As they should. that's how it works and they are correct. Employees should argue against that and demand more if they dare.

The job of Central bank is to increase interest rates until unemployment rate increases to the level where employees don't dare ask more. Unemployment reduces both demand and wage growth. That will slow down inflation but it also baits recession.

Economy is a dynamic system with feedback loops.

I might be old fashioned, but last time I checked, government's job was not to drive down living standards.

Maybe their job is to ensure that a resource-show like rising energy prices does not hit, by majing economy rsillient and relying on diverse suppliers

thats because you have been reading the government marketing materials instead of looking at what they do

Central Banks are generally tasked with setting one single, but very powerful, variable: interest rates. There's thought to be a pretty strong causal relationship between interest rates and unemployment.

The central bank absolutely knows that jacking up interest rates will, in the short term, drive down living standards. The trade-off is that it will also drive down inflation, which causes much bigger drops in living standards in the long term.

... Or so the theory goes.

You say as it's a bad thing. The mandate is public and set by politicians selected by people.

This "it's all bad" because politics stuff is jut nihilism.

There is so called "Natural level of unemployment" and NAIRU (Non Accelerating Inflation Rate of Unemployment) typically between 3% and 5%.

This is incorrect. The job of the Fed is to maximise price stability (which it defines as 2% inflation) and minimise unemployment (which it defines as the natural unemployment rate, to which we are close). There has basically never been a time when the Fed wanted unemployment to go up. (Keep in mind: unemployment != wage increases, though the two are related as are prices.)

Either the government is unable or unwilling to enforce this equally. If unable, they are incompetent, if unwilling, than they are corrupt. In either case we live in a corporatocracy not democracy.

EDIT: I mean advocating not just that we should avoid a wage/price spiral through other means, but specifically that individual workers should accept/volunteer for lower wages than they could otherwise get?

Edit 2: seeing several cases of "$Reserve_Bank_Person says wage increases are too high and need to come down", not a lot of "Please turn down your pay increase so we can fight inflation." The reason no one would actually say the second is it is a ridiculous collective action problem that is obviously unsolvable on the employee side. The Australia governor warned against a 5.75% pay raise for govt employees (I think), but he was addressing the employer in that case, not individual workers.

One of the more recent articles: https://www.reuters.com/world/uk/uk-annual-wage-growth-72-ex... Or here: https://www.theguardian.com/business/2022/jun/20/would-a-wag...

I didn't see any mention of calls for workers to accept lower wages in the first article. In the second article, such calls were mentioned but not explicitly referenced or quoted. (Maybe they would be familiar to a British audience.)

But I would say that is different than asking for private sector workers to accept lower wages as an inflation fighting strategy. And note that the actual fiscal policy that the UK has pursued is wage subsidies, as much as 650£ - 1000£ annually it seems. (As described in the second article, not something I'm familiar with beyond that.)

Ironically, they are most vehement when claiming wage rises in the public sector cause inflation, despite ethe evidence there being much weaker (or non existent according to many economists).

Telling workers to accept lower pay makes about as much sense as asking companies to accept lower profits. Yes you can ask but they will not obey.

https://www.bloomberg.com/news/articles/2022-11-15/uk-s-suna...

A central bank saying inflation is caused by high wages is exactly the same as the government telling people they should get a lower wage. There is no practical difference.

It is in fact worse, because the central bank tends to act on that phrase. So the government not only tells people they should earn less, but forces their hands into that.

You may think that is better or worse, but it is not appealing directly to workers to throw away their pay check.

https://www.nytimes.com/2023/04/28/business/wage-inflation-m...

Note that the main transmission mechanism of monetary policy in fighting inflation is basically putting people out of work, to the extent of provoking a recession if need be. So yes the fed is looking for some pain in the labor market to see that things are working, though they would love for inflation to come down without a recession too.

But high inflation is also bad for workers, because wages in general don't keep up in real terms (re-negotiated infrequently, leverage imbalance between company and worker, status quo bias, etc.). The higher inflation is the larger you can expect companies profit shares to be (case in point, the original article). Also really high inflation seems bad in general for the economy, both workers and companies.

that is, more of less, ahat bank of england has announced.

ok so you agree with the general thesis but not the exact mechanism? why quibble then?

https://www.canberratimes.com.au/story/8054911/rba-wants-wor...

In before someone argues that RBA isn’t part of the Australian capital-G Government, the organisation certainly is part of the governing institutions of Australia.

