Thursday, January 12, 2023

Transitoriness — Brian Romanchuk

The latest CPI report for the United States suggests that the inflation spike after 2020 was transitory in the rather weak sense that I understood the term “transitory.” I am curling in a bonspiel over the next few days, so I do have a long time to spend on this article, so I just want to outline my thinking on the topic of “transitory.”...
Bond Economics
Brian Romanchuk


mike norman said...

Curling in a bonspiel??!!! I had to look that up.

Ahmed Fares said...

At this point, people will want to give central bankers credit for the turn around in inflation. The problem with that is that this requires some selective editing of the 1970s experience

Declining union membership prevented a wage-spiral. According to this, we don't have data going back that far but you can extrapolate that it was higher from this:

The union membership rate has dropped over time. In 1983, the first year with available data, 20.1% of wage and salary workers were union members. A decade later in 1993 it had fallen to 15.7%. Decades later in 2021, the rate stood at 10.3%.

This Wikipedia page however has data going back to 1960 when the union membership rate was over 30%:

Ahmed Fares said...

"prevented a wage-price spiral"

Peter Pan said...

Transitoriness is next to arbitrariness.

Matt Franko said...

“ wage-price spiral"

Nice figure of speech…

Ahmed Fares said...

Nice figure of speech…

Thanks. Bill Mitchell likes that phrase too (bold mine):

In the 1970s, the price setting powers of workers and firms were such that the inflation that began with the OPEC oil price rises became a self-fulfilling wage-price spiral as the two conflictual forces – labour and capital – fought it out for who would take the real income loss arising from the imported oil price rises.

source: US Federal Reserve Bank economists going Marxist on us

Also, Bill likes the phrase "battle of the mark-ups" (bold mine):

So income distribution in capitalism can be characterised as a ‘battle of the mark-ups’ – workers try to get more real output for themselves by pushing for higher money wages and firms then resisting the squeeze on their profits by passing on the rising cost – that is, increasing prices with the mark-up constant.

Also, "distributional conflict" as you can see from the title of the article.

source: Distributional conflict and inflation – Britain in the early 1970s