[noemon]

Hey, ingliz, I think you're a 'champ' for pointing all of this out -- all the ruling class does is blame *wages* for inflation when actually lagging wages is the *effect* of rising inflation, not its cause.

All you are doing is being somebody's victim, your whining is boring though and contains zero information for our readers other than the whine itself.

As previously stated the high inflation we are witnessing is down to:

1) Extreme QE
2) Energy prices
3) Wage-price spirals

There have been wage-price spirals in the UK the past year in several sectors primarily, truck drivers, hospitality staff, agriculture and construction due to very high employment levels.

Our ruling classes have responded by taking all our money and giving it to rises for pensioners, benefit claimants and public employees.

Still you lot are unhappy and even more entitled than you were before.

[noemon]

First of all, I didn't specify high (or low) inflation.

Make up your mind please on what it is that you are talking about. Are you talking about our high inflation today or about regular moderate inflation?

1) And what argument might that be?

2) Evidently not since they're recording record profits. Current windfall taxes are attentuating, not preventing, profiteering.

3) That it's not true to say "there is no winner from inflation".

The argument that high inflation creates winners or losers. High inflation does not create any winners.

That'd be news to BP, ExxonMobil etc just now. Or to OPEC during the 1970s.

High wholesale energy prices are giving them the opportunity to profiteer, not inflation. Inflation is a symptom not a cause.

It isn't even what I said.
Prove what negative?
Why? What does it even mean?
I was originally trying to establish why the Truss fiasco (allegedly) discredits MMT. That trail went cold but led to discussion of inflation in general, which is commonly misunderstood as an aggregate loss of purchasing power. For a given quantity of available goods and services, it's nearly always a redistribution of purchasing power.

Seriously, you need to point out these winners from inflation since you insist on it.

In the case of a supply shock (a reduction in the quantity of available goods and services), price rises are effect, not cause. Trying to cure it by further reducing the quantity of available goods and services probably will result in aggregate loss of purchasing power, whatever the effect on nominal prices.

Not sure what your point is, further reducing the supply of available goods results in even higher inflation.

Today a large part of our inflation is due to reduced availability of energy, semiconductors and employees.

The cure is to increase supply, not reduce it. The other cure is to reduce demand by redistributing wealth from the middle-classes to the lower classes which is what our ruling classes have opted for but that reduces aggregate economic output and impoverishes everyone.

Moderate predictable inflation is also stimulative of growth, hence most rich countries deliberately maintain it.

Which countries "do not deliberately maintain moderate inflation"?

[SueDeNîmes]

Make up your mind please on what it is that you are talking about. Are you talking about our high inflation today or about regular moderate inflation?

Why? Has somebody forbidden discussion of inflation in general?

The argument that high inflation creates winners or losers. High inflation does not create any winners.

That'd be news to BP, ExxonMobil etc just now. Or to OPEC during the 1970s.

High wholesale energy prices are giving them the opportunity to profiteer, not inflation. Inflation is a symptom not a cause.

And how is that not an example of inflation with winners?

Seriously, you need to point out these winners from inflation since you insist on it.

Seriously, I'm happy with what I've already pointed out until I hear some counterargument.

Not sure what your point is, further reducing the supply of available goods results in even higher inflation.

Today a large part of our inflation is due to reduced availability of energy, semiconductors and employees.

The cure is to increase supply, not reduce it.

So raising interest rates until the economy contracts is not a cure.

The other cure is to reduce demand by redistributing wealth from the middle-classes to the lower classes which is what our ruling classes have opted for but that reduces aggregate economic output and impoverishes everyone.

I doubt the idea is to reduce demand since the lower classes have the higher marginal propensity to consume. "Our ruling class" would rather squeeze the middle than themselves.

Which countries "do not deliberately maintain moderate inflation"?

I don't know whether there are any.

[noemon]

Why?

Why do you need to specify if you are talking about moderate inflation or high inflation or stagflation?

So that we know what we are talking about.

That'd be news to BP, ExxonMobil etc just now. Or to OPEC during the 1970s.
And how is that not an example of inflation with winners?
Seriously, I'm happy with what I've already pointed out until I hear some counterargument.

