Originally posted by @metal-brainIf you are in the lowest wage bracket you don't have a portfolio and you cannot afford it.
Index funds do not require monitoring. A diverse portfolio is a very safe investment with very little risk. You don't know what you are talking about.
Higher wages have never led to higher interest rates. That is a myth.
The world owes the underclass a wage that is adjusted for inflation. If you like the poor losing buying power so you can do better that is called being selfish. It is called class warfare and you are a sick POS!
A diverse portfolio is safe right until it isn't. Many people lost a lot (or everything) in the last crash. There is no risk free portfolio's. Even government bonds sometimes fail.
Higher wages leads to higher inflation. At least in theory. Higher interest rates is another discussion.
I agree that higher inflation equals a real wage decrease. I think all economic schools agree on this. Unions (in Denmark at least) fight for wage increase to match inflation (as a minimum) so their members don't see a real wage decease. This is fair in my mind. In the US things are a little different, I believe?
Originally posted by @metal-brainAgreed.
No, the debt is out of control. Trump has done nothing about it but make it worse.
Originally posted by @metal-brainAs with all economic KPIs they cannot stand alone or explain the entire situation. That the US could do better, I think everyone on RHP agrees upon.
The unemployment rate is a farce.
https://www.nytimes.com/2018/09/14/opinion/columnists/great-recession-economy-gdp.html
Originally posted by @metal-brainThe late 60s saw an increase in inflation (in the US). The 70s began with the Nixon shock - fun times. And then the stagflation that has been discussed so much in economic theory.
The 60s and 70s were periods of inflation. The FRS caused that inflation. Your whole unintelligible guess is based on the belief inflation is an accidental event and it is not.
I don't think the FED in itself would have caused the crisis in the 70s. The pressure on the USD, which let to the end of the Bretton Woods system, was influenced by the lowered interest rates by the FED. However, the supply shock that the increased oil prices gave wasn't and that had at least as much effect.
Originally posted by @wajomaFirst of all, I'm not struggling. Lets start by defining inflation - from wiki: "inflation is a sustained increase in the price level of goods and services in an economy over a period of time."
If one were to take a snap shot of an economy, there are X dollars in circ, and there is Y wealth, all looks hunky dory. A unit of currency buys a something of value tha tis measured as a unit of currency But it is the act/action of pumping currency in faster than what wealth is increasing which is inflation. Might be why you're struggling with the concep ...[text shortened]... sents wealth, it is not wealth in and of itself. Need to stretch your mind around that one too.
A snap shot in itself tells us absolutely nothing. What happened in the previous period? Are there sticky prices (or wages) or was money supply decreased? At what state is the economy in?
How fast does an increase in money supply change price levels? It isn't instant in most industries (menu cost) so you see no loss of purchasing power one from day to the next.
Secondly, we have the effects of increasing money supply on the exchange rate, on the treasury bonds, etc. It's a lot more complex than it seems.
(short run) Inflation and money supply are a hugely discussed subjects and there is no agreement in theory. Supply shocks are not that rare.
Banks (or more correctly financial institutions including banks/hedge funds/pension funds/equity funds/investment banks, etc) are maximizing their profits within the given regulations (most of the time). As they should. However, the banks have become so big it's changed the economic setup. Government should regulate banks even more to avoid another 2008. I agree with you that right now the banks and (some) governments are in same boat and it's not the government leading. That's is unhealthy for society as the profit doesn't tickle anywhere outside the ones that get it. Unfortunately, there is no end in sight for this behavior and even if the banks wants to reduce risk, they cannot, since another bank will feel no moral obligation to reduce their risk.
Originally posted by @wajomaIt's called the wage-price spiral. I don't really see any point in arguing what comes first.
Ooops, got that one back to front, wages are trailing inflation not driving it.
However, we do see trailing real wages for the lower classes in the US. This will increase the inequality and lead to nothing good. On that I think we agree?
Originally posted by @lundosA diverse portfolio is safe in the long term. Wealthy people have the money to wait out anything short term. There are 4 mutual funds that will insure a very safe investment with minimal risk.
If you are in the lowest wage bracket you don't have a portfolio and you cannot afford it.
A diverse portfolio is safe right until it isn't. Many people lost a lot (or everything) in the last crash. There is no risk free portfolio's. Even government bonds sometimes fail.
