discourages the formation of new businesses and thus costs us jobs.)

We need to cut our excessive level of military spending and redirect that money to improving access to social services for those in the bottom third of the wage pyramid.

None of these are quick fixes, but they are a step in the right direction.

Quote:
Originally Posted by hitpausebutton2 View Post
The bold is what i dont understand how can they legaly price freeze a wage, but allow cost of goods to continue to rise? Should have and always be the other way around. Freeze goods if the wages are not keeping up with demand prices. ( yes they can lower the price but remeber they are not a charity speech).
That makes the problem worse! Freeze the price of goods and the production of those goods goes down.

Quote:
The consumer wants deflation to happen more then inflation to get better deal and spending to be encourage.
Only if the consumer is an idiot. Deflation increases unemployment, and the average consumer is not going to be increasing his spending if he has no wage coming in. Deflation only benefits the very wealthy, who have enough resources that they can ride out a deflationary spiral and in the process pick up assets being sold by the desperate for pennies on the dollar.
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Old 05-07-2018, 10:37 PM
 
5,221 posts, read 2,377,031 times
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Quote:
Originally Posted by Mircea View Post
<<SNIP>>

That's a bizarre statement you found.

The whole purpose of contracts is to obtain guarantees.

Whoever made that statement is apparently unfamiliar with the term "amortization."
You didn’t explain what amortization has to do with the question that was raised.

Quote:
My parents bought our home in 1965. Their monthly mortgage payment was $79.

I rented my first apartment in 1980 for $150/month. Obviously one can see the value of owning a home, as it fixes certain expenses, like housing, because my parents were still paying $79/month in 1980.

When banks set interest rates, they account for future Inflation,
If a bank makes a mortgage loan today at 4%, how does that account for future inflation? If rates go up to say, 6%, how is that “accounted” for?

Quote:
and when my parents paid their $79/month, that $79 wasn't going toward the principal. Only $17 was paid on the principal and the other $66 went straight to the bank, so it's not like the lender is being screwed.
You just accounted for $83 on a $79 payment. Am I missing something?
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Old 05-08-2018, 07:00 AM
 
4,836 posts, read 2,142,556 times
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Just wanted to compliment some of the posters for the explanation/analysis of economy projections based on supply/demand. Worth studying!

I've yet to find an easier way to save money other then to sock drawer it.
Last time I bought something...the cashier said...hey you saved $3.00. I said, nope otherwise that 3$ would be in my stash drawer. Instead I lost 6.98$ by acquiring this tool I néed to repair a faucet. That tool holds no value in cash...it has value in keeping the pipe secured. My goal is always to reduce the loss of revenue.and buying is losing revenue.
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Old 05-08-2018, 07:31 AM
 
5,605 posts, read 4,159,335 times
Reputation: 12338
Quote:
Originally Posted by hitpausebutton2 View Post
The bold is what i dont understand how can they legaly price freeze a wage, but allow cost of goods to continue to rise? Should have and always be the other way around. Freeze goods if the wages are not keeping up with demand prices. ( yes they can lower the price but remeber they are not a charity speech).

Dont you want the GDP to be same and we be singing in the rain? What process needs to happen to make them even, according to your post and good one! The consumer wants deflation to happen more then inflation to get better deal and spending to be encourage. I remember gas was 40 cents, and ecomomy was thriving, we had more to spend and we did. But soon as it went to 2+ in a matter of a few years, it tanked and we saw this back in 2000 when market was inflated. Correct?

Underline, no the lender was banking and your parents was getting screwed. Should been other way around honestly.%66 toward principle and rest on interest. Payment of the house would been paid in full lot quicker if they (lender) would have done that. ( Keeps you in debt shorter)
Who is the they who are freezing wages? My wages aren’t frozen. Never have been and they increase every year. Perhaps you’re referring to minimum wages as being frozen. If so, you’re wrong there too. Just because there’s a minimum doesn’t mean employers aren’t able to pay above that level.

As to your statement about how principal vs interest payments work, you need to read up on amortization. It’s how every home loan works. You’re paying principal and interest based on the loan balance. In the early years of the loan, that means you’re paying mostly interest and in latter years mostly to principal. If you find that unfair, just save up and pay cash.
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Old 05-08-2018, 10:22 AM
 
3,529 posts, read 2,173,136 times
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Quote:
Originally Posted by hitpausebutton2 View Post
ok point taken..

Back to the basics.. what would need to happen to get our wages higher then COL? to make goods cheaper to afford?
You need to transfer wealth from landowners/capitalists to wage earners. You can accomplish that directly (e.g. tax the rich, pay the poor) or indirectly (e.g. increasing inflation combined with increasing minimum wage).

The average consumption per American is much higher than a basic cost of living, but many people consume a bit less and a few people consume much, much more. On some level, you have to reallocate wealth.
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Old 05-08-2018, 10:45 AM
 
2,360 posts, read 1,026,502 times
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Quote:
Originally Posted by UNC4Me View Post
Who is the they who are freezing wages? My wages aren’t frozen. Never have been and they increase every year. Perhaps you’re referring to minimum wages as being frozen. If so, you’re wrong there too. Just because there’s a minimum doesn’t mean employers aren’t able to pay above that level.

As to your statement about how principal vs interest payments work, you need to read up on amortization. It’s how every home loan works. You’re paying principal and interest based on the loan balance. In the early years of the loan, that means you’re paying mostly interest and in latter years mostly to principal. If you find that unfair, just save up and pay cash.

I assume they put it all in one lump sum total. 100k house + %5 interest= 105k total with interest..

So 15 year payment be around $584 if my math is correct. So what am i missing here? ( insurance and taxes are separated i know)

If we cant freeze price of goods ,( other then state of emergency), producing more can lower it down but besides that.. what else can do to keep wages above col with out increasing the inflation value.
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Old 05-08-2018, 10:47 AM
 
2,360 posts, read 1,026,502 times
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Quote:
Originally Posted by FrankMiller View Post
You need to transfer wealth from landowners/capitalists to wage earners. You can accomplish that directly (e.g. tax the rich, pay the poor) or indirectly (e.g. increasing inflation combined with increasing minimum wage).

The average consumption per American is much higher than a basic cost of living, but many people consume a bit less and a few people consume much, much more. On some level, you have to reallocate wealth.

Might as well give up your hope and dreams because we know that will not happen. They can afford lobbiest to prevent this.
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