Why is inflation escalating out of control

Dude. Give us a break! We couldn't make any sense at all out of your first post.

Your first post was so scattershot that you even put a disclaimer in it at the bottom. How were we supposed to understand it?

Ted, thank you for your time and from studio 5 we wish you success with your book in Japan.

Opinion: JD Vance Epically Fails to Understand How Inflation Works (msn.com)

While I also disagree that inflation is mainly corporate greed, there are reasonable explanations for 'why' we hit this inflationary period starting 2 years ago.

About 4 years ago, the nation, as an entire group, began raising wages for pretty much everyone. California is now sitting at $16/hr as the new 'minimum wage'. And there is a movement in California to raise it to $20 and some calling for $25/hr. But at $16/hr the annual wage for a minimum wage worker is about $65k.

So now, every business in California has to pay their lowest level employe $65k. In 2020 the same 'minimum wage' was only $13/hour. That's a $3 increase that businesses have to pay if they want to do business in California. It's one of the reasons that some businesses are moving out. But the phenomenon swept across the entire nation. But that $3 increase means a 20% increase in the costs that a business now has to cover for the same work and the same product that it sold for $10 just 6 months before. Because the costs of pretty much every employee across the nation was raised, even the products that the example company above has to pay for all the underlying products that it buys to make its product. The wire that it bought a year ago for $2 is now $3. The packaging that cost the company 30¢ a year ago is now 40¢.

All the way down the production line, costs have increased mainly due to our giving pretty much every employee in the country a raise. Now a company is not being greedy because they want to maintain their same profit margins that they have enjoyed previously. They're just adjusting to all of the new costs and prices of finished goods on the shelf as their costs go up. It's not magical and it's not the fault of an administration. It just is the normal outcome of cost increased for companies to produce finished goods.

And even though some states haven't made any changes to their published minimum wage, you can't get employees to work for $7.25/hr when everyone else is now making $13/hr that was previously making $11/hr. All these increases of employee pay and thus cost of goods going up all the way down the line, just means that the final consumer's price is going to go up.

So the cause of this inflationary period was brought on by our own efforts to raise people's wages to pull them out of poverty. But honestly it doesn't work. Everything just adjusts and the person now making $65k is still just as poor, in comparison, to where they stood before the inflationary period. But we all adjust and given time it all settles down and the nation has fairly stable wages for a period and the rate of inflation falls.

I agree that Mr. Vance isn't particularly wise on financial matters, but I disagree with the alternate explanation that it is all a matter of corporate greed. It just is a natural process that every economy goes through as wages and costs increase. And honestly, you can't really blame it on the federal government. The stated minimum wage for the U.S. is still $7.25/hr, but nobody gets away with paying that in todays employment market. Family babysitters that have basically no costs to provide their services, or any real training, won't work for $7.25/hr.

So understand that it isn't the fault of any administration that we are going through another inflationary period. The major cause of the recent inflation was a given from our raising wages we started doing 4 years ago. It's just the basic way that healthy economies operate.

It appears to be practical things that would theoretically mitigate inflation... it's basically telling someone with a shot-gun wound to try putting on a band-aid.

When there are criminals in charge inflation increases. It's literally that simple.

Look at California.... people can make 240,000 dollars a year and can't afford a house. Bc a house costs at least 1 million there.

When you have that type of situation you're looking at a full calypse.

Things do not come for free is true as well. But if they got rid of the money laundering, printing money for the laundering, and spending on ridiculous things everything would be fine. Taxes go up for everything, but surprisingly the roads never looked improved. If the money is never going to the purpose it's obsolete.

That's the way the SWAMP wants it.

Next question??

Hi all,

Here's a small scale example of how inflation works, as I have described it.

Denver’s fast-rising minimum wage is a boon to workers, but it’s squeezing restaurants and small businesses (msn.com)

Because Denver is pushing up its minimum wage, this restaurant has a choice to make. Go out of business or raise prices.

Why? Because they're employee costs are higher now than they can pay without raising more incoming revenue.

Now imagine that pretty much the entire nation has been on a tear to raise employee wages for the last 2-4 years. So, it's not just some small restaurant that is having to increase prices, but pretty much every business that has employees in the entire country. That's the major mover of the recent inflationary period that we have just gone through.

Now it will settle for a while and we'll have a fairly stable inflation rate for the next few years. It's been a pretty basic economic truth for quite a while now. I'm surprised that so few people seem to really understand the basic forces the cause inflationary pressures. And I would think that one could look at the entire state of California as a prime example. They have long been fighting for higher and higher wages. Right now they're the state with probably the highest overall wages. Oh, look! They're also the state with pretty much the highest prices for everything. Gee, I wonder why that is, duh?

Now that's not to say that increased wages are the only cause for inflationary forces, but I think it can be pretty well proved that it is the biggest part of the pie.

But we'll get through it just as we always have. People's take home pay will go up and the cost of goods will go up and we'll settle at a new plateau for a while. I mean, why can't you buy bread for 19¢ a loaf today? Anybody want to explain that? And no, it's not because we have a fiat currency. All nations have fiat currencies.

^ The best part of that video is at around 2:05 when he essentially says " it's our fault because we want it".
This is why my parents raised me differently to NOT buy anything on credit unless absolutely necessary.
If you can't pay it with cash don't buy it! As simple as that.
That's how i raised my kids too.

Exactly!! I was taught the same and hubby and I do the same. We have our vehicle paid off and will have our home paid off hopefully in the next two years so we can be a better help to our parents.

Wage demand follows inflation; people say "I can't afford my rent! I need more money!!!" when what they need is a better business opportunity and more affordable housing- not more paper. The communists here in NY and in CA are happy to pander to their ignorance and watch the value of their own assets go up while the value of the paper goes down; and when they get everyone on electronic banking, they won't even have to go through the painstaking effort of printing all that paper anymore! Pretend like it's "nobody's fault"; but people are figuring it out. Virtually everything they do creates artificial supply shortages and increases costs; except for the people they choose to subsidize. The idea that things will "settle down" and get "stable" under the Democrats is a joke. It will never happen. This is the "New Normal" that they wanted.

JD Vance is understanding inflation just fine. Since businesses use energy, they will have higher operating expenses when energy costs go up- those higher expenses will be passed along to the consumer, who is also paying higher energy costs and exploding real estate costs; and will also charge businesses more for their labor. The businesses' profit will also have to go up proportionally to maintain their real value with inflation so that they can maintain a similar rate of growth.

Milton Friedman is also correct; to an extent... Communist types gain power when there are enough people who are unable to solve their own problems... which would be fine, If those in government solve problems and step back; instead of forming a co-dependent relationship with those who are unwilling to solve their own problems, or make problems up that don't exist et. al.

Our private sector would be better than at government at most things; except, as explained by Robert Kiyosaki, our schools don't train us to think like businessmen; they train us to act like obeisant slaves. They reward compliance with a "good job"; and inspire no innovation at all.

I'm not a 100% gold-standard guy; but states would be a lot less likely to make huge raises in minimum wage in a short period of time without fiat.