Posted on 09/23/2017 6:24:24 AM PDT by Kaslin
All around the Federal Reserve building, someone for years has been riding his horse—a la Paul Revere—crying out in excitement over the notion that 2 percent inflation is finally coming. This week, Janet Yellen has finally gotten to where many other Central Bankers around the world already are—it’s not happening.
We’re not even close. Especially since we haven’t seen any real, sustainable increases in the Producer Price Index (PPI) or the Consumer Price Index (CPI). Indeed, the European Central Bank leaders (along with the Fed) have been throwing everything they possibly can at inflation, and it doesn’t seem to move. The only thing that will move it is sustainable, global GDP growth.
I know that no consumers or governments want excessive inflation. But without increases to PPI and CPI, instituting wage increases without companies taking a hit on their bottom line is impossible; hence, it’s been nearly 16 years since we’ve seen any real wage increases.
One would think the labor force is about as tight as it can get at 4.4 percent unemployment, but also remember that we have a 40-year low in labor participation. We need some of this labor to begin to participate in a growing economy—not to mention that we need to see sustainable increases in PPI as a result of GDP growth and a tightening labor force before we will ever see any real growth or wage increases.
I know it is nearly impossible for those living in the Washington, D.C. bubble to think about unintended consequences. Most of the brilliant economists on Capitol Hill believe the labor participation rate as it stands today is the new normal. They must think millions of people (even those between the ages of 16 and 55) have all retired and are sitting on the beach or playing golf.
If that is true, there is no way we will have a labor force that will be able to keep pace with a growing economy. Such an economy will put demands on this limited workforce—at least until there is balance in employment. If President Trump’s economic team is correct, then it is very likely we will have a labor crisis that could stifle our ability to sustain GDP growth.
Streamlining immigration reform must happen at the same time GDP is growing. Yes, there will need to be some important milestones that every legal immigrant must meet before becoming a citizen; the vetting process must be priority No. 1. But if our leaders are right about the labor participation in this country being the new normal, they had better get moving with immigration reform.
However, if the so-called new normal of labor participation is inaccurate, then we better incentivize those who are out of the labor market to return to the workforce. The best way to do that is to carefully examine the broken system that is supporting so many people under the age of 55—and hope that this group desires to become productive citizens again by offering them opportunities for prosperity for themselves and their families.
We have been somewhat shortsighted when it comes to pushing economic stimulus as we seek to develop ways to keep companies here and bring new companies to America. Such a push will not be sustainable if we can’t promise those employers a strong, ready and willing workforce.
Our leaders in Washington seem to have a huge problem with understanding cause-and-effect. There was a time when the Federal Reserve and other organizations had to consider the effect of underlying causes, not simply default to textbook scenarios.
Certainly, there is a relationship between PPI increases, inflation, and wage increases, but if the Federal Reserve, along with some government agencies, believe we will see higher wages without PPI, GDP growth and a tightened labor market—think again. Maybe we will see consumer confidence and consumer spending increase without wage growth, but it’s not likely.
In the big picture, companies are not anxious to lower their profit margins by raising wages without consumer prices increasing as well. Now, prices remain flat globally, and we are importing deflation. Growth simply will not be sustainable without increases in GDP. No matter what, the U.S. and global economy will dictate interest rates and monetary policy—even though central banks around the world believe they have all the answers.
Unfortunately, the sluggish growth of our economy is not the fault of the Federal Reserve. It’s all about our failed legislators doing nothing. And that is something to get very nervous about. If your wages are not going up, don’t look to the Federal Reserve, your human resources department, a corporate board, the president of the company or the owner of the small business.
The next time you walk into a voting booth, take a long, hard look at the ballot.
Food prices go up, and package sizes get smaller.
************
Yep, pay more get less.
I can tell you are a frequent shopper! :)
My econ prof was terrible at spelling.
The bastard is saying that wages are not going up thanks to the Republican congress.
