Where will inflation stop?

In reply to GameboyRMH :

Oh, and your Tawainese and South Korean manufacturing companies that treat their employees so well?  THEY buy their chemicals from the same foreign chemical manufacturers we did. 
 

Come on, man. It's a big game. The only thing that matters is who you give you money to. If making you feel good about their alleged employment practices is what it takes to make the sale, they are completely up for the challenge.  

In reply to GameboyRMH :

An interesting theory, as personally distasteful as I find this "great men of history" sort of approach to economics, it has good logical consistency to it, but I have two issues with it - first I suspect you have some variables wrong, in that you're artificially misallocating productivity, and two if your theory IS correct, then the economy actually requires unsustainably cheap labor from people who are practically forced to do it because they're trapped in bad situations (fun point, I have actually heard a business owner openly argue that this is in fact the case, that this is just how the system works).

You are missing the sustainable cheap labor from other countries, where they are literally are trapped. Here, no one is locked in a warehouse until the end of their shift. Employers do "trap" the employees that the wish to retain by offering just enough pay and accommodations to keep them from going elsewhere. But they aren't holding them against their will. And it's only a trap if they fail to explore other opportunities. I think you are also confusing productivity and value. You can be very productive in a task that many people are willing and able to do. The end result of your labor might be valuable to the company, but if many people are willing and able to do the same job, they don't need to pay you a lot to do it. Once the business has the good or service that the employee produced, they must bring it to market. Sure, they could jack up the price and make crazy profits. Unless competition is willing to forego crazy margin percentage to capture more sales. The consumer has a big say, as they vote with their dollars. Value is what someone is willing to pay for a good or service. Your used car is only worth $25k if someone is willling and able to pay $25k for it, just like flipping burgers is only worth $20 an hour if someone is willing to pay that. How much you think it should be worth is irrelevant unless you are willing to pay for it. 

Onto the first issue, I suspect flipping burgers or stacking boxes should produce enough value to support a livable wage - not necessarily sustain a family of 4 single-handed, but decently support one person or maybe two on a tight budget. This has happened in a few countries at various points throughout history, and is still happening in a few countries today, mostly in Scandinavia and Europe, and the only reason it isn't is that outside of those situations the productivity of the company's output has been misallocated onto those Few Great Men, who according to economic stats have seen their wealth explode over the last few decades while wages for the workers fall or remain stagnant at best, especially as a share of overall productivity. And what is so special about those Great Men that makes them worth so much? Is a day of high-level managerial work really worth more than a year toiling away at most any other profession? We've had CEOs make plainly disastrous decisions that lead companies into ruin (WeWork and Nokia stand out) while collecting more money than any worker could gross in a lifetime. Does being a CEO require more knowledge than being a doctor or an engineer or a full-stack web developer? I suspect not.

Define liveable wage. You can put a roof over your head and food on the table flipping burgers and stacking boxes. It won't be the nicest roof, in the nicest area, and the best food. But you can live comfortably. You might need a room mate. You might need a second job. Lots of people do this when starting out. The Scandinavia/Europe example is often cited, but more myth than accurate. There is a larger amount of redistribution, prices are higher, and overall, people live much more modestly than they do in the US. As I've stated before, the only way to make everyone more equal is to bring everyone down. The more productive people of Europe would love to have the opportunity we take for granted here. Don't forget, they also spend a fraction of what we do on their own defense, since they count on us for protection. Recent world events are changing that, and those increased defense spending dollars need to come from somewhere. You are also confusing high pay with great men. Yes, the few great men (and women) that truly move society forward are often accomplish their goals because they were perusing success. But that doesn't mean that every one with a high income is a great man. Rather, someone bet their money on that person. That new CEO was given the high salary because the complany believed there would be a return on that investment. It doesn't always work out. Just like paying a big contract to a quarterback doesn't guarantee success (looking at you, Jimmy G.) But at the time, it looked like a good decision to those that made it, they weren't trying to waste money. 

