12/ note again: this is CONSTANT DOLLARS. So we're seeing that people produce 2.2 times as much / earn 2.2 times as much over 50 years. Extrapolating to 100 years, that's a 5x. Population has done a 3.5x wealth increase x population increase = 20x compared to your figure of
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23/ If we add 50 million new Americans through birth / immigration / cloning, and each has the same apple demand curve, and we don't introduce any more apples, prices climb. But say that 1 in 1000 Americans grows apples, and grows 1,000 apples each. Pop growth -> apple growth
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24/ So we still have one apple per person. HOWEVER we have failed to increase the money supply. There are 350 M people who want 350 M apples, but only 300 M dollars. Apples are now 85 cents each, and wages have likewise dropped by 15%. When pop grows we need to grow $ supply
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25/ and deflation is BAD. When your boss tells you "new deflation figures are in, we need every employee to accept a 1% paycut...but good news, it's only nominal not real" no one is happy.
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26/ Fed doesn't run a deficit, US gov does. Agree, if the Fed increases money supply faster than population, we get inflation. However MODEST INFLATION IS GOOD. Far better than deflation. https://twitter.com/Bobthewelder3/status/1188970092551430146 …
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27/ That's not "hidden" inflation. That's regular inflation. Inflation only hurts two ways: 1) cash holdings 2) UNCERTAIN inflation prevents ideal business investment https://twitter.com/Bobthewelder3/status/1188970092551430146 …
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28/ The utility in inflation is not "wow, it's great that we've had 10,000% when you compound it over years". The utility is "it's always better to have +0.2% per quarter than -0.2%". So you aim to have errors on one side of the target.https://twitter.com/tigerboy74u/status/1188970535524261895 …
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29/ I've explained this. * deflation is QUITE BAD * modest predictable inflation has almost zero downside * therefore you should always aim slightly at the pro inflation side of the target, to avoid bad deflation 100% of the value is avoiding deflationhttps://twitter.com/tigerboy74u/status/1188971108776599552 …
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30/ OK, maybe not 100%. Some minor part of the utility of inflation is that it lets moderately unsuccessful businesses and moderately defective employees stay in place and avoid painful "creative destruction" that would otherwise be required.
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31/ I've said "sticky prices" several times.https://twitter.com/tigerboy74u/status/1188971518815899649 …
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33/ But to expand for folks who don't want to read the whole thing: imagine a firm making widgets with productivity X. Measured in apples, it produces 1,000 apples worth of value per week.
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34/ If the firm has 100 employees each earning $10/week, it's paying out 1,000 apples worth of wages per week. We'll ignore cost of goods sold, rent, etc.
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35/ So now, let's imagine some deflation. Either the fed screws up the fiat currency, or there is a surge in demand for gold elsewhere in the world, and there's less gold sloshing around the US. 10% deflation. Apples now cost 90 cents each. The firm is paying out $10/person.
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36/ Wow, those lucky employees! Last week they could buy 10 apples with their weekly paycheck, but this week they can buy 11 apples with their weekly paycheck! Except ... the firm has to sell widgets. Exchange rate of apples / widgets hasn't changed. Only NOMINAL prices did
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37/ So the firm has to drop its price of widgets by 10% in order keep up with the general deflation. But, hey, it's MERELY nominal prices. So firm goes to employees. "Guys, dollars are worth 10% more this week...so we're paying you 10% less"
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38/ Employee: the HELL you are Boss: no, it's cool. We gave you $10 last week and you could buy 10 apples, and we're going to give you $9 this week...and you can still buy 10 apples. YOUR SALARY HASN'T CHANGED IN REAL TERMS. Employees: <rioting INTENSIFIES> <strike starts>
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39/ I feel that this is kind of a loaded question, because I'm defending "fiat currency is real" and "deflation is bad", and folks are trying to hit me with every single policy they dislike, as if they're all the same thing. And they're not.https://twitter.com/tigerboy74u/status/1188973750475059201 …
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40/ > when you have a massive trade deficit first of all, it's rarely the case that there are real and prolonged deficits we export a lot of things. many of them are services. one of the big ones is "economic stability" when we export dollars, tons of them flow back >>>
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41/ to buy things like "bank accounts denominated in American dollars" and "real estate subject to the rule of law".
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42/ slightly, yes, I am. The problem with hard money is that the money supply does not scale in sync with the overall economy. Remember "won't be crucified on a cross of gold" from high school history? that said, I like multiple competing currencies https://twitter.com/relicn0cer/status/1188973952015712258 …
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43/ ok, ALL SORTS of things are getting dragged in and conflated. what's the change in demand for housing? what's the change in supply of labor? what's the USG's actual (not official) policy on illegal aliens? have carpenters upped their productivity? https://twitter.com/Bobthewelder3/status/1188974485191479298 …
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44/ also, any time I see statistics, I want to know WHAT DO THEY REALLY MEAN. In that graph that
@Bobthewelder3 presents, what's the definition of "construction worker" in 1975? Today? What percent were crane operators then? Today?Show this thread -
45/ there's some truth here, but also there's explicit PRC industrial policy, US policy (commoditizing compliments of our speciality which is high tech white collar products, and which crushes blue collar workers), also aspects of >>> https://twitter.com/Bobthewelder3/status/1188975865817899013 …
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46/ "well, just bc Blue Collar Jim wants to earn $25/hr making Snap On wrenches is no reason to forbid
@MorlockP from buying a $1 good-enough Chinese wrench" and also, of course, automation I wonder if the construction wages are falling bc of prefab etcShow this thread -
47/ ok, fine, but neither one of these is topics that I chose to defend / am defending https://twitter.com/Bobthewelder3/status/1188976318345560065 …
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48/ well, sure One can't defend the use of copper in electric wiring without, at 5 removes, getting dragged into a debate about three toed sloths impacted by the train lines that carry workers to the factory that makes wire drawing machines https://twitter.com/Bobthewelder3/status/1188976671975755778 …
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49/ but just because all things tie together does not mean that when I set out a thesis that I am willing to defend ("fiat currency is actually currency") that I am signing up to debate and/or defend every single topic in the field of economics.
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50/ 50 is a good number. I'm done. Punching back into work after (checks clock) 1.5 hours of dinner and nonsense.
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End of conversation
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