PAUL JAY: Welcome back to The Real News Network.
I’m Paul Jay in Baltimore. And we’re continuing our interview with Heiner Flassbeck, who now
joins us from France, just outside of Geneva.­ Heiner served as director of the Division
on Globalization and Development Strategies of the United Nations Conference on Trade
and Development, known as UNCTAD. He also was vice minister at the Federal Ministry
of Finance in Bonn in Germany from October 1998 to April 1999. And he’s now a professor
of economics at Hamburg University. Thanks for joining us again, Heiner. HEINER FLASSBECK: Hi. You’re welcome. JAY: We’re just going to pick up our discussion
from part one. So if you haven’t seen that, I suggest you go watch it and then come back
and watch this, part two. But what we’re going to talk about in this segment is the whole
issue of inflation. If you look at the arguments coming from the
right, their principal argument against higher wages is that it’s inflationary. Their principal
argument against stimulus is that it’s inflationary because it might cause higher wages. And they’re
also–they don’t like stimulus ’cause it will increase the deficit and the debt, they say,
and that could result in lack of confidence in the U.S. dollar and could also increase
the money supply, and thus that’s also inflationary. And in the final analysis, they see inflation
as the principal, you could say, enemy of the global economy. And Mr. Flassbeck, I don’t
think you agree with that. What’s your take, first of all, on what’s their theory and what
you make of it? FLASSBECK: Well, first of all, we have two
reliable theories of inflation. One is cost-push, the other is demand-pull. Cost-push would
be indeed the wages-induced inflation, which doesn’t exist in the whole world, because
what we have is falling wage shares and we have stagnating unit labor costs. The most
important determinant, indeed, of inflation is unit labor cost, but unit labor cost means
nominal wages, so to say, minus productivity. Nowhere in the world nominal wages exceed
productivity by a huge margin. And what we’re asking for, what the reasonable
people, reasonable economists in this world are asking for is that unit labor costs should
increase like the inflation target. So we do not want to have overshooting over the
target, but we just say like the inflation target. But that implies that the real wage
rises like productivity. And this is the crucial point. Everybody misses in this debate or
tries to dismiss the point of productivity. Productivity is the core. JAY: So, Heiner, let me ask you a question.
If that formula was applied to wages in North America or Europe, where would wages be now?
How much of a rise in wages would we see? FLASSBECK: In nominal terms, in nominal terms
it would be a wage rise, say, in United States of something like 4 percent, something like
3.5 percent in Europe. That’s it. That’s–not more. There’s nothing inflationary in that.
That would be just–and that would just–you see, the crucial point is we’re talking about
income distribution. We’re talking about inequality. What I’m asking for, what we have been asking
for in UNCTAD is only the stabilization of the wage share at this very low level. What
I say: if you apply this formula, the unit labor costs follow inflation target, real
wages follow productivity, then you just stabilize the very low wage share, so that the huge
share of profits of the capital side is even conserved, which is a big thing, a big challenge
politically and needs further redistribution from the government side. But from the wage side what you should do
is clearly–what you need definitely for a recovery in the whole world is this formula,
to apply this formula–which was a famous formula in the United States, by the way,
a long time ago. It was the famous formula on which Japan and Germany had based their
success stories in the past. And we have to come back to that. We have to relearn that
story. Without that, it will never work. JAY: And what kind of government policy could
achieve that? FLASSBECK: Well, what you do, you do–it’s
different from country to country, but the United States, I’m not quite sure about the
power of the unions at this moment of time, but it’s very clear that the unions are weak.
So what you need is a strengthening of the union power of the labor side from the government.
So put together a kind of roundtable discussion between employers or unions, or strengthen
the right of the unions to fight for such a wage formula. And there are many other ways. And one of
the most important signals is clearly that the government for its own employees applies
such a formula, and plus you apply such a formula to the minimum wage. That’s why the
whole discussion about the minimum wage is a bit beside the point. To raise once the
minimum wage is a good thing but is not sufficient. You have to dynamize, you have to make it
dynamic, you have to move the minimum wage year by year with the productivity and the
inflation. This is what would make the difference and would give a signal to all the other employees
that they have the same right and would give a signal to the employers that they have to
give their people what the people on the minimum wage get. JAY: So, Heiner, what then do you make of
the economic theory of the Obama administration? ‘Cause he seems to be a million miles away
from what you’re talking about. When he first ran in 2008, he was talking a lot about the
Employee Free Choice Act and the importance of trade unions and such, and in a sense,
by implication, higher wages. But since then we’ve heard very little of that. And in the
last State of the Union and more recently, the words EFCA and that reform to labor law
are not even spoken. As I said in the opening to part one of this interview, President Obama
seems to be arguing with the Republicans not about cuts, but about how much cuts, in terms
of he does buy into the basic logic of austerity, he just doesn’t want it to be quite so extreme
as the Republicans do. FLASSBECK: Yeah. That’s–but we will have
to learn it then the hard way, you see. There is no way out. I don’t see how should a recovery
come about without a new stimulus on the consumption side. If you take Europe, Japan, and the United
States, you have such a huge share of consumption that you cannot expect a recovery coming from
anywhere but from consumption. And consumption doesn’t come from just jumping employment,
suddenly having employment growth. No. Never in history it was like that. But the first
thing always was that the people got back in their jobs, they got in their jobs higher
wages, because there was a normalization of the labor market. If we are not able to bring about the normalization
of the balance of power in the labor market due to normal economic policy instruments,