You have been told several arguments and ignored them all:

1) High wholesale energy prices are giving them the opportunity to profiteer, not inflation. Inflation is a symptom not a cause.
2) Inflation can go up while energy prices may go down. That is enough to prove your argument wrong.
3) Since some of our existing energy providers are indeed profiteering from higher energy prices we smack them with windfall taxes to prevent them from profiteering.
4) A lot of energy companies are public national companies. Saudis, EDF and plenty more around the world.
5) Profiteering enforces the argument that all should nationalised and the lot of them are interfered with by various and wide-ranging means, windfall taxes, nationalisations, etcetera.
6) Most importantly, you have still failed to produce your underlying point.

So raising interest rates until the economy contracts is not a cure.

Increasing interest rates contracts the money supply, which makes available money more valuable and reduces private debt.
Its effect on economic output is significantly lesser than contracting demand.

Do you even know what QE is? QE is basically free money printed by central banks and handed over to private banks to give out as loans. During the past 10 years our economies have printed multiple trillions worth of money, funneled into the banking system to sustain fake growth, venture capital and bubbles in the housing market and beyond. This has made the big fish corporations, lazy, wasteful and impotent echoing public companies of old. Hence why were are not seeing any innovation by our big corporations. Restricting the money supply has a lot of added benefits aside from reducing inflation, it also disciplines these big fish and makes them far more productive.

I doubt the idea is to reduce demand since the lower classes have the higher marginal propensity to consume. "Our ruling class" would rather squeeze the middle than themselves.

False, as they are squeezing both the middle and the upper. Truss reduced the upper bracket from 45% to 40% and Hunt increased it from 45% to 60% by taking away the personal allowance, topped up with a 30% increase on corporation tax.

I don't know whether there are any.

Right, so you admit that your statement is wrong then.

[Steve_American]

Why do you need to specify if you are talking about moderate inflation or high inflation or stagflation?

So that we know what we are talking about.


You have been told several arguments and ignored them all:

1) High wholesale energy prices are giving them the opportunity to profiteer, not inflation. Inflation is a symptom not a cause.
2) Inflation can go up while energy prices may go down. That is enough to prove your argument wrong.
3) Since some of our existing energy providers are indeed profiteering from higher energy prices we smack them with windfall taxes to prevent them from profiteering.
4) A lot of energy companies are public national companies. Saudis, EDF and plenty more around the world.
5) Profiteering enforces the argument that all should nationalised and the lot of them are interfered with by various and wide-ranging means, windfall taxes, nationalisations, etcetera.
6) Most importantly, you have still failed to produce your underlying point.


Increasing interest rates contracts the money supply, which makes available money more valuable and reduces private debt.
Its effect on economic output is significantly lesser than contracting demand.

Do you even know what QE is? QE is basically free money printed by central banks and handed over to private banks to give out as loans. During the past 10 years our economies have printed multiple trillions worth of money, funneled into the banking system to sustain fake growth, venture capital and bubbles in the housing market and beyond. This has made the big fish corporations, lazy, wasteful and impotent echoing public companies of old. Hence why were are not seeing any innovation by our big corporations. Restricting the money supply has a lot of added benefits aside from reducing inflation, it also disciplines these big fish and makes them far more productive.


False, as they are squeezing both the middle and the upper. Truss reduced the upper bracket from 45% to 40% and Hunt increased it from 45% to 60% by taking away the personal allowance, topped up with a 30% increase on corporation tax.


Right, so you admit that your statement is wrong then.

noemon, you wrote: "1) High wholesale energy prices are giving them the opportunity to profiteer, not inflation. Inflation is a symptom not a cause."

IMHO, you are redefining the word 'inflation'. Every source I've seen for the last 1 - 2 years uses the word inflation to name the thing they don't like, which is high gas/diesel prices.

If we MMTers accept your definition, then we lose the argument by definition. It sounds like you are claiming that only price increases that result from too much money in the economy are to be called 'inflation'. You are excluding price increases that result from 'profiteering', and it seems like maybe supply reductions from a pandemic too, also maybe droughts that cause reduced crop yields. Everyone else seems to use the word inflation for any and all price increases.

