Thanks for the essay by Dave Lewis --- very interesting, very thought provoking --- but with links in the chain of reasoning that seem doubtful to me.
“All of which is to argue that those who are looking for the price of oil to come down due to the "growth sapping" effects of increased oil costs have to explain why a far greater expansion in financial flows towards financial assets didn't lead to a similar slowdown in growth.”
Surely this is incorrect. The person who put out money to buy a financial asset more than likely saw the value of his asset rise (in the 1980s and 90s for sure), giving him something to leverage for additional purchasing power and more assets. On the other hand, the buyer of oil has an asset that goes up in smoke (or depletes), and ends up with nothing that can be leveraged.
I don’t think the weak link in the argument that Lewis makes invalidates his argument about a “flight to real goods” in an inflationary regime.
But is that the question? In other words, nobody doubts that a flight to real assets takes place in an inflation regime. But are we in one, or are we going to get in one --- a real one, with rip-roaring price increases, shades of Weimar, etc. etc.
That’s what I am beginning to doubt.
The bar through the spokes of the inflation wheel is the labor market.
In this country, labor has no way to protect itself, no way to erect barriers, no way to defend itself --- there are too many immigrants, it’s too easy to move production overseas, or set up call centers in Bombay.....
With no wage inflation, can there be any inflation. Or am I wrong? Does anybody know of a country where there was inflation but not of wages? |
