Could this be the primary cause of inflation?

[The2ndAmendment]

I have decided to make this thread in the Clean Zone, because this could quickly derail into a flame war otherwise. I didn't even mention the reason in the Title as to avoid the hatred that might ensue.

----------------------

Let us suppose, for a moment, that each the average family had 2 workers earning the average yearly income. Let's give it a fake number for the ease of math. Say the average yearly income is $10,000, therefore the average family is earning $20,000 per year.

Now, let us suppose that over a couple of years the average number of workers in each family doubles to 4, thus each family earns roughly $40,000 per year.

Within a short time, the supply of money would be too great for the limited supply of consumer goods, as such, the prices of all goods would quickly double, thus making that 40,000 equal to the previous 20,000, the value of each person's work would be cut in half, or equivalently, the two new workers in the family can be viewed as working for free.

However, now there's a problem. All four of the workers in the family are now COMPELLED to continue working, because they need every last dollar in order to survive from month to month. Telling your two kids to stop working and to go to back to school isn't an option, since the value of your own work has been cut in half via inflation.

--------------------------------------------

So, what is the point of this example? My grandmother was distressed over the fact that a man and woman now have to work one full time job each, and often more, just to make ends meet each month. She reminisced about the "good old times" where a man with a high school diploma could comfortably provide for his entire family while his wife was active with the kids, at home, at school, at the park, etc. She believes that the family unit has been demolished, YET, she does not know why.

In my opinion, the average family used to have a single worker, 1 workers, the man. Over the decades, the average family has 2 workers (man and woman), which has doubled the supply of money, and hence halved the value of the money. We've reached a point where a man with a high school diploma can barely support himself, never mind a woman, and furthermore any children. Without a doubt this has influenced the divorce rates and similar problems.

What's worse is that a woman is not even free to choose whether she wants to work or not (unless she marries a well-to-do man), she is COMPELLED to work for the survival of their family.

So that's my two cents. Although Feminism has contributed to liberating women from many abuses and oppressions, this is one clear way in which it has hurt them and the entire family unit.

 

[OohPooPahDoo]

I have decided to make this thread in the Clean Zone, because this could quickly derail into a flame war otherwise. I didn't even mention the reason in the Title as to avoid the hatred that might ensue.

----------------------

Let us suppose, for a moment, that each the average family had 2 workers earning the average yearly income. Let's give it a fake number for the ease of math. Say the average yearly income is $10,000, therefore the average family is earning $20,000 per year.

Now, let us suppose that over a couple of years the average number of workers in each family doubles to 4, thus each family earns roughly $40,000 per year.

Within a short time, the supply of money would be too great for the limited supply of consumer goods, as such, the prices of all goods would quickly double, thus making that 40,000 equal to the previous 20,000, the value of each person's work would be cut in half, or equivalently, the two new workers in the family can be viewed as working for free.

Twice as many workers = Twice as much production capacity from your workers. If there are double the number of people working ultimately the economy will be capable of roughly doubling its output. Do you think the economy would choose to employ twice as many workers and keep producing the same amount of goods and services as it did before doubling its payroll?

 

[editec]

The root cause of inflation has been and will continue to be the manipulation of the money supply.

Feminisim didn't send women to work poverty did.

 

[OohPooPahDoo]

The root cause of inflation has been and will continue to be the manipulation of the money supply.

Feminisim didn't send women to work poverty did.

Velocity has nothing to do with inflation?

OK.

Maybe you can explain how the massive increase in the money supply over the past several years has done very little to spark inflation - without considering the fact that the velocity has been reduced. I can't. I'd love to hear it though.

 

[Flopper]

Now, let us suppose that over a couple of years the average number of workers in each family doubles to 4, thus each family earns roughly $40,000 per year.

Within a short time, the supply of money would be too great for the limited supply of consumer goods, as such, the prices of all goods would quickly double, thus making that 40,000 equal to the previous 20,000, the value of each person's work would be cut in half, or equivalently, the two new workers in the family can be viewed as working for free.

Maybe I'm missing something but wouldn't the price change depend on the productive of the 2 additional workers. If two new workers were producing the same as the 2 exiting workers, the money supply would double and the supply of goods and services would double so there would theoretical be no price change.

