From your comment on this thread I do not think you get your Dr degree in economy!!
The reason you have a inflation pressure is too much money running after too little goods. It is a issue of supply and demand. The added on non farm payroll or salary increased will increase the inflation pressure is just one end of the story about inflation . But if the productivity can be increased further together or even more with the hike of wage , example use more computers and automations, which means
we also increase the output , which is the supply, this will cause a deflation , and people's living standard is improved, because have more money to run after more cheap products as a reult of improved productivity. So I do not worry the increase of wage, but if the productivity is increased together with the wage hike.
Another factor you did not consider in your equation is the currency
effect. US imported lot of consumer products from Asia, cloths, consumer electronics, DRAM, SRAM ..... etc, you name it, this will
further reduce the inflation pressure in US. So I think our currency
is the most over valued currency , fortunately, our productivity was
increased significantly in the past 10 years to back up the currency,
because the unit cost of product was reduced as a result of productivity increased, eventhough the wage of wokers are increased.
As a matter of fact , the US workers are most under paid if we take
the productivity into account. I remember Steve mentioned that in Cpq's modern plant of PCB , not too many workers were needed to maintain the equipment, everything is automation and computer controlled. Just think about the output of that PCB plant in Austin,
How much CPQ paid to the workers to maintain that plant, and many
percentage of the cost go to labor cost on each unit of PCB shipped
from that plant ? I do not think it is too much. This means productivity. Even your salary is high, but you output is even more,
as a result , the unit cost is further down. This is the reason why
in the past almost ten years, US enjoyed a prolong economy growth without inflation ( maybe will be deflation) , the productivity increased together with the economy this time. This is why I always
said high tech is the key for propersity, The high Tech industry will
lead the world well into the 20th centry, a world of propersity
and continuous economy growth and low or even no inflation. Greenspan
is currently thinking about reduce the rate instead of increasing to
prevent deflation and rescue the S.E economy. A high rate in US will
encourage more investors to pull out their investments from S.E Asia. |
