<extreme "hand-to-mouth" living, where people don't spend until they get their paycheck.>
You have a growing economic group (*), that fits this description. But you also have a larger group, that has cheap,easy access the "Asian credit card" . Those people can INCREASE their spending, especially if they feel confident that the Wizards will keep bringing out their moral hazard poms poms, and lead more bubble-economics cheerleading. Therefore, I don't see why stagnant income (not quite true given the 4% PI "gift" from Uncle) and poor wage growth (they just borrow to make up the difference) is a factor pointing toward the deflationary notion. Therefore I can only conclude that the haves will CONTINUE to put inflationary pressures on all kinds of prices. I underline CONTINUE, because it's clear to me after reading Bernanke in particular, that the FED uses ancient, pre-history price models, and certainly not real time dynamic ones (such as today's food moonshot), in their decision making. They are not only well behind the inflation curve, but the curve is doing a Jesse Owen's like sprint down the track ahead of them, while they stand there and put weird mushroom substances in their pipes. Even if they were to act on rates today, I think a high single digits CPI rate is out of the bag already, and double digits on intermediate input prices.
(*) Unsung political hot potato for the 2004 election, that's going to bite the establishment class. |