then we have to use unnormal, you would have to use heterodox or unorthodox measures to
get back to a normal recovery. Otherwise, I do not see where [incompr.] this whole system
is going to go. If the system is going to stagnate for the next 20 years, as in Japan–we
have two lost decades–where will it go politically? Politically that would be a disaster. We will
have extremists on the right and the left everywhere fighting each other like hell,
and we will never get back to a normal growth trajectory as we had in the past. JAY: So when I read the business pages this
morning and the talk about sequestration and these $85 billion worth of cuts, they seem
unconcerned. In fact, one of the articles specifically talked about how unconcerned
Wall Street and corporate America are about the sequestration cuts. And I wonder–you
know, leads me to think that perhaps in fact the objective here is a period of more recession,
because it is lowering wages. And what corporate America and Wall Street
perhaps want out of this period is a fundamental restructuring of what a normal wage is in
the United States. And while that might make sense in terms of an individual enterprise,
which can then pay their workers less and in theory they make more profit, I don’t get
why they can’t think systemically, that if all the enterprises are doing this, they’re
generally lowering demand and they’re going to continue this paralysis, and then you don’t
actually see how the recession ends. FLASSBECK: No, I think their microeconomic
calculus, it makes sense. They’re sitting on high profits. They’re sitting on an enormous
amount of cash. Look at Apple and other companies. They’re sitting on so much cash they don’t
know what to do with it. So they’re feeling comfortable for the moment. Well, they do not understand that very much
of the profits that they made in the last years was clearly based on government spending,
on nothing else. The whole company sector can only benefit from deficit spending, so
to say, of one sector, either of itself–when the company sector is investing and is taking
on credit, that increases indeed the profits of the company sector. But if they don’t do
it (and they really don’t do it at the moment of time) and if the government does nothing,
the government is saving and the households are saving, and they don’t get initial demand
from other countries, then they’re stuck, then they’re sitting on the cash. But how
long can you sit on the cash? Sooner or later the cash is gone, and then they will get a
wake-up call, and it will be not a very nice one. This is what the government has to understand.
And that is why government cannot just be happy with happy companies with their shortsighted
view of the world. JAY: So, Heiner, you were head of UNCTAD.
You were in Geneva. You were meeting senior politicians and businessmen, both European
and American. You were meeting with leading economists, conservative economists. I don’t
get how they answer your logic, your argument. I mean, it seems–unless I’m missing something,
what you’re saying is rather obvious and true, and it’s clear if you look at austerity policy
in Europe that Greece and Italy are in chaos and the other countries are showing rather
clearly that austerity does not lead to growth. I mean, what do they say to you? How do they
argue with you? FLASSBECK: One argument is we need structural
reforms, what they call structural reforms. Nobody knows exactly what it is, but in principle
it’s always–in the end it’s wage cuts. And they say–which ends up with the same thing:
they say we have to improve competitiveness. But that is all nonsense. Not the whole world
can improve its competitiveness. If everybody cuts wages, it doesn’t help anyone. And these
are macroeconomic logic that they don’t understand. You see, these are what economists sometimes
call fallacies of composition: the thing that is right for the single entity is not right
for the economy as a whole. And here we are lacking brave economists that
would really have an insight into these things and speak about it. They don’t do–even the
most progressive economists shy away, as I said in the beginning, shy away from addressing
the labor market instability. They’re not willing to say, oh, wages can be too low.
That’s very difficult to say, for an economist to say the wage is too low. I’m saying that,
but they’re shying away from saying that. And so they’re always back into the trap that
they tried to do what all the other guys do, and then they end up in chaos. You see, in Europe they have done all this
exercise. What is now happening, they are giving the impression as if this was all natural
[incompr.] Greece GDP dropped by 30 percent, and it was natural, it was given, so to say.
It was not the result of wrong policies; it was given due to the structural problems in
that country. And this is the kind of language, the kind of narrative with which they try
to get away without acknowledging that they were totally wrong. JAY: It makes me think of pre-World War I
days, where there were many people that saw the world was headed towards this disastrous
global war, but none of the elites, none of the leaders of any of the countries would
really do anything to stop it. And, in fact, there was almost an appetite for it. And now,
with the current economy heading what seems to be towards deeper recession–again, one
of the–a lost decade you’ve talked about, and others have. I mean, it’s like the Titanic
is heading towards the iceberg and it’s too late to turn, but except they’re not just
not turning these days; they’re actually putting coal on the fire to go faster. But I guess
part of it is that, you know, there’s people that know how to make money out of the current
situation, they know how to make money out of recession, they know how to make money
out of deeper crisis, and they’re very powerful. FLASSBECK: That’s right. That’s right. And
if you don’t have one political leader who would really take the lead, who would, so
to say, claim leadership among the others and tell them this is not the way to do it,
so we have to change our direction, so where would you end? Imagine Roosevelt would not
have been Roosevelt. What would have happened in the United States? It would not have been
a recovery. It would have gone deeper into depression. And surely some people are always
gaining, even by a Depression, but in the end it destabilizes the whole society. What
you see in Italy last Sunday and Monday, the election, shows that the people are uncertain,
the people are scared, the people are voting for this and that without knowing where to
go. And this is really dangerous. This is dangerous not only for the economy; this is
dangerous, extremely dangerous for our societies and for democracy. JAY: Thanks for joining us, Heiner. FLASSBECK: Okay. Thank you. JAY: And thank you for joining us on The Real
News Network.