.

[SueDeNîmes]

Why do you need to specify if you are talking about moderate inflation or high inflation or stagflation?

So that we know what we are talking about.

Fallacy of the excluded middle. From low to high inflation is a continuum, not a binary. Ditto the extent to which there tend to be winners and losers.

You have been told several arguments and ignored them all:

1) High wholesale energy prices are giving them the opportunity to profiteer, not inflation. Inflation is a symptom not a cause.
2) Inflation can go up while energy prices may go down. That is enough to prove your argument wrong.
3) Since some of our existing energy providers are indeed profiteering from higher energy prices we smack them with windfall taxes to prevent them from profiteering.
4) A lot of energy companies are public national companies. Saudis, EDF and plenty more around the world.
5) Profiteering enforces the argument that all should nationalised and the lot of them are interfered with by various and wide-ranging means, windfall taxes, nationalisations, etcetera.
6) Most importantly, you have still failed to produce your underlying point.

1) I'm hardly ignoring that since it prompted the question.
2) What argument? Of course inflation can go up while energy prices may go down. And..?
3) Evidently not since corporate profits are at record highs. Current windfall taxes are attentuating, not preventing, profiteering.
4) And..?
5) And..?
6) Why need there be any "underlying" point? I'm happy with whatever I've stated.

Increasing interest rates contracts the money supply, which makes available money more valuable and reduces private debt.
Its effect on economic output is significantly lesser than contracting demand.

But still negative. You said "The cure is to increase supply, not reduce it."
(rather beside the point but "and reduces private debt" doesn't follow either)

Do you even know what QE is? QE is basically free money printed by central banks and handed over to private banks to give out as loans. During the past 10 years our economies have printed multiple trillions worth of money, funneled into the banking system to sustain fake growth, venture capital and bubbles in the housing market and beyond. This has made the big fish corporations, lazy, wasteful and impotent echoing public companies of old. Hence why were are not seeing any innovation by our big corporations. Restricting the money supply has a lot of added benefits aside from reducing inflation, it also disciplines these big fish and makes them far more productive.

Near enough. Yes, far smaller direct fiscal stimulus would have sufficed than the oceans of liquidity central banks have pumped into the financial system since about 2008. As even the central banks were saying by 2019.

False, as they are squeezing both the middle and the upper. Truss reduced the upper bracket from 45% to 40% and Hunt increased it from 45% to 60% by taking away the personal allowance, topped up with a 30% increase on corporation tax.

Whatever, redistributing to the lower classes doesn't reduce demand. It increases demand.

Right, so you admit that your statement is wrong then.

Not at all. I don't know whether there are any countries which don't deliberately maintain a positive rate of inflation, but most rich countries do.

[noemon]

noemon, you wrote: "1) High wholesale energy prices are giving them the opportunity to profiteer, not inflation. Inflation is a symptom not a cause."

IMHO, you are redefining the word 'inflation'. Every source I've seen for the last 1 - 2 years uses the word inflation to name the thing they don't like, which is high gas/diesel prices.

Energy has possibly the highest multiplier, that is 1 penny energy price increase cascades into an increase of possiblly £1 by the time it reaches the consumer & it also possibly totals several trillion worth of money as it gets passed down several middle-men and several taxes along the way. On just one pass, the fuel duty for example is 60% and then 20% VAT is charged on both the price of the fuel as well as fuel duty creating a triple-tax effect for consumers, for wholesalers the effective tax rate to sell petrol is 75% in the UK today.

If we MMTers accept your definition, then we lose the argument by definition. It sounds like you are claiming that only price increases that result from too much money in the economy are to be called 'inflation'. You are excluding price increases that result from 'profiteering', and it seems like maybe supply reductions from a pandemic too, also maybe droughts that cause reduced crop yields. Everyone else seems to use the word inflation for any and all price increases.
.

