President Biden: The NEW one and only politics thread

It's actually the opposite, if we hadn't interferred with things to the degree we have. If the dollar was stable (i.e. -- we hadn't been creating massive monetary inflation). ... salaries would increase due to productivity gains. Productivity has increased dramatically during my lifetime (I am 55) due to technological gains. It may not be a one to one relationship, but in that environment, wages should have gone up dramatically, and in fact, at the utopian end of that we'd all be able to retire, let automation take care of everything and live like kings.

It hasn't worked out that way. Wages have increased, but the prices of other things (wages are a price) have way outpaced wages. That is due to us blowing our money supply through the roof so politicians can run up massive debt and take over bigger and bigger swaths of the economy in wasteful ways. Over the last four years, the biggest thing -- even though prices generally have risen by more than 20 percent -- has been that housing costs are swallowing up people's wage increases (and then some).

So work your way backward. ... Consider that we had ZIRP (zero percent interest rates) for more than a decade and a central bank that was buying up trillions of dollars worth of mortgage-backed securities to distort the market for housing, which drove up prices. It was part of an overall scheme to monetize debt, which is necessary when you are running up trillions of dollars of public debt. ... nobody would have bought that debt without an artificial buyer .i.e. -- we essentially created more dollars out of thin air and bought up all kinds of debt, including MBS, in order to drive up the price of that debt and suppress yields, which in turn made houses artificially cheaper for people -- creating more demand -- which in turn drove up prices. While that was going on, politicians were selling a "Look at how much home owership we created."

But it was all a fantasy. With Covid, they went berzerk monetizing debt (because our government spent like crazy) and the effects became very pronounced in the prices of a lot of things, and people have gotten killed by what they call "inflation."

That forced the central bank that was behind it all to take its foot off the gas and try to allow interest rates to rise -- they only do that when the pitchforks start to come out. Not only did that create financial instability (the market for things like bonds had been severely distorted for more than a decade) that we are dealing with (in ways that just kick the can down the road and make a bigger reckoning later), but it had the effect they hadn't considered that all of those people with 3 percent 30 year mortgages are now trapped in their overpriced homes, and as a result prices of housing have kept going up, now because of supply problems rather than demand being juiced.

In the mean time, you have millions of millenials who look at the American Dream and are saying, "We'll never be able to buy a home." They have created despair for the have nots.

But to answer your question. ... it's the opposite. If productivity increases the way it has due to technological gains, salaries SHOULD be way outpacing the cost of other things (which technically should get cheaper due to those technological gains, but never do because we keep increasing the money supply -- "taxing" people to keep the debt fantasy alive by making their wages worth less and on the other side of the equation making things cost more because of the monetary inflation).

 

As a worker you are as good as how much income your labor provides to someone else. As your productivity grows, each hour of your work generates more income. That makes you worth more salary (if an employer wants that incremental income from your work).