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100 thoughts on “Higher Wages Will End Recession”

  1. I think at some point, authorities will need to defend their currency(who knows when). When that happens they will decrease the money supply/increase rates. That money supply cut would bring deflation. Something similar to the Volker raise in the early 80's, but on a global scale. In that scenario I couldn't see central banks lowering rates. However, This is why I didn't want to answer that question, but the way it is worded makes it a trick.

  2. The question should have been worded "What happens when interest rates rise, and the answer would be deflation" In a world where central banks control interest rates, it's hard to say if deflation would occur because the central banks want it, or because of some exogenous shock, meaning central banks would want to lower rates.

  3. 'Disinflation' might be a better word to use there for the intended effects of rate rises (decreased inflation rather than outright deflation). But there are some that contest that the relationship is that simple anyway (since higher interest rates represent a supply side cost to businesses which borrow which often gets passed on).

  4. Right. And many business which couldn't afford to currently will find they CAN when wages rise across the board since sales will increase across the board.

  5. It says allot about the standard of idiot on these comments sections that this post has been flagged as spam.

  6. QE.x doesn't print dollar bills, but even the Fed has admitted it is essentially printing money.

    So are you maintaining that inflation CAN'T come from printing money? (Diluting the value) or simply that there's no way the Fed would ever print enough to do that?

    If that latter, I'm curious. How many times the current money supply would have to be printed before that occurred?

  7. Bankruptcy eliminates debt. But bars you from credit for 7 years. Most people would be fine. Many survive bankrupt right now.

    The rich have means to survive both inflation and deflation. The richer you are, the less either is an issue.

    Typically in inflative environments wages don't go up to scale. Basic needs start costing a lot more (food, energy etc). There's no protection via savings as they are eroded.

  8. The poor default and go bankrupt. They must live within their means. They rent houses or take transit at worst.

    Everything however is lost for the richer investing institute who had bet that a slew of ppl who could pay off their debts would. They would go under. Similiar to how the banks SHOULD have gone under with the mortgage crisis.

    The creditors would cease to exist. The poor would have restrain spending.

    Ceasing to exist is worse last time I checked.

  9. LOL….The poor default and go bankrupt, AND lose their job.

    Everything is lost for the rich? hold the fuck up, EVERYTHING IS LOST FOR THE POOR! The rich should have some savings at the very least and generally, be LESS in debt, or at least own more assets.

    We are talking about PEOPLE, NOT INSTITUTIONS. The rich would have things to fall back on…Savings and hopefully a home…What do the poor have?

    The poor do not benefit, I don't care how you try and slice it.

  10. You probably shouldn't debate someone on economics. Printing money expands the money supply. Therefore, causing inflation. This is about as simple as economics can get.

  11. You're about as simple as a person can get. You hear some bullshit spoken by a know-nothing in a wrinkled suit, and you go around smugly repeating it to everybody. You're like the Johnny Appleseed of bullshit, pal.
    But you're in a position to actually learn something now, and I advise you to listen and think (if those two are within your skill set): PRINTING MONEY DOES NOT CAUSE INFLATION.

  12. Firstly, you're fucking retarded. You might want to brush up on your definitions. If you are going to insult someone. Monetary inflation, literally means, the expansion of the money supply. Secondly, he meantions something about inflation caused by too much demand or lack of supply FOR A GOOD, without talking about the money used to buy that good. How can you talk about changing in prices, without talking about the money you use to buy goods, it's illogical.

