American Middle Class Disappearing?

[Scottty]

I found this little essay on Quora, and thought I'd post it for comments here:

Is the American middle class disappearing?

David Henderson's answer: Yes. For me, the most obvious single example of this phenomenon is… The Simpsons. When the Simpsons began, the overarching joke of the series was that the Simpsons were a struggling lower middle class family. Literally dozens of episodes make a plot point about how poo...

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Is the American middle class disappearing?




David Henderson
Reads a lotUpvoted by
Scott Blackwood
, lives in The United States of America (1961-present) and
Terry Noles
, lives in The United States of America (1971-present)23h
Yes.
For me, the most obvious single example of this phenomenon is… The Simpsons.
When the Simpsons began, the overarching joke of the series was that the Simpsons were a struggling lower middle class family. Literally dozens of episodes make a plot point about how poor the Simpsons are and how they are doing worse than all their friends and neighbours, however that joke now falls completely flat, because what was presented as a struggling middle-class family in the 80’s is an almost inconceivably unattainable lifestyle in the 2020’s.
The Simpson family:

• Live in a massive, detached house with huge gardens front, back and side, multiple living rooms, three bathrooms, a large kitchen diner, a separate dining room, four good sized bedrooms, a two car garage/workshop and a massive basement and attic. Even if it were located in a town known as ‘Americas Crudbucket’, there’s no way this home costs much less than half a million dollars today.

• In quite a nice suburban town. Yes, they make multiple jokes about how crappy Springfield is, but honestly it seems a lovely place to live - lots of amenities, reasonably crime free, friendly neighbours, close to nature etc.
• They can afford to take multiple holidays a year, often internationally.
• They have at least two cars at any one time.
• Homer has enough disposable income to drink at Moes basically every night without thinking about it.
• They can afford to frequently splash out on hugely expensive one off impulse purchases such as a pool or an RV.
• They afford all of this on a single income that Homer makes from his union job as a safety inspector, a job he got without even having a high school diploma, and is apparently so secure that he seemingly cannot be fired despite frequently being caught sleeping on the job, antagonising his boss, and often just not turning up.
• Although they often talk about money being tight, Marge never seems to be under real pressure to get a job and add a second income to the family, unless the plot for that week demands it.

Marge and Homer are in their mid- 30’s, having had Bart quite young. There is most likely not a single young family in the western world right now living in anything like the kind of situation the Simpsons are in, being supported by a single wage from a low skilled job.
Obviously I do get that the Simpsons is a cartoon and of course it is going to take liberties, but it’s a simple fact that the basic living setup of the family was deliberately set up to reflect the lower-middle class lifestyle of Americans at that time. The idea that what was presented as a struggling middle class family in the 1980’s is now an unimaginably successful one is the biggest indictment of the past 40 years I can think of.
Edit:
Quite pleased at how this one has blown up and created a bit of a debate in the comments, I’m not going to address them all, but one thing I should clarify, a lot of people are making the argument that Homer as a Nuclear Power Plant safety officer would be making very good money, but this isn’t true, we see his payslip in the ‘Bear Patrol’ episode from 1996 and it looks like he makes only $352.19 per week, or $19k per year after tax.

Homer is neither smart or talented enough to demand a market rate, so $19k per year is what the family has to afford that lifestyle.

 

[Bassoe]

Idea's been around for a while.

SMBC said it best.

 

[Bear Ribs]

Yeah, the middle class has been steadily eroding for the past 50 years or so.

How America’s Middle Class Is Shrinking [Infographic]

America's middle class has been shrinking for the past 50 years. While middle class Americans remain the biggest income group by number of people, the same can't be said of the aggregate income earned by them.

www.forbes.com

 

[Skallagrim]

Obviously this is the case, and not just in America. The reasons are clear, although most left-wing critiques will whine about capitalism or something like that. See the above refererence to "late-stage capitalism". Yeah, no. It's more like "late-stage big government". The reasons the middle class is shrinking are all tied to the fact that there's a huge, inefficient, wealth-guzzling, economy-crushing beast of a government ruling over practically every nation.

