Saturday, November 7, 2015

The Cost of Counters is Far More than even They Can Figure

The trouble with this article about a potential increase in the Fed rate, as it is with economic policy arguments in general, is that it nearly always lacks in not only a deeper context in which to judge what we are being told, but even significant indication that the so called experts cannot agree on how to properly gauge things in whatever context one might present.

We are told in the article that, in addition to the jobless rate going down, the aggregate hourly wage rate has increased slightly. And the gold standard nostrum of people having more to spend affecting inflation is reiterated; only here the consensus on one side is that a desirable rate of 2% is closer at hand so that now would be a good time to "tap the breaks" on the flood gates of dollar specific counters.
What we aren't told, of course, is a more comprehensive breakdown on a wide ranging number of metrics concerning such counters, and how their interaction affects inflation. Any more than on how complex the relationship of prices, and the actual count of counters are to each other, or why it is still mostly the wages of consumers that impact both.

The old idea was that you had to have a certain level of productive application within the cost of labor to justify that cost. Too much demand, and too much wage increase to support demand would always, ultimately, lead to rapid price increases, which, in turn would lead to self perpetuating demands for more wage increases. That we are now in a global wage and product market makes this relationship a great deal more problamatic, certainly, as counter balances can come in from all over.

But that introduces another factor; the amount of dollar specified counters others hold, and their perception of what they are worth. If a negative perception gains general acceptance the speclators jump in with bets for the continued value decline, and the central bank has to jump in to support the counters; a stop gap that can continue for only so long. Unless, of course, you are too big to fail, whereupon everyone one but the holders of large counter aggregates has to take a big bite of a shit sandwhich.

One thing that is hardly ever emphasized is that the overal count of any specified counter grows by means other than simple wages. Certainly, if the Fed simply pumps new counters in, as they did with quantitative easing, you will have more in the total aggregate. Debt itself, however, is the creation of new counters. A piece of paper, created to signify the specifics of the debt arrangement, is then held by whatever institution as an actual instrument of value; rather as gold used to be held, or other, more substantial objects of production, or the things produced, still are. In this case, however, it is the process of repayment that this paper represents that is the productive activity.

The holders of large aggregates, hiding behind the paper of institutions they hold sway over, have been getting absolutely obscene increases in the wages of their paper instruments. How could it be otherwise when they have been able to speculate with the knowledge that, whatever the machinations of the institutions they hold sway over, they can fall back on the zero rate of the Fed to ease any sudden bumps in the road. Mean while the infrastructure of most of the rest of civil interaction goes a begging for counters to keep any of it working at all, much less improved to handle the challenges that will occur more than a financial quarter or two down the road. And wage erners continue to barely make ends meet as global wage competition, as well as automation, makes sure that ever more of us will be living paycheck to paycheck

In this larger context I always start wondering why there isn't greater talk about the actual productivity of any given debt instrument. What is the economy in general getting in return for the profit made on a given speculation? No doubt there are some instances where this might be quite obvious. In others, though, I suspect it is far more aggregious than any recent wage hike, or perhaps even for those going back a good ways into the past.

The answer to why we don't get more comprehensive discussions about such issues is obvious of course. It simply isn't in the interest of any of those who control the discussions, or those with most of the counters. And those of you out there now occupied with the real work of distraction don't want to hear it either. It is, after all, complicated. It requires thought, further inquirey, as well as study of things that just aren't all that entertaining. Even as I write this I know those mostly interested aren't worried at all.

With Fed Poised to Raise Rate, Is U.S. Economic Honeymoon Over?

Would Fed Rate Hike End U.S. Economic Honeymoon?