> I've suspected that maybe a simple way to fix this would be (snip) to drop money out of helicopters.
Wouldn't a simple way to fix this, be to change the relative importance of the "basket of goods" so that it reflects what real people actually spend money on?
Because housing, healthcare, and daycare/education when totaled should probably be 60-75+% of that basket, since that's where most people's money actually goes. Based on this - https://www.bls.gov/news.release/pdf/cpi.pdf - the percentages the Fed currently uses seems far, far too low.
The cost of gasoline going up 50%, or the cost of laptops going up 50% is far less hurtful than say, the cost of rent going up 50%, or the cost of healthcare going up 50%. I suspect if we used realistic numbers for inflation cost calculations, we'd see the real rate is far higher than is currently claimed, which would help economists better understand why so many people are suffering so much under a "good" economy.
The Fed already tries to adjust the basket of goods to reflect what real people spend their money on. The problem is that the average dollar is not reflective of the average person. Dollars are concentrated among the rich; that's what inequality means. The rich spend their money on asset purchases like buying stocks, real estate, and businesses. To my knowledge, asset prices are not included in the CPI at all. If all the money that the Fed pumps into the economy ends up being concentrated in Facebook and then is used to buy Whatsapp for $19B, that doesn't count as inflation at all. So they keep pumping money into the economy, it keeps going to the 1%, asset prices keep rising, and the rich get richer while the poor get nothing.
If anything should be progressively taxed its individualized capital gains. It is simultaneously very healthy to incentivize everyone to invest a bit in capital, and extraordinarily detrimental to the health of civilization to let capital concentrate without any impediment.
When do you assess the tax? If it's at any predictable interval of time, it opens the market up to massive manipulation schemes where people crash their own stocks to avoid paying taxes and bid up their rivals so they'll be forced to owe a massive tax bill.
You could I guess take an average over time to avoid the manipulation efforts, but then you still run into the issue many dot-com paper millionaires faced, where they were assessed a tax bill based on the paper value of their options but when it came time to pay it, the stock wasn't worth enough money to cover the taxes.
That's why we have the current system, where capital gains are taxed as income (though at a lower rate), but only when you sell them. That's the only time when you can put a fair value on the asset being sold, when it's convertible into the currency you actually plan to pay the taxes with.
IE, buy all the stock you want. It doesn't matter. The dividends you get, and any payout you get from selling those stocks (even for immediate reinvestment) count as income.
People aren't awarded money arbitrarily... Nobody will pay you more than you're worth. If a good hedge fund manager is able to make 1000x as much as a good doctor, he is worth 1000x as much as a good doctor, by definition, no matter how distasteful that might seem.
I believe @utexaspunk is saying that salary should be tied to the amount of social good you do.
You are saying that the market sets salaries based on how much value you create, as measured in dollars.
And he wouldn't be in my bracket so he doesn't have to deal with struggles either.
That would be great but think of the difficulties. Firstly, which politicians would support it? Most politicians spend their time fundraising ( begging the wealthy for money ).
https://www.theatlantic.com/politics/archive/2013/06/the-hum...
Can you imagine the future of such politicians?
Especially now that corporations can donate as much as they want?
https://en.wikipedia.org/wiki/Citizens_United_v._FEC
Secondly, the ultra-rich will simply move money/assets offshores in hidden accounts. A lot of them already do that to avoid paying taxes. If it were to increase, a lot more money will go underground.
Thirdly, citizenship is something that can be bought and sold in modern society. The ultra-rich will buy citizenship in countries with lower taxes and simply move their companies/assets there. Look at what the pharmaceutical industry has been doing the past 10 years.
https://en.wikipedia.org/wiki/Tax_inversion
The problem is that the international world order is corrupt and the wealthy write the rules/laws. Even if there was a raise in taxes, they would add a loophole for the wealthy to bypass it.
The Australian Government did just this during the Global Financial Crisis, https://en.wikipedia.org/wiki/Rudd_Government_(2007%E2%80%93...
It included a lot of measures, such as an increase in infrastructure spending and tax cuts, but one of the most interesting was the $950 AUD outright cash payment to individuals earning less than $80,000 AUD a year.
Australia did not feel the Global Financial Crisis nearly as much as other countries, and it is argued that the stimulus package was a big part of that.
There are concerns that the stagnation of wage growth we are seeing now is our economy paying for the stimulus package but I am waiting for a thorough retrospective report to make comment.
It seems like you have a lot of different prices in the economy, and if all prices stay the same, except milk goes up 20% and yachts fall 20%. How much has inflation changed? You have to pick some way to weigh the prices. And it seems to me that the best way to do this is weigh them by how much the average consumer is spending on them.
Imagine where we would be if instead of baling out the banks after 2008, letting those banks fail and forgiving the loans they held. Millions of Americans owning their houses free and clear as well a having an extra few thousand dollars a month to spend or save.
https://www.nakedcapitalism.com/2015/01/the-failure-of-a-pas...
It was intended as an emergency measure to help the poor when grain prices had risen sharply due to meager harvests.
Today we can produce so much food we have to come up with creative ways to keep it valuable - subsidies, dumping it, etc. We've "lost" a ton of agriculture jobs since that experiment was tried, because we can do it with less people. Seems reasonable to transfer those gains back to the people instead of all of them going to the guy that owns the harvester.
I find/believe shadowstats.com to be more accurate than the gov't stats on inflation and unemployment.
Interestingly, they never seem to adjust inflation upward because of product debasements (other than price per unit in a bundle), so that seems to bias the numbers.
[1] http://www.reuters.com/article/us-usa-fed-dudley-ipad-idUSTR...
> Dudley tried to explain how the Fed sees things: Yes, food prices may be rising, but at the same time, other prices are declining. The Fed looks at core inflation, which strips out volatile food and energy costs, to get a better sense of where inflation may actually be heading.
Guess exactly when food and energy costs were declared volatile. If you thought "when they went up" you'd be right.
If you disregard those actual inflation is 5%.
One of Warren Buffett's annual reports (I forget which year, but I think it was the late 1990s) had an interesting observation: inflation doesn't affect all firms equally. Instead, it pools where there is a competition bottleneck. If you are the monopoly provider in a market, you have complete and total ability to raise prices in response to your customers having more money available to pay. If you are in a very competitive market, then every time you try to raise prices, some other entrant undercuts you and your customers and suppliers capture the surplus instead.
The Fed, however, measures inflation based on a basket of goods bought by the "average" consumer. Most of these goods are in competitive markets: groceries and gas and consumer electronics. And so the measured inflation rate that the Fed uses to control the money supply significantly undercounts the true inflation rate, with much of the money injected into the economy pooling in differentiated industries like high finance, elite universities, health care, Google & Facebook, etc. From there, it doesn't circulate the way it should, because people in those industries need few goods that the average American produces. Instead, it goes into asset prices, as they try to buy up more future earning potential.
I've suspected that maybe a simple way to fix this would be with "helicopter" Bernanke's crazy idea: drop money out of helicopters. Maybe not literally (imagine the fights on the ground!), but perhaps the Fed could inject money into the economy at the bottom, through direct deposit into consumer's bank accounts or tax refunds, and then collect it from the top, through fees on banks. That way, the money is immediately spent, and so the true effect of the money injected is more easily measurable in the CPI.