Inflated Heads

Many people these days sit there and complain about inflation and how oil prices are soon going to be too high to handle. I’m not sure I completely agree with this thinking.
I see inflation somewhat as a byproduct of greed and our inflated egos. In the working world, isn’t it our goal to get as much money as we can get? People are constantly trying to up their pay and in turn, up their buying power. As people continue to increase their pay, aren’t merchants going to continue to raise their prices because they know there’s more money out there?
Every time we see a minimum pay rate increase, we’re bound to see some inflation as a result of this cash inflow to the buyers. In essence, aren’t we decreasing the value of a dollar every time society gets a pay raise?
“A whole host of leading indicators is pointing towards a slowdown which should/could occur any time now. If the Fed continues to tighten while the economy is decelerating we should stop worrying about inflation right now.” – (Inflation?)
So if inflation is increasing, so is our pay and if pay is increasing so is inflation. I’m not worried about inflation…are you?

1 comment:

Dr. Tufte said...

MEG badly misses the point.

Yes, inflation is related to both demand and supply (these are just the demand-pull and cost-push inflations of principles texts).

But what is critical is what is there after inflation, not inflation in an of itself. Inflation is what we try to get rid of because doing so gives us a better understanding of how we're doing on the important stuff.

So, when you're watching the news, the price information is not what you should be paying attention to. Rather, you want to look at things like productivity and real GDP growth.