Austrian government for one because they're the pawns of the big industry. But I'm sure other governments too.

https://en.wikipedia.org/wiki/Nixon_shock#:~:text=Nixon%20is....

It also enacted price freezes and rations.

Now, of course, he's not saying to any particular workers "Hey, stop asking for much higher wages," but he says plainly in the final paragraph of the article:

> “The labor market … shows only tentative signs of rebalancing, and wage growth remains well above levels that would be consistent with 2 percent inflation over time,” he said. “Despite some promising developments, we have a long way to go in restoring price stability.”

How would you suppose workers are supposed to have wage growth "consistent with 2 percent inflation" if said wage growth were to greatly exceed that magical 2% number? This is the Fed literally saying "Please turn down your pay increase so we can fight inflation," except that there's also the implicit thread of "... or else we're gonna have to make sure a bunch of you lose your jobs so it all balances out. It'd be a shame if that happened, wouldn't it?"

Source?

[1] https://www.bloomberg.com/news/articles/2022-03-17/powell-tr...

Bailey's comments were squarely aimed at blaming Brexit and energy markets, people intentionally took his words out of context to bake up a "gaff".

“I’m not saying nobody gets a pay rise, don’t get me wrong. But what I am saying is, we do need to see restraint in pay bargaining, otherwise it will get out of control.”

Back in May, his Chief Economist Huw Pill got in trouble for expressing the sentiment thusly:

“Somehow in the UK, someone needs to accept that they're worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing energy costs through on to customers,” which Bailey had to walk back.

Last week on Sky News, he was pitching a version of that same position, though, that balanced calls for wage restraint with calls for companies to exercises restraint on profit margins also:

“We've got to get and we will get inflation back to its target. To do that … we cannot continue to have the current level of wage increases, and we can't have companies seeking to rebuild profit margins which mean prices continue to go up at their current rates.”

How is that not directly telling workers to not ask for wage increases? I’d also say adding the word “chastising” is changing the tone of what the original commentor and I were referencing when talking about governments asking workers to not ask for wage increases.

"To do that I have to be clear – and we expect inflation to come down this year – to do that we cannot continue to have the current level of wage increases ... And we can't have companies seeking to rebuild profit margins which mean prices continue to go up at their current rates...But what I would say to people is we expect inflation to come down, and it is important then that price setting and wage setting reflects that."

Again, nothing "suggests" that he thinks workers are supposed to be blamed for wage increases being unsustainable. If anything he is blaming corporations!

Worker wages have been stagnant for a decade plus. Even the recent increases have been vastly outpaced by increases in prices AS EVIDENCED BY INCREASING PROFIT at companies that are increasing wages.

The problem is there is no price competition because most sectors of the economy are oligopolistic and have no interest in competing with each other one price at the moment.

Governments will blame businesses, consumers, employees, foreigners and bad weather. The only option ruled out is all the money printing going on and a good decade of regulators encouraging that and high-risk financial behaviour.

If inflation is high, it is a bad time to listen to governments.

Why complicate matters? I suggest we change it into: "It is bad to listen to governments"

Why are you ignoring a pandemic with associated measures such as lockdowns (although funnily, Sweden is very useful - they didn't lock down, they didn't print a ton of money, yet they're experiencing similar inflation to their neighbours), war in continental Europe, and the impact those had on global markets (higher costs of critical raw materials such as oil and gas, various metals, disrupted supply chains and bottlenecks, etc.)? Do you really think none of this matters, or do your political leanings tell you it's always the government's fault?

Sweden didn't lock down but they did print a ton of money. Compare money supply growth for UK vs Sweden. It's the same and occurred at the same time. Lockdowns weren't the only pandemic spending measures unfortunately. All governments everywhere massively pumped the money supply to pay for "whatever it takes" and now the bill has come due:

https://d3fy651gv2fhd3.cloudfront.net/charts/sweden-money-su...

> Do you really think none of this matters, or do your political leanings tell you it's always the government's fault?

Inflation is always and everywhere a monetary phenomenon, however, this basic insight is easy to get confused about because there's a large gap between theory and practice when it comes to this metric.

In theory inflation cannot occur without money printing, because a rise in prices of something like oil or food must be compensated by a fall in prices elsewhere as demand for that less essential thing disappears. People re-allocate their financial decisions towards the thing increasing in prices, businesses compensate by lowering prices to try and increase demand, it balances out.

Several things complicate this simple picture in practice.