  13. Thirdly, if printing money doesn't cause inflation, why in the fuck would anyone be working? We'd just tell our government to print a bunch of money and we'd buy up the resources of everyone else. There are consequences to everything in economics, just because you can't comprehend them, doesn't mean they aren't there.

  14. That entire comment made little to no sense. How is printing money a meaningless term in our system. OKAY, lets use monetary expansion. If you want to argue semantics, you'd be better off getting a hobby. You do realize, part of OE1/2/twist all involved buying mortgage backed securities from the banks? IE, giving them money, for their useless securities. This is not money available to borrow, this is CASH! Explain to me how the gvt can stop the money supply falling, but can't increase it. thx.

  15. I don't like the expression "printing money", but other persons do, so I've adapted. What they mean by "printing money" is "quantitative easing", i.e., the Fed's buying government bonds and other assets from banks.

  16. Obviously printing up a billion dollars and dropping it out of a helicopter to a crowd waiting below to pick it up–THAT would cause inflation. No shit. But THAT isn't what the US government is doing, and THAT isn't what's being talked about on this page. What the government is actually doing is quantitative easing, which is a far different thing than dropping freshly printed money out of a helicopter.

  17. You just keep getting lamer and lamer. Obviously no one was talking about MONETARY inflation, dummy. That printing money will result in MONETARY inflation is true by fucking definition–it's what the term means. But when persons use the term inflation, 99% of the time they mean rising prices, and that's what everyone arguing in the comment section of this video has meant by it.

  18. I stopped taking anything you had seriously when you said, printing money doesn't cause inflation. When people say printing money it is assumed they are taking monetary inflation, because there is LITERALLY NO MORE PRINTING MONEY. It's all 1's and 0's in a computer. HOWEVER, that does not mean it is not the same as printing money, because it is! You are arguing semantics here, and it makes you look like a moron. Printing money, may be a old term, but the result is the same.

  19. Look, dope. There's two types of inflation: monetary inflation and price inflation.

    "Monetary inflation" is the simple expansion of the money supply. It's printing money or it's 1's and 0's on a computer–however you do it, it's making money out of thin air. Example: your money supply was $1,000, and now it's $2,000, that = "monetary inflation."
    "Price inflation"–WHICH IS A DIFFERENT THING–means that prices are going up.

  20. Most persons believe that increasing the amount of money in an economy will of itself increase the level of prices. This is based on the formula: MV = Py ,
    where "M" means the amount of money, "V" means the velocity of money, "P" means average prices, and "y" means the quantity of good and services sold. Obviously, increasing the amount of money WOULD increase the level of prices IF "V" an "y" were constants, but in the real world they're NOT……….

  21. Milton Friedman ASSUMED "V" and "y" were constants, and therefore got the answer he was looking for: "increasing the money supply causes inflation." Without getting into more technicalities, let me just say Friedman would only be right if the money supply were increased by dumping new money out of a helicopter (=his example). But what the gov. is REALLY doing (QE1,2,3) is an entirely DIFFERENT thing.

  22. What are you talking about?! A Resource Based Economy IS anti-ownership!!!!!!!!!!!!!!!!! AND, what THE HECK do you mean, by an "anti-economy"???

    One more thing, A RBE would be "controlled" (or I should say, MORE ACCURATELY…"MANAGED") by ANYONE or more OF US (citizens of THIS PLANET) who WANTS to, AND can SCIENTIFICALLY PROVE his/her theory!!!!!!!!!

  23. You really believe the economic SUPERPOWER in the world is broke? That 16.4T$ debt is nothing but propaganda. It is there so that you feel bad for your country & be more reluctant to pay MORE taxes. The US EASILY has more than 100T$. EASILY. Greed is always the case. The same ones telling us we're broke are the same ones who told us the Iraq War lies, closing GITMO lies, etc. Turn CNN & Fox news OFF! The financial collapse will be intentional, READ HISTORY

  24. I'll intervene in this debate one last time then wrap it. The POINT is increasing the monetary base DOESN'T increase 'the money in the economy' because banks don't rely on existing central bank reserves to lend (only that the central bank accommodates lending after the fact, which it effectively must do). No equations needed here. It's like loosening your belt and expecting your belly to grow as a result.

  25. That doesn't make any sense. He would be only right if dumping money out of a helicopter? So he'd be wrong dumping money out of a dump truck? or dropping money from a building? lol…Your statement is a little ridiculous….My question to you is this, how is what the FED is doing different from dumping money from helicopters?

  26. Okay, I think I understand your argument. Let me get this straight, you're saying, just because the FED gives banks a bunch of money, they aren't going to lend, and therefore the economy does not see this new money? Honestly, that's a pretty weak argument if that's what you're trying to say. You are making the false assumption in this argument that the banks are going to sit and do nothing with their cash if they are unable to lend. Don't forget we no longer have glass steagall.