The tax burden is ludicrious. Unprecedented, in fact. (There have historically been brief times of very high taxation, but never sustained periods of so destructive a tax burden as we suffer today.) This burden falls almost exclusively on the middle class. The government makes the poor dependent on hand-outs (in reality mere scraps) to keep them in line, while the rich establishment can dodge almost any tax with great ease. The middle class pays for all.

Not statisfied with the absurd amounts of money it vampirically sucks out through taxation, the government also prints money like it's going out of style (spoiler alert: it is, because that strategy never ends well). Result is inflation, a.k.a. devaluation of the currency. This is a tax on savings. The poor have no savings. The rich can invest in something that retains its value. The middle class is, again, hit by far the hardest. The government is almost literally burning up your savings account.

That's it. That's what's going on. There are some other considerations, but these are the big ones.

 

[Morphic Tide]

The reasons are clear, although most left-wing critiques will whine about capitalism or something like that. See the above refererence to "late-stage capitalism".

The offshoring of jobs and some of the regulatory bloat causing issues for new businesses growing into large businesses is on late-stage capitalism efforts, being a major factor in how we got here but not as important in what has continued getting worse.

The tax burden is ludicrious. Unprecedented, in fact. (There have historically been brief times of very high taxation, but never sustained periods of so destructive a tax burden as we suffer today.) This burden falls almost exclusively on the middle class.

Firstly, the tax burden was a very good thing when first instated between WW2 and the Cold War, the issue is that it hasn't been brought down to "normal" since the 90s. Secondly, plenty of taxes come from the "upper class", but it's only 45-50% rather than the much higher but nearly impossible to figure out (how liquid does an asset need to be to count?) proportionate sum.

Not statisfied with the absurd amounts of money it vampirically sucks out through taxation, the government also prints money like it's going out of style (spoiler alert: it is, because that strategy never ends well). Result is inflation, a.k.a. devaluation of the currency. This is a tax on savings.

Savings-based economics have nightmarish money supply volatility. Because saving money contracts the money supply and spending savings increases it. Usually this cancels out cleanly. But then "waves" of things to save for or spend savings on crop up, like idiot real-estate developers putting a whole multi-hundred-lot suburb on the market at once or a Beanie Baby style "craze". Savings really only work on the micro level, they do very weird and nasty things for aggregates of millions.

 

[Scottty]

Firstly, the tax burden was a very good thing when first instated between WW2 and the Cold War,

A good thing for who?

Savings-based economics have nightmarish money supply volatility. Because saving money contracts the money supply and spending savings increases it. Usually this cancels out cleanly. But then "waves" of things to save for or spend savings on crop up, like idiot real-estate developers putting a whole multi-hundred-lot suburb on the market at once or a Beanie Baby style "craze". Savings really only work on the micro level, they do very weird and nasty things for aggregates of millions.

It is human nature to plan ahead, and to lay goods in store for the future. It's how our species avoids starving to death in winter. We also have an instinct to provide for our offspring. If your economic system is so much in conflict with basic humanity, then it is your system that must change.

 

[Buba]

Idea's been around for a while.

Yup, I remember reading about the demise of the American middle class since the late 70s or early 80s ...

 

[Cherico]

Obviously this is the case, and not just in America. The reasons are clear, although most left-wing critiques will whine about capitalism or something like that. See the above refererence to "late-stage capitalism". Yeah, no. It's more like "late-stage big government". The reasons the middle class is shrinking are all tied to the fact that there's a huge, inefficient, wealth-guzzling, economy-crushing beast of a government ruling over practically every nation.

The tax burden is ludicrious. Unprecedented, in fact. (There have historically been brief times of very high taxation, but never sustained periods of so destructive a tax burden as we suffer today.) This burden falls almost exclusively on the middle class. The government makes the poor dependent on hand-outs (in reality mere scraps) to keep them in line, while the rich establishment can dodge almost any tax with great ease. The middle class pays for all.