The definition of inflation is the total aggregate measure of the price increase of a particular basket of products inside a particular market. CPI includes x amount of products, RPI Y amount of products. Neither of which measures total price increase of all products, it is extremely difficult to measure properly and account for all the variables required in a way that would be meaningful.

Price increases have various sources but as we can clearly observe, while global price increases are identical for everyone, inflation is not identical despite using the same standard measurements by and large. The ability of every country to absorb what I would describe as natural market price increase depends directly on the value of their currency, the value of the currency depends directly on the money supply. So, the money supply is the most obvious and standard method of controlling inflation which is another way of saying absorbing the price increase without it cascading into times 2000.

As stated in the previous post addressed to you, western countries have had the historical ability to absorb global price increases without sweat or shock due to enjoying reserve currency status.

This however is a privilege and an exception and not standard for the average country out there and theories can not be built for exceptional circumstances. They are castles in the sand.

And this privilege itself has been flaunted away on extreme QE and debt.

@SueDeNîmes Higher interest rates = less borrowing, especially privately as again a 0.75% increase on the central bank base rate cascades into 2-3% increases on existing loans and 4-5% increases on new loans. I'm really not up for going at another circle.

Inflation may be a continuum but context is still required for an argument, that should be quite obvious.
Moreover, high inflation is a different set of circumstances than moderate inflation and stagflation even more different.
If you are talking about particularly high inflation which has been the topic we should be clear on that and not use the "oh I was talking about moderate inflation" as a get-out-of-the-argument card. That also should be quite obvious.

Inflation has no winners and as I said in the aggregate but even in the particular it is extremely difficult to find winners during a high inflation period, even the energy giants and their employees are not having a larger purchasing power than they had during moderate inflation. Higher prices does not mean higher profits or higher value profits if you prefer(which is the most important thing in this conversation) and not all energy companies are posting record profits, a lot of them are going down under. High inflation saturates everything, including energy company profits.

This is a fact that must be understood if you and the readers are to actually learn something from this conversation.

[Unthinking Majority]

https://globalnews.ca/news/9301531/bank ... rest-rate/

"Lifting pandemic stimulus sooner would’ve limited inflation: Bank of Canada’s Macklem

The Bank of Canada and the federal government could have taken their foot off the gas sooner when stimulating the economy during the COVID-19 pandemic, Governor Tiff Macklem said Wednesday, but he added that knowledge is only clear now with the benefit of hindsight."

[ingliz]

Inflation has no winners

Debtors win, don't they?

Inflation redistributes wealth from creditors to debtors; lenders suffer, and borrowers benefit.

[Potemkin]

Debtors win, don't they?

Inflation redistributes wealth from creditors to debtors; lenders suffer, and borrowers benefit.

And if the government is the debtor, and it owes that debt in its own currency, then inflation begins to look very attractive indeed. Weimar Germany is the canonical example of this, of course.

[noemon]

Debtors win, don't they?

Inflation redistributes wealth from creditors to debtors; lenders suffer, and borrowers benefit.

Debtors are faced with higher interest rates on their loans and their savings having a lower value.

The only debtor that benefits a bit is the government, not private debtors.

[Potemkin]

Debtors are faced with higher interest rates on their loans and their savings having a lower value.

The only debtor that benefits a bit is the government, not private debtors.

Debtors with savings? They should use those savings to pay down their debts.

[noemon]

Debtors with savings? They should use those savings to pay down their debts.

The equation says that they should but people do not let go of their own savings even if the equation makes it reasonable for them.

[Steve_American]

Energy has possibly the highest multiplier, that is 1 penny energy price increase cascades into an increase of possiblly £1 by the time it reaches the consumer & it also possibly totals several trillion worth of money as it gets passed down several middle-men and several taxes along the way. On just one pass, the fuel duty for example is 60% and then 20% VAT is charged on both the price of the fuel as well as fuel duty creating a triple-tax effect for consumers, for wholesalers the effective tax rate to sell petrol is 75% in the UK today.



The definition of inflation is the total aggregate measure of the price increase of a particular basket of products inside a particular market. CPI includes x amount of products, RPI Y amount of products. Neither of which measures total price increase of all products, it is extremely difficult to measure properly and account for all the variables required in a way that would be meaningful.

