Comment by adventured | Hacker News Reader

Comment by adventured | Hacker News Reader

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Business just got a massive tax cut. They can dig themselves out by spending on increasing productivity and paying higher wages. The economy needs to be run very hot for an extended period of time, instead of getting crashed by an obnoxiously over-eager Fed that likes to kick the economy into a recession to dampen wage growth for the benefit of businesses in the guise of controlling inflation.

Businesses need to be made to squeal in pain here. Run the economy as hot as we can get it for as long as we can and shove wages through the roof at the cost of business margins (which were just considerably boosted via the tax cuts).

If the Republicans and Democrats weren't collectively so stupid, they'd be cooperating on hammering out a massive infrastructure spending plan paid for by a trillion dollars printed by the Fed across 10-15 years (or similarly constructing an infrastructure bank filled courtesy of abusing the global reserve currency while we still have it). And doing that would juice things that much more right now and for the next decade.

Not much point increasing wages if you are just going to erode them with inflation.

Avoiding worker revolt is the point. If the inflation is bad enough, workers feel pain, demand wage increases. So far inflation has been low, wage increases low and thus cancel each other out (June wage increase 2.7%, May inflation 2.7%).

But from a business standpoint, no point in increasing wages above inflation until workers revolt. So what's needed is a healthy dose of inflation to get workers to revolt, and make business compete for workers by taking the risk, instead of hoarding, and paying more. Businesses and their shareholders have had it really good compared to workers, because workers have been docile and shareholders have been there to scoop of the profits that workers refuse to fight for.

The myth of the link between rising wages and inflation is very common in the media, but there is hardly any connection in reality.

Wages will naturally adjust to the equilibrium supply and demand. If the needed increase in wages to increase production pushes prices up such that supply falls then production will be cut to adjust. That is what actual economic theory says.

In the real world their is a lot of lag, so some market participants will be increasing wages and producing too much, and then they lose money, and have to overcut on the other side, but in a massive diverse economy this random noise balances out.

The market will never over price labor, therefore inflation cannot come from increasing wages.

Inflation comes from printing money (or creating it digitally since we don't actually print any more). When the inflation from printing money results in rising wages, then that is a sign to the bankers that they should cut back so that they can keep the poor in line, and keep them from paying off their loans so that they can't get out of debt.

Real world economics.

Yes, I was thinking about the comment "a trillion dollars printed by the Fed" when I posted my reply.

Run the economy as hot as we can get it for as long as we can and shove wages through the roof at the cost of business margins (which were just considerably boosted via the tax cuts).

i gotta say, this idea has some appeal. since businesses tend to use the new tax savings for stock buybacks or paying out dividends instead of hiring and expanding, force their hand a little.

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