Not statisfied with the absurd amounts of money it vampirically sucks out through taxation, the government also prints money like it's going out of style (spoiler alert: it is, because that strategy never ends well). Result is inflation, a.k.a. devaluation of the currency. This is a tax on savings. The poor have no savings. The rich can invest in something that retains its value. The middle class is, again, hit by far the hardest. The government is almost literally burning up your savings account.

That's it. That's what's going on. There are some other considerations, but these are the big ones.

he's actually not kidding when you add up federal, state, and local taxes, in some estimates it eats up rougly 40% or so of the average american's income, and its actually worse in europe.

 

[Zyobot]

Honestly, there are times when I wonder how much of a role rampant inflation plays in promoting modern consumer culture and much of the cheap, easily breakable crap that’s mass-produced these days?

As others have already pointed out, inflation (via the Federal Reserve creating fiat money out of nothing) is essentially a tax on purchasing power that disincentivizes savings and encourages consumers to spend now before their money’s worth disappears.

Sooner or later, companies start picking up on this, thereby adjusting their business models and time preferences to match the short-term thinking of customers who have money to spend now instead of money they’ve invested for years (in which they’ve had years to research deals that offer the most “Bang for your buck!” and have leverage to demand something better).

The result: Less savings and personal austerity due to yearly currency devaluation — and consequently, far more ultra-consumerism in which people buy cheap, easily breakable crap instead of long-term wealth-building and durable, high-quality goods that last long and have real craftsmanship to them. We don’t have nearly enough of that these days, I think.

 

[Typhonis]

Don't forget how wages have not matched inflation over the decades.

 

[Zyobot]

Don't forget how wages have not matched inflation over the decades.

Frankly, I’m wondering if we wouldn‘t need to raise wages constantly if we nixed inflation first.

Again, it presents a host of perverse incentives that not only diminish purchasing power in any case, but also shorten people’s time preferences and force businesses to go along with them by making their products shittier, now that customers are coming in with sudden influxes of money they need to spend now instead of saving for later (which gives them time to shop around for the best product, forcing businesses to up the quality of their offers). Lots of run-off ramifications fiat currency has that never occur to most people, really.

 

[Bear Ribs]

It's also worth noting that the middle-class are also the target of a lot of political pressure and hate.

Much as middle minorities take a lot of heat, so do the middle class as the "go betweens" who manifest as managers and small business owners, the ones caught between the consumer and the megacorporate suppliers. The elites despise the middle class, from whom their replacements will eventually emerge if not crushed and have a motivation to keep the middle class poor, where their surplus is more easily extracted and because the poor won't turn their surplus into small businesses that compete with the elites.

It's also easier for politicians to interface with megacorporations than the middle class, it's significantly easier to get all on board, both for "fund raising" and for pork projects, if five guys control 99% of the industry rather than eighty thousand mom 'n pop operations. Communists heap more hatred on the "bourgeoisie" than they ever do on the truly wealthy, who they hope to coopt instead.

 

[Skallagrim]

Firstly, the tax burden was a very good thing when first instated between WW2 and the Cold War, the issue is that it hasn't been brought down to "normal" since the 90s.

A good thing for who?

A high tax burden is rarely a good thing. High war-time taxes when fighting Hitler and Hirohito can be understood. That tax regime was not necessary during the Cold War, however, and was certainly not "good" for the people. There was no longer a total war to fund, and while a sturdy military budget can again be understood in the face of the USSR and its deadly idiology-- sustaining such a military didn't require the kind of tax regime that existed then.

Secondly, plenty of taxes come from the "upper class", but it's only 45-50% rather than the much higher but nearly impossible to figure out (how liquid does an asset need to be to count?) proportionate sum.

That's... pretty skewed reasoning. Even if that kind of percentage came from the upper class (which differs per country, but which on the whole I think is only plausible if you define the "upper class" rather broadly), it leaves out the really relevant facts. The middle class pays a substantial fraction of its income and savings to the tax collector, while the wealthy establishment pays only a small fraction of their income.