Higher wages leads to higher inflation. At least in theory. Higher interest rates ...[text shortened]... real wage decease. This is fair in my mind. In the US things are a little different, I believe?
"Higher wages leads to higher inflation. At least in theory."
In theory, but not in example. Don't blame inflation instead of the money supply. Wages have never caused inflation in the USA. NEVER!
Originally posted by @lundos"However, the supply shock that the increased oil prices gave wasn't and that had at least as much effect."
The late 60s saw an increase in inflation (in the US). The 70s began with the Nixon shock - fun times. And then the stagflation that has been discussed so much in economic theory.
I don't think the FED in itself would have caused the crisis in the 70s. The pressure on the USD, which let to the end of the Bretton Woods system, was influenced by the lowere ...[text shortened]... the supply shock that the increased oil prices gave wasn't and that had at least as much effect.
I disagree. We had hyperinflation in the 70s and the Saudi embargo cannot be blamed for that. After Iraq was invaded we saw oil prices soar, yet no hyperinflation.
That is the problem with economic theory. It is not economic fact.
Originally posted by @deepthought"The proximate cause of price inflation is people increasing the asking price of whatever they are selling. This is in response either to supply price increases, or because they believe that the market will accept it due to an increase in demand."
I did not mention inflation in my post. What is more it was perfectly clear. I was talking about unemployment and not inflation. However, since that seems to be what you are interested in: The proximate cause of price inflation is people increasing the asking price of whatever they are selling. This is in response either to supply price increases, or ...[text shortened]... ncrease in demand. All that central banks can do is tinker with base rates and set regulations.
Supply price increases are mostly because of inflation. Competition is supposed to keep prices in check. Even higher oil prices after the invasion of Iraq did not cause inflation to spiral downward and out of control.
You are just repeating unsupported economic theory.
Originally posted by @wolfgang59Economists will tell you the government controls inflation. Don't you ever listen to economists?
Politicians not in power will tell you the government controls inflation.
Politicians in power will tell you it is due to the world economy/war/oil prices/wind direction.
Politicians lie, especially if they are in power.
Originally posted by @wolfgang59It is about time you acknowledged it. Don't forget this time!
Really!
Any more pearls of wisdom?
You do realise I am only slightly to the right of shav don't you?
Originally posted by @lundos"As long as the interest rate are above the inflation there is incentive to save money - and depending on your risk tolerance even below."
As long as the interest rate are above the inflation there is incentive to save money - and depending on your risk tolerance even below.
Inflation in itself only discourage savings outside bonds/banks.
I do not believe the FED wants to keep people poor. Why would that be? The poorest in most countries tend to spend all their money. This is either bec ...[text shortened]... hich is one of the main reasons to keep inflation down. The FED (and the EU) wants exactly that.
Sure, but that is not always the case. After the 2008 financial crisis for example. High inflation and low interest rates. Didn't the FRS artificially support US treasury bonds to prevent an exodus from them?
Originally posted by @lundos"I do not believe the FED wants to keep people poor. Why would that be?"
As long as the interest rate are above the inflation there is incentive to save money - and depending on your risk tolerance even below.
Inflation in itself only discourage savings outside bonds/banks.
I do not believe the FED wants to keep people poor. Why would that be? The poorest in most countries tend to spend all their money. This is either bec ...[text shortened]... hich is one of the main reasons to keep inflation down. The FED (and the EU) wants exactly that.
The FRS serves the elites and they want wealth to trickle up instead of down. That is why.
Why would people support overt slavery? Because some people like to exploit people. Economic slavery is covert and they want to keep it that way. The best slaves are those that think they are free.
Originally posted by @metal-brainTell that to the clients of Lehman Brothers, Bear Stearns or the thousands of banks that have gone bankrupt after 2008. Minimal risk is not risk-free, and minimal risk might mean a 3%-5% profit before tax p.a. which doesn't really help low income bracket households that much.
A diverse portfolio is safe in the long term. Wealthy people have the money to wait out anything short term. There are 4 mutual funds that will insure a very safe investment with minimal risk.
"Higher wages leads to higher inflation. At least in theory."
In theory, but not in example. Don't blame inflation instead of the money supply. Wages have never caused inflation in the USA. NEVER!
In theory, but not in example. Don't blame inflation instead of the money supply. Wages have never caused inflation in the USA. NEVER!
That is some statement. You are saying that wages haven't had any effect on prices at all in the entire US history. Not even 0,0001%. I disagree.