Giving a few people a lot of excess wealth can do a lot of bad things to the economy, the more money you give a person the greater the percentage of that wealth will go into cash savings and investments rather than goods and labor, and the more they will spend outside the country. In short, wealth concentration takes money out of play for most of the economy, while wider-spread wealth, especially on the lower end of the economic ladder, will spread rapidly to other workers and stays local.

This is flawed. One, investment drives the economy and progress. Without investment, the best we can hope to do is to maintain the status quo. As I pointed out earlier, it's also a vehicle that allows people of modest incomes to accumulate wealth that they could not otherwise attain. Growing the economy from the bottom up is not feasible. To do so, you would need to artificially inflate the value of unskilled labor. Which would raise the costs of goods and services. Skilled labor would need to be paid more, because why would they do more specialized and valuable work for the same wage as unskilled labor? While costs are going up? All you did was increase the supply of money without increasing production. Like I said, a dog named inflation chasing it's tail. 

Onto the second issue, if your theory is correct and we need some people who have no other options to work in grinding poverty or even work themselves

 

deeper into poverty ("Gig economy," looking at you) to keep the economy as we know it afloat, isn't that a moral failing in the system we should address? That's drifting dangerously close to indentured servitude and we know there are working alternatives.

You are assuming that it is the same people who are working in poverty from year to year throughout their lives. This is most certainly not true. People can and do work themselves out of poverty all the time- it's the rule rather than the exception- in this country at least. If you took a look at the people working in poverty in 2010, and then in 2020, a very small percentage would be on both lists. For the vast majority of people, poverty is transitional, not permanent. I do agree with you on the gig economy- I fear it will lead to more people lingering in the transitional poverty part of their lives longer, as advancement opportunity may be less frequent than with traditional employment. With the exception of those using it as supplemental income or while continuing education, then it may get them out of poverty more quickly. 

In reply to SV reX :

There you go again expanding my perspective. Between you and Matt Risinger I keep feeling like I should get into building sciences...

In reply to SV reX :

Nirvana fallacy is a false dichotomy of attacking an idea basically because it proposes an imperfect solution:

https://en.wikipedia.org/wiki/Nirvana_fallacy

Similarly there are degrees of safety between OSHA vs. the slightly less stringent requirements in Taiwan or SK vs. signficantly looser reqirements at a mainland Chinese Foxconn factory vs. a Xinjiang slave labor factory where they'd just harvest any viable organs from anyone killed in an industrial accident and continue work, while turning the rivers interesting colors with raw industrial waste. There are some semiconductors and electronics manufactured in the US so it's not impossible to make them while compying with OSHA and EPA regulations, just expensive enough that few have tried it - and the difference in labor costs shouldn't be ignored as a factor either.

In reply to GameboyRMH :

Semi-conductors are made in the US. Some of  chemicals used to make them are generally not. 

BTW... my company does similar "slight of hand". All companies do. 
 

We don't hire undocumented workers. That's a proveable fact. Sorta...

Come to my job site and judge for yourself. 

Etc, etc

Sometimes you've got to pick your battles. 

pheller said:

In reply to SV reX :

There you go again expanding my perspective. Between you and Matt Risinger I keep feeling like I should get into building sciences...

Matt is a great source of knowledge but his social media reach has led to many sponsors which are now muddying his message. I wish he would identify sponsored content (or acknowledge free stuff) for transparency. But he doesn't. Not yet anyway. 
 

I do appreciate that he openly admits mistakes he has made. 

The Build Show isn't perfect, but its production values are on par with This Old House. I wish both would cover the technique a little better. Whenever Tom Silva talks, I listen. 

Duke said:

frenchyd said:

In reply to AaronT :

You are correct. But just stating it like it isn't easily solved. 
     Unions

    They raised wages high enough so a working father could send his children to college, provide a decent living, and an 8 hour work day, leaving much of the of the rest of the day  for rest and time with the family. 
  Today to achieve that requires 2&3 jobs and no time with the family. 