So if a small fraction of the wealth of the very richest is enough to pay almost half the tax revenue (as you claim)... then why not have them pay all of it? Institute a flat tax of a given percent, and exempt all income under 50.000 or even 100.000 dollars. Over that first sum, nobody ever pays taxes. Over everything above that, a flat rate. No exemptions, no loopholes, no subsidies, no complex schemes. Then the common man never has to deal with the IRS at all. The only discussion between Left and Right is then what the appropriate flat tax rate hat's raised above the tax-free sum should be. I'd advocate "lower is better", but if the common man is shielded from the greedy claws of the tax-collector, the discussion gets far less murderous.

Savings-based economics have nightmarish money supply volatility. Because saving money contracts the money supply and spending savings increases it. Usually this cancels out cleanly. But then "waves" of things to save for or spend savings on crop up, like idiot real-estate developers putting a whole multi-hundred-lot suburb on the market at once or a Beanie Baby style "craze". Savings really only work on the micro level, they do very weird and nasty things for aggregates of millions.

It is human nature to plan ahead, and to lay goods in store for the future. It's how our species avoids starving to death in winter. We also have an instinct to provide for our offspring. If your economic system is so much in conflict with basic humanity, then it is your system that must change.

Saving is the sign of forethought. It makes you self-reliant. Able to survive. This is why the establishment wants savings gone. Without savings, you're dependent. Vulnerable. Which is what they want.

The foolish dogmas of Keynes have not helped us, as the crises of the current system have shown quite clearly. There is no stability now. There is desperation. Normal people are now in trouble if their washing machine breaks down, because they can't afford to buy a new one. People live from pay-check to pay-check, or -- ever more commonly -- from credit card to credit card. How is that stability?

Savings are good. Savings are necessary. Savings will save you.

Unless the government makes them worthless. Then you're fucked.

he's actually not kidding when you add up federal, state, and local taxes, in some estimates it eats up rougly 40% or so of the average american's income, and its actually worse in europe.

In some Western European countries, when you add up the national, provincial, municipal and other local taxes, you find that the government swallows up in excess of 60%. As in my own country.

Frankly, I’m wondering if we wouldn‘t need to raise wages constantly if we nixed inflation first.

If there had been no inflation -- no policy of destroying the money, the savings, and the middle class -- then the currency would be worth far more, and you'd thus get paid nominally far lower sums-- but you'd be able to buy a bread for a few cents, too. Overall, the effective purchasing power would be significantly higher, the middle class would be larger, and most regular families would still be able to afford a nice home and two cars, all on a single bread-winner income. They'd pay off their mortgage by the time the kids finish high school, and then they'd have enough to put those kids through collage, or help them out while they enter the job market. All the while knowing that when dad retires at 65 or so, he and his wife will have a decent pension lined up.

Because that, my friends, is normal. That is what the world should look like. It's not some crazy fantasy, it was real, it existed-- and it was stolen from us. Because there are those in this world who much prefer you under the yoke.

 

[Zyobot]

Yeah...

Honestly, the fact modern economists' eyes probably glaze over when you point out the vulnerabilities of fiat currency certainly doesn't help there.

They always like to rag on the Gold Standard's weaknesses and lambast it as "inflexible" and "outdated"... but have they ever thought about the weaknesses of the currency we have in place, save for a pretty "Meh, I guess it exists!" attitude towards the inflation tax? From what I've seen, not really — especially when you start talking about long-term consequences over the next forty, fifty, or sixty years instead of the next month, quarter, or year. Seems like how everyone's been trained to think nowadays, really.

 

[Scottty]

Yeah...

Honestly, the fact modern economists' eyes probably glaze over when you point out the vulnerabilities of fiat currency certainly doesn't help there.

