> The central bank has expressed concern that a robust job market exerts upward pressure on wages — and prices.
This seems like a bad statement to make without any comment on what’s happening to wages. Are wages rising?
This seems like a bad statement to make without any comment on what’s happening to wages. Are wages rising?
This might be in reference to during the pandemic, nobody really wanted to work (labor shortage), so employers had to offer incentives and above-average (for them) wages in order to entice people to work.
I know in some minds we might think "good, higher wages for entry level workers"
The only problem is, as you know, that money has to come from somewhere. Cut a cost somewhere, raise a price to a customer somewhere, or the owners make less money. The third one doesn't really happen/isn't worth the risk of owning a business at that point, right?
In other words, people make more money in robust job markets and can spend more money on goods and services.
But this assumes there isn’t excess production capacity. If supply is elastic then demand increasing makes supply increase, which creates investment and expansion, leading to a virtuous cycle.
Parallel to the story here is that supply chains have normalized to about 2019 levels of backlog. We aren’t seeing mass production stoppage due to outbreaks. We have an enormously elastic just in time economy so long as the parts are functioning - and they are.
The fed is managing things with a playbook from 45+ years ago. It’s not been updated for the modern globalized just in time economy with enormous ability to scale to almost any amount of demand. It’s not the 1970’s, which is the last time we tried to manage inflation. But the Fed still dances to disco and wears bell bottoms, so they must strangle wage growth and full employment to make sure people save 5% on a bag of Doritos.
A one-time "this is your fee for us allowing you to exist and your business to thrive despite you putting a ton of burden on tax payers through tax credit abuse, creative accounting, lobbying, etc..." tax for the 10-20 wealthiest people (or families) would be one of the most deflationary events in the history of this country.
You take 30% of Bezos' net worth away and he'd still have enough to buy the entire NFL....which would probably increase his net worth (and still have a few billion to screw around with). Take 30% of the Walton's collective net worth away and they wouldn't blink an eye. Take 30% of Musk's net worth away and he could still afford to piss away 20, 30, 40, 50 billion on some vanity project and still be one of the top 10 wealthiest people on the planet.
Such a tax would be the biggest shot in the arm to the US (and world) economy in a very long time. It would also be extremely deflationary because it would spike the M2 Velocity chart to unseen highs, which is generally an indicator of middle and lower class economic activity.
It's insane that we have people that are worth hundreds of billions of dollars and we don't tell them "we created this system that allowed you to attain astronomical wealth, and we maintain that system....you should consider that when it comes to tax season, rather than hiring an army of lawyers to avoid paying tax". THEY are the cause of inflation, because there's absolutely fuck all reason to just hoard billions when we have inflation and massive income inequality.
Taxing the uber-wealthy is actually deflationary, not inflationary. Taking away their ability to hoard unimaginable amounts of money actually helps the economy tremendously. The money that sat around in Jeff's or Elon's bank account doing nothing but accruing interest actually flows back into the economy, reducing the need government's need to print more money.
How, and why? People still need money, the economy still needs money, the business cycle and the real world still need to continue. Even if one person takes an outsized percentage the money supply, the underlying conditions that allows everyone else to participate in the overall economy remain unchanged except for one critical point. The only change is that because one person has so much money that they've effectively skewed the velocity of an average (currency of your choice), the government has no choice but to step in and print more money.