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[McTraveller]

Just saw an op-ed on CNN about how someone thinks a solution to high inflation is to increase minimum wage.

While I know that increases in minimum wage don't have a strong causal influence on inflation, raising minimum wage doesn't reduce inflation... it barely mitigates its effects.   

Also if you want to look at more odd choices - check out OPEC cutting production explicitly to increase prices, because they are worried about reduced demand due to worldwide recession.  Talk about a move that does have strong causal influence on inflation and recession...

[None]

Is that a solution proposed to fix inflation or a solution proposed to ease the pain of inflation? Rising prices affect different wealth groups very differently.

[McTraveller]

It was in the same op-ed section as "raise interest rates" and "release strategic reserves" - so it seemed like it was for "addressing inflation" not just the "address the pain of inflation."

[EuchreJack]

Increasing minimum wage IS inflation. Anyone that can't concede that point is an idiot.

Now, I'm not necessarily saying that it's not an appropriate response to inflation, but you have to get the inflation under control before you throw more gas on the fire.

[Loud Whispers]

Increasing minimum wage IS inflation. Anyone that can't concede that point is an idiot.

Now, I'm not necessarily saying that it's not an appropriate response to inflation, but you have to get the inflation under control before you throw more gas on the fire.

The price of labour increasing is a symptom of inflation, as much a cause of it. The creation of money is the foremost cause of inflation, not the circulation of money. The circulation of money is the purpose of money; higher wages is simply a way to transfer wealth from job destroyers and low-productivity workers to job creators and high-productivity workers. It will not affect the creation of money, but it will grow the economy and improve living standards for all those suffering a real decline in their ability to purchase vital resources like living space, nutrition, clothing & transport. Much hubub is put on how rising wages would make rising services and manufacturing costs, thus forcing businesses to raise prices and drive inflation up. So individuals are asked to take a real wealth cut and a real drop in security and living standards - and yet inflation still continues. This is because all of America's news media are owned by 4 companies, none of which want to discuss the role that profits have in the deleterious wealth transfer from poor to ludicrous elite. E.g. it's unfair to expect Amazon or McDonalds to pay more of the record profits they make to the workers who made those profits, but Jamal and Cletus need to really tighten their belts so shareholders can get better returns on Jamal's shift

[JoshuaFH]

Wouldn't the way to fight inflation be to incentivize saving, incentivize long-term investments, increase taxes, anything to tie up people's money and remove it from the economy?

[MrRoboto75]

Wouldn't the way to fight inflation be to incentivize saving, incentivize long-term investments, increase taxes, anything to tie up people's money and remove it from the economy?

Kinda?  Velocity, how often money changes hands, is the other half of the money value equation after the money supply.

Problem is we've already been irresponsible with interest rates as-is, politicians want it low to make the economy look better than it is over their terms.  Even without quant. easing policy we were teetering on recession over/post the quarantine.  We're typically expected to ease during boom times.

[Duuvian]

Increasing minimum wage IS inflation. Anyone that can't concede that point is an idiot.

Now, I'm not necessarily saying that it's not an appropriate response to inflation, but you have to get the inflation under control before you throw more gas on the fire.

The price of labour increasing is a symptom of inflation, as much a cause of it. The creation of money is the foremost cause of inflation, not the circulation of money. The circulation of money is the purpose of money; higher wages is simply a way to transfer wealth from job destroyers and low-productivity workers to job creators and high-productivity workers. It will not affect the creation of money, but it will grow the economy and improve living standards for all those suffering a real decline in their ability to purchase vital resources like living space, nutrition, clothing & transport. Much hubub is put on how rising wages would make rising services and manufacturing costs, thus forcing businesses to raise prices and drive inflation up. So individuals are asked to take a real wealth cut and a real drop in security and living standards - and yet inflation still continues. This is because all of America's news media are owned by 4 companies, none of which want to discuss the role that profits have in the deleterious wealth transfer from poor to ludicrous elite. E.g. it's unfair to expect Amazon or McDonalds to pay more of the record profits they make to the workers who made those profits, but Jamal and Cletus need to really tighten their belts so shareholders can get better returns on Jamal's shift

