Inflation vs. Unemployment (user search)
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  Inflation vs. Unemployment (search mode)
Pages: [1]
Poll
Question: Controlling inflation is more important than controlling unemployment.
#1
Strongly disagree
 
#2
Disagree
 
#3
Agree
 
#4
Strongly agree
 
Show Pie Chart
Partisan results

Total Voters: 41

Author Topic: Inflation vs. Unemployment  (Read 21599 times)
Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« on: June 17, 2010, 10:37:54 PM »

Agree. There is a simple rule I learned in economics class: The higher inflation is the lower unemployement will be, the lower inflation is the higher unemployment will be. We don't want too much of either, but given the choice I would prefer to control inflation, as high inflation ultimately does far more damage to the economy in the long term.
Unfortunately, the rule you leaned is clasical Keynesian economics. It has been shown to have exceptions in modern economies, particularly in the 1970's. See for example stagflation.

Well, I did forget to mention that the rule only applies in the short term. No economic rule is perfect anyways, they are very general, and can't account for all factors.

Or, conversely, the 1990's, in which inflation and unemployment were both low.

The key is keeping the economy running at maximum productivity. Unemployment is thus bad, because it represents inefficiency in the economy; every person who doesn't have a job is someone who is not contributing, but yet they still must consume resources in order to survive. Consumption has to be met by productivity.

Clearly run away inflation is a bad thing, but as long as everyone is working in a job in which they are producing either a valuable good or providing a valuable service, and are being compensated fairly for it, it will be kept in check. The key is to ensure that consumption and production of goods is kept in balance.

The fundamentals of macroeconomics teach us that inflation is not a problem unless it is unexpected, and secondly how can a thread discussing inflation not start out by discussing cost-push inflation model?
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Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #1 on: June 18, 2010, 08:19:48 AM »

The question posed here presents a false dichotomy.

obviously but it is something the Federal Reserve seriously considers. Probably because they have no clue what cost push inflation is!
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Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #2 on: June 21, 2010, 10:52:20 AM »

What an old poll - wish I could change my vote on this one!

how did you vote and why?

This thread does not consider cost push inflation, and i am assuming it is only talking about price inflation, but not any other kind of inflation.
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Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #3 on: June 21, 2010, 11:07:31 AM »

What an old poll - wish I could change my vote on this one!

how did you vote and why?

This thread does not consider cost push inflation, and i am assuming it is only talking about price inflation, but not any other kind of inflation.

I voted in favor of prioritizing inflation as compared to unemployment, as at the time I was a right-winger.

But yes, few people understand that the inflation of the 70 through early 80s was not in fact any kind of indictment of Keynesian-ism, nor an effective argument for neo-liberalism, but rather just a supply shock.

maybe you should post more in this forum about inflation. Their are a lot of misconceptions about it. For example my father comes from the generation that had to deal with supply shocks, and thus until this economic crisis he had an inherent disagreement with inflation.
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Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #4 on: June 21, 2010, 08:55:37 PM »
« Edited: June 21, 2010, 09:02:07 PM by Free Trade is managed by the invisible hand. »

The market takes care of unemployment. Inflation is determined by alot of things; too high wages for one lead to too high prices. This deflates the value of the dollar and inflates the price of goods. Low taxes and low wages are the best way to increase the value of the dollar.  You will have less money in the system but people will be able to afford more in the long run. Unemployment is caused by wages being too high as well because the money that is lost due to wage increases has to be made up for by laying off workers. Now they are dependent on the government for money and can't find work. The bottom line is that politicians in Washington for the most part aren't capable of understanding the free market because if they did then they would be making a living in the private sector rather than running for office. Unemployment can be helped with tax cuts but it's profits that must result from cutting taxes that really allows jobs to be created. This is why jobs are always the last thing to come in a recession recovery.

Inflation helps people pay off debt, and helps to build a new economic growth, and is just one of the uncomterble things that is necessary for growth. In short at most inflation is only a necessary evil, but to think any less is stupid.

// This deflates the value of the dollar and inflates the price of goods.//
What do you think of this economic concept: Time value of money? A dollar is worth more today than it is tomorrow because of this very concept. Finally the value of the dollar is effected more by our balance of trade, and the only reason the dollar is low is because we are importing more than we export, and thus the value of the dollar loses its exchange value. This could continue forever or as long as we like(in other words its to are advantage to keep the dollar low, and this is something we are doing on purpose), and can be changed whenever we want. Thus why do you think policy makers want a low dollar? Probably because they know a thing or two about economics, or just accidenlty happen to respect some macro economic basics...which you respect right? This is because if policy makers want a stronger dollar we could simply create or disolve a trade deal like we did in the late 70's and early 80's under reagan to make the dollar stronger.  Finally lets say that the united states continues to pursue its weak dollar trade policy,... does that mean the currency will crash? not exactly and this is because our dollar can always be exchanged for T-Bills, and vice versus.  Thus our dollar is safe, but importantly is fixed to the value of our government, the most powerful, and greatest government this world has ever known. America will continue to dominate and destroy all who opposes it, by simply outlasting its detractors.

