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Comment by sp332 | Hacker News Reader

But inflation has been very low lately.

Depends on what you measure :-) yes white goods (flat screen tvs etc) have reduced in price but housing costs (not normaly included in inflation measures see the UK's CPI or RPI ) have shot up.

And not all groups have the same inflation rate eg pensioners vs those of working age - pensions spend more on heating for example.

Ok I agree on the housing thing. I was kinda measuring by interest rates.

So? We're talking about changes over 40 year timespans. Your observation reads: Labor is being screwed slightly less quickly lately.

The inflation rate has been low for over 30 years, since the early 80's when Volcker killed it by creating a recession.

The Fed's loose money policy has only been around since 2008, with very low inflation since then.

While critics constantly predict inflation, it hasn't caused inflation in practice.

Yes, labor is getting screwed but how it's being done is not that simple.

what fantasy world do you live in where there hasn't been inflation since the 70s?

The minimum wage in 1990, (well after volcker), was 3.80/hr

would you be able to live on $3.80/hr today?

As for loose money policy, the current loose money policy is just very very extreme. In 1980 my parents bought a house at a 16% interest rate; in 1990, they bought a second house at the same value (side observation: it was of worse construction) at 8%, and then in 2001 they bought a third one at ~5%. It would be hard to argue that the fact that my parents obtained two houses at no extra yearly cost is not a result of a 'loosening' of policy.

I'm going by the official inflation rate. Here's a graph [1]. Where do you get your numbers?

How to include housing prices in the consumer price index is apparently controversial. (It's by "imputed rent", what you could theoretically get if you rented it out.)

[1] https://tradingeconomics.com/united-states/inflation-cpi

Minimum wage is now $7.25, could anyone live on that today. Taking that further if it was raised to $15 an hour that would mean half of the country would get a raise. http://www.slate.com/blogs/moneybox/2016/03/28/how_many_work...

Only in the USA.

By comparison, the minimum wage in Australia is about to be raised to $18.70 an hour.

The official line is that inflation is low; but as far as I see the amount of money in the American economy, which I put at, eg, ~7% in the last 12 months of the M1 [1], appears to be growing faster than the inflation rate which is what, ~2-3%?

If this isn't being measured as 'inflation', it makes me ask why inflation is the key measure. The amount of new money is pretty substantial.

[1] https://fred.stlouisfed.org/series/M1SL

Money supply is not the dominant cause of changes in the price level, despite what hard money advocates think.

You have to look at stocks and flows together.

M1 is the stock of money.

But if that money doesn't flow, then it doesn't drive economic activity.

Here's the velocity of M1 -- it falls off a cliff in 2009 and continues falling to the present day.

https://fred.stlouisfed.org/series/M1V

If velocity held constant as the money supply increased, then you'd have a very good point.

You can flood the system with liquidity, but if nobody spends it, then it makes no difference. I believe this is what economists call "pushing on a string".

Basically because the velocity of money is variable and depends on societal factors (lending practices, payment technologies, even psychology). What the central bank is really looking to do is keep the amount of money that's in flight supporting transactions at any given moment roughly stable. When velocity drops the money supply needs to increase faster than inflation to keep the amount of cash in flight the same. https://fred.stlouisfed.org/series/M1V

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