They always like to rag on the Gold Standard's weaknesses and lambast it as "inflexible" and "outdated"... but have they ever thought about the weaknesses of the currency we have in place, save for a pretty "Meh, I guess it exists!" attitude towards the inflation tax? From what I've seen, not really — especially when you start talking about long-term consequences over the next forty, fifty, or sixty years instead of the next month, quarter, or year. Seems like how everyone's been trained to think nowadays, really.

In my experience, the most telling arguments against many an ideology, doctrine, or set of ideas tend to be those that its adherents will simply refuse to even acknowledge.

 

[Zyobot]

In my experience, the most telling arguments against many an ideology, doctrine, or set of ideas tend to be those that its adherents will simply refuse to even acknowledge.

*Eyes the Trans Activist who can't define what a woman is right here.*

Better yet, DEI multiculturalists to whom it never occurs that some cultures mix like oil and water, because they're simply not compatible in the same space together. The fact they'll shout you down when you try to point out that certain foreigners who they want to let in are actively hostile to the values and way of life of their hosts doesn't help, either, so there's that.

 

[Morphic Tide]

A good thing for who?

Initially the people who needed their cities' near-enough everything rebuilt, then the people who had some need of government help that defaulting on the assorted debts, then it was building up new stuff for everyone bringing down a whole bunch of costs, then it was maintaining public confidence that the Soviets wouldn't steamroll them which coincidentally involved spreading money out far more than the economy would have "naturally".

It is human nature to plan ahead, and to lay goods in store for the future. It's how our species avoids starving to death in winter. We also have an instinct to provide for our offspring.

It basically comes down to money working so differently between the bulk use-case running "the economy" in general that actually makes the stuff worth saving for and the individuals concerned with getting it that the shared supply necessitates strongly prioritizing one over the other. The resolution to this issue, within the current system, is to stockpile highly liquid assets that you then sell to people looking to use them, rather than keeping hard cash on hand doing nothing. Shifting to a different system is very high risk with little ability to reduce it for surprisingly limited reward.

That tax regime was not necessary during the Cold War, however, and was certainly not "good" for the people.

You would not believe the amount of massive infrastructure projects in the period and how much of the work to do came back to the defense spending. This essentially accidentally imposed "trickle-down" economics because the government's money was strictly attached to work to do, which demanded the money go through a lot more hands than it'd see in the private sector before being lost to High Finance.

Even if that kind of percentage came from the upper class (which differs per country, but which on the whole I think is only plausible if you define the "upper class" rather broadly), it leaves out the really relevant facts. The middle class pays a substantial fraction of its income and savings to the tax collector, while the wealthy establishment pays only a small fraction of their income.

Your point was that "the burden" rested on the middle class, but in actuality it's the upper 1-2% well outside the "middle class", even if not stably so, that carry the burden of the state's budget (chiefly extremely highly salaried specialists and small to medium business owners), while the smaller share borne by the middle class is disruptive on oddly-specific margins.

So if a small fraction of the wealth of the very richest is enough to pay almost half the tax revenue (as you claim)... then why not have them pay all of it?

Because wringing twice as much out of them is very likely to hit a large portion of them with similar "crunch" issues to what the middle class faces, causing issues with businesses expanding and greatly incentivizing the current 1%-qualifying highly salaried specialists be payed considerably less.

Saving is the sign of forethought. It makes you self-reliant. Able to survive. This is why the establishment wants savings gone. Without savings, you're dependent. Vulnerable. Which is what they want.

No, it was instantiated because that the wheels need unfathomable amounts of money to grease them, which goes up as the scale of things being done increases, increasingly so as the financial sector discovers ever more obfuscated ways to soak ever increasing amounts of money into its gambling addiction. And good luck untangling that mess, just take a look at how far the supply chain interruption of the lockdowns has spiraled out.

