The World Outlook is inflationary. The world has grown sufficiently wealthy to develop the inflationary attitude. This shouldn't have happened until 2004, but technology has accelerated the inevitable. Inflationary attitude is evidenced by strikes. Seems there isn't much striking going on world-wide, but the US sets the pace just like monopoly union labor did in the past and the pace is quietly quickening.
In the US there is grumbling and resentment within the middle class towards the beneficiaries of an inflated stock market reinforced by their perception that the few who do the least get most of the compensation. The outcome of this perception is to enable the less wealthy to find a way to steal the wealth back from the unworthy. When demand for unskilled labor is high, the successful execution of this strategy is possible. The grumbling is still sotto voce, but when you start hearing it outright, you will know the philistines are upon us.
By that time the market will have backed up rates and the diswealth effect of a rapidly falling stock market will be even a stronger tonic to the urge to "beggar-thy-neighbor". In the past 20 years the world's economies were out of synchronization so not everywhere was there strong growth but everywhere there is knowledge of worth. Now, all the world's economies are in synch about the perception of the value of labor. The perception is, my labor is worth more than yours. The world is tired of deflation and the people are opting for inflation which enables a few to benefit at the cost of the many. All of the many believe they will be the few.
If the world's central banks fight the inflationary tendency by allowing short rates to rise, then the tempest will blow itself out in one year. Of course, that means we're back to the major, deflationary trend again. But nothing can stop that trend because it represents that the instantaneous cost to manufacture goods is practically nothing.
If the central banks fight higher rates with fiat money, then the the structural inflation becomes strongly embedded requiring draconian measures to root it out. That would take years and much suffering. We will see if the central banks which are populated by the universities ever understood what caused inflation during the '70's and whether they have the resolve to do what is necessary.
All that is necessary is to not interfere in the free market for money. We'll see if the "pretense to knowledge" that is the hallmark of the university mind set, has learned anything from history. History suggests they haven't. |