Now go out there and read a book on economics, and than come back to me with what you have learned. I suggest you read some nobel prize winning essays.
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Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #5 on: June 21, 2010, 09:03:25 PM »

i'll make the argument againts myself if nobody responds in two days. you have a chance to prove that i am wrong, and if you fail than i will argue againts myself in order to grow wiser.
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Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #6 on: June 21, 2010, 09:06:45 PM »

The market takes care of unemployment. Inflation is determined by alot of things; too high wages for one lead to too high prices. This deflates the value of the dollar and inflates the price of goods. Low taxes and low wages are the best way to increase the value of the dollar.  You will have less money in the system but people will be able to afford more in the long run. Unemployment is caused by wages being too high as well because the money that is lost due to wage increases has to be made up for by laying off workers. Now they are dependent on the government for money and can't find work. The bottom line is that politicians in Washington for the most part aren't capable of understanding the free market because if they did then they would be making a living in the private sector rather than running for office. Unemployment can be helped with tax cuts but it's profits that must result from cutting taxes that really allows jobs to be created. This is why jobs are always the last thing to come in a recession recovery.

Inflation helps people pay off debt, and helps to build a new economic growth, and is just one of the uncomterble things that is necessary for growth. In short at most inflation is only a necessary evil, but to think any less is stupid.

// This deflates the value of the dollar and inflates the price of goods.//
What do you think of this economic concept: Time value of money? A dollar is worth more today than it is tomorrow because of this very concept. Finally the value of the dollar is effected more by our balance of trade, and the only reason the dollar is low is because we are importing more than we export, and thus the value of the dollar loses its exchange value. This could continue forever or as long as we like, and can be changed whenever we want. This is because if policy makers want a stronger dollar we could simply create or disolve a trade deal like we did in the late 70's and early 80's under reagan to make the dollar stronger.  Finally lets say that the united states continues to pursue its weak dollar trade policy does that mean the currency will crash? not exactly and this is because our dollar can always be exchanged for T-Bills, and vice versus.  Thus our dollar is safe, but importantly is fixed to the value of our government, the most powerful, and greatest government this world has ever known. America will continue to dominate and destroy all who opposes it, by simply outlasting its detractors.

Now go out there and read a book on economics, and than come back to me with what you have learned. I suggest you read some nobel prize winning essays.

It would help people pay off debt as long as their interest rates haven't gone up and as long as their making more money. That part is true. However, either way you go in a circle with the wages and inflation. We can raise wages which causes prices to go up and deflates the dollar. Or we can decrease wages which causes prices to go down and have a stronger dollar. I prefer the latter. However, the difference is that with higher wages you end up with higher unemployment.


so you are worried more about wage inflation? me too, but I think wage inflation may just lead to a higher natural unemployment rate for years to come, and thus our ultimate obstacle will be sticky wages. Than again prices are normally sticker on the way downward than up...I think?
Logged
Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #7 on: June 21, 2010, 09:21:48 PM »

The market takes care of unemployment. Inflation is determined by alot of things; too high wages for one lead to too high prices. This deflates the value of the dollar and inflates the price of goods. Low taxes and low wages are the best way to increase the value of the dollar.  You will have less money in the system but people will be able to afford more in the long run. Unemployment is caused by wages being too high as well because the money that is lost due to wage increases has to be made up for by laying off workers. Now they are dependent on the government for money and can't find work. The bottom line is that politicians in Washington for the most part aren't capable of understanding the free market because if they did then they would be making a living in the private sector rather than running for office. Unemployment can be helped with tax cuts but it's profits that must result from cutting taxes that really allows jobs to be created. This is why jobs are always the last thing to come in a recession recovery.

Inflation helps people pay off debt, and helps to build a new economic growth, and is just one of the uncomterble things that is necessary for growth. In short at most inflation is only a necessary evil, but to think any less is stupid.

// This deflates the value of the dollar and inflates the price of goods.//
What do you think of this economic concept: Time value of money? A dollar is worth more today than it is tomorrow because of this very concept. Finally the value of the dollar is effected more by our balance of trade, and the only reason the dollar is low is because we are importing more than we export, and thus the value of the dollar loses its exchange value. This could continue forever or as long as we like, and can be changed whenever we want. This is because if policy makers want a stronger dollar we could simply create or disolve a trade deal like we did in the late 70's and early 80's under reagan to make the dollar stronger.  Finally lets say that the united states continues to pursue its weak dollar trade policy does that mean the currency will crash? not exactly and this is because our dollar can always be exchanged for T-Bills, and vice versus.  Thus our dollar is safe, but importantly is fixed to the value of our government, the most powerful, and greatest government this world has ever known. America will continue to dominate and destroy all who opposes it, by simply outlasting its detractors.

Now go out there and read a book on economics, and than come back to me with what you have learned. I suggest you read some nobel prize winning essays.

