Re: Lol, QE 3? Try raising wages and giving something back to people to SPEND
Inflation is measured as a general increase in the price of goods and services. There are considerations for substitutions and improved quality but they're far from perfect.
If all the tradespeople in an area suddenly got raised to 1.5 mill a year, they'd stop buying bread and start having their breakfast cooked by the restaurant industry the CPI just wouldn't' be able to handle that sort of a shift and would assume people still have bread for breakfast when working out the weighted basket of goods. Meanwhile 3 out of the 4 town bakeries have closed down and all the bread being sold now costs $4 instead of $1 an the price of restaurant cooked food has gone through the roof as the 1.5M tradie will glady pay for it.
The person on minimum wage say $17 an hour, is stuck eating $4 loaves of bread.
In your world, there is now only one bakery in the town and a fancy restaurant. The bakery employees are now all unemployed, leaving the remaining bakery to increase it's price to $5.
The end result is less jobs - less bakeries and due to monopolistic position is raises the price to $6. People are broke and hungry.
In my world 10% of income is spent on bread, bread went up 400% means you get a 40% raise in the minimum wage which means all of the bakeries stay operational, selling bread at $4 a loaf to workers on $23.8 an hour enough to keep pace with the increased price of bread due to a re-structuring of the economy.
My shares in the bread company continue to increase by 8% every six months and everyone is happy - inflation also bumps up those share prices and the bread company retains profitability AND there is a booming restaurant industry in the town.
Oh, the tradies however, extracting maximum utility due to the monopoly position of their labour can only extract $7 an hour less from the company as it has to pay an increased minimum wage.
End result - bread companies more profitable - restaurant and tradies slightly less profitable winners compensated the losers.
A few tradies are pissed off that poor people can afford bread. We call them "austrian school economists"
Inflation is measured as a general increase in the price of goods and services. There are considerations for substitutions and improved quality but they're far from perfect.
If all the tradespeople in an area suddenly got raised to 1.5 mill a year, they'd stop buying bread and start having their breakfast cooked by the restaurant industry the CPI just wouldn't' be able to handle that sort of a shift and would assume people still have bread for breakfast when working out the weighted basket of goods. Meanwhile 3 out of the 4 town bakeries have closed down and all the bread being sold now costs $4 instead of $1 an the price of restaurant cooked food has gone through the roof as the 1.5M tradie will glady pay for it.
The person on minimum wage say $17 an hour, is stuck eating $4 loaves of bread.
In your world, there is now only one bakery in the town and a fancy restaurant. The bakery employees are now all unemployed, leaving the remaining bakery to increase it's price to $5.
The end result is less jobs - less bakeries and due to monopolistic position is raises the price to $6. People are broke and hungry.
In my world 10% of income is spent on bread, bread went up 400% means you get a 40% raise in the minimum wage which means all of the bakeries stay operational, selling bread at $4 a loaf to workers on $23.8 an hour enough to keep pace with the increased price of bread due to a re-structuring of the economy.
My shares in the bread company continue to increase by 8% every six months and everyone is happy - inflation also bumps up those share prices and the bread company retains profitability AND there is a booming restaurant industry in the town.
Oh, the tradies however, extracting maximum utility due to the monopoly position of their labour can only extract $7 an hour less from the company as it has to pay an increased minimum wage.
End result - bread companies more profitable - restaurant and tradies slightly less profitable winners compensated the losers.
A few tradies are pissed off that poor people can afford bread. We call them "austrian school economists"