Oh, you mean the same unions that drove entire heavy industries overseas and burdened so many US products with wage / pension requirements and lack of quality control that they became completely uncompetitive?

Management was ALSO bad in that era, but let's not forget the unions that helped kill the golden goose.

I'm glad you acknowledge that management made mistakes.  Look at what Roger Smith did to GM during his tenure. To take the company from respected and trusted. To the depths that led to bankruptcy?   
     Then the company I worked for. Clark of Battle Creek.  Now Battle Creek was in the heart of Union country. But Clark equipment dominated material handling with as much as 80 % market share.  Profits that were plentiful.  
       The heirs took over and didn't want to be bothered to work so they employed advisors who said blow this union town go to a right to work state like Kentucky. 
     Market share dropped competitors like Hyster, Yale. Etc started replacing Clark. Even Nissan and Toyota. Were out selling Clark.   We went from 80% market share to 20%- 15% profits dried up and losses mounted. Right to work didn't guarantee good workers.  So Clark went overseas.  Lost all of their market. 
   Harvard uses them as a textbook on how to mishandle a company 

    Management will always blame unions for their failures. When the simple truth is worker are the real secret to  profits. Treat workers well and companies are rewarded. Focus on profit and the company is doomed. 
  Ford found great workers by doubling wages. To $5 a day  and then as Henry Ford refused to modernize the Model T he lost market share  he blamed his employees and well the labor troubles at Ford led him to blame Jewish bankers and unions.  
 Look at Japan. They went from no market share to world domination. Toyota builds trucks that the rest of the world want. Same with cars. 
Honda went from a motorized bicycle to dominating car sales. Nissan, Miata, etc  took the place of American car companies As Studebaker Packard, AMC, faltered and died. Now the big three are abandoning car sales to imported.  Those are decision management made.  Not Union.  
Look  at the rewards management rewards itself even on years where sales are low and competitors are dominating. 
compare management rewards in Germany and Japan to America.  Last I looked management in Japan made 12 times what workers did. Germany Was 18 times. America? Depends but as much a 2300 times what workers made. An American went to Japan and ran Nissan.  Look at what he took and as a result Japanese wanted him arrested. 
 

  Finally your comment about American heavy industries going overseas?   I was working for Caterpillar when much of that happened. We sold American made products to various countries by letting them manufacture certain lines there. 
    The unions had nothing to do with that except lose jobs.  Wages weren't that far out of line. In fact finished products made overseas often were more expensive than the same product made in America when transportation and import duty was factored in. 
   Along with that our sales of those items lost overseas markets.  A clear case of stepping over dollars to pick up dimes.   

frenchyd said: Last I looked management in Japan made 12 times what workers did. Germany Was 18 times. America? Depends but as much a 2300 times what workers made. An American went to Japan and ran Nissan.  Look at what he took and as a result Japanese wanted him arrested.

Carlos Ghosn is a real-life cyberpunk villain and holds 3 different nationalities, but American isn't one of them.

In reply to GameboyRMH :

Correct...

I was going to add a Mythbuster's "Confirmed" GIF but I stumbled across a GIF of Kair Byron standing on a vibrating platform and got totally distracted 

OK, so here is a thought exercise:   

The current conversation seems to be surrounding Companies, Unions, Workers and such and how each can be bad or good in their own way.