It would help people pay off debt as long as their interest rates haven't gone up and as long as their making more money. That part is true. However, either way you go in a circle with the wages and inflation. We can raise wages which causes prices to go up and deflates the dollar. Or we can decrease wages which causes prices to go down and have a stronger dollar. I prefer the latter. However, the difference is that with higher wages you end up with higher unemployment.


so you are worried more about wage inflation? me too, but I think wage inflation may just lead to a higher natural unemployment rate for years to come, and thus our ultimate obstacle will be sticky wages. Than again prices are normally sticker on the way downward than up...I think?

Yes I'm worried about wage inflation. Alot of the minimum wage laws are political promises made to get politicians reelected. If more people worked for less money then the unemployment rate would go down. Only then will you see a decrease in overall prices.

minimum wages do not have an effect like that on all real wages, and the effect is nill to none. What i fear is that we will not generate enough growth, and inflation for our market to keep up with the population. Thus leading to a situation where the natural unemployment rate is 7%,prices are too low, and beggar thy neighber policy.
Logged
Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #8 on: June 21, 2010, 09:29:34 PM »

The market takes care of unemployment. Inflation is determined by alot of things; too high wages for one lead to too high prices. This deflates the value of the dollar and inflates the price of goods. Low taxes and low wages are the best way to increase the value of the dollar.  You will have less money in the system but people will be able to afford more in the long run. Unemployment is caused by wages being too high as well because the money that is lost due to wage increases has to be made up for by laying off workers. Now they are dependent on the government for money and can't find work. The bottom line is that politicians in Washington for the most part aren't capable of understanding the free market because if they did then they would be making a living in the private sector rather than running for office. Unemployment can be helped with tax cuts but it's profits that must result from cutting taxes that really allows jobs to be created. This is why jobs are always the last thing to come in a recession recovery.

Inflation helps people pay off debt, and helps to build a new economic growth, and is just one of the uncomterble things that is necessary for growth. In short at most inflation is only a necessary evil, but to think any less is stupid.

// This deflates the value of the dollar and inflates the price of goods.//
What do you think of this economic concept: Time value of money? A dollar is worth more today than it is tomorrow because of this very concept. Finally the value of the dollar is effected more by our balance of trade, and the only reason the dollar is low is because we are importing more than we export, and thus the value of the dollar loses its exchange value. This could continue forever or as long as we like, and can be changed whenever we want. This is because if policy makers want a stronger dollar we could simply create or disolve a trade deal like we did in the late 70's and early 80's under reagan to make the dollar stronger.  Finally lets say that the united states continues to pursue its weak dollar trade policy does that mean the currency will crash? not exactly and this is because our dollar can always be exchanged for T-Bills, and vice versus.  Thus our dollar is safe, but importantly is fixed to the value of our government, the most powerful, and greatest government this world has ever known. America will continue to dominate and destroy all who opposes it, by simply outlasting its detractors.

Now go out there and read a book on economics, and than come back to me with what you have learned. I suggest you read some nobel prize winning essays.

It would help people pay off debt as long as their interest rates haven't gone up and as long as their making more money. That part is true. However, either way you go in a circle with the wages and inflation. We can raise wages which causes prices to go up and deflates the dollar. Or we can decrease wages which causes prices to go down and have a stronger dollar. I prefer the latter. However, the difference is that with higher wages you end up with higher unemployment.


so you are worried more about wage inflation? me too, but I think wage inflation may just lead to a higher natural unemployment rate for years to come, and thus our ultimate obstacle will be sticky wages. Than again prices are normally sticker on the way downward than up...I think?

Yes I'm worried about wage inflation. Alot of the minimum wage laws are political promises made to get politicians reelected. If more people worked for less money then the unemployment rate would go down. Only then will you see a decrease in overall prices.

minimum wages do not have an effect like that on all real wages, and the effect is nill to none. What i fear is that we will not generate enough growth, and inflation for our market to keep up with the population. Thus leading to a situation where the natural unemployment rate is 7%,prices are too low, and beggar thy neighber policy.

Ah yes the more people you have the higher unemployment will go unless of course you keep adding jobs.

we won't have much new jobs if inflation does not kick in to help pay off debt, and create a new economic base on which a company expand from. Finally, if we don't have good amounts of inflation the velocity of money is going to suck. Finally our dollar needs to weaken,but right now it has been pretty stable. Thus we are trapped in a time period where things are just not going to get better.
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Free Trade is managed by the invisible hand.
HoffmanJohn
Jr. Member
***
Posts: 1,951
United States


« Reply #9 on: June 21, 2010, 09:35:58 PM »

A reasonable inflation isn't necessary a bad thing. Unemployment is the main problem.

Define "reasonable."

2-3% inflation is typically regarded as a sign of a healthy economy as the price level is increasing due to increasing consumption spending, which increases aggregate demand and therefore GDP.

Exactly. As long as consumer inflation is below 3 percent, there is room for expansionary monetary policy.

money chasing too few goods? is that what you are saying?
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