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There is a shortage of labor in the U.S. due to a lack of population growth of our citizenry. That should cause wage inflation but it hasn’t due to the illegal immigrants.

There must be a way to calculate the number of black market workers based upon the official number of jobs, the population or working age citizens, the official unemployment rate, the increase or lack of increase in wage rates and the GDP. I believe the illegal immigrant population must be more like 30-40 million.

We saw a similar wage stagnation effect in the 60’s and 70’s when the economy had to absorb the large numbers of women moving into the workforce who had been freed up by the birth control pill. It took more than a decade to absorb that worker influx and begin wage increases again. Figure a 1960’s-1970’s population of about 200 million. Half female, 100,000,000. Maybe half too old or too young to work, 50,000,000. Maybe half of those enter the workforce who would not have 20 years earlier, leave us with additional worker population of maybe 25 million. (I have to admit, I pulled all these numbers out of my hat)

We see a similar lack of wage growth today which leads me to believe the illegal worker population is more than 30 million.

Commodity prices (oil, metals, food, lumber) are up. The stock market is up. Real estate values are up. Foreign Currencies are up. The Federal Reserve has stopped publishing some of it’s money supply growth numbers. I believe the dollar is being devalued.

If interest rates were held steady this should cause inflation. Well interest rates are being held steady and yet we don’t have inflation. How can this be? Because there’s been a massive deflation of manufactured goods prices.

You can buy manufactured products at a fraction of their price of a couple of decades ago. There are a couple of reasons for this:
1. increased productivity due to computer technology. It took many years for computers to fulfill their promise of lowing the cost of work. Now they do.
2. Third world manufacturing. China, Indonesia, India are all competing for our manufacturing jobs with much lower labor costs. First our jobs moved from the Rust Belt to the Southeast U.S. Then our jobs moved to Mexico. Then our jobs moved China.

This deflation of manufactured goods combined with the inflation of raw materials aggregate to give us the steady inflation numbers we see today.

A smart man would have moved his investments out of dollars and into another currency a couple of years ago. (Kind of like Warren Buffett suggested a couple of years ago. Douh!)