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April 06, 2009

Comments

Luis Enrique

This is interesting - what are the implications for the real wage? At first I thought that if wage costs are rising but prices are not, that must mean the real wage is rising and the capital share of income is falling. Did that happen after 1997? I thought not. But then your chart just shows a lack of correlation and/or a negative correlation in 1997 - so we could have had periods in which wages were falling relative to prices, so no trend in the real wage, and a noisy looking relationship between wages costs and prices. Is that what happened?

chris

Yes. Fluctuations in unit wage costs have led to fluctuations in real wages and profits, not to fluctuations in inflation.
But over the last 10 years, unit wage costs and prices have risen at very similar rates, so the shares haven't shown much trend.

Andrew Duffin

To understand these issues more clearly, it's worth trying to distinguish between inflation and rising prices. They are not the same thing.

Inflation is when the state (it's always the state, in some guise or other) debauches the currency by printing too much of it - however, and however subtly this may be disguised.

Rising prices are one of the possible results of inflation.

Prices may or may not rise, depending on other factors, and they may or may not provide a good proxy for inflation.

But the two are different things.

reason

Inflation is when the state (it's always the state, in some guise or other) debauches the currency by printing too much of it - however, and however subtly this may be disguised.

Imagine you are oil shiekdom in 2006. Now your problem is not printing money, it is neutralising it.

reason

Andrew Duffy
you are only inventing your own definition of inflation (yes I know it isn't just you) and saying that our host is using a different one. Have you a substantial point to make?

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