Key Points
- As shoppers await price cuts, retailers like Home Depot say their prices have stabilized and some national consumer brands have paused price increases or announced more modest ones.
- Yet some industry watchers predict deflation for food at home later this year.
- Falling prices could bring new challenges for retailers, such as pressure to drive more volume or look for ways to cover fixed costs, such as higher employee wages.
Question for the economists in this thread. Everyone seems to be saying that a lack of at least some inflation is bad but also that wages going up to meet it is bad. Isn’t this a system automatically doomed to fail? Eventually in such a setup no one can afford anything and the economy collapses.
Some inflation is necessary to prevent wealth hoarding. It’s one reason we moved away from the gold standard.
Minimum wage needs to be tied to it though because we’re still seeing a huge amount of wealth disparity which is exactly what inflation is meant to solve.
Inflation doesn’t prevent wealth hoarding. In fact it benefits non-cash assets which the rich hoard plenty.
That’s an issue with non-cash assets (like cash was when we moved away from the gold standard). And why Bernie suggested they be taxed heavily.
But the intention of inflation, was to prevent the hoarding caused by the gold standard.
How does reducing the value of cash prevent hoarding of gold (which would be worth more cash then)?
It’s not to prevent hoarding gold, it’s to prevent hoarding money. When tied to the gold standard when gold is worth more, money is worth more, and vice versa. By not selling my gold (or using my money), the gold (and cash) in circulation becomes artificially worth more, as the law of supply and demand dictates. This encourages the hoarding of cash because your money becomes more valuable the less money is in circulation.
The paper standard solves this through yearly inflation and decommodifying money. Commodities are subject to the law of supply and demand. Paper money isn’t and shouldn’t be. When both currency and the things we buy with currency are subject to the law of supply and demand, the system breaks down, essentially.
So, we no longer tie money to commodities. A lesson we learned the hard way, unfortunately.
But then they just hoard real estate.
You’re right, and it’s basically a loophole in the system. It should be fixed.
Inflation is fine as long as wages rise with it.
The issue is our economy is entirely built around low interest rates and low inflation. It’s been that way for a generation. This benefit asset-holders like home owners and the wealthy. Hence why they are doing everything possible to avoid wage-growth. They don’t care about inflation, what they are terrified of is wage growth and higher interest rates.
If wages rise together with inflation you get hyper inflation.
No, that’s nonsense. Wages going up are not going to cause 1,000% inflation per year.
But it will and there’s plenty of precedent, like Weimar Republic.
No, that was because of high volumes of money printing to pay debts.
Yeah, debts to workers.
That’s not how that works. That’s not at all how that works.
Right… Well, enlighten us all! Maybe you’ll get a prize or something for disproving economists!