 

[wjmacguffin]

Interesting proposal, but I think it's off the mark.

If your argument that two-worker households (as defined by the wife taking a job) has led to inflation is correct, then there would be an increase in inflation corresponding to the rise of feminism. Feminism spiked in the late 1960s (at least in the US), so how as inflation changed between then and now?

1960: 1.46%
1965: 1.59%
1970: 5.84%
1975: 9.20%
1980: 13.58%
1985: 3.55%
1990: 5.39%
1995: 2.81%
2000: 3.38%
2005: 3.39%
2010: 1.64%

There is a correlation at first (1970 - 1980), but then it falls consistently until 2010. If your two-worker theory was correct, shouldn't it be consistently higher? Also, the spike in question was caused by oil prices, currency speculation, and US governmental monetary policy.

EDIT: Lastly, the idea that an additional worker creates more money and thereby driving prices up is offset by the additional supply that worker brings, as pointed out by good posters above.

 

[The2ndAmendment]

Well the true cause of inflation is the Federal Reserve, since most of that inflation is artificial.

However, why is that that both man and woman must work full time jobs just to survive, when it wasn't like that in the past? I believe (when artificial inflation is removed from the equation) that the doubling of the money supply severely reduces the value of each (inflated) dollar.

My theory is that if women were generally not working, the average man would be able to support his family alone, regardless of the money manipulation of the Federal Reserve. Times would still be tough for the family, as they would still be living pay check to pay check, but the woman wouldn't be working.

 

[Flopper]

My theory is that if women were generally not working, the average man would be able to support his family alone, regardless of the money manipulation of the Federal Reserve.

I don't understand. If women left the work force, production of goods and services would decline, demand in the labor market would drive up the cost of labor. The result would be higher prices and less goods and services. How is this good?

 

[eflatminor]

Well the true cause of inflation is the Federal Reserve, since most of that inflation is artificial.

On that point, I agree. End the central price controls and inflation would return to its natural state, where some products/services in demand see price increases, others decreases. The market should determine the price of money (the interest rate), not central bureaucrats.

 

[The2ndAmendment]

My theory is that if women were generally not working, the average man would be able to support his family alone, regardless of the money manipulation of the Federal Reserve.

I don't understand. If women left the work force, production of goods and services would decline, demand in the labor market would drive up the cost of labor. The result would be higher prices and less goods and services. How is this good?

Businesses would have to lower their prices, otherwise there would be a revolution of starving families. The government would have to adopt an Andrew Jackson monetary system or Lincoln Greenback system in order to ease the transition.

Today, we have robotics and computers that can do many labor and non-labor jobs, for much cheaper too, you'd probably see an increase in production with modern technology if many workers (thus taxes, benefits, etc) were eliminated.

The question really is, would women re-enter the workforce? Or would they prefer a return to traditional values?

That is a question I would like to see on a poll for women only.

 

[Dugdale_Jukes]

Where is inflation? Did it go away? What is going on?
Alt questions for the header question....

It tickled me in the 1990s that people didn't see it. Inflation moved from consumer goods to assets. First, securities. That bubble burst. Then real property. That bubble burst.

There is something like $550kkkk (nominal value) in low margin and no margin derivatives out there with a true value (marked to market) of about 10% of that. That makes US govt securities the safest investment on earth.

Reason one consumer goods inflation remains in check.

The FED is working closely with the EU as both central money supply managers increase currency supply at about the same rate.

Reason two consumer goods inflation remains in check.

Within some limits the interest rate paid on US debt is subject to bid. As the safest investment on earth and with the FED keeping bank rates down, this is reason three consumer goods inflation remains in check.

If any two of those three gets out of whack, inflation will rise about one percent a month until a hard lid is put on it. The last person to do that was the man Reagan fired: Paul Volcker.

Reagan went on to triple the debt injecting cash into the US economy. He is directly responsible for today's debt because as a fake-conservative he made debt okay.

Thanks NeoCon Ron. We owe you. And everyone else, it seems.

 

[OohPooPahDoo]

Well the true cause of inflation is the Federal Reserve, since most of that inflation is artificial.