 

[S'task]

If there had been no inflation -- no policy of destroying the money, the savings, and the middle class -- then the currency would be worth far more, and you'd thus get paid nominally far lower sums-- but you'd be able to buy a bread for a few cents, too. Overall, the effective purchasing power would be significantly higher, the middle class would be larger, and most regular families would still be able to afford a nice home and two cars, all on a single bread-winner income. They'd pay off their mortgage by the time the kids finish high school, and then they'd have enough to put those kids through collage, or help them out while they enter the job market. All the while knowing that when dad retires at 65 or so, he and his wife will have a decent pension lined up.

See... while I in general agree with you, this is where people who support fiat money have a few good point.

You cannot keep the supply of money the same over time. That actually doesn't lead to stable monetary value, it leads to deflationary money value. This is because of the two aspects that you're not immediately taking into account: the increase in human productivity and the increase in human population. Basically to maintain a useful amount of money in the system governments, even if using a standard, actually need to slowly increase the money supply over time, as if you don't the increase in the demand on money simply due to the increase in supply of humans will place deflationary pressure on money which has its own massive set of issues. If you just want stable prices, you actually need to be slowly inflating your currency over time to account for at a minimum the increase in population, even moreso if you want to account also for increased efficiencies as prices can actually drop lower than your currency practically values for.

To use a real life example of this, take the average price of a gallon of milk in US in 1950. Back then is was $0.83 per gallon. Sounds really good, right? Well, the average income of a family in 1950 was $3300. This means 1 gallon of milk cost .00025% of their annual income. Meanwhile in 2020 the average per gallon of milk was $3.51. This sounds like a lot of inflation; however, the average wage in 2020 was $55,628, which actually means that a gallon of milk due to improvements of milk production and distribution efficiency was now only .000063% of the average income. If you go back and figure out what that is of 1950s dollars it's about $0.21, less than a quarter a gallon. Now yes, that is a practical amount to pay in 1950s levels of currency there are numerous things that were priced lower than milk for sale that would have dropped to near impractical levels of cost to pay for.

Now, I'm not defending the current status quo by any means, they have clearly overinflated the currency, but there's a reason that the Fed has wanted a very SLIGHT amount of inflation year to year and it's strictly because of this. Thing is, it's easy to see inflation, and it often ends up disguising falling prices (like in the milk example above) gained from improvements in efficiency and increase in the supply of labor. Thus a increase in the supply of money over time is actually a good thing for everyone as money's value follows the laws of supply and demand just like everything else in the economy.

 

[Blasterbot]

while the vast majority of the policy decisions recommended by those who subscribe to MMT are kinda crap. the thing they say that actually does make sense is if the money supply grows by the amount your GDP grows you experience net 0 inflation. this is kinda true and accurate. the problem is that for whatever reason the people in charge hear that and think they can predict how the economy will or won't grow and print way more money than the economy grows.

go figure that when the "experts" hear that they fall to temptation and make terrible economic decisions.

 

[Skallagrim]

Initially the people who needed their cities' near-enough everything rebuilt, then the people who had some need of government help that defaulting on the assorted debts, then it was building up new stuff for everyone bringing down a whole bunch of costs, then it was maintaining public confidence that the Soviets wouldn't steamroll them which coincidentally involved spreading money out far more than the economy would have "naturally".

You would not believe the amount of massive infrastructure projects in the period and how much of the work to do came back to the defense spending. This essentially accidentally imposed "trickle-down" economics because the government's money was strictly attached to work to do, which demanded the money go through a lot more hands than it'd see in the private sector before being lost to High Finance.

I wasn't aware of American cities being bombed and needing rebuilding. Yet we were first and foremost talking of the American situation, here.

There are American cities that look like they've been through a war right now, though. Namely the cities where, for decades, leftists implemented Keynesian economics. That tells you everything you need to know.

"Spreading out the money" is, as you actually already admit through your own phrasing, unnatural. It creates perverse situations that are fundamentally unsustainable. As has already been mentioned (not only by me but by basically everybody else in this thread): savings are good. "Spreading the money" through centralised intervention is fundamentally a bad idea. You want savings to exist.

