The majority of price increases, of inflation, right now, are driven by price increases that are higher than increases in costs. Numbers I see tend to range from the mid sixties to the seventies.
They aren’t, then, driven primarily by wage increases.
The obvious way to solve this is to put in a surplus profit tax based on 2019 profit levels and forbid other ways of withdrawing excess profits like stock buy backs and option grants. Only after doing this would you consider trying to crush wages or cut pensions or other benefits.
That is, if your primary aim was to reduce inflation.
But it is undeniable that crushing wages will will reduce inflation somewhat, even if it is far from the best way to do so and it has a great advantage.
It makes the rich even richer by reducing their wage costs!
On the other hand, an excess profits tax would make the rich not get richer nearly as fast.
You can see why governments controlled by the rich (yes they are, let us not be tedious) would prefer to crush wages as opposed to limit profits.
For the elite to support the sort of policies which would not crush wages and which would appear to reduce their profits, they would have to be like a good chunk (but not all) of the post-war elites. Having seen what happened when demand collapsed in the Great Depression, they knew they needed wages to rise and were thus willing to share and to pursue some policies which they didn’t like.
After all, while the fastest way to deal with inflation is an excess profits tax, the structural way is breaking up control of industries and re-regulating anything that even sniffs like an oligopoly or monopoly, plus slamming on huge estate taxes, wealth taxes and 90% top marginal tax rates, while putting a Glass-Steagall analogue back in place and re-nationalizing key parts of the economy.
Now, as it happens, the post-war economy was the best we’ve known since we were keeping records. High growth, reducing inequality but still plenty of profits. The rich had to live with only getting 20X or so as much as the middle class, though, and that’s just unacceptable to them.
Now never let it be said that the rich don’t learn: they do have a dim understanding of “demand collapse bad” and they have a solution, which they’ve been trying since 2008.
“What if we just print tons of money!?” Trillions and trillions of dollars were produced and are currently being produced out of thin air, with no increase in the underlying economy, and given to rich people to bail them out and even when they don’t need bailing out.
Who needs to actually grow customers and have customers having increased real incomes when you can just give yourself money?
This is why things will only improve when current elites lose power wholesale.
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JBird4049
As a whole, the economy is collapsing and the United States is losing the skills needed to run the country because it is not immediately profitable. Covid made this clear.
Just how does giving trillions in free money to themselves while not giving much to the real economy, aka the general population, just guarantees a continuing collapse. It is obvious that the population requires sources of income to even stay alive, forget about the country keeping the skills needed to function and survive. There will be a ruptured, effectively a civil war or anarchy, with the leaders on the target list. Are our elites that stupid, or foolish, or ignorant?
NR
Unfortunately many of the elites you’re talking about are pushing hard for fascism to ensure that they won’t lose power. And also unfortunately, they are finding a lot of working-class people willing to be their foot soldiers.
Those working-class people who believe they’ll be better off under fascism are in for a rude awakening when they find out the opposite is true, but by then it will be too late for the rest of us.
Feral Finster
Russian phone prankers Lexus and Vovan impersonated Zelenskii and spoke with Fed Chair Jerome Powell a couple of days ago.
The conversation was most instructive, which is evident from the fact that the MSM stoutly insists otherwise, yet refuses to provide a transcript. Anyway, among other inconsequential matters, Powell admits that at least two rate hikes are coming, to be followed by a long period of high rates with significant negative effects on the US economy and labor market, as necessary to get inflation down.
https://twitter.com/KimDotcom/status/1651550300476674048
Willy
I just saw an article about the sellers of those Joe Biden “I did that!” stickers seen at gas pumps. They’re mostly opportunistic online sellers who don’t seem to care one way or another about what actually caused the rise in prices. Plus a few young conservative zombies. More accurate would’ve been Darren Woods but it’s doubtful those would’ve sold since nobody knows who he is. It’s a shame the left keeps trying to give the working class proto-fascist more intellectual curiosity points than they deserve. I’d advise a dimbulb propaganda wing but that seems a bit disingenuous.
GlassHammer
What the rich always want from their Government is “a guarantee of unrestrained individual autonomy” because… a.) such a structure highly advantages those who currently have wealth/power and b.) their actual moral/ethical code is simply “do as you wish”.