  27. You are trying to make the argument that velocity would drop to zero(or close to it), therefore any money supply increases would be meaningless? However, you are dismissing the point that when people see inflation, they try and protect themselves by buying hard assets(meaning velocity would increase). Look at China for example, they are on fire because of US inflationary policies.

  28. Obviously, if they dumped money out of helicopters, we'd pick it up–it's free money. And this helicopter money would then rapidly pour into the economy. But what QE does is different. QE injects money into banks (trades money for bonds, etc.), but unless that money is lent out, it just sits there. Business has no need to borrow this money, and so it just sits there in the banks. That's why the helicopter analogy is faulty. .

  29. Look up glass steagall..Banks don't need to lend to get money into the system. You have the banking system confused.

  30. "business which couldn't afford to currently will find they can when wages rise across the board"
    I doubt that. If your product would cost +n% and you make no money of it to begin with, selling +n% would not help.
    The idea here is to raise the inflation to raise the cost of keeping money.

  31. state-induced slavery is only part of the picture… it's honestly more to do with supply and demand. far more hungry mouths than jobs, and you end up with people more willing to work for $1 per day than starve to death

    immigration restrictions prevent supply of workers from too rapidly outpacing supply of jobs. remove immigration laws and we'll return to the 1930s where unemployment was through the roof.

  32. Immigration restrictions actually ramp UP the number of workers rather than keep it down – if Chinese had been immigrating they wouldn't all be packed into such a tight space – Chinese wages would be higher now.
    1930's unemployment is in fact BETTER than today's. You have way more people unemployed than in the 1930's by comparison using the same DECIDING LINE for what is "unemployed" but now you have foodstamps to pretend there are no soup-lines. They are soup-lines.

  33. No, you are repeating Zeit-lies. A resource-based economy is PRO-ownership. It requires I personally own resources & decide what to trade them for. That's RBE. Zeit-lies and Penus Project are ANTI-RBE, declaring full control over planetary resources like a global dictator, or global central BANK which we ALREADY HAVE.
    This shit's GOT TO GO.
    RBE can't be controlled, control is anti-RBE.
    There is NO SCIENCE in PENUS PROJECT or zeit-LIES.

  34. Every economy requires trade. REQUIRES. An atmosphere without pressure is one that isn't there at all. An economy without trade is NOT an economy. A theory calling for a no-trade all-controlled "economy" is in fact ANTI-economy. Zeitgeist & Venus Project are 100% anti-economy and actually attach the real name RBE to the inverse definition.
    Ownership is the 100% solid basis for RBE.
    I have gold, silver, lumber, resources, that I trade IN AN ECONOMY. That's RBE. No controllers EVER.

  35. the NON-resource-based economy is the DEBT-based economy.
    These are the options:
    central control slavery (venus project),
    fiat debt currency central bank slavery (today)
    and PERSONAL OWNERSHIP of RESOURCES for consenting trade
    aka RBE
    welcome to reality – you've been lied to your ENTIRE LIFE.

  36. All economies are, by definition, resource-based.
    The current economy is the Birth of Plenty economy.
    That's all we need to know.

  37. Ug. I'm about done with you people. Look, at present big American corporations are swimming in cash; they have plenty of it; a bank loan is the last thing they need. Why don't you try reading the newspaper for Christ's sake? Now, the doomed small business you run out of your garage might need cash–I'm sure it does–but the banks aren't willing to take a chance on it.

  38. Listen, you stupid fuck. You're wasting my time. Inflation sits right now at 1.6%–BIG FUCKING DEAL. According to you, there was a tremendous expansion of the money supply and there should be a consequent tremendous increase in inflation. WHERE'S THE INFLATION, DUMMY? Inflation is lower today than it ever was under George W. Bush. Your theories are proven horseshit.
    But keep telling us the sky is falling, and that hyperinflation is right around the corner.

  39. "the doomed small business you run out of your garage might need cash"
    Mark Cuban recently said that every one but two of the dozens of investments he made on Shark Tank made money (and of the other two, one broke even). That doesn't sound very "doomed".

  40. You're telling me the price of a home has been 1.6% in the last 10 years? The price of gas, 1.6%? You're fucking delusional. News flash…They are lying about the numbers kid. Get your head out of your ass.

  41. Maybe if you weren't living in your moms basement and actually had to shop for food, you'd know this. Get a job you loser.

  42. That's a funny way of putting things. I sense it's inaccurate but since you provided so little detail I suppose I can't be sure.
    And no, as a matter of fact, today's economy is not resource-based. It's debt-based. Debts are passed around in place of commodities, leveraged margin on trade is used with fractional reserve & delivery of actual resources is not expected most of the time. Ever.

  43. Here are some details?: efficientfrontier. com/ef/404/CH1. HTM
    "The Birth of Plenty, an inquiry into the origins of modern prosperity"

  44. So your solution is to allow endless people to flood in? You don't see how that will make the situation worse? There are already TOO MANY people looking for work in North America.

