Inflation or Not, That Is the Question
Per the San Francisco Fed recently,
With enormous slack in labor markets, wage pressures have been low. Compensation per hour, a broad but relatively volatile measure, registered growth of only 1% in the second quarter from a year earlier. …. By any of these measures, business labor costs haven’t been growing rapidly. …. We expect the high degree of resource slack to cause core inflation to moderate even more in the near term. (Full story)
Sorry, boys, I’m not buying it. I’m a bit surprised that you are selling it – but it is logical that you would.
It has been studied and acknowledged for over 100 years that inflation hammers labor most. (See: “Currency of Currency”). Inflation emerges in uneven patterns and is reflected earliest in the prices of items other than labor, more so in consumer non-discretionary items than all else.
This all stands to reason.
Labor in an economy that is emerging from a poor economy (read: low velocity of money) has no leverage to demand wage increases. Unemployment is at its apogee and assertiveness is hitting a perigee. The planets are (continuing with the metaphor) aligned for businesses to expand margins as revenues rise.
Excerpt from "Inflation in France", written in 1896:
By this, the prices of everything were again enhanced [by the printing of paper money] save one thing, and that one thing was labor. Another striking example can be seen of the truth uttered by Daniel Webster, that "of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper-money."
So, when economists on government boards are using the last item to react to inflation as their primary reason for low inflation for “years”, what is the real message?
Answer: That they know inflation is coming. And, is inevitable because the tools to avoid it are all more distasteful than inflation itself.
Disclosure: LONG GLD, physical gold, SLV,
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