What is a common agreement here?  (E.g. the people in those various positions have more of an effect on the result, than the position itself)

In reply to frenchyd :

Your examples just demonstrated the value of good leadership and why companies are willing to pay what they believe it takes to secure it. You gave examples of the harm bad leadership can mean for a company. Since no leadership is not a realistic choice, most companies feel compelled to pay what it takes to avoid those situations and maximize profits and growth. Yes, employees are extremely important. But it's management's job to hire, train, retain, and get the best performance out of the employees. It's very easy to just say if they pay them more they will be more productive. Next question- how much more? It's not linear, it's a curve, and that curve is different for each individual employee. Too little and you leave production on the table, too much and you are past the point of diminishing- or any- returns. This is way overly simplistic and there is a lot more to it, the point is management is not at clear and simple as "take care of the employees." Too little, you fail, too much, you fail. It's also not just about pay- pay can actually be pretty far down the list of what keeps employees happy. If you rate the value of a job just by the pay, you are missing a big part of the picture.

Boost_Crazy said:

In reply to frenchyd :

It's not linear, it's a curve

Exactly.

The Laffer curve is present in almost all economic systems:

How is it possible that we don't find time to cover this within our government mandated twelve years of education?

 The cynical side of me thinks "they" don't want us to be too smart.

Boost_Crazy said:

In reply to frenchyd :

Your examples just demonstrated the value of good leadership and why companies are willing to pay what they believe it takes to secure it. You gave examples of the harm bad leadership can mean for a company. Since no leadership is not a realistic choice, most companies feel compelled to pay what it takes to avoid those situations and maximize profits and growth. Yes, employees are extremely important. But it's management's job to hire, train, retain, and get the best performance out of the employees. It's very easy to just say if they pay them more they will be more productive. Next question- how much more? It's not linear, it's a curve, and that curve is different for each individual employee. Too little and you leave production on the table, too much and you are past the point of diminishing- or any- returns. This is way overly simplistic and there is a lot more to it, the point is management is not at clear and simple as "take care of the employees." Too little, you fail, too much, you fail. It's also not just about pay- pay can actually be pretty far down the list of what keeps employees happy. If you rate the value of a job just by the pay, you are missing a big part of the picture.

Very well said.  I was trying for a different point and I guess I failed to make it.  That is there is a trend in  companies to blame problems on the employees lower in the ladder. But seldom does anyone look up for the problem.   
   I would have thought that was the obligation of the board. Instead that board tends to be made of Friends and buddies rather than those critical of CEO's or CFO's. 

GameboyRMH said:

frenchyd said: Last I looked management in Japan made 12 times what workers did. Germany Was 18 times. America? Depends but as much a 2300 times what workers made. An American went to Japan and ran Nissan.  Look at what he took and as a result Japanese wanted him arrested.

Carlos Ghosn is a real-life cyberpunk villain and holds 3 different nationalities, but American isn't one of them.

Fair enough.  However what is commonly done in American companies is considered criminal in much of the rest of the world. 
    Well even that statement isn't absolutely factual. I don't know each individual corporation or company's  but I do read enough and see enough abuses that I wonder who's taking care of the store.  

RX Reven' said:

Boost_Crazy said:

In reply to frenchyd :

It's not linear, it's a curve

Exactly.

The Laffer curve is present in almost all economic systems:

How is it possible that we don't find time to cover this within our government mandated twelve years of education?

 The cynical side of me thinks "they" don't want us to be too smart.

Because it's made-up nonsense, a common problem with popular economic theories:

https://ctmirror.org/2018/01/18/why-the-laffer-curve-is-garbage/

https://www.nytimes.com/2019/06/25/opinion/the-dangerous-folly-of-lafferism.html

Edit: Just ran across a point that even the remaining defenders of the Laffer curve argue that its peak should be somewhere in the 50~80% range, so a Laffer curve peaking around 30% is especially wrong.

aircooled said:

OK, so here is a thought exercise:   

The current conversation seems to be surrounding Companies, Unions, Workers and such and how each can be bad or good in their own way.

What is a common agreement here?  (E.g. the people in those various positions have more of an effect on the result, than the position itself)

Power corrupts.  absolute power corrupts absolutely.  Every group organization, company , corporation, political system, Government. Needs a force equal to them to control those who fail to balance interests.  

