Economics Questions

Re: Hyperinflation in the US mathematically impossible?

Scott Jefferies — Sun, 18 Jan 2009 05:09:37 GMT

auctionguy10:

He posted another response -

"No, wages are generally not linked to inflation, with the exception of some public sector jobs. Wage-price spirals can only occur when wages are directly linked to inflation, meaning that wages naturally adjust to any increase in the cost of living.

If Weimar Germany had simply inflated, prices would have risen, demand would have crashed and unemployment and deflation would have resulted. The hyperinflation occurs only when wages are linked to the cost-of-living increase."

so when can inflating prices not effect on the cost of living???

Re: Hyperinflation in the US mathematically impossible?

dsimo04 — Thu, 15 Jan 2009 20:01:10 GMT

Wages are prices.

And the relation of price inflation (sic) to wages is easily understood. The receivers of new money must employ more and new factors to expand their production. And these factors, previously employed or not, must be drawn away from their current employment (or unemployment) only by offering more than what the prevailing rates are. If anything, far from being unlinked to inflation, one could say that wages and rents compose the closest transmitting link between new money creation and the economy as a whole.

Re: Hyperinflation in the US mathematically impossible?

Jon Irenicus — Thu, 15 Jan 2009 18:40:39 GMT

I don't think one can measure it in that way. As money loses value, people rush to spend it, increasing the volume of transactions. It's anything but static.

Re: Hyperinflation in the US mathematically impossible?

Magnus — Thu, 15 Jan 2009 16:06:53 GMT

Jon Irenicus:

To add to what KK said, the velocity of money is itself not static and will increase as inflation increases... Hazlitt debunked the typical QTOM understanding of velocity.

Does the velocity of money exponentially increase as inflation increases or does the velocity keep the same speed in proportin to the rise of inflation no matter how high?

Re: Hyperinflation in the US mathematically impossible?

Jon Irenicus — Thu, 15 Jan 2009 13:19:18 GMT

What is this moron jabbering about? Wages are directly linked to prices, in that real wages fall if prices rise. Hence workers tend to demand increases to catch up (which higher apparent profitability due to inflation will allow for.). Is his head really so firmly entrenched in his posterior?

To add to what KK said, the velocity of money is itself not static and will increase as inflation increases... Hazlitt debunked the typical QTOM understanding of velocity.

Re: Hyperinflation in the US mathematically impossible?

CorporateGhost — Thu, 15 Jan 2009 06:06:17 GMT

Check Henry Hazlitt's What You Should Know About Inflation, I haven't read it myself but someone recomended to me.Plus, you can't go wrong with Hazlitt.

Re: Hyperinflation in the US mathematically impossible?

krazy kaju — Thu, 15 Jan 2009 05:57:02 GMT

1. Math is deductive logic.

2. The lack of unions doesn't mean that inflation cannot happen. It means that expectations are more flexible and that there will be higher employment, that is all. If more money competes for the same amount of goods, you will have price inflation. If a lot more money competes for a diminished amount of goods, you will have hyperinflation.

3. To overcome a two-fold increase in the monetary supply, the velocity of money would have to be extremely, extremely low. This is simply not the case in America.

4. I'm not sure we'll have hyperinflation either way. We will have large inflation and an inflationary depression, but we most likely won't have hyperinflation simply because we'd need a much larger increase in the monetary supply.

Re: Hyperinflation in the US mathematically impossible?

auctionguy10 — Thu, 15 Jan 2009 05:33:10 GMT

He posted another response -

"No, wages are generally not linked to inflation, with the exception of some public sector jobs. Wage-price spirals can only occur when wages are directly linked to inflation, meaning that wages naturally adjust to any increase in the cost of living.

If Weimar Germany had simply inflated, prices would have risen, demand would have crashed and unemployment and deflation would have resulted. The hyperinflation occurs only when wages are linked to the cost-of-living increase."

Due to my obvious inability to answer these questions(since I'm posting his replies here)- anyone want to refer me to some reading regarding inflation? Especially anything that can compare other definitions of inflation outside of the Austrian school- so as to easier understand their arguments.

Re: Hyperinflation in the US mathematically impossible?

fezwhatley — Wed, 14 Jan 2009 09:42:58 GMT

that's just stupid, hyperinflation is not a phenomenon of union employment. Hyperinflation occurs when currency quickly losses its value, often due to over-printing (which has nothing to do with people losing their jobs 30 years ago), and higher prices ensue.

Wages are a price on employment, in a scenario where inflation begins to affect an economy it will also increase wages (and other prices). So yeah, wages are linked to inflation

Re: Hyperinflation in the US mathematically impossible?

CorporateGhost — Wed, 14 Jan 2009 09:24:50 GMT

First of all he didn't explained how union representation and outsourcing relate to hyperinflation (they don't), and he didn't made any attempt to prove the "mathematical impossibility" of hyperinflation

auctionguy10:
"There are several other factors that affect the rate of inflation. For instance, hyperinflation depends upon an increase in the VELOCITY of money.

even a "slight" Inflation increases the velocity of money because people want to spend their money before the prices rise any further (they anticipate future inflation).

auctionguy10:
Excessive inflation is ONLY sustainable when wages are linked to the rate of inflation

Wages are always linked to the inflation.

auctionguy10:
Politicians will not pursue policies that yield high inflation because that would cause political order to quickly COLLAPSE. That's definitely not in their best interests.

And now he accepts that hyperinflation is possible if politicians pursue certain practices witch makes his previous arguments irrelevant.

You could also point that using caps to emphasise words makes him look like a douchebag

Hyperinflation in the US mathematically impossible?

auctionguy10 — Wed, 14 Jan 2009 08:16:55 GMT

I was pointed to a discussion on youtube http://www.youtube.com/comment_servlet?all_comments&v=oP63d5HNRZk

And one guy "dconjar" says that "Excessive inflation is impossible without a means to transmit the rise in prices into wages. Because of the huge decline in union representation since the 70's, along with the threat of outsourcing, hyperinflation isn't mathematically possible. When you use "deductive logic" to formulate your economic theories, rather than math, you're bound to miss that." as well as

"There are several other factors that affect the rate of inflation. For instance, hyperinflation depends upon an increase in the VELOCITY of money. Excessive inflation is ONLY sustainable when wages are linked to the rate of inflation, as they were in Zimbabwe, Weimar Germany, and the US in the 70's. Politicians will not pursue policies that yield high inflation because that would cause political order to quickly COLLAPSE. That's definitely not in their best interests. "

He also uses this to point to where he got his ideas - http://derekconjar.com/2009/01/k-den-lays-the-smackdown/

Now- I haven't heard of this argument before- that hyperinflation isn't possible because there is no way for the money to reach into wages? I think he mixes up inflation with rising prices - but I'm more interested in the notion that its mathematically impossible to have hyperinflation in the US. Any thoughts?