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Comment by christiansakai | Hacker News Reader

I'm just thinking with the unemployment high as of it is now, this would be no problem? When our situation gets back to normal then this would be a problem.

Please correct my line of reasoning here.

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How does unemployment relate to this?

A popular post on r/wallstreetbets[1] summarizes Michael Burry’s thesis that CPI (consumer price index) is unaffected as long as inflation isn’t directly impacting consumers of the bag of goods that make up CPI. When there are fewer jobs, these consumers aren’t able to influence the prices of these goods (because they aren’t being paid inflated wages), and the metric commonly used to evaluate inflation is unchanged.

[1] https://www.reddit.com/r/wallstreetbets/comments/lr8h1v/why_...

With unemployment, the velocity of money decrease. Non essential goods like tech is deflationary over time, but food and rent is not. The rich few can absorb costs whether it is food, rent or tech, but the poor and unemployed mass can only absorb so much, and they will use it for rent and food, but not other non essential goods. Therefore no inflation. i.e, grocery price might increase but an iPad will still cost the same.

Higher Unemployment = More people chasing fewer jobs = salary should fall Lower Unemployment = More jobs chasing fewer people = salary should rise

If the cost of labor does not rise due as it absorbs the previously unemployed workers in to the labor force, it blunts the inflation effect for goods and services as those costs don't get passed on to the consumer

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