One is that government inflation metrics don't include all prices. Indeed they cannot because it's too difficult to collect that data and prices constantly change. Also, governments like to play games with inflation statistics because if you can confuse people about inflation you get to pay for election pledges with money printing and then blame inflation on external factors, and because people tend to vote for whoever promises to spend more without raising taxes it's a quick way to hack democracy. So they usually define inflation only in terms of a small subset of all prices. If you do that then you can obviously have inflation even in the absence of money printing because you're ignoring the prices that fall.

Another problem is that in a sufficiently damaging period of price instability, some goods and services may simply cease being available. Everyone is spending all their money on heating their homes and other businesses go bankrupt as a consequence. At this point the price of the thing effectively goes to infinity, it just can't be obtained at any price, but that ruins the calculations and so governments do substitutions within the basket of prices, asserting that X is a substitute for Y even if in reality X is quite different (e.g. different kinds of meat). There are lots of hacks like these in how the stats are calculated.

Yet another problem is that money printing is somewhat circular in a fractional reserve system with very low reserve ratios and there are lots of feedback loops. If the government prints lots of money, then gives it to people whilst simultaneously banning the spending of it then it will appear they printed lots of money without causing inflation. When they stop banning the spending of it, that will show up as inflation even if the money printing has stopped. This is what's happening now, as governments shovelled money into people's pockets during lockdowns but there was nothing open to spend it on.

Nonetheless, we usually think of inflation has being caused by money printing because most of the time prices aren't being affected by wars or oil cartels and when that does occur, the prices which rise are being compensated by other prices that are falling or disappearing (which is a loss of wealth). It may just not be obvious.

This is silly, inflation existed before "money printing" existed as a concept. We had inflation when we had gold standard. Inflation existed even when we used physical gold coins to pay.

More plainly, the most important factor in the economy is velocity of money and you completely ignore that it exists. Higher velocity of money can allow inflation to rise, with a fixed supply.

1. Debasement of the currency (reducing the gold content of coins)

2. Gold mining

3. Stealing gold from abroad

That's why the Spanish Empire suffered hyperinflation after Cortez, because so much gold was brought back to Spain from the conquered South American tribes.

Yes, money velocity has an impact too but the main thing which can affect that is government intervention (like by printing lots of money and giving it to people who then save it - low velocity - and later start spending it - higher velocity).

If governments sell bonds to domestic buyers then indeed that doesn't create money, but in practice most bonds are bought by the central bank using printed money.

From extant currency.

What do the funds used to buy bonds do until repaid?

They back the newly printed currency.

You see, nothing is ever actually created.

Money is created from Commodities like wheat, corn, and metals, all of which are obtained in manners where the input cost is less than the output value with the additional value coming from a process in nature (sun and photosynthesis, or geologic actions for example).

You've clearly never actually done the flow chart, huh?

The money used for the bond is Taken Out Of Circulation and then new cash is printed.

The money already exists.

The value already exists.

It simply doesn't exist as Cash.

Theres a difference.

Really, do the effing flow chart.

>How are bonds repaid?

They aren't, the central bank indefinitely rolls them over.

What flow chart are you referring to?

Wow, that's purely disingenuous

Investors are absolutely paid back. Why do you think people buy them?

Really, given that and every other response so far I'm afraid Poe's Law is now in play.

You're a troll until proven otherwise.

>On the auction settlement date, the maturing Treasury securities are exchanged for the newly issued Treasury securities.

In net, the debt is only paid back when the central bank is actively reducing its treasury holdings, by rolling over less than the total amount of maturing debt. That is basically the reverse process of 'printing money', it takes the money back out of the wider economy.

>Why do you think people buy them?

Certainly 'people' buy them because they intend to get paid back, yes, but the central bank doesn't have the same motives. It increases and decreases the amount of treasuries it holds in order to control the money supply. That's the whole purpose of it holding treasuries.

Do investors get paid in exchange for returning the bonds?

Yes.

The fact that the government repeats the process is irrelevant to the simple fact that the Cash printed is done so by first securing an equal amount of funds to back them which is then returned with interest to the bond holder, inherently meaning that the Cash is not printed out of nothing but rather printed explicitly to represent real world value.

The amount of wealth in circulation and the amount of cash in circulation are not equal.

Wealth is constantly changing as new commodities and services are produced which create new wealth "out of nothing". You're engaged ina complete misattribution of cause and effect

At this point it seems intentionally deceptive...