In addition, while the following is a vast oversimplification, there are luxury goods, and basic goods that everyone requires. It can be assumed that the basic goods will remain affordable outside of some sort of disaster or disruption, due to competition and a government interest in stability leading to intervention, though pricing methods could possibly skew that at some point in the production and transport chain (not only retail) especially as one of the more commonly ways inflation is calculated is by essentially measuring changes in retail price that does not seek to determine reasons for the retail price being such as it is, and if I may put on my insane conspiracist hat could be used (due to the limited mechanics of measuring) for political reasons in theory for at least short periods if there is consolidation in production/transport/retail, but I digress greatly on something effectively intangible for me to determine at my current power level in economics as well as it generally being unlikely with all the far more reasonable explanations for a price change. For a simple example using my preferred amateur gauge of a 2 liter of generic knockoff carbonated drink, the things cost more in wealthier areas vs the cost in a significantly less wealthy neighborhood nearby. Whether this is due to the natural desire to increase profit when possible or for other reasons effecting the disparate pricing I'll never know I think. Housing is a different beast and I don't mean to include that as there are so many distortions that frequently happen in that market, and it's also difficult to compare such a good that can radically differ in it's composition for this purpose of sidetracking into complaining about pricing rather than using a stable comparison of the same type (cola) and size/quantity of local brand 2liter drink.

If a large portion of money supply remains in the accounts and investments of fewer fortunates, this may actually stimulate the luxury market (investment on large scale or "living off the interest" could arguably be included here but usually it's described as things like the Yacht industry) while depressing prices on basic goods due to a lack of money supply in the broader consumer base of these industries. However there are also intermediate or semi- luxuries as I learned in a Robert Reich documentary I watched many years ago that featured the now infamous Pillow Guy (my reason for dismay when I learned how far off the cliff that man has gone) where he explained that a pillow is a semi-luxury in that a person may be able to use the same pillow for twenty years if necessary, but will replace it much more frequently if wealth allows it while it still being in demand in some form whether cheap or luxurious to pretty much everyone. This means that increasing wages in an economy actually sells more pillows and is better for the semi-luxuries industry in contrast to the luxury industries, while an increase in basic goods pricing can be absorbed better by having higher wages (though pricing schemes will do their best to disrupt that and keep consumer prices high without being unbearable as it is an art to find the balance point on profitability regarding prices and volume of sales). A semi-luxury in this theory goes up in price as fewer will be sold at high income disparities and less workers employed to make them, less production capital to mass produce them driving up the cost per individual item which on an economy wide scale has a theoretical effect of further impacting the production numbers and employment, while raising the cost of these type of items, so that between the broader effect on employment and higher costs, more people are using pillows they would have discarded or replaced.

I likely screwd up the terminology as I didn't do some refresher reading to recall the correct terms but I hope it is clearly expressed regardless. Also, I'm not an expert, so there may be many flaws that I'm not aware of in the theory, being a humble dabbler in economics, especially with an aged documentary being my main example.

[McTraveller]

Much of the economy is a "who blinks first" situation, tied in with human emotions and drives.

Consider also that at its core, an economy isn't money at all - it's goods and services and money is just a tool that at its best facilitates balancing production of goods and services with desire for goods and services.  At its worst, money creates massive imbalance.

The curious thing about those with capital reserves holding it tight (and so causing a recession) is - what are they afraid of losing?  If they could spend $1M today to keep 20 people employed for a year making widgets, are they really better off if they fire them instead and just sit on the $1M?  The calculus must be "I think if I spend that $1M this year, I may not actually be able to sell anything at all and so will lose money, but if I hold that $1M, I'll at least have $1M at the end of the year."

But if too many people do this - then there won't be anything left to buy; in the reductio ad absurdum they would have their $1M but there would be zero goods and services.

Ultimately this is an odd artifact of extreme specialization: at least in medieval times, the owner-class had, at the end of a year, food and clothing and basic resources.  Today, most owner-classes don't actually produce necessities, so they'd rather just sit on their cash reserves and buy the excess produce from those that do make basic resources.

Is the problem bankruptcy law? Is it over-specialization? Is it the lack of a buyer of last resort, always providing incentive to keep production up of some products when there is little demand - or to ensure there is a reasonable reserve if there is a supply disruption such as with war or pandemic?

That is - we have a strategic petroleum reserve, should we have strategic housing reserve? Strategic automobile reserve? Strategic food reserves? Strategic clothing reserves?

(Sorry, this was kind of a random collection of topics...)

[McTraveller]

It's been a while, so new post:

I was reading an article yesterday about how the average monthly income in some countries is the equivalent of like $250 (US).

My understanding is this is done not on a purchasing-power-parity comparison but just on a nominal conversion rate comparison.

My musings are thus: If it's possible to live (albeit with a low standard of living) on $250 a month - which it must be possible to "survive" on that - basic food and stuff at least - then what bizarre systems are in place which prevent price equality?  I mean, I'm pretty frugal with my budget, and it costs my family of four roughly $800 a month for groceries ($50/person-week).

In these countries with $250 monthly income, how much does it cost for monthly groceries?

What's preventing resourceful "rich" folks from going in, buying that really cheap food for even half what it costs me locally, both giving those low-income places more revenue and getting me my food for less?  That is - why is there not massive arbitrage here?  Is it purely trade restrictions?

