idle thought

It would screw not just retirees, but everyone saving for retirement, in essence by cutting the value of their savings by 25% to 50%. Why should prudent savers get screwed because so many other people bought over-priced houses, took out mortgages they can't pay, and invested in risky securities based on those mortgages?

How to give such an increase without raising consumer inflation? And yeah, it would screw everyone who was saving for retirement. Plus there really isn't a mechanism for implementing anything like this. Companies, forced to do this, would just lay people off, wouldn't they?

The alternative isn't that bad: we're almost half-way to the bottom by many esteemed estimates :)

Traditionally you mitigate the consumer inflation through higher productivity; one of the things that is crunching the economy is consumer inflation driven by energy and commodity increases - the mean inflation index is lower because of technology deflation, but disposable income is set by what is left after necessities - food and energy - so buying a new TV is deferred, on average, and the economy goes into recession.
Housing prices are set on the margin, so for most people a collapse in prices doesn't affect ongoing costs, it is asset deflation which affects outgoing costs for only a small fraction of the population.
Hey, I hear Seattle is 7.5% off-peak now, you think you'll get away with only a 15% decline.

Russell: you are partly right - anyone who bought long term bonds or other long term fixed income assets would be hurt by inflation; but retirement portfolios ought not to be such - and if fact if you invest in real estate in your savings, you're likely to take a 25-50% hit... stocks are also whiplashed, both by wage inflation and by commodity inflation and by asset deflation.
Question is not if someone is going to get screwed but who and for how long.
BTW wage inflation won't rescue people who are going to get crunched in the current contraction, or the corporations who invested in those bonds - too slow a process.
It'd take rapid hyperinflation to rescue them and that will not happen.

The current chair of the federal reserve is noted for arguing why modest inflation would have averted a prolonged deflationary depression in the 1930s...
I think our poison has been chosen. The Treasury right now is vaguely hoping that people will suck up consumer inflation and accept negative interests and declining standards of living rather than push for wage inflation. Make it be someone else's problem, starting next year.

Yes, the alternatives are probably much worse in the short term, especially for low wage earners. But not in the long. When the blind and pompous rule the roost, revolution is inevitable.

I'm almost embarrassed to say this, but I benefited from the Carter era inflation.

I owed what seemed at the time like a vast amount of money for my Federal student loans used to pay for Caltech and grad school. However, those loans were at 3% interest. So when OPEC drove up the price of oil and gasoline (deja vu all over again) and inflation was up towards 20%, it was as if the government was paying me 17% per year NOT to repay more than the monthly munium on my student loans.

It took me 17 years to finish paying off my loans. By the end, I was paying a LOT less in value than I'd been in the red back in the late 1960s when my debt started accumulating.

So who benefits from real inflation?

The super-rich, who lend money to the USA. They buy real estate on the cheap, when the Depressions hit. And the deeply indebted, if those debts are in cheap money.

I'm intentionally NOT speaking from my Mathematical Economics expertise here. Just a personal anecdote.

And Ive started taking Federal loans for another round of grad school (first in 1/3 century) just to see if this works again. Another degree or credential has value; paying after the chickens come home to roost may turn this into another bargain.

"Hey, I hear Seattle is 7.5% off-peak now, you think you'll get away with only a 15% decline."

We wish!

Luxury downtown condos, the McBurbs on the Eastside, and the over development of townhouses will kick Seattle pretty hard. Outside of those, yeah, 15 percent sounds in the ball park.

On the other hand, we've lagged a bit in recovering from the dot com bust, so I don't think we were nearly as bubblicious as California, Nevada, and Florida.

It will be interesting to watch. Both Seattle and Portland have a lot going for them right now if you're in the right industry. Making a living wage outside of tech/biotech/Boeing, however, hasn't been easy in Seattle for at least a decade now. And hey, our median house price is still affordable compared to San Francisco and San Jose :) Crap, this means more Californian immigrants. Crap, I'm a Californian immigrant.

Dave, you violated regulations by saying: "I'm a Californian immigrant."

One the one hand, that matches the bumper stickers that say "Don't Californicate Washington" {or, alternatively, Oregon).

On the other hand, when Aerospace went bust the first time, there was the famous billboard.

Real estate agents Bob McDonald and Jim Youngren put the words, "Will the last person leaving SEATTLE -- Turn out the lights" on a billboard at S. 167th St. and Pacific Highway S. near Sea-Tac airport. The date was
16 April 1971. I was still at Caltech, but saw this in the newspaper.

Bob McDonald and Jim Youngren, who worked for Henry Broderick, Inc., say that they put up the billboard as a humorous response to pessimism generated by the national aerospace industry's nosedive, known locally as the Boeing Bust.

That recession came as Mama Boeing, a.k.a. The Boeing Company, the region's largest employer, went from a peak of 100,800 employees in 1967 to a low of 38,690 in April 1971. McDonald said their out-of-town clients, "were amazed that Seattle wasn't a ghost town with weeds growing in the streets. We wanted to counteract that attitude with a little humor." They chose a billboard site that they inevitably passed after picking up their clients at the airport. The men rented the billboard for $160.

The Boeing recovery began slowly: by October 1971 the firm employed 53,300 workers.

Deja vu all over again. I worked for Ma Boeing 1979-1985, and had them ship me back to Pasadena, to work as a contractor of JPL (which Caltech administers). But then Southern California aerospace crashed from 385,000 full-time employees to less than half of that. Those jobs (including mine, which corrected for inflation paid $180,000/year) never came back.

And then Ma Boeing moved her HQ to -- Chicago? What? That makes no more sense than to globally franchise that cute little coffee company at 2000 Western Avenue that was opened in Pike Place Market in Seattle, Washington, in 1971 by three partners: English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker. The three were inspired by Alfred Peet, whom they knew personally, to open their first store in Pike Place Market to sell high-quality coffee beans and equipment. No more sense than to relocate the Marines to Oklahoma City, or to blow up the Kingdome. Oh... never mind.