[Southack]

"The math is pretty simple: A lack of purchasing power for consumers has led to a lack of pricing power for companies." - CNBC

CNBC is staffed by idiots. The lack of pricing power is not due to consumers, but to ZIRP.

CNBC analysts would be lucky to tell you that ZIRP means Zero Percent Interest Rates...they certainly don't have the mental capacity to link long-term low interest rates to low pricing power.

...but that's what happens in a credit-based economy. While low interest rates can be a brief economic stimulant in an otherwise healthy economy, such rates are akin to drug use over long periods of time where the user requires greater doses to achieve the same high.

In economic terms, low interest rates keep marginal zombie companies afloat...operating and producing goods and services...when they should have been shuttered. Liquidated.

By keeping so many zombie firms on low interest rate life support, the market is flooded with over-capacity.

You can see what over-capacity does to oil prices: it drives them down. That's not due to consumers.

...and low interest rates are universal, so they prop up marginal zombie companies in every industry and service nationwide.

That means that the good companies don't have pricing power...anywhere.

To get pricing power (inflation), you have to kill off the marginal companies. The zombies must die.

Do that, and the over-capacity problem goes away. This is also known as the Boom-Bust cycle. You have to have a Bust to get a new Boom.

Now, there are lots of ways to kill off the marginal zombie companies...and any way that you kill them restores pricing power to the entire rest of the market. The economic Boom begins again.

Delaying that die-off likewise delays the onset of the next economic Boom.

One way to kill off the zombie companies is to *raise* interest rates.

CNBC staffers just fainted...

[pierrem15]

But the Fed can’t raise interest rates because it would cause the US government to go bankrupt. There’s no way they can roll-over $19 trillion in short term T-Bills to a higher interest rate: how would the US government pay the interest?

[FourtySeven]

To get pricing power (inflation), you have to kill off the marginal companies. The zombies must die.

Shoot em in the head! Only way to be sure. (And you also have to burn the body).

[mrsmith]

"low interest rates keep marginal zombie countries afloat..." like ours.
That's why policymakers are NOT “hoping to generate the kind of inflation that would indicate strong growth”...

[CPT Clay]

Great thread