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Journal pudge's Journal: Economic Realities 10

Journal by pudge

People who hate Bush like to talk about all the problems that exist, and leave out the good things. This is a given, and is well-known, but sometimes their overemphasis and cherry-picking is subtle.

Take, for example, the economy. The Bush-haters love to talk about how there's inflation. Inflation bad, so therefore Bush bad. Except that inflation is the inevitable result of high oil prices, which are the inevitable result of policies and situations that are mostly independent of Bush (increased worldwide demand), compounded by a policy that we already knew, before it started, would contribute to higher oil prices (the Iraq war).

Bush deserves some responsibility for inflation, of course, but for those who thought the Iraq invasion was necessary, the increased oil prices -- again, known beforehand -- are worth it. For those against the war, of course, they are not worth it. Duh.

And then there's the decreasing "real wages." They love to trot out the notion that people are "earning less." But again, this is the inevitable result of the inflation caused by high oil prices: wages do not react quickly to market pressures, so even though nominal wages are increasing (the actual dollar amount you take home), inflation is increasing even more, so real wages (the amount of buying power you have) are therefore decreasing. This is, again, inevitable in the short term. If prices don't come down, then real wages will increase to match, over time. That's how it works.

Inflation and real wage decreases are symptoms, not diseases, and the disease is increased oil costs, which is likely something we're simply going to have to get used to, and everything will balance itself out over time, as it usually does.

This discussion was created by pudge (3605) for no Foes, but now has been archived. No new comments can be posted.

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Economic Realities

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  • If prices don't come down, then real wages will increase to match, over time. That's how it works.

    Not always. Housing prices, e.g., haven't been playing nice at all with this theory. In my area my condo has tripled in value in 5 years. I'm a senior software engineer, and I don't think I'll ever make in my lifetime 3x what I'm making now. Wages are higher in, e.g. Silicon Valley, but the gap between wages and housing there is even worse, such that people making good money can't afford to buy a place within a
    • Not always. Housing prices, e.g., haven't been playing nice at all with this theory. In my area ...

      But here we're talking about national, not regional, figures. Nationally it still bears out. Also, read the other comment about inflation vs. price appreciation.

      Still, the point that theories and models don't always work in every single case is worth making.

  • Except that inflation is the inevitable result of high oil prices

    I'm with you that I don't blame Bush for inflation, but inflation is not caused by high oil prices. May I encourage you to read Whatever Happened to Penny Candy? by Richard Maybury? You can find it at nearly any homeschool book fair. :)

    • I'm with you that I don't blame Bush for inflation, but inflation is not caused by high oil prices.

      In this case, it certainly is.

        • That's fine, he's allowed to. But the Fed chair agrees with me [federalreserve.gov]:

          Thus far in 2006, inflation pressures have been elevated. Higher prices for crude oil contributed to a further run-up in domestic energy costs; this year's increases, combined with the steep increases in 2004 and 2005, not only boosted the prices of gasoline and heating fuel but also put upward pressure on the costs of production for a broad range of goods and services. Partly as a result of these cost pressures, the rate of core consumer pri

          • In all honesty I do not believe the Fed chairman to be a credible source on this matter. I seriously believe the person in that position has incentive to try to distort the meaning, cause, and even extent of inflation.

            I think if you get ahold of that book I suggested above you'd really find some material there you'd find beneficial. One of my big complaints right now is that conservatives are ignoring traditional conservative issues of small government and sound economics in favor of more high profile i

            • In all honesty I do not believe the Fed chairman to be a credible source on this matter. I seriously believe the person in that position has incentive to try to distort the meaning, cause, and even extent of inflation.

              And I think it is quite obvious that high oil prices cause inflation.

              There are more than one definition of inflation, despite what Mr. Williams said. The one that we talk about most in this country has always been the relative purchasing power of our currency over time. High oil prices have

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