Wednesday, October 19, 2022

Price Spiral

I suppose it takes big brained economists to see prices going up, wages falling in real terms, then declaring it a "wage/price spiral" and demand the Fed tank the economy.

There's a bit more pushback on this stuff from economists under the age of 60 (somewhat a generational thing if not entirely) now, but in a few years it will be fully acknowledged that destroying investment in the face of rising prices caused by supply constraints and market power was actually insane.

The hippies will be right, once again, but not given credit. As always.

House prices and rents going up? Hike borrowing costs to prevent new home construction. Labor supply tight in certain markets? Hike borrowing costs to prevent investment in new capital and let businesses know this will happen every time so they should never bother investing!

True genius stuff.