Its not "artificial". The goods and services really do cost more money to buy.

However, why is that that both man and woman must work full time jobs just to survive, when it wasn't like that in the past?

The unions have no power anymore, that's why. I'm tired of anti-union rightists whining about how there's no good jobs anymore. Of course there aren't you, you killed the unions. Did you expect when you took away the power of collective bargaining that those who own businesses would say "Well now that you're in a weaker position to negotiate, how about we pay you more?" Jeez!

 

[OohPooPahDoo]

Well the true cause of inflation is the Federal Reserve, since most of that inflation is artificial.

On that point, I agree. End the central price controls and inflation would return to its natural state, where some products/services in demand see price increases, others decreases. The market should determine the price of money (the interest rate), not central bureaucrats.

The market does determine the price of money.

 

[Flopper]

My theory is that if women were generally not working, the average man would be able to support his family alone, regardless of the money manipulation of the Federal Reserve.

I don't understand. If women left the work force, production of goods and services would decline, demand in the labor market would drive up the cost of labor. The result would be higher prices and less goods and services. How is this good?

Businesses would have to lower their prices, otherwise there would be a revolution of starving families. The government would have to adopt an Andrew Jackson monetary system or Lincoln Greenback system in order to ease the transition.

Today, we have robotics and computers that can do many labor and non-labor jobs, for much cheaper too, you'd probably see an increase in production with modern technology if many workers (thus taxes, benefits, etc) were eliminated.

The question really is, would women re-enter the workforce? Or would they prefer a return to traditional values?

That is a question I would like to see on a poll for women only.

Would women re-enter the workforce? Or would they prefer a return to traditional values? If by tradition values you mean staying home and taking care of the kids and the home, most women with young children would certainly want to stay home and raise their kids at least for the first 6 years if they there was enough money to do so. If their financial situation was good enough, I think think women would prefer a career until they had kids, stay home when the kids were young, and return to the work place as the kids got older and left home. That's just my guess judging from my daughters now married.

I really don't thing there are many women who want to return to the days of barefoot in the kitchen and pregnant. They've come to far for that.

 

[Kevin_Kennedy]

I have decided to make this thread in the Clean Zone, because this could quickly derail into a flame war otherwise. I didn't even mention the reason in the Title as to avoid the hatred that might ensue.

----------------------

Let us suppose, for a moment, that each the average family had 2 workers earning the average yearly income. Let's give it a fake number for the ease of math. Say the average yearly income is $10,000, therefore the average family is earning $20,000 per year.

Now, let us suppose that over a couple of years the average number of workers in each family doubles to 4, thus each family earns roughly $40,000 per year.

Within a short time, the supply of money would be too great for the limited supply of consumer goods, as such, the prices of all goods would quickly double, thus making that 40,000 equal to the previous 20,000, the value of each person's work would be cut in half, or equivalently, the two new workers in the family can be viewed as working for free.

However, now there's a problem. All four of the workers in the family are now COMPELLED to continue working, because they need every last dollar in order to survive from month to month. Telling your two kids to stop working and to go to back to school isn't an option, since the value of your own work has been cut in half via inflation.

--------------------------------------------

So, what is the point of this example? My grandmother was distressed over the fact that a man and woman now have to work one full time job each, and often more, just to make ends meet each month. She reminisced about the "good old times" where a man with a high school diploma could comfortably provide for his entire family while his wife was active with the kids, at home, at school, at the park, etc. She believes that the family unit has been demolished, YET, she does not know why.

In my opinion, the average family used to have a single worker, 1 workers, the man. Over the decades, the average family has 2 workers (man and woman), which has doubled the supply of money, and hence halved the value of the money. We've reached a point where a man with a high school diploma can barely support himself, never mind a woman, and furthermore any children. Without a doubt this has influenced the divorce rates and similar problems.

What's worse is that a woman is not even free to choose whether she wants to work or not (unless she marries a well-to-do man), she is COMPELLED to work for the survival of their family.

So that's my two cents. Although Feminism has contributed to liberating women from many abuses and oppressions, this is one clear way in which it has hurt them and the entire family unit.

