I just don't think wage inflation is possible for the forseeable future and as you say no pricing power= no inflation...
Agreed. The rate at which the population is growing in the 3rd. World is reaching levels that boggles my mind how they will be able to maintain these countries from falling in total chaos.
Look at Argentina (which as far as population goes, it is one more in line with Western standards due to the heavy European influence. i.e. approx population 37.8 mill growth popl growth rate 1.3 % *2000*)
cia.gov
The place is a mess, I really have no idea what will happen there. As for other countries their population growth is troublesome...
Other countries with larger populations.... say Brazil:
Estimated: 176 mil plus. grwoth rate .87 % (estimate)
How will these people be employed? and what impact will they have on wages in the US and other Western economies? Just as you point out earlier, the outsourcing of manufacturing from US companies to these economies will take any sort of inflationary effect in the US.
However... the other side of the coin is, if all this manufacturing jobs go elsewhere, what will happen to employment and wages here? not a happy answer I am sure. Will this bring other evils (in stead of inflation)? and what effects will they have?
Higher taxation ? (to cover benefits, or whatever else the politicians will promise to get elected)
Unrest by the American labor unions ?
Protectionism ? import barriers to products which are manufactured in these (probably labled) slave-wage-countries?
I do not know... but it will make trading difficult as the level of uncertainty will be greater than anticipated.
Bottom line... we as traders... How can we benefit from these conditions?
I have long held the view that gold is not a "productive" asset, so in my eyes, gold will shine only if enough people become convinced that the productivity of the US economy will deteriorate. If so, gold price will be sought as protection of value... it is certainly possible since the alternatives to the US Dollar are only the Yen and the Euro. Neither of the two seem attractive as a "store of value" Which leaves gold (possibly the Swiss Franc) so long so there are enough people convinced the US economy is shot. Possible... I think so... but ther has to be a catastrophic event... not only a war, but a war with BIG consequences....
Price of gold went nuts in the late 70's early 80's because of the oil embargo and the consequences that came with it... the skyrocketing in the price of gold was not an isolated event. There was a massive loss of confidence in the US dollar due to the inflation created by the price of oil --and the outlook at that time that OPEC created for industrialized economies. So demand for gold simply ran-over its supply... (and it was not sustained, we know what happened afterwards) Will it happen again?
Is there in the horizon an event like the oil embargo that could trigger such loss of confidence ? I do not know.
A total financial collapse I suppose is feasible, but I am certain that officials will do the impossible to restore such confidence.... Corporations will have an important role in whatever development may evolve to restore confidence...
So... what can possibly cause the total loss of confidence....
imo a terrorist attack of such magnitude that the word "nuclear" would have to be included.
I think deflation will be a larger threat. While I think there are enough small companies out there that are growing and doing fine... this will be limited to specific fields and will not matter much if unemployment becomes a big problem...
So, all this still leaves me with the question of how to benefit (as a trader ) from all of the above....
As of yet, my only possible answer is short term trades (long/short), I do not see the under which a steadier growth could be achieved....
The only positive (if one can call it that) is that so long there is no catastrophic event, then the longer we "drag on" the existing uncertainty, the longer a stronger base could be built for a more reasonable growth in the future... but that carries a big question mark |
