Its like the minimum wage debate, people against it say that it costs jobs and the people for it point to the studies which show no immediate short term job losses. The people against the minimum wage need to understand that in the short term it does have largely no effect, and focus on its long term effects. Why doesn't it have much short term effect?
Well, businesses are typically run as efficiently as possible. This means you have the least amount of labour for the output you can make. Increasing wages slightly might make your marginal product lower and decrease your equilibrium output, but only slightly and so typically it is going to be best to absorb the costs and maintain output. Also, most bosses would rather not sack people, and so employers tend to not replace people who leave rather than forcing people to leave. This is a more long term process, and so doesn't show up in short term studies.
Minimum wages also further increase the incentive for a business to replace labour with capital (ie technology). This is just common sense, if you make labour more expensive then you make technology relatively cheaper, which is going to cost long jobs. So why don't we see short term job cuts? Simple, again common sense tells you that it takes time to implement and develop technology that can replace these unskilled workers.
So basically, Peter, you would be better of if you stopped talking about the short term inflation which just really isn't there to any extent that might be deemed worrying, and focusing on the long term effects which are much more scary. It is just basic common sense that if you make more money available and that money does nothing to improve output then you increase prices in the long run. The only way out of that is to reduce the monetary supply by upping rates which as we all know the world simply cannot handle the way it is structured now.
I think Peter has perhaps rightly lost credibility for his talk of inflation being high now. The message that inflation is actually the increase in the money supply and that this will cause problems eventually (or rather, its causing the problem now, we just wont get the side effects until later) is obviously correct, but you open it up to attack by coupling it with the claim that inflation is extreme currently, which is just isn't.
- Queensland University of TechnologyBusiness Degree - Finance, 2013 - present
- Griffith UniversityPhotonics & Nanoscience, 2011 - 2012
- Wellington Point SHSHigh School, 2006 - 2010
- Coolnwynpin SSPrimary School, 1999 - 2005
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