[EuchreJack]

It's been a while, so new post:

I was reading an article yesterday about how the average monthly income in some countries is the equivalent of like $250 (US).

My understanding is this is done not on a purchasing-power-parity comparison but just on a nominal conversion rate comparison.

My musings are thus: If it's possible to live (albeit with a low standard of living) on $250 a month - which it must be possible to "survive" on that - basic food and stuff at least - then what bizarre systems are in place which prevent price equality?  I mean, I'm pretty frugal with my budget, and it costs my family of four roughly $800 a month for groceries ($50/person-week).

In these countries with $250 monthly income, how much does it cost for monthly groceries?

What's preventing resourceful "rich" folks from going in, buying that really cheap food for even half what it costs me locally, both giving those low-income places more revenue and getting me my food for less?  That is - why is there not massive arbitrage here?  Is it purely trade restrictions?

You're probably fond of heat, air-conditioning, electricity, and indoor plumbing. You also probably don't spend half the day every weekend transporting your water for the week.

I saw something on the Discovery channel about folks in the US trying to live in the woods. They don't have huge expenses, but they spend quite a lot of time doing stuff we take for granted.

Remember also that many of those countries live along the equator. They don't have to heat their homes with much more than a stove, as their winters are warm and short.

As to your actual question: You CAN grow food yourself, and it SHOULD reduce your grocery bill. Of course, foods that grow easily might not be to your liking.

[Loud Whispers]

In these countries with $250 monthly income, how much does it cost for monthly groceries?

What's preventing resourceful "rich" folks from going in, buying that really cheap food for even half what it costs me locally, both giving those low-income places more revenue and getting me my food for less?  That is - why is there not massive arbitrage here?  Is it purely trade restrictions?

Transport usually kicks things up a notch. Otherwise you can totally do stuff like that. E.g. rich people flying to another country to buy tailor-made clothes at prices cheaper than generic store one size fits all clothes. Of course it also makes more economic sense for rich people to fly to a cheaper country to get their goods because they also receive a lot of free flights from their credit and air club schemes. Another similar version is old pensioners moving from the west to live in hotels abroad. And to some extent you can get away with arbitrage, and you see it a lot even between countries that have no trade deals at all and so face full tariffs. I guess the main competition is that if you try to get away with something like selling cheap imported food... You'll probably already be competing with a globomartcorp^TM who has the same idea

[anewaname]

Spoiler (click to show/hide)

It's been a while, so new post:

I was reading an article yesterday about how the average monthly income in some countries is the equivalent of like $250 (US).

My understanding is this is done not on a purchasing-power-parity comparison but just on a nominal conversion rate comparison.

My musings are thus: If it's possible to live (albeit with a low standard of living) on $250 a month - which it must be possible to "survive" on that - basic food and stuff at least - then what bizarre systems are in place which prevent price equality?  I mean, I'm pretty frugal with my budget, and it costs my family of four roughly $800 a month for groceries ($50/person-week).

In these countries with $250 monthly income, how much does it cost for monthly groceries?

What's preventing resourceful "rich" folks from going in, buying that really cheap food for even half what it costs me locally, both giving those low-income places more revenue and getting me my food for less?  That is - why is there not massive arbitrage here?  Is it purely trade restrictions?

The three problems are lawyers, guns, and money.

If you want to buy cocoa from Ghana and pay the farmers twice as much, you are going to be confronted by the existing "market makers", which includes the merchants in Ghana who are forcing the farmers to sell for as little as possible, and the merchants in your country, who sell the chocolate for as much as possible. These two groups are making good money, each by exploiting the people within their own country. Each of these groups will use lawyers, guns, and money within their country to stop you from interfering with their profit margins. You might only experience the "guns" in the form of piracy and theft, but some of the farmers who supported you may get killed.

Look at all those nations that produce specialty organics (cocoa, bananas, tea, coffee, so many spices, and cane sugar). The guys who rule those countries keep the farmers impoverished, because they like the profit gained by selling internationally. This is economic slavery. All of these countries sell to countries that give their own workers more rights, education, wealth, and freedom.

[McTraveller]

So that basically confirms what I thought - "trade restrictions" was my shorthand for "the people with guns preventing free trade from happening."

[Loud Whispers]

So that basically confirms what I thought - "trade restrictions" was my shorthand for "the people with guns preventing free trade from happening."

Reminds me of one of my old Russian-Ukrainian schoolmates who used to fly to Ukraine to buy tobacco to resell in the UK. It's the kind of stuff you can get away with when you're arbitraging 60 packets of cigarettes but when you start getting higher the people whose profits you're hurting notice it and put an end to it