American Economics Thread


horse

Senior Member
Registered Member
US inflationary is transitory, there is no doubt about that now.

What we need for inflation to sustain itself, is demand, and expectations to be built into the general public.

1/3 of the US workforce is employed in the gig economy IIRC, so there is no wage inflation.

(With no wage inflation, there will be no increases in a wage price spiral, which means no built in expectations).

Demand is weak. It is. Demand will not drive that number.

All this inflation number seem to be in the US is supply chain disruptions, a temporary event in the markets of goods and services.

Then we add in the final factor, and most important one, is that the Fed can step in at anytime and raise interest rates to crush inflation. They have done that many times in the past, the most famous one was Paul Volker under President Reagan.

However, if they raise interest rates to crush inflation, they crush demand too, and have an instant recession. The US economy will turn soft like instant noodles.

That is why they won't do it, and let inflation eat away at the non-existent savings of the working poor.

Ain't that America.
For you me.
Ain't that America.
Something to see, baby!
Ain't that America.
Home of the freeeeeee ...

:D
 

horse

Senior Member
Registered Member
Even after 4.6% increase in wage, employers still fail to fill their job vacancies. I would say wage inflation is real and persistent as people are not afraid to quit their jobs anymore due to labor shortage.
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The way I remember the wage price spiral, is that the worker demands higher wages to keep up with inflation.

Then the company passes on those costs of higher wages to the consumer, who are also workers, who in turn demand higher wages. This propels the wage price spiral, which reinforces the entire inflationary environment.

This current situation no one has seen before. The company, ie the boss, is offering higher wages, which contributes to inflation. Yet, there are still no workers.

What is going on, is probably more sinister.

If you were the boss, what would you do?

The boss should hire a robot, then eventually lower wages. The reactionaries win again!

What is going on with the boss voluntarily offering higher wages, that could be a sign of inflation, or that could be a sign of some gigantic shift in the economy or labour market.

The former is a known narrative, that people are comfortable with.

If we want to bet on something, then we should bet the latter, because that is unknown and has all the potential.

Seems to me, that is how things work. At the top, everyone is long.
 

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