    China's problems are China's problems. As much America and other first world countries would like to solve the problems of the entire world, it seems they cannot even solve their own.

  45. Shark Tank? What the hell are you talking about? I don't even own a TV. Look, I know nothing about that show, and frankly couldn't care less how many cranks are writing into a reality show trying to peddle the next Flowbee or get financing for it or whatever else they're trying to do.
    But if anything, this phenomenon supports my point. If these desperate goofballs could get a bank loan, they'd get one, and wouldn't be pinning their hopes on a TV show.

  46. 1.6% is the ANNUAL rate of inflation, for Christ's sake, not the rate over ten years. And the point is, since Obama has taken office inflation has been very low–one year there was actually DEflation–which is the opposite of what your theory would predict.
    But it's exactly what I would have predicted. The preconditions of high inflation don't exist. There's high unemployment. Demand in the economy is weak. Productive capacity goes unused. So, there's zero upward pressure on prices

  47. Obviously, it's annual, you buffoon. You're telling me from 2000-2007 the price of a home increased 1.6% a year? or Gas? Food staples? Like I said in my previous comment, they are lying about the numbers and if you aren't smart enough to wise up to it, then you're lost.

  48. 1.6% figure is what the govt. tells you.

    There is a great deal of subjectivity in the BLS numbers, esp. the headline CPI.

    There were changed in the early 80's, then came Boskin Commission and introduction of hedonics, which introduced much subjectivity.

    Liberal substitutions, subjectivity of under/over-weighting, and the use of geometric calculation instead of arithmetic weighting results in a lower number by definition.

    See Shadowstats for more info.

  49. "Preconditions for high inflation." Can you show me one economy in world history that had high/hyper inflation and a strong economy? Keynesians are wrong.

    While it's true that prices would naturally fall in the wake of a burst phony credit/asset bubble (of Federal Reserve creation!), that wasn't allowed to happen. The Fed responded with ZIRP and cheap money policies.

    I have no idea where you shop.

  50. Because MIT doesn't include asset classes. It also doesn't account for producers reducing the quantity of products with prices remaining the same. That, my friend, is hidden inflation.

  51. Look, YOU are the one who's been duped–not me. You're being played like a fool by bond traders and other Wall Street types who see inflation–any inflation whatsoever–as the Great Satan. Any they have you out doing their bidding, contrary to your own interests.
    I repeat: YOU are being played like a fool.
    This "Hyperinflation is right around the corner" crap is on an intellectual and moral par with the crank scholarship that says climate change is a myth.

  52. Where do you think the rich hold their savings? In investments. All other money depreciates with inflation. And yes they have assets, but far more is invested than are in assets. They GROW their money remember?

    Most bankrupt ppl keep their job. In fact they have more incentive than ever to do so. And what does happen when you lose your job? Do you blow up? No you get another job and save your money.

    Wait, deflation raises the value of saved money.. Hrm..

  53. So the poor bankrupt individual who now can't get a loan wouldn't care as with deflation loan rates are crazy high.

    So they'd have to save money, and the money they save automatically accumulates in value. So wait, before with high inflation they lost 2-4% from interest (REALLY low interest) now they gain 2-4% (low deflation) a year w/o any investing. That's better than you get betting like Vegas on your mutual funds.

    No slicing involved. It's called "math". I invite you to try it.

  54. Is this your argument showing that the poor benefit from deflation? You start by saying "the poor bankrupt individual", then jump to saying "they'd save money". How are you jumping to that conclusion? NOT saving money is what got them into bankruptcy in the first place, how are you making the conclusion that they are going to save now? Your entire argument doesn't logically follow. Secondly, you are talking in percentage terms…2-4% on $1,000, it's very much….

  55. I've really grown tired of trying to educate your stupid ass. You don't even have an "Economics for Dummies" grasp on inflation, which is pathetic since it's clear you devote much time to the subject.

    You are like the morons who believe 9-11 was an inside job, with your "the government is lying about the numbers" horseshit.

    This country is fucked. Half the population could care less about economics and politics, while the other half is a bunch of pseudo-intellectual conspiratards.

  56. "Bond traders and Wall Street….duped…" You don't understand what is going on at all.

    Wall Street loves the rigged interest rate grid and cheap money policies of the Fed. That's how they make money for free without adding any value. That's the source of the inflation, excessive leverage, uncollateralized derivatives, and pyramided debt.

    The last thing that the Wall Street types want is market interest rates and commodity money.

  57. "Climate change is a myth…crank scholarship?" What does that have to do with anything. Climate is always in a state of dynamic disequillibrium. I challenge you to point to one period of the planet's history that indicates otherwise.

    I'm fully aware of how fiat paper currency and Fed's rigged artificially low interest rate grid works to transfer purchasing power to those who get the benefit of those rates and the new currency FIRST and away from the rest of us.

