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.
-
Show this thread
-
ⓘ Dogs don't have thumbs Retweeted Snake
31/ I've said "sticky prices" several times.https://twitter.com/tigerboy74u/status/1188971518815899649 …
ⓘ Dogs don't have thumbs added,
3 replies 0 retweets 3 likesShow this thread -
1 reply 0 retweets 2 likesShow this thread
-
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.
1 reply 0 retweets 2 likesShow this thread -
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.
1 reply 0 retweets 2 likesShow this thread -
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.
1 reply 0 retweets 2 likesShow this thread -
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
2 replies 0 retweets 2 likesShow this thread -
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"
1 reply 0 retweets 2 likesShow this thread -
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>
4 replies 0 retweets 5 likesShow this thread -
Replying to @MorlockP
FWIW while I grok this, I am not convinced that low and stable deflation would be as bad as the standard economists' standard argument (which you outlined, in part) says it would, and that a Fed target of 0% would be as benign as 1% or 2% even with random walks into the negative.
1 reply 0 retweets 2 likes
-
-
Replying to @MorlockP @random_eddie
Seems to be mostly a issue of framing inflation relative to a moving reference point. 'Keep value within 4% of 20XX value, and rate of change less than 2% per year'
1 reply 0 retweets 0 likes -
Replying to @chris_polis @random_eddie
but former isn't actually of any utility
1 reply 0 retweets 1 like - Show replies
New conversation -
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.