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Technology Stocks : C-Cube
CUBE 36.94-0.8%Dec 1 3:59 PM EST
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To: Black-Scholes who wrote (43593)8/3/1999 10:02:00 PM
From: Helios   of 50808
 
Inflation is the devaluing of currency. Prices of commodities go up when there is inflation. But a consistent economic model does not make a distinction for labor. Labor is a commodity and rising wages can mean rising inflation. It is true that rising labor costs does not necessarily mean rising inflation, but the same can be said of other commodities. When the corn crop fails due to a drought for example, corn prices go up because of the scarcity of corn not because the value of the currency is reduced. However rising corn prices will draw the attention of inflation watchers because the event may trigger the cycle of inflation. If it does the fed will raise interest rates but the fed would be crazy to raise interest rates just because there was a crop failure, in fact that would be a recipe for disaster.

Given what we have heard from Greenspan I think it is pretty clear that he will interpret rising labor costs as inflation and in the end it's his opinion that counts.
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