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Economics question
Posted by: Ted King
Date: February 09, 2018 09:46AM
The US is at a high enough rate of employment that the job market is tightening and employers (on average) are having to pay more to get the workers they need. There is a pretty fair chance that that is going to increase inflation and the cost of borrowing as the Fed increases rates to cool down the inflation.

The Republicans passed a tax bill that gives corporations (and wealthy individuals) a huge tax break. I get this "gut" feeling that all that the pumping of that money into the economy is going to do is add upward pressure on inflation. That's my economics question - assuming there is already upward pressure on inflation because of relatively high employment, is it likely that the tax cuts will increase the inflation rate even more?
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Re: Economics question
Posted by: cbelt3
Date: February 09, 2018 10:58AM
Ted,
The very real issue that has been playing out for the last two decades is that "Inflation" used to pretty well track between wage inflation and price inflation. And that stopped. Wages, in general, have not been going up. Corporations have been using the profitability and stupidly lower cost of capital to invest in huge automation projects to effectively reduce the wage costs.

Keep in mind also that inflation is still relatively low, forecast around 2%. I still remember the hyper inflationary years of the 1980s.
[www.thebalance.com]
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Re: Economics question
Posted by: Acer
Date: February 09, 2018 11:59AM
My personal conspiracy theory is that the $hadow government is perfectly fine with an overheated economy brought about by tax cuts, speculation or fraud. They sell high during the booms, then scoop up low during the inevitable busts. They can't do this as well in a slow, boring Obama economy.
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Re: Economics question
Posted by: pdq
Date: February 09, 2018 12:53PM
Well, most companies (such as Apple) were already swimming in cash before Trump came along and gave them more.

Will that stoke inflation? I dunno - that's above my pay grade. Inflation has been creeping up. But apart from a few companies that wanted to make a show of it, I doubt that most of that cash is going to end up in workers' pockets.
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Re: Economics question
Posted by: Ted King
Date: February 09, 2018 04:50PM
Quote
cbelt3
Ted,
The very real issue that has been playing out for the last two decades is that "Inflation" used to pretty well track between wage inflation and price inflation. And that stopped. Wages, in general, have not been going up. Corporations have been using the profitability and stupidly lower cost of capital to invest in huge automation projects to effectively reduce the wage costs.

Keep in mind also that inflation is still relatively low, forecast around 2%. I still remember the hyper inflationary years of the 1980s.
[www.thebalance.com]

Since the Republicans didn't significantly reduce government expenditures as they gave a huge tax cut to corporations and wealthy people, that tax cut is $100 billion dollars a year (probably more, maybe much more) extra that is going into the private economy that wouldn't otherwise be there (it's borrowed money that the government has to pay back). What are corporations going to do with that money?

Is pdq right that there won't be a significant amount of that money going into hiring workers? If that's the case then I can see how the tax cut wouldn't lead to an increase in wage inflation. But, then, what would corporations do with the money? Buy back their own shares? Would that inflate the stock market? (Corporations buying back their own shares probably wouldn't be much of a gain for workers.) Or do they stuff it under the mattress thinking they'll use it sometime in the future? If so, it's hard to see how that would help the economy much.

I guess the question I should have asked is - what are corporations going to do with the tax cut windfall? And what will be the consequences of the choices they make about what to do with the windfall? Similar questions could apply to what wealthy people as private individuals will do with their tax windfall money.
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Re: Economics question
Posted by: max
Date: February 09, 2018 05:57PM
Amazing, while the working class is finally about to achieve a real and significant rise in wages, because of the upcoming skilled labor shortages, something completely elusive under Obama, where the increase in employment rates was accompanied by flat compensation, the wringing hands here are busy flagellating` the inflation boogey man.
I got news for you boyz, with the Feds printing up tons of new money to pay off old debt, the inflation has been with us all along, over the last decade your dollar, your savings, have lost have a major portion of their real value already. For the next four years I doubt it will get much worse....


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Re: Economics question
Posted by: Ted King
Date: February 09, 2018 06:00PM
Quote
Acer
My personal conspiracy theory is that the $hadow government is perfectly fine with an overheated economy brought about by tax cuts, speculation or fraud. They sell high during the booms, then scoop up low during the inevitable busts. They can't do this as well in a slow, boring Obama economy.

Well the Illuminati* do burn through a lot of money doing their nefarious deeds. I mean, everybody has to make a living, right?


*This is a sort of long and probably boring old man's tale about the Illuminati so I'll hide it in a spoiler so that only the wary will be subjected to it:



Edited 2 time(s). Last edit at 02/09/2018 09:47PM by Ted King.
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