Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
Well, yes - but that ignores the fact that the useful definition of inflation isn't some percentage variation in something or other, but loss of buying power.

And current measures of inflation have a very partial and selective view of that. Specifically they consider inflation a loss of buying power for one class, who experience inflation as a corrosive destroyer of asset values.

Coincidentally, that same class experience property and investment appreciation as an expansion of buying power, which is why they're not considered inflationary - even though to someone outside that class their buying power can be reduced dramatically during (e.g.) a property bubble.

There's only a loss of buying power for the population as a whole when nominal inflation is running at outrageous levels and wages aren't being raised to suit.

The real cause of inflation isn't profit, but interest/usury and the constant demand for increasing ROI.

If your units of measurement are discrete rather than synergistic, it's not physically or mathematically possible to make the pie higher without inflating it.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Nov 19th, 2010 at 10:08:49 PM EST
[ Parent ]
Yes, the useful definition of product price inflation is the loss in buying power of new product of future contracts fixed in terms of money values.

Chasing after "the proper" definition of inflation sui generis is another one of those idealist will-o-wisp chases after the impossible. The question of what is "the proper" definition of inflation sui generis is a category mistake.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Nov 19th, 2010 at 10:58:48 PM EST
[ Parent ]
And current measures of inflation have a very partial and selective view of that. Specifically they consider inflation a loss of buying power for one class, who experience inflation as a corrosive destroyer of asset values

I'm not sure what you mean by that.  Inflation plays havoc with debt instruments, but it has little impact on other classes of wealth such as property or shares.  For those in the middle class, their homes do fine, their savings get hammered. The poor have no assets to worry about, but they do see their already low incomes decline with high inflation.  My one experience with it, back in Poland in the early nineties, was merely annoying, but that's because when my wages went from quite adequate to 'oh fuck' I was able to both beg my parents for an infusion and to switch to a de facto inflation indexed form of freelance work.  

by MarekNYC on Fri Nov 19th, 2010 at 11:35:26 PM EST
[ Parent ]
The poor only see their already low incomes declining because there's an implicit assumption that wages can't be increased to compensate.

The usual narrative is that if wages were increased, that would be 'inflationary.'

Meanwhile profits that increase at the expense of wages aren't considered inflationary, even though they drive down effective buying power for the majority of the population in an equivalent way.

Nor is commodity sharking - at least not directly.

Nor are asset bubbles.

So in practice, traditional inflation is almost entirely a political concept. It's a loaded idea that enforces certain political assumptions about the way that wealth should be distributed.

This doesn't mean that economies can't explode. But economies can explode in many ways, and it's interesting that only some of them are considered inflationary, while others are described as "Oopsie, didn't see that coming - just one of those things, I guess."

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Nov 20th, 2010 at 12:28:52 AM EST
[ Parent ]
the great ideological victory of the 70s and 80s for the neolibs has been to blame "inflation" on wage indexation, and conflate inflation with wage inflation. It justified breaking the unions, and it brought about endless growth to profits and asset values, which are of course not 'inflation'...

And then Greenspan went one step further by saying that asset inflation is not something that can be identified (and thus should not be fought) whereas asset deflation is evil and should be fought by increased central bank liquidity.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Nov 20th, 2010 at 06:16:21 AM EST
[ Parent ]
The poor only see their already low incomes declining because there's an implicit assumption that wages can't be increased to compensate.

The usual narrative is that if wages were increased, that would be 'inflationary.'

It's worse than that.

  • Even if wages are indexed by general inflation, it often happens that the price of products bought by the poor inflate much faster.

  • When the pension system is based on the fiction that people save while they work and live on the savings once retired (rather than be earnest, risk the explicit social confrontation, ditch the Ponzi scheme and treat pensions as one segment of the contributions from working people to non-working people), poor pensioners are at a risk, too. If pension is provided by the state, the state may or may not index by inflation (it didn't in post-1989 former East Bloc countries); if pensions are provided by private funds, those can, no, will lose big when their investments provide the fuel for the next asset inflation bubble.

So, again, I am not convinced that inflation is automatically bad for the wealthy and good for the poor.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Nov 20th, 2010 at 10:39:30 AM EST
[ Parent ]

Display:

Top Diaries

Occasional Series