Okay, one more look at wage inflation, followed by a short diatribe on the unfairness of life. As the labor markets get tighter, power is finally shifting from companies to workers. For some reason Iowa is leading the way (the promised two sentences are in bold): Say Hello to Full Employment — Want to know […]
Inflation Is Back, Part 8: Labor Shortage Reaches “Critical” Point
Economist Peter Bookvar recently analyzed the the anecdotal evidence of capacity constraints piling up in recent industry surveys, including the following: “Business is strong in all regions. Materials are tight. Trucking continues to be a major challenge.” (Chemical Products) “Strong economic growth continues to put pressure/strain on capacity, lead time, availability and pricing across a […]
Emerging Market Crisis Spreads To The Core, Central Banks Face Catch-22
One of the things giving “data-driven” central banks wiggle room on their pledge to tighten monetary policy is the fact that there are several definitions of inflation. In the US the thing most people think of as inflation is the consumer price index, or CPI, which is now running comfortably above the Fed’s target. But […]
Inflation Is Back, Part 7: Just Check Out This Chart
Monthly economic readings tend to be full of noise and are therefore unreliable. So it’s best to save the excited assertions for established trends. The US Consumer Price Index appears to have reached that point: As most readers probably know, the CPI is widely believed to understate the true rate of inflation because of statistical […]
Inflation Is Back, Part 6: More People Now Expect Higher Prices
Turning points in a financial system usually occur in discrete phases. At first, new information that contradicts existing preconceptions is dismissed as unimportant. But as more such data accumulates, a growing number of people come to expect the new trend to continue. In economist-speak, “expectations” change, and these become self-fulfilling prophecies, as people start behaving […]
Japan Shows Why — And How — All Fiat Currencies Are Doomed
A couple of decades ago, when the post-war baby boom generation was in its prime earning and tax-paying years, governments had a chance to guarantee the survival of their financial systems. But they blew it. Instead of controlling spending, running surpluses and banking the proceeds against the inevitable retirement of millions of boomers, most chose […]
Is Oil About To Become Front-Page News? “A Glut That Held Prices Down For Years Is Essentially Gone”
Here’s a new indicator for you: It seems that the difference between the price of oil here and abroad is a measure of tightness in the market, with a rising spread indicating higher prices in the future, with all the inflationary pressures that that implies. From today’s Wall Street Journal: Trans-Atlantic Oil-Price Spread Soars as […]
Italy: An Anti-Euro Government Takes Power In the Heart Of The Eurozone
Ah, Italy. My people; fun to be around, a nightmare to govern. And now an existential threat to the European Union, the euro currency, and the global bond markets. After suffering for over a decade under a monetary regime designed by and for efficient economies like Germany, the Italian people have finally said enough, giving […]
Here’s When Everyone Should Have Known That Argentina Would Implode
About a year ago, Argentina – which has inflated away and/or defaulted on its currency every few decades for the past century – issued 100-year government bonds. And the issue was oversubscribed, with yield-crazed developed-world institutions throwing money at the prospect of a lifetime of 7% coupon payments. A contemporaneous media account of the deal: […]
Argentina Joins Venezuela In The Currency Crisis Club
In interviews, whenever I try to make the case that US policies are leading to the kinds of currency disruptions common in developing countries, I say something like, “For a glimpse of America’s future, take a look at Argentina, where they’re eating cats and dogs because of hyperinflation … wait, no, I meant Venezuela.” Mixing […]
Inflation Is Back, Part 5: “The Cost To Run A Restaurant In New York City Is Unbearable”
If you’re running a business and the price of one thing goes up, you can work around it by economizing elsewhere. But when everything – wages, rent, supplies, taxes – goes up simultaneously, you have a problem that can be solved one of only two ways: Raise prices or close up shop. That’s the dilemma […]
Inflation Is Back, Part 4: Maybe The Phillips Curve Was “Just Resting”
Economists have been struggling to explain how unemployment can fall to 4% without wages starting to accelerate. The following chart shows paychecks rising at about the rate of inflation over the past five years, which means the average worker’s earnings don’t buy much more now than in 2013. The reasons for this glacially slow recovery […]
Inflation Is Back, Part 3: Home Prices Jump Again And “$3 Gas Is Coming”
Cornflakes and milk may or may not be getting more expensive, but some higher-profile things are rocking like it’s 1979. Houses, for example: Home prices just took the biggest jump in four years (CNBC) – Homebuyers, hold onto your wallets. The gains in home prices are getting bigger as the supply of homes for sale […]
Inflation Is Back, Part 2: Now It’s Trucks And Teens
In a world of cheap emerging market labor and ever-more-dexterous robots, inflation – especially the wage-driven variety – seems like yesterday’s news. But maybe not. It’s late in the cycle and things are getting tight, with pretty much the same result as in every previous expansion: Companies are having to pay up and look farther […]
Inflation Is Back, Part 1: Does This Mean Spiking Interest Rates?
Dave, the plumber who saves us every six or so months when a leaking pipe, water heater, or toilet threatens to destroy our walls and ceilings, was here the other day. As usual he fixed the problem right away and charged us less than expected. We love this guy. While he was working I asked […]
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