Poe's law is in effect and I will begin treating you as a troll until proven otherwise.

All those issues will be resolved and the effects will disappear in times. The war will end. Supply chains will realign. And if those things matter, then at that point we would expect prices to come down at that point. You'd have to be naive to believe prices will come down. They aren't going to. This is not the first crisis in the last century and yet inflation is almost uniformly positive year after year. Governments are explicit in their policy-making.

Those things don't matter when identifying why prices tend to go up over time.

Meanwhile, my government mandates that ALL employees automatically get a raise matching inflation. No negotiation possible/needed; employers cannot refuse. Belgium.

Sounds great in theory; in practice Belgium competitiveness index and innovation index is lower than all its neighbouring countries; including France and post Brexit UK.

How does this work in practice? It is your wage is reviewed annually and adjusted, or more frequently? Do employers give raises for good performance or do you expect to just get a raise based on inflation?

Employers typically take this into account and reduce the performance based raise they give by the amount. It's great for the low performer or easily replaceable people who get a raise they otherwise would not have gotten and bad for the top performer / more sought after profiles because employer look at the total costs and thus have less legroom for individual increases. It acts as an equaliser in that sense; but the best and brightest are getting way more few kilometres away (it's not like Belgium is a huge country; almost every lives less than 1.5 hour away from the border).

For the companies that are less able to pay that automatic inflation; it can be pretty hard/expensive to fire, because the employment laws are quite protective. So the usual solution is to just not hire. Big companies are also finding ways to reduce their headcount and transfer the risk on smaller structure; such as using sub companies and franchising models. Thos inherently reduce employee job security and stability. Unions are fighting this as much as they can; without any success.

Companies that need local workforce (retail, ...) adjust their prices accordingly. As an example the same pack of pasta costs ~40% more in Belgium than in France. Many people take their car and drive significant distances to cross the border buy food.

How are the citizens in the least regulated doing on that front?

Yea....

Anyways, the device in question would simply not have existed if there wasn't for competition. His comment is thus evidence of its content being false.

Plenty of nation that are not lawless but are effectively unregulated in the matters being discussed.

And they do not fit your supposition.

Really...

Can you provide an example?

Worker protection against harrassment being a blatantly obvious one.

The type of discrimination women face varies from state to state. In 123 countries there are no laws to stop sexual harassment in education, and 59 countries don’t legislate against it in the workplace.

That lack of regulation inherently keeps women out of the workforce, specifically due to the lack of regulation.

Need I iterate more blatantly obvious examples?

You wrote:

>>>>How are the citizens in the least regulated doing on that front?

Now you're noting that some countries don't have specific workplace condition mandates. Not having said law doesn't mean they meet the ideals noted, of having laws establishing a free market, while lacking regulations that restrict voluntary exchange. To elaborate: in order to prove classical economists' and libertarians' claims about the free market being optimal are wrong, you'd have to show far more than these cherry-picked examples.

Your argument is sloppy, and when I request for more vigor, you lash out to create a flame war. This is not intellectual or scientific.

I'm absolutely justified in demanding you support your claims with evidence, and your belligerent responses are not justified, no matter how morally superior you believe yourself to be.

You said "Can you provide an example of poorly performing economies which "are not lawless but are effectively unregulated in the matters being discussed"?" And that's what I was replying to.

I provided an entire class of people who are harmed in such nations, of which too many exist.

Just because they don't share your preferences doesn't change the fact they meet the criteria you set forth.

I'd argue it's because economic productivity is not the only input into well-being and quality of life.

Put differently, do you think a lower quality of life is a worthwhile tradeoff if it raises productivity? What about the inverse?

Then why does it seem to be the exact opposite?

If fact, if you want competitiveness you need to prevent a fully free market.

No matter how many times this is explained, people still continue to make this incredibly simple and enormously consequential mistake.

If we're taking the reductionist view that economic output is the only important measure of society, then people need to understand that means maximizing competition not maximizing a free market.

I've seen no indication of that.

Isn't this just a cleverly worded tautology? It's like saying healthy people tend to live longer and happier lives. But is it actionable information? Not really.

No reasonable person could believe you're acting in good faith, right?

Really...

But your caustic response is anything but, so you've become the very thing you imagine me to be: a bad faith interlocutor.

If you can't see it then take a step back and analyze the thread until you can see how others would perceive your reply as such.

Anyone stupid enough to listen deserves all they get...