Price increases have various sources but as we can clearly observe, while global price increases are identical for everyone, inflation is not identical despite using the same standard measurements by and large. [highlight=yellow]The ability of every country to absorb what I would describe as natural market price increase depends directly on the value of their currency, the value of the currency depends directly on the money supply.[/highlight] So, the money supply is the most obvious and standard method of controlling inflation which is another way of saying absorbing the price increase without it cascading into times 2000.

As stated in the previous post addressed to you, western countries have had the historical ability to absorb global price increases without sweat or shock due to enjoying reserve currency status.

This however is a privilege and an exception and not standard for the average country out there and theories can not be built for exceptional circumstances. They are castles in the sand.

And this privilege itself has been flaunted away on extreme QE and debt.

@SueDeNîmes Higher interest rates = less borrowing, especially privately as again a 0.75% increase on the central bank base rate cascades into 2-3% increases on existing loans and 4-5% increases on new loans. I'm really not up for going at another circle.

Inflation may be a continuum but context is still required for an argument, that should be quite obvious.
Moreover, high inflation is a different set of circumstances than moderate inflation and stagflation even more different.
If you are talking about particularly high inflation which has been the topic we should be clear on that and not use the "oh I was talking about moderate inflation" as a get-out-of-the-argument card. That also should be quite obvious.

Inflation has no winners and as I said in the aggregate but even in the particular it is extremely difficult to find winners during a high inflation period, even the energy giants and their employees are not having a larger purchasing power than they had during moderate inflation. Higher prices does not mean higher profits or higher value profits if you prefer(which is the most important thing in this conversation) and not all energy companies are posting record profits, a lot of them are going down under. High inflation saturates everything, including energy company profits.

This is a fact that must be understood if you and the readers are to actually learn something from this conversation.

You wrote: "... but as we can clearly observe, while global price increases are identical for everyone ..."

I don't know what you are thinking here, but this is totally wrong. Different nations are buying oil, for example, at different prices. Also, different nations will be/are being impacted at different price levels cause by supply shortages because they are nearer of further from their suppliers, for example. Etc.

You wrote: "The ability of every country to absorb what I would describe as natural market price increase depends directly on the value of their currency, the value of the currency depends directly on the money supply."

This is a conclusion of mainstream econ. theories" that has been 'proven' by them using 1 or more false premises. This proof is not logical. Such proofs are banned in logic. Here you are asserting it based on the authority of MS-Econ. This is what we are disagreeing about. So, simply asserting it over and over is not going to convince anyone who doesn't already agree with you.

right now, for example, Japan has totally inflated its currency (the yen) by having a debt to GDP ratio of over 240%, and by having the Bank of Japan buy over 40% of that debt. But, Japan has/had very low inflation and low unemployment. The BoJ is not raising interest rates now either. Can you explain why the "universal rule" that you hold to and just expressed above, doesn't apply to Japan?

I have seen 2 reports put out by the San Francisco FED which say that the amount of the current and earlier inflation is caused mostly by things other then an increasing money supply. The numbers it publishes was around 1 percentage point of the total of around 8 percentage points. So, around 12% of the total, between 6% and 14%, IIRC.

Two posts above, you asserted that "profiteering" doesn't count as inflation. Are you still asserting this?
The SF Fed included excessive corp. profits as being a much bigger part of the current inflation than the money supply increase.
.

[Steve_American]

And if the government is the debtor, and it owes that debt in its own currency, then inflation begins to look very attractive indeed. Weimar Germany is the canonical example of this, of course.

Clearly you need to read up on the Weimar inflation. IMHO, you don't understand it at all.
.

[noemon]

EU & UK enjoy the exact same energy prices, yet inflation is different for both. UK is at 12%, France at 7%, Germany at 8%.

The difference for the most part is QE and the money supply.

I asserted above that inflation is not the cause of profiteering but profiteering the cause of inflation. The difference matters on whether inflation makes winners and losers. Inflation does not make any winners.