The worst possible situation is one where there are a few vast concentrations of wealth, and the vast majority has almost no capital. In other words: the current situation. The best possible situation is one where there are many quite modest concentrations of capital, very few people with little to no capital, and likewise very few vast concentrations of capital. That's what I'm proposing. The irony is that you're talking about spreading the money in defence of policies that create unhealthy extremes, whereas I'm opposed to redistribution, in the knowledge that the natural balance (which you decry) leads to a decently even spread-- not perfect, but frankly as good as it gets. All artificial attempts to "improve" things will ultimately have negative side effects.

The kind of people who turned Detroit into a shell of itself never grasp that. They just want to spread the money a little, after all.

Your point was that "the burden" rested on the middle class, but in actuality it's the upper 1-2% well outside the "middle class", even if not stably so, that carry the burden of the state's budget (chiefly extremely highly salaried specialists and small to medium business owners), while the smaller share borne by the middle class is disruptive on oddly-specific margins.

Because wringing twice as much out of them is very likely to hit a large portion of them with similar "crunch" issues to what the middle class faces, causing issues with businesses expanding and greatly incentivizing the current 1%-qualifying highly salaried specialists be payed considerably less.

You're avoiding my main point, still focusing on a skewed perspective. Interesting how you, in defence of Keynsian policies, come to the rescue of those poor billionaires. I hope you see the comedy in that?

But I'll simply ask again: what's the percentage of their income that the wealthy pay in taxes, and how does that compare to the percentage that the middle class pays? And no, I'm not asking how large a percentage of the tax revenue they contribute. I'm asking how much of their income they pay.

You suggest that increasing taxation on the wealthy to spare the middle class would destroy the poor billionaires. I dare to doubt that assertion.

(Although, to be clear: I'm actually in favour of lowering taxes for everybody, and outright abolishing them for most people. But that's because I fall on the small-government side of that debate. I suggest that we exclusively tax the rich, and that the only debate is then how much we tax them. Lefties would then advocate high taxation to pay for a big government, whereas I'd want low taxation and a small government. But either way, no vampiric taxes for regular people.)

No, it was instantiated because that the wheels need unfathomable amounts of money to grease them, which goes up as the scale of things being done increases, increasingly so as the financial sector discovers ever more obfuscated ways to soak ever increasing amounts of money into its gambling addiction. And good luck untangling that mess, just take a look at how far the supply chain interruption of the lockdowns has spiraled out.

"Bigger economy needs more money, so we need to print money".

Not necessarily.

The total money supply is equal to the size of the economy. Always. Economy grows faster than money supply? Each dollar increases in value as time passes. Both grow equally? Each dollar remains worth the same. Money supply grows faster than the economy? Each dollar decreases in value.

We've seen the latter throughout the age of Keynesian stupidity, and more than just a little. If they always print more money than can be justified by the size of the economy, then the result is debasement of the dollar and evaporation of all savings. This must either be staggering stupidity, or active malice. No good sense can justify this policy being perpetuated for decades.

I feel that deflation would, in fact, be good. So the situation where the economy grows faster than the money supply is actually my ideal. However, even if you disagree, then at most you can argue that the money supply should grow to keep up with the size of the economy. I'd argue that this is practically impossible to do, but soit. The salient point is that the current situation -- printing more vastly money than can be justified by the size of the economy -- is bad under all possible circumstances, and can only be justified by idiots, madmen and psychopaths.

Or Keynesians, who are by definition a combination of all three.


---------------------------

See... while I in general agree with you, this is where people who support fiat money have a few good point.

You cannot keep the supply of money the same over time. That actually doesn't lead to stable monetary value, it leads to deflationary money value. This is because of the two aspects that you're not immediately taking into account: the increase in human productivity and the increase in human population. Basically to maintain a useful amount of money in the system governments, even if using a standard, actually need to slowly increase the money supply over time, as if you don't the increase in the demand on money simply due to the increase in supply of humans will place deflationary pressure on money which has its own massive set of issues. If you just want stable prices, you actually need to be slowly inflating your currency over time to account for at a minimum the increase in population, even moreso if you want to account also for increased efficiencies as prices can actually drop lower than your currency practically values for.