  58. I understand pretty well what's going on. Legally, the Fed has two objectives–(1) to strive for low inflation and (2) to strive for full employment. Full employment isn't taken seriously at all at the Fed, while low inflation is a burning obsession. Why? The rich despise inflation because it eats away at their wealth; on the other hand, the rich like a slack labor market because this helps keep wages low.

  59. Nobody in his right mind wants commodity money. The gold standard is an awful idea. Why this stinking corpse is being trotted out these days, I have no idea.

  60. "Strive for low inflation?" The Fed is the one that creates the inflation!!

    If a price rises here or there, it can be for any number of reasons. If all or the majority of prices are rising for long periods, it can only be due to the supply of all goods and services being less (very unlikely outside of war), or it is due to the debasement of the money.

    The Federal Reserve's original mandate was almost sound. For the last 25-years the Fed's policy is inflationary. It serves govt./banks.

  61. You have a set up a false choice when you claim that the Fed must choose between low inflation (anyone who thinks inflation is low now is brainwashed and gullible) and low employment.

    There have been many years in U.S. history where there was little inflation and very high employment.

    In fact the late 19th century (classical gold standard) had deflation (real wages were going up as other prices gradually fell) with very low unemployment. According to Keynesians this is impossible.

  62. "Rich despise inflation?" LOL!!!!! They hold most of their wealth in assets. They aren't living paycheck to paycheck. They aren't on fixed income. Dollar debasement hurts those who live hand-to-mouth the hardest.

    During this inflationary enviroment over last decade wealth has become much more concentrated. The more inflation, the greater the transfer of purchasing power.

    Asset prices will nominally rise with inflation. It's the poor/middle class that get stuck with the bill.

  63. The FED isn't eating away at the wealth's money because the rich have a microscopic portion of their money sitting in bank accounts. It's invested in assets and equities!! That's not the case with the poor. The middle-class has less of a percentage of its wealth in assets, too.

    If you own assets or get the Fed's funny money first, you'll be okay. It's those who get the new funny money after prices rise to convey the increased supply that get the shaft.

    You're a brainwashed Keynesian.

  64. "No one is his right mind wants commodity money…awful idea…" Well, you said it, it must be true!!

    The average historical life span of a fiat currency is 27-years. Re-read that until it sinks into your statist skull.

    The classical gold standard (1873-1914) worked fine. Nation-states abandoned it because they wanted to finance part of the cost of WWI with printing press money. Govt.'s would institute price controls to try to hide the inflation. It only resulted in rationing.

  65. Gold and silver have been monies for thousands of years. They have the following attributes that make them perfect monies:

    1) High unit value per measure of weight

    2) Fungibility

    3) Very scarce but enough exists to function as media of exchange (it's not a quantity thing, it's a PRICE thing)_

    4) Durable and malleable so as to fashion into coins.

    5) Portability

    6) Non-monetary functions/value

    Fiat paper currency can only exist by decree. What does that tell you?

  66. Without credit, you don't really have a choice but to save money. I know about a dozen ppl who've gone through bankruptcy. A couple still try to ask for money, but all of them save. They really have no choice but to. I can't say any are worse off now, most are better, even in these times.

    The logic is pretty straight forward. How else do you afford unexpected expenses? You either don't and lose that thing, ask others, or steal/loanshark. Unsurprisingly most try SAVING before the last 2.

  67. Remember, we are talking in percentage terms here. Where by 1% of $1,000 is a hell of a lot loss then 1% of $ 1 million. Just saying, assuming your theory is even correct, the poor are saving percentages on pennies, compared to percentage in thousands(by the rich).

  68. The rich are human beings with the same difficulty to downgrade lifestyle as poorer people. Poorer ppl are instantly forced to. The rich will most often carry on incredible spending habits despite the dramatically lowered income. They can afford to…

    Sort of.

    In doing so they don't save nearly as much. Many go over their investment or savings and simply live off savings until that's all gone too.

    Plus the vast poor are used to saving now. A habit that got the rich initially wealthy.

  69. Your entire concept of savings and poor and rich is distorted. It's so far distorted that I don't think I can even bring you back to reality by telling you. Sooo, now you're telling me the poor save as much as the rich during a depression? Because the rich can't curtail spending habits? Give me a break. You need to look up the great depression. Checkout pictures of the food lines.

  70. You say some pretty stupid things, but this has to be near the top of the list. The rich despise inflation? You are joking right? You do understand that the rich own assets. Assets that appreciate in value during times of inflation. If you are going to argue it eats away at their savings you have no concept of fractional reserve lending, nor indirect finance. I suggest you pick up a book and look up those two terms. Might save you from adding something else to that list of yours.