I'm confused about the portion I bolded above. Why is the money supply too high for the number of goods in this hypothetical? Also, there is no money supply that's "too high" or "too low" in regards to actual goods within the economy. Prices will adjust accordingly. The trouble is in actively introducing new money into the economy and distorting the capital structure, not the amount of money per se.

Also, the number of people working in an economy has no bearing on the supply of money in an economy.

 

[eflatminor]

Well the true cause of inflation is the Federal Reserve, since most of that inflation is artificial.

On that point, I agree. End the central price controls and inflation would return to its natural state, where some products/services in demand see price increases, others decreases. The market should determine the price of money (the interest rate), not central bureaucrats.

The market does determine the price of money.

Well yea, that's the point. The price of money has been centrally controlled ever since the Federal Reserve began in 1913. Before the Fed of course, the market did in fact determine interest rates.

 

[Flopper]

On that point, I agree. End the central price controls and inflation would return to its natural state, where some products/services in demand see price increases, others decreases. The market should determine the price of money (the interest rate), not central bureaucrats.

The market does determine the price of money.

Well yea, that's the point. The price of money has been centrally controlled ever since the Federal Reserve began in 1913. Before the Fed of course, the market did in fact determine interest rates.

The market does determine interest rates. The fed influences rates, but it is the demand for loans and willingness of lenders that actually control the rates. In the past, the fed has tried to stimulate or slow growth by changing the interest the banks charge and the market has resisted. If the fed is bucking a strong economic expansion or contraction, it may take the fed a a long time to push rates in the desired direction.

 

[eflatminor]

The market does determine the price of money.

Well yea, that's the point. The price of money has been centrally controlled ever since the Federal Reserve began in 1913. Before the Fed of course, the market did in fact determine interest rates.

The market does determine interest rates. The fed influences rates, but it is the demand for loans and willingness of lenders that actually control the rates. In the past, the fed has tried to stimulate or slow growth by changing the interest the banks charge and the market has resisted. If the fed is bucking a strong economic expansion or contraction, it may take the fed a a long time to push rates in the desired direction.

I would argue that the Fed influences interest rates to such a degree that the supply and demand in the market are effectively negated. We see this in the inflation caused by the Fed, constant inflation that the market would not otherwise produce. Case in point: A widget that cost $100 in 1780 cost about $100 in 1912, meaning, some products/services saw inflation, others deflation with overall costs remaining about the same. However, a widget that cost $100 in 1913, when the Fed took control of interest rates, now costs $2,350, a cumulative rate of inflation of over 2,200%! Clearly, the Fed has produced constant inflation, something they could not have done without complete control over the price of money.

 

[OohPooPahDoo]

On that point, I agree. End the central price controls and inflation would return to its natural state, where some products/services in demand see price increases, others decreases. The market should determine the price of money (the interest rate), not central bureaucrats.

The market does determine the price of money.

Well yea, that's the point. The price of money has been centrally controlled ever since the Federal Reserve began in 1913. Before the Fed of course, the market did in fact determine interest rates.

The market still determines interest rates.

 

[OohPooPahDoo]

I would argue that the Fed influences interest rates to such a degree that the supply and demand in the market are effectively negated.

The Fed has lowered rates to (or near) all time lows and massively increased the monetary base - yet inflation is still low. So clearly you're wrong.

We see this in the inflation caused by the Fed, constant inflation that the market would not otherwise produce. Case in point: A widget that cost $100 in 1780 cost about $100 in 1912, meaning, some products/services saw inflation, others deflation with overall costs remaining about the same. However, a widget that cost $100 in 1913, when the Fed took control of interest rates, now costs $2,350, a cumulative rate of inflation of over 2,200%! Clearly, the Fed has produced constant inflation, something they could not have done without complete control over the price of money.

In 1780? LOL! A widget produced in 1780 isn't the same widget produced in 2013.

Periodically dipping into deflationary periods is one of the bad things the Fed helps us to avoid. Deflation makes it harder for debtors to pay their debts which leads to default. Did you happen to notice the massive credit crisis caused by falling home prices? Deflation is bad. It pushes businesses under which harms the economy. Rampant inflation of course is also bad, however with a few exception ( late 70's early 80's) the Fed has been able to prevent - or at least not cause - over-inflation.