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View Full Version : If we keep more of our own money, they will just raise prices.




Bodhi
11-26-2007, 02:21 PM
This was a new one. A friend of mine who "supports" Obama said that if Ron Paul was elected that she is afraid prices would go up because if we are allowed to keep more of our own money, "they" will just raise prices. :eek:

Some people truly amaze me. :o

OptionsTrader
11-26-2007, 02:22 PM
Have him/her watch this video, Money and Prices. This is how prices actually work:

http://mises.org:88/FEA9

10thAmendmentMan
11-26-2007, 02:23 PM
"They" wouldn't raise prices any more because it's already being spent by the government. If anything, prices would lower since people would save more than the government leading to less demand.

angelatc
11-26-2007, 02:26 PM
Find the clip of the last Fed meeting, where Bernake said that China should force the people to spend most of their 51% savings rate, so that the American enonomy would recover.

Delaware
11-26-2007, 02:28 PM
Without government intervention, supply and demand shift prices. Most prices are at a point of equilibrium with supply and demand being equal. Prices will be the same.

ItsTime
11-26-2007, 02:29 PM
So their logic is for us to hand all of our money over to the govenment so items will be cheaper?

Scribbler de Stebbing
11-26-2007, 02:35 PM
If "they" raise prices, then "I" can enter the market with a lower price and steal all their customers. Then "they" will have to lower their prices to compete with me, causing me to go lower still. And so forth. The market cures all.

BLS
11-26-2007, 02:38 PM
If "they" raise prices, then "I" can enter the market with a lower price and steal all their customers. Then "they" will have to lower their prices to compete with me, causing me to go lower still. And so forth. The market cures all.


Well hello lurker!!

You have mail in your 'Q' account.

What time will you be there Wednesday?

Scribbler de Stebbing
11-26-2007, 03:56 PM
Well hello lurker!!

You have mail in your 'Q' account.

What time will you be there Wednesday?

6 PM to set up. Doors open 6:30, but you guys can get there a little before. They had 188 rsvp'd last Wednesday, but should be a lot more by now. They did invite the press, so we have no option but to win.

Sounds like Jim is bringing a laptop, but I don't believe the cam is wireless. I hope he's not a bumpy walker!

I don't get on here that much anymore, but my work mail is inaccessible at the moment, so I'm catching up on the news. What does it say that this is one of my news catch-up spots? :cool:

runderwo
11-26-2007, 03:59 PM
Wages will reach a lower equilibrium in saturated job markets, but the company will be able to hire more people with an overall beneficial effect on the economy.

Hook
11-26-2007, 04:09 PM
So by that logic, if the government takes all of our money, everything will be free!

Tell them every person the Feds pay to make bombs, missiles, tanks and pay to not farm or stay on welfare is one less person making tvs or refridgerators or serving you in some other way. Every dollar the government spends is a net drain on the economy because it is being spent on things that by definition the free market wouldn't spend it on.

Goldwater Conservative
11-26-2007, 04:16 PM
Even where this is true (it depends on how elastic supply and demand are in any given market... and then there's the fact that government demand would also fall, thereby pushing prices down anyway), I'd rather be able to spend, say, all $10 of mine when "prices" are $10, instead of being able to spend $5 when "prices" are $5 with the government doing whatever it wants with the rest.

ionlyknowy
11-26-2007, 04:30 PM
I have thought about this and one thing has got me...

If we do away with the income tax, then that means everyone will have more money in their pockets.

If everyone has more money in their pockets, then more products will be bought with this extra money.

If more products are bought with this extra money, then the demand for the products will go higher.

If the demand for the products goes higher, then the supply will have to meet the demand.

If the supply cannot meet the demand, then the only thing left to do is price more people out of the market.

Meaning higher prices for everyone.

Now if the companies are some how able to increase supply because of the abolished income tax, then this will not happen.

But you must realize that there are menu costs to increased supply.
Menu costs: a restuarant decides that they want to increase the price of a food item. But their menus are already printed, so they just wait until they have time to print new ones.

Menu cost = lagging effect.

So even if the abolished income tax put more money in companies pockets, then supply probably would not be able to meet demand right away.

Imagine, you are a company that makes Widgets. You are operating at 90% capacity, utilizing all of your resources... Then Ron Paul gets elected and the Income Tax is abolished.

Now you have A LOT more people willing and able to buy your product, but since you are operating at 90% capacity you can only increase by 10%. So what do you do, you raise prices because you can and people will still buy up to a certain point. Now you have all of this new profit, and what do you do? You invest in new equipment to build more Widgets to meet demand better. THEN after you have made this investment prices will drop.

So in the end, we have an equilibrium that is met, but there is an initial price surge... IMO

me3
11-26-2007, 04:43 PM
That's how an economy is supposed to work. It is supposed to be flexible, expanding and contracting, to accommodate the conditions of a free market. But it can't be forced, the market has to react, and no federal reserve or amount of central economic planning can predict and manipulate the market as well as itself.

ionlyknowy
11-26-2007, 04:44 PM
First of all I believe that RP's policies would be the best in the long term.

Not necessarily in the short.


You have an economy that is set up at this point to cater to the military industrial complex. If you cut back on military spending, then you will have TONS of people looking for work. I used to work for a defense contractor, and when defense budgets were cut, there were layoffs. That's just how it works. If they dont need you, the BYE.

