22/ If we have 300 million Americans and each has 1 dollar and each wants to buy 1 apple today with that dollar, and we have 300 million apples <handwave> the market clearing price is $1/apple.
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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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