So, after a skim of this page, everyone in the entire continent wants to have an above average income, whether employer or employee, and it's somebody else's fault.

Ok, it's clear now.

Just gonna say it again, we are richer and healthier now, than we have ever been in human history.

frenchyd said:

aircooled said:

OK, so here is a thought exercise:   

The current conversation seems to be surrounding Companies, Unions, Workers and such and how each can be bad or good in their own way.

What is a common agreement here?  (E.g. the people in those various positions have more of an effect on the result, than the position itself)

Power corrupts.  absolute power corrupts absolutely.  Every group organization, company , corporation, political system, Government. Needs a force equal to them to control those who fail to balance interests.  

If you want to look for bad examples, Russian history proves that monarchy, socialism, and democratic capitalism all do not work   And that is just in the previous century.

Sort of like the saying where if you meet one shiny happy person versus if everyone you meet is a shiny happy person...

There are plenty of examples of any economic climate (management, unions, workers) where they work well and examples where they don't work, the problem is the people who make up the environment, not the environment itself.

In reply to frenchyd :

That statement is pretty hard to swallow. 
 

We all have some degree of power.  Might not be money or political strength. Perhaps familial authority, or relational influence. There are hundreds of tykes or power, and we all have spheres of influence. So are we all corrupt?

And there is no such thing as absolute power. 
 

That's one of those "morality quips@ that we just swallow and smile, in spite of its rancid taste. It's hogwash. 

GameboyRMH said:

RX Reven' said:

Boost_Crazy said:

In reply to frenchyd :

It's not linear, it's a curve

Exactly.

The Laffer curve is present in almost all economic systems:

How is it possible that we don't find time to cover this within our government mandated twelve years of education?

 The cynical side of me thinks "they" don't want us to be too smart.

Because it's made-up nonsense, a common problem with popular economic theories:

https://ctmirror.org/2018/01/18/why-the-laffer-curve-is-garbage/

https://www.nytimes.com/2019/06/25/opinion/the-dangerous-folly-of-lafferism.html

Edit: Just ran across a point that even the remaining defenders of the Laffer curve argue that its peak should be somewhere in the 50~80% range, so a Laffer curve peaking around 30% is especially wrong.

Nobody knows what the optimal level of taxation is and even if they somehow did, the level would immediately become outdated due to situational changes.

My only interest in the Laffer curve is its acknowledgement that almost nothing in economics has a linear relationship...there is almost always a sweet spot above and below which is non optimal.

I'll try to make time to review the material you linked but 50-80% intuitively seems insanely high.

I recently posted about letting my pool guy go because the spread between the gross dollars I had to earn to put the net dollars in his pocket (governments take) made it better for me to do the work myself (cut the government out) even though I'm wildly more educated and experienced than the typical pool maintainer.   

frenchyd said:

aircooled said:

OK, so here is a thought exercise:   

The current conversation seems to be surrounding Companies, Unions, Workers and such and how each can be bad or good in their own way.

What is a common agreement here?  (E.g. the people in those various positions have more of an effect on the result, than the position itself)

Power corrupts.  absolute power corrupts absolutely.  Every group organization, company , corporation, political system, Government. Needs a force equal to them to control those who fail to balance interests.  

Unions are also a type of group and unions are major political campaign contributors. 

In reply to RX Reven' :

Everything I have read about the Laffer Curve is that the peak is at about 85%.  

Those who champion that it isn't fight for lower taxes claiming that it will increase revenue.  Then when it doesn't, they claim that taxes just weren't cut hard enough.  Then when the economy is in tatters, they admit that they don't care as long as they don't have to pay taxes.

85% DOES seem insanely high, do not get me wrong.  But I also look to the countries with high per capitas and they all have what would be considered insanely high taxes in the US.

In reply to RX Reven' :

Unions also have a long history of uncomfortable connections with organized crime. 
 

Political power AND crime!  WooHoo!!