Now you have all of these new people looking for jobs. Millions of people add to the unemployment market. Some will go back to school, some will change careers, but they will be looking for work.

With this added surge in new available workers, the companies that are not seeing reduced funding from the cuts, will need to absorb all of the extra labor on the market. If a company doesnt need you then they wont hire you.
If they do need you then they will.

So lets suppose that they do need you. But remember, there is a ton of new people on the market, so they have more to choose from. Since there is more to choose from, then they can offer you a lower wage, locked in for a year.
(that is the problem with wages, they only change yearly, and even then they might not change with what supply and demand are showing)

So lets suppose that they do NOT need you. This means that you are unemployed.

But in the long run, coupled with the abolished income tax. Companies will see higher demand of products and they will want to increase their supply so they will need to hire more workers, and THEN these people will be absorbed at a wage that is current market value.


But it's all theory anyway...

ionlyknowy
11-26-2007, 04:46 PM
That's how an economy is supposed to work. It is supposed to be flexible, expanding and contracting, to accommodate the conditions of a free market. But it can't be forced, the market has to react, and no federal reserve or amount of central economic planning can predict and manipulate the market as well as itself.

All I am saying though, is that there will be price increase in the SHORT RUN.

So the Obama supporter was 1/100th correct when they said "they" would raise prices.

JMann
11-26-2007, 04:46 PM
This is an Obama supporter. Probably not much of a thinker, probably supports him because he is cuter than Edwards.

runderwo
11-26-2007, 04:55 PM
You have an economy that is set up at this point to cater to the military industrial complex. If you cut back on military spending, then you will have TONS of people looking for work. I used to work for a defense contractor, and when defense budgets were cut, there were layoffs. That's just how it works. If they dont need you, the BYE.

Now you have all of these new people looking for jobs. Millions of people add to the unemployment market. Some will go back to school, some will change careers, but they will be looking for work.

What's sad is that many people vote based on this bald self-interest because they have allowed themselves to become dependent on the make-work system. Entire towns are built around national laboratories that hang in the balance. It is very hard to get people to vote based on principle and against their own self-interest.

ionlyknowy
11-26-2007, 05:04 PM
What's sad is that many people vote based on this bald self-interest because they have allowed themselves to become dependent on the make-work system. Entire towns are built around national laboratories that hang in the balance. It is very hard to get people to vote based on principle and against their own self-interest.

I totally agree with you... alot of military contracter outfits are in rural areas, and they pretty much support the town...they employ thousands of people in this town.

"I work here, my brother mom and dad, work here. Just like grandpa and grandma." "Oh yeah, and uncle Bob."

I used to go into work every day and the parking lot was filled with HUGE trucks. People in rural areas love their fantastically huge gas guzzling trucks...

They all used to face them the same way and they all had these protruding rear view mirrors. When you walk between the trucks the rear view mirrors almost touched each other, and you would have to fold them back to get through....

:)

JMO
11-26-2007, 05:05 PM
Deleted. Misread the quote.

billjarrett
11-26-2007, 05:07 PM
And another way to look at it..

If "they" raise prices, then I have the option not to buy it. If the price of televisions triple, I can choose not to buy a new television as a consumer.

However, as a taxpayer, I haven't seen me having this option.

ionlyknowy
11-26-2007, 05:09 PM
And another way to look at it..

If "they" raise prices, then I have the option not to buy it. If the price of televisions triple, I can choose not to buy a new television as a consumer.

However, as a taxpayer, I haven't seen me having this option.

That is what I like about Paul. His policies give US the money to decide what to do with.. Not the govt.

So WE can decide to save and everyone else can blow it on a new flat screen tv.

Then once prices drop in a couple years.. who knows... maybe retire early!

JMO
11-26-2007, 05:10 PM
On average higher demand means the company will increase production. The more a company can produce the cheaper it becomes per item. Increased production means the company can sell the item at a cheaper rate. the cheaper the price the more of the item they will sell, the higher the price the less they will sell.

TVMH
11-26-2007, 05:15 PM
So by that logic, if the government takes all of our money, everything will be free!

Tell them every person the Feds pay to make bombs, missiles, tanks and pay to not farm or stay on welfare is one less person making tvs or refridgerators or serving you in some other way. Every dollar the government spends is a net drain on the economy because it is being spent on things that by definition the free market wouldn't spend it on.

If you go this route, your friend will have to admit that she has socialist/statist tendencies.

Lots of people are not so inclined to readily admit such a thing. :cool:

Stoli
11-26-2007, 06:14 PM
And another way to look at it..

If "they" raise prices, then I have the option not to buy it. If the price of televisions triple, I can choose not to buy a new television as a consumer.

However, as a taxpayer, I haven't seen me having this option.

Thats how see it.

I would rather have the 30% im loosing every week in my bank account. Then it's my choice to spend it and on what. I could even take a pay cut so the company I work for could lower prices:)
We can't compete because we are taxed to death. Payroll and property taxes eat up most of my income.

forsmant
11-26-2007, 06:47 PM
If the income tax is abolished employers should have the option of lowering your wage accordingly. That would allow them to lower prices or increase production since they would have the capital first. Your paycheck would be the same but all prices could lower.

Either way the purchasing power of money would be the same. If your wage increases, prices increase. If employers decide to cut prices by the amount of income tax paid wages would go down. That is what I gather from the video.


HE actually said that the amount of money available is irrelevant, since the market would fluctuate towards equilibrium.