<<You are predicting inflation pressures will continue to increase without greater Fed rate increase. Agreed to come to a conclusion one must speculate but you are extrapolating the current inflationary pressures into the future unabated. It could be the rate increase already in place are enough but they have not yet had time to do their job. >>
Inflationary pressures are MUCH worse than the BLS has been letting on. First of all, the trend in excluding energy from "core" inflation numbers is ridiculous. Energy works its way into nearly every form of human economic endeavor, and IS a vital component of inflationary pressures. Wage inflation has been underreported, in part because employers are substituting payment with equity rather than cash. When stocks are rising, this income is "felt" by the worker and reenters the economy (through expanded credit made possible by the options). Anyone who hires in a service industry (where by far most of the new job growth occurs in the U.S.) can confirm that hiring is more difficult now than 6 mos ago for most positions, higher starting salaries and bonuses are being awarded. This has NOT been reflected accurately in the BLS reports, IMO.
<<My point is all this is speculation for the future based only on recent past events without taking into account the increase productivity gains from technology among other things.>>
Development of revolutionary technology is not a new phenomenon. Every new technology from stone instruments on enhanced economic performance. Indeed, performance enhancing technologies have frequently served as the catalyst for investment manias. Witness railroads in the 19th century (U.S. and Great Britain), and mass production of the auto, the airplane and radio (U.S., 1920's). I reject the proposition that the Internet, optical networking and widespread use of the PC represents any greater improvement (in terms of "percentage change from baseline") than that seen in the periods above. When the devices in questioned entered mainstream consciousness, however, they all served as objects of speculation for the bubbles that developed in their respective eras. The cycle of monetary expansion, speculation and overtrading (ie, everyone you know suddenly becoming an investment whiz overnight), scandals, swindles & discredit(which is where we are right now), revulsion and panic (where we will be in the next 2 mos) and finally contraction and depression ensued in each case.
Technology is therefore not a panacea for economic malaise, though it is often purported to be by the media and by supporters. In the long run, of course, it is beneficial. In the shorter run it has often proven to be disruptive and destabilizing.
To summarize: We are in the late stages of an investment bubble. Technology will not save us from ourselves. Invest accordingly. |