The idiot thinks that inflation is a good thing. It’s not. It’s the continuing loss of purchasing power of money. Where there is no money, there is no inflation.
The fool doesn’t realize that the rise in prices and salaries is not a good thing.
Politicians love inflation. When the public complains about rising prices, they blame it on some mysterious external force, by saying stupid things like “Prices are rising because of inflation”. (Inflation = rising prices).
Inflation allows the politicians to crow about how some indexes are rising (stock market, GDP, tax revenues) as it were a good thing, while in reality the numbers are going up because the dollar has lost its value.
The only things that count are the things that don’t count.
Every public policy initiative in the last 30 years has been designed to keep wages down. It’s worked.
Republicans and the cheap labor express have flooded the USA with an oversupply of workers and Democrat voters.
It showed up about 8 years ago.
Many different versions of the CPI are calculated, both with and without food and fuel. Which one gets pumped up in the news changes, but the main one which affects things like automatic Social Security cost of living adjustments do include food and fuel. The big January 2009 and two years of 0% increases were caused by a spike in gas prices in the summer of 2008 (remember $4 gasoline) which was gone by December.
Did you buy it at the higher price?
Bacon inflation! This could be a national disaster!
Inflation is the decrease in purchasing power of a currency.
The cause is sometimes hidden by the actions of the government. Historically, major inflations have been caused either by wars (see the American revolution, or Civil war), or really horrible government (see Zimbabwe or Venezuela). The inflation caused by WWII was somewhat hidden by price controls. It became evident after the war when price controls were lifted.
Modern inflation in the US is caused by the government hindering economic growth with burdensome regulations and too much taxation on productivity combined with wasteful government spending. This causes the government to create money faster than economic growth, which devalues the currency and causes inflation. Market based growth fueled by increased efficiency is actually deflationary. Growth caused by population growth should be neutral, or deflationary if economies of scale are considered. Market based wage increases aren’t inflationary either. Therefore, when the government and their media blame inflation on economic growth and wage increases they are lying, but it sure does a great job of hurting the middle class over time, and it masks the crooked behavior of our political ruling class.
No. Not because I'm trying to send a statement or impact my little corner of the Supply and Demand world. But simply because I'm cheap. :)
the Fed and Govt publish so many Fake Statistics that they eventually begin to believe their own lies
anyone who has not noticed all the inflation in the REAL costs of living in the last 7 or 8 years has been BLIND
Seriously, bacon costs as much as steak.
I think too many economists have cause and effect backwards from the Great Depression. The economy collapsed causing panic and prices to drop. So now whenever prices drop or don't rise fast enough they panic thinking the economy will collapse.
I read some economist who said the natural rate of inflation is about negative 0.1% from productivity gains. Anything above that is someone manipulating the money supply for their benefit and your detriment.
I buy food like I am day trading.
I only buy an item when price is down.
Food, energy, AND housing. The 3 most basic needs. 5 years ago, the average 3 br. house in my area rented for $1200. Now it’s $1700.
Maybe we need a better definition of inflation,but from the standpoint of a senior on Soc. Sec. seeing rising prices on the necessities,smaller quantities in packaging for the same or higher price,& the same old check coming in....to us that spells inflation. Maybe it can be defined in some other way,but to most consumers,it’s the same old story of getting less & less & paying more & more for it. I would agree with what others seem to be saying about how the CPI is being figured.
Economics is the most over-hyped, misunderstood, and dangerous ‘discipline’ in the world. Any economic theory that may be true on monday may very well not be true on tuesday because something has changed. And that ‘something’ may simply be attitude. A ‘desirable two percent inflation’ is a lazy cover for real growth. Also it is a hidden transfer of wealth from earners and savers to the government. Get Real! Voodoo does not even begin to describe any form of economics - theoretical or applied.
Time for Saturday morning bacon fest with fresh ground coffee. One of my few pleasures I aint giving it up yet. Daily’s thick slice applewood is $9.75 for a pound and a half.
Dont let the bastards grind you down!!
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