  71. No they don't save as much as the rich. It's the trend thats important. In the example the trend was towards the poor gaining and the rich losing. And yes even saving pennies and dollars compounds with interest. Einstien himself stated when asked what mans greatest invention was, His response was compound interest. He who understands it, earns it. He who doesn't, pays it.

  72. February 2013 inflation was 1.98% annualized: inflationdata. com/inflation/inflation_rate/currentinflation. asp
    "Inflation is lower today than it ever was under George W. Bush."
    No. 2002 inflation was only 1.59% for the year.

  73. Ah yes, his choice was zippers. Perhaps more impressive than the misquote were the number of people that agreed with it. But even more important to the argument is if it's true or not. An exponential pattern will eventually overtake anything save a greater exponential pattern or infinity.

    There is good reason your grandparents generation had the term "save your pennies."

  74. There is no such flood. Never has been. People keep moving to find work & food. People don't endlessly flood, they just keep moving on. Only a few stay. They don't stay unless you LET them stay. With no work and / or no place to stay they WON'T stay. It's YOUR choice. Not a NATION's choice but YOUR choice

  75. no there are NOT too many people looking for work in North America. You've been fooled.
    There are too many people in North America PAID NOT TO WORK, too many people told they should GET DEBT, GET USELESS SCHOOLING and then in 5 years time be deeply owing & not working, and BLOCKED from leaving by immigration restrictions. Many around you would leave if they could do so.

  76. 10:28 How come nobody knows what "Structural Reform" is?
    It is very simple. "Reform" and "Structural". That is a reform that is structured. Duh!
    I'm a freakin' financial prodigy genius. I should have gone for MBA or other money-related degree instead and joined a bank.

  77. its pretty sad that they can't get an education without getting in deep debt… and what else are they supposed to do, not try to get an education?

  78. there is an endless supply of new human beings. people in 3rd world countries have kids more rapidly (or at least as rapidly) than hunger/disease kills them. china has laws to kill kids at birth to keep the population down. we need immigration control to keep our North American way of life from getting diluted by endless immigrants. most people who move don't move FROM the first world… they move TO the first world.

    we need to solve our own problems before we can look at shouldering new ones.

  79. pretty sad they can't see the truth: this debt is not required for education. It's quicker to work first & pay in cash than to pay the debt. It's also cheaper to learn from the work-force what education is rejected, gets you nothing, so you can't be tricked into paying for that brand/degree by any means.
    Work first & you'll save real money & see the truth without a day in college / university.
    Look at those with degrees working jobs that DO NOT NEED one: they could have worked there first.

  80. there is NEVER an endless supply: population has a very hard limit of the exponential curve. Babies that aren't fed well die before working age & people who aren't mobile don't migrate even if they want to do so. Then people who do migrate don't stay when there's no place to live (too expensive, no vacancy) and no jobs (you are not forced to hire). This solves problems: now your people can leave & work too. And no, disease kills the kids FAR FASTER than breeding makes them.

  81. Your mistake is thinking you'll be shouldering new problems and in thinking your country is 1st world. It isn't. Neither are true.

  82. Think of it this way: in a real 1st world country you'd have financial equity in opportunity, real rights of property & self-defense, real mobility to look for work & not overt interference from corporations & governments to take those things away. Instead (your profile says Canada) we have little right to self-defense, NONE using guns, NONE from overt violent dirty cops, no land rights (must pay tax, Mining Act says no subsurface rights at all), and so on. Think about it.

  83. That's kind of my point – we have it bad, but if we allow any person to move here who wants to move here, our already dwindling wealth will be diluted further. I don't want things here in North America to go from bad to worse. Canada is $600B in debt and the US is almost $17T. Should we allow more people to flood in and see unemployment rates go up and welfare expenses go up? If things get worse here, just where are people supposed to move "to"?

  84. you have it bad because your own people aren't moving – you need to keep moving to new cities and countries to get jobs. Everyone does. It's unnatural to do otherwise. Right now most Americans would be better moving to Canada, Peru, Chile, Australia & Singapore, Thailand to find lower cost of living, more job availability & that doesn't mean stay forever – you can keep moving. Get savings there, learn a bit & move on

  85. Canada has a much higher debt than $600 B and the government part doesn't matter as much as you think. You can get quite a lot out of a tax-service dollar in Canada & you can find good work in Alberta, Edmonton and near. Quebec is OK but let's be honest, if you don't speak French you won't have a good job search there.
    Believe me the smart people ARE NOT intending to move to the USA to stay.
    They may need to pass through there to get to Canada & have family from the old country (Texas=Mexico)

  86. Move "to"… where? The world economy is in shambles except for a few pockets here and there. For example, I live in Alberta where our economy is doing well due to the oilsands. I've watched as this province has gotten overcrowded and it continues to get worse over time. The mass influx of workers is what drags salaries and wages down, but it would get exponentially worse if there were no immigration controls.

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