To use a real life example of this, take the average price of a gallon of milk in US in 1950. Back then is was $0.83 per gallon. Sounds really good, right? Well, the average income of a family in 1950 was $3300. This means 1 gallon of milk cost .00025% of their annual income. Meanwhile in 2020 the average per gallon of milk was $3.51. This sounds like a lot of inflation; however, the average wage in 2020 was $55,628, which actually means that a gallon of milk due to improvements of milk production and distribution efficiency was now only .000063% of the average income. If you go back and figure out what that is of 1950s dollars it's about $0.21, less than a quarter a gallon. Now yes, that is a practical amount to pay in 1950s levels of currency there are numerous things that were priced lower than milk for sale that would have dropped to near impractical levels of cost to pay for.

Now, I'm not defending the current status quo by any means, they have clearly overinflated the currency, but there's a reason that the Fed has wanted a very SLIGHT amount of inflation year to year and it's strictly because of this. Thing is, it's easy to see inflation, and it often ends up disguising falling prices (like in the milk example above) gained from improvements in efficiency and increase in the supply of labor. Thus a increase in the supply of money over time is actually a good thing for everyone as money's value follows the laws of supply and demand just like everything else in the economy.

To be quite clear: I'm not opposed deflatation. I'm not ignoring the relevant factors, but rather, I'd argue that they represent a positive instead of a negative-- certainly compared to the alternative! I don't expect the results to be a utopia by any means, but I see no fundamental reason to consider deflation a problem.

As I stated above: the total money supply is always equal to the size of the economy. Now, if we have a full gold standard, then we get a very clear situation: the value of the money supply = the value of the gold supply = the value of the economy. Every dollar represents not a given and theoretical value, but rather a specific mass in gold. Now, the gold supply does increase over time, but almost always by a lower perfectage than the economy does. So the money supply isn't static, but yes-- you do normally see deflation.

Every mass of gold increases in value, then, as time passes. And since every dollar represents a mass in gold, every dollar increases in value over time. It's the opposite of inflation. And I think that this is good. It's good for the exact same reason that inflation is bad. Inflation kills your savings and encourages a pattern of "spend now, because it'll cost more later!" -- That is: a pattern of high time preference, favouring short-term thinking and quick gratification over careful conideration.

If you see the flaws of the "credit card economy" that we now live in-- then consider the virtues of its antithesis.

The Keynesian argument against deflation (I shit you not, this is from old John Maynard himself) is that it's bad because it would cause people to hoard their money and never spend it. Can you imagine that? "Fuck, I need food, but I guess I'll starve because bread will be cheaper next month."

In reality, if savings and delayed action are rewarded, this will encourage people to make considered choices. What do you need now, and what is worth more to wait for? Look at computers and games. Not so much now, but PC hardware used to get cheaper within months. Some people bought the newest model right away, others (like myself) waited until they got cheaper. And every time, I could wait even longer, for an even lower price. But I also wanted the good PC hardware, and waiting for years would mean my stuff was always old. So I struck a balance. Price-quality. Economic calculation!

The same is true for games still. You can pre-order, and some will. Or you wait a bit and buy the thing cheaper, which most do. And some wait for years, and buy old games from the discount bin.

That's situation where, if you wait, you can buy more for your buck. And we already know how people respond to it, because those situations exist. And the reality is nothing like the Keynesian bullshit.


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while the vast majority of the policy decisions recommended by those who subscribe to MMT are kinda crap. the thing they say that actually does make sense is if the money supply grows by the amount your GDP grows you experience net 0 inflation. this is kinda true and accurate. the problem is that for whatever reason the people in charge hear that and think they can predict how the economy will or won't grow and print way more money than the economy grows.

go figure that when the "experts" hear that they fall to temptation and make terrible economic decisions.

Central planners always fuck it up. No matter their intent. It never goes well. It can't.