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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Lee who wrote (29883)	12/1/1999 3:05:00 PM
From: MeDroogies	Respond to of 50167

Actually, that reads as though he skirted the issue.... Sure, he touched on it, but he didn't address it. Wages and salaries are not increasing in the manner that reflects ongoing inflation, because measurement of productivity increases are poor (at best). This is well documented. While I may get a 5% increase in salary next year, that is unlikely to translate into a 5% increase in prices, since I am given tools that increase my output 5%. That is one point. The second point is that when raises are handed out now, options are also increasingly part of that package. Equity prices being run up isn't inflationary (again, in the traditional sense) UNLESS they are being exercised and used to increase demand. We have yet to see that to any degree. On the lower wage scale, one MIGHT argue that increases aren't met with anything comparable. That is likely true. However, if it only represents 50% (very generous) of the overall income measurement, a 5% increase in wages in this sector is only a 2.5% increase in prices (if that). I'm not arguing that rates are too high. I'm pointing out that NAIRU is likely too high. Also, it is probably true that inflationary effects of the current environment are probably deferred. We may see today's inflation result in a major inflation in 10-15 years as people cash in options and spend $$$. Of course, this may spur the market, as earnings increase, causing some people to cash out less............ It is an interesting conundrum, and one I don't think anyone is currently an expert at. My best guess would be that rates should be left well enough alone at the moment. There are no real signals of inflation, yet. One thing is true: Marx was wrong in the respect that now employees are increasingly in control of the means of production. However, Adam Smith forecasted this type of behavior as a cycle that can only have an unfortunate ending (of course, he was speaking in a moral sense, as well). Then again, Schumpeter called the "perennial rain" a source of renewal and growth. I like Schumpeter the best. I've reread alot of his stuff. He was dead on...only some 60 years too early.