Indeed all these said by me are mainstream and standard economics proven time and time again over the course of centuries.

MMT is a non-mainstream theory that asserts that we can print unlimited money with no effect on inflation but that as we observe is total and utter nonsense. It used to be applicable to countries that have reserve currency status like the US exporting dollars outside its market, but no longer applicable when dollars are returning back into the country like today, and further propped up by a cheap Chinese manufacturing base and also propped up by cheap shipping costs.

So much star-alignment required to make the theory barely workable.

I already explained why Japan and the US are exceptionally dynamic economies that can absorb shocks and price increases better than all others in the post that you forgot to address.

You can not build theories from the exceptional countries because once you apply your theories to regular countries like Turkey or African countries for example, inflation will shoot up to 100% and 1000% respectively.

@Steve_American I think Potemkin is being ironic but being the commie that he is, he is not being forthright about it.

[Potemkin]

The equation says that they should but people do not let go of their own savings even if the equation makes it reasonable for them.

People are idiots then. And the fact that they choose not to use their imaginary ‘savings’ to pay down their debts (which have a higher rate of interest than their savings) doesn’t change the fact that debtors are winners from inflation.

[SueDeNîmes]

@SueDeNîmes Higher interest rates = less borrowing, especially privately as again a 0.75% increase on the central bank base rate cascades into 2-3% increases on existing loans and 4-5% increases on new loans.

And no one says otherwise. The unique claims are that redistributing to the poor reduces demand , and that reducing the money supply makes debt easier to pay off

(as for the 'debtors with savings' thing, debtors means net debtors)

Inflation may be a continuum but context is still required for an argument, that should be quite obvious.
Moreover, high inflation is a different set of circumstances than moderate inflation and stagflation even more different.
If you are talking about particularly high inflation which has been the topic we should be clear on that and not use the "oh I was talking about moderate inflation" as a get-out-of-the-argument card. That also should be quite obvious.

I believe my previous response re context stands.

Inflation has no winners and as I said in the aggregate but even in the particular it is extremely difficult to find winners during a high inflation period, even the energy giants and their employees are not having a larger purchasing power than they had during moderate inflation. Higher prices does not mean higher profits or higher value profits if you prefer(which is the most important thing in this conversation) and not all energy companies are posting record profits, a lot of them are going down under. High inflation saturates everything, including energy company profits.

This is a fact that must be understood if you and the readers are to actually learn something from this conversation.

Aggregate purchasing power = the quantity of stuff (goods and services) available to buy. No one persistently produces stuff no one can afford. For a given quantity of stuff, price rises are zero sum. If you're paying more, someone's getting more, and that someone can then buy a bigger proportion of the available stuff, nominal prices notwithstanding. Aggregate purchasing power is unchanged because you lose by the same proportion.

If some shock reduces the available quantity of stuff, aggregate purchasing power is reduced regardless of nominal prices, though they will almost inevitably rise (barring price controls by govt). If some entity then increases profits (income minus expenses at increased nominal prices), they are exacerbating price rises and benefitting from it as a matter of arithmetic. And it's anything but "difficult" to find examples just now.

[MadMonk]

There are indeed many debtors with savings, especially when interest rates are near zero and stocks are running wild. The craziest of the bunch take out loans to invest in stocks, hold those stocks far longer than they should have and now are faced with huge debts while the companies they invested in are worth maybe 30% of what they were when they bought in. Some even bought crypto (LOL!)

[noemon]

People are idiots then. And the fact that they choose not to use their imaginary ‘savings’ to pay down their debts (which have a higher rate of interest than their savings) doesn’t change the fact that debtors are winners from inflation.

Like the debtors of Weimar Republic?

Hyperinflation is good enough reason to go to war for every single class in a country, poor, middle, rich and everything in between.

Private debtors do not win from inflation because interest rates go up on their debt and the value of their money(both savings and income) drops down at the same time.

Only government debt is helped by high inflation marginally and that due to the indirect drag factors that I explained earlier.

I believe my previous response re context stands.

No it doesn't. Changing the goalposts when convenient is a fallacy, get over it please and proceed to arguments with actual value.