But… no Government can actually maintain itself or anything it creates if it prioritizes “a guarantee of unrestrained individual autonomy” above all other goals and…. any ethical/moral code based on “do as you wish” is utterly evil.
The only thing remarkable about this is that the rich might destroy the wealthiest and most powerful Government to ever exist far quicker than any prior Government simply by using the same methods they historically used.
mago
A broken record yo going on about reification’s fallacy and how the rich and sometimes famous and those who follow that story line think that shit’s somehow going to last forever when it’s actually DOA, will fail the lesson even while burning in the hell realms. Or something like that.
StewartM
In standing in a line yesterday, I met a non-native born European (?) US resident. I couldn’t make out his origin from his accident.
But anyway, he was an admirer of the US. I told him about what other countries have in mass transit, and his reply was “I like my car!”. I told him that a automobile-based transit system is the most costly one, especially for consumers, and his reply was that it would cost a lot of money to build the infrastructure for mass transit and how ‘everything goes by truck’. I told him we *used to be a country that ran on trains!!” and a bystander chipped in that “yes, things go by car but only because of the interstate system that was built”–IOW, the government dumped a huge amount of money which is what made car transit (sorta) economical.
I tried to tell him that the US was nowhere as ‘rich’ as its GDP numbers indicate, that these numbers are an illusion as Americans are gouged in every conceivable way for the profit of our social betters—on housing, on health care, on phone service (go switch plans, even with an unlocked phone only 2 years old, and they’ll insist you must buy one of *their phones* instead) and on transportation. Americans may make high incomes, but the reason they have low savings isn’t due to some character flaw–it’s because the lack of real competition and downward price pressure means any raise in income they get is just an opportunity to raise prices.
Then he started ranting about how inefficient government is. I tried to explain “yes, but that’s because we get gouged there too, as the government contracts out work to private companies who are deliberately allowed to overcharge the government while providing slow and crappy output”, (heaven forbid the government simply hire workers and employ them directly itself, to make sure the job got done right!) but then he switched tracks to complaining about America’s foreign wars. He’s right about that, but we’d still have a bloated, inefficient, costly military that costs near-WWII money (inflation-adjusted) that buys only a fraction of what we had in WWII for the same money. But then, the government far more ‘ran the show’, and followed more Ian’s prescription of “you’re going to make 5 % profit and that’s all you’re going to get”.
Frustrating….
GlassHammer
StewartM
In the U.S. most of your conversations will center on the political propaganda the other party has consumed and continues to consume.
Political propaganda is just how life is structured and goals are set in the U.S.
To put it in perspective, most Americans watch, read, or listen to political propaganda 3-4 times more frequently than they pray or meditate. (And I am being real generous saying it’s 3-4 times more frequently.)
Trinity
They are clinically insane, any conscience they possess (possibly a few have one, at least) is overridden by their insatiable need to keep “winning” the same “heads they win, tails we lose” game.
I’ve said all along their games aren’t sustainable, and I’m also looking forward to when they start fighting with each other publicly. It has to happen, as they’ve impoverished an increasing percentage of the population. And the plans appear to be more misery for many more. Some of the elites will eventually start losing, the ones on the lower rungs most likely. Hopefully those won’t go down without a fight, taking a couple more down with them.
Carborundum
It’s important to note that an excess profit tax isn’t going to address all of the balance not due to wage increases. Housing costs make up 30% of the CPI basket by weight and that’s going to be pretty stubbornly inflationary over the medium-term (i.e., multiple years), in Canada at least, as the interest rate regime reset works its way through the system (unless we really are complete loose monetary policy junkies – I keep hoping not, but I guess we’ll see).
Provided we do see a reset in the interest rate regime, the acid test in many ways is going to be what companies do with these windfall profits – do they understand that the strategies for success are different in a changed monetary policy environment, or have the financialists taken over management completely?
Jorge
I suspect that the story “the Fed wants to hurt the poors with higher rates” is BS the same way everything else is BS. You know that everything you hear is BS, why do you believe this?
Here is an explanation of what is going on: some of the elites have realized that living out their old age in secure compounds is really going to suck, and have decided to gear down world fossil fuel usage by gearing down the world economy. Encouraging the Ukraine war was part of this strategy. Encouraging the Fed to gear down is another part.
Ian Welsh
Except that this has been the policy since 1979 or so, so it’s unlikely it has suddenly changed to environmental concern, especially when they are doing so little anywhere else for climate change.