Touch the gold and be healed!!
Posted on 04/06/2007 12:30:30 PM PDT by farlander
Sounds inflationary. If only M3 were still published I'd be able to sleep at night.
Linking a currency to gold may be beneficial to a young country with questionable finances. These days such countries link their currency to solid currencies like the dollar or the euro. Ultimately a cuurency's value depends on the stewardship of the government, its honesty, and truthful accounting. Gold standards tend to give a false sense of security, such as Bretton Woods in the 1960's or Germany of the 1920's.
4.4% - Think how much lower that would be without the tons of illegal immigrants invading our country. We might be looking at lower that 3% unemployment.
Actually, this is already *full* employment pretty much. The 4% unemployment is about what needs to be out there moving between jobs so that there is any kind of pool of potential workers. Anything closer to 4% and we’ll be seeing serious inflation. If anyone was hoping for a Fed rate cut that isn’t happening any time soon.
Really? When has low unemployment ever caused inflation?
Just send me as many dollars as u can muster (in pre 64 US silver coins)...Ill send u double back in FED notes!....
U pikers are all alike.......U never send the money!!!!...LMAO!....HOW COME?.. ( and don't be looking at my tag line!...*G*
Touch the gold and be healed!!
In what categories? Wait. Don’t tell me. Agriculture.
Yes, really. Too low of an unemployment rate (yes, there is such a thing) causes inflation. Meaning, employers can’t find people to fill the jobs, and, must compete for the (un)available labor by paying more and more. This reached a crescendo in 2000 when some high-tech companies were giving huge signup bonuses and BMWs for people to switch companies. We all know how that ended.
Ultimately higher labor costs are passed to the consumer, and, voila, there’s your inflation. Therefore, Fed will not be lowering rates any time soon - if anything, they’ll be wanting to raise rates as labor markets overheat.
Is that what happened in the 1970's, the last time we had significant inflation?
Is that what happened in Zimbabwe, the country with the highest inflation rate in the world?
Look, I’m not going to argue with you on basic economic principles. Check out an economics 101 book and you’ll find that as labor costs increase those costs are passed on to the consumer. This is inflation.
There are many causes of inflation. Price controls are the worst - which covers your 70s and Zimbabwe ‘examples’. In an advanced free market economy overheating job market exerts an upward pressure on prices (inflation), and it is just one of many things that influence it. We’re not talking about a black and white, A causes B concept.
What is more inflationary, a person collecting welfare, or an employed person that pays taxes, even if his wage is slightly higher due to "overheating?"
Honestly, a welfare person doesn’t cost as much as a leased BMW or a Mercedes. Not to mention that those kinds of things don’t necessarily increase productivity all that much. It’s pretty darn inflationary when you don’t have enough engineers, architects and other highly skilled (expensive) labor.
Everything in moderation - we don’t want unemployment, but we don’t want over-employment either (as defined as unemployment under 4%). The 4% unemployment is basically the simple pool of folks moving between jobs. Anything below, and things are getting out of control - and we’re not talking ‘slightly’ higher - I remember getting raises of 15 - 25% in the late 90s early 00s, as part of the company’s retention policies. Now, your labor costs just go up 20% each year. What are you going to do ? Especially when labor is 80% of your cost ? Raise prices.
Yet inflation went down in the 1990's, in spite of low unemployment, increased wages and a growing economy. My point is the government causes inflation, not anything in the economy like low unemployment. You were on the right track when you mentioned price controls. Whenever the government hurts the supply side of the economy, and/or when it spends more money than it takes in, inflation is the result.
In market economies prices go up and down all the time, including wages. But the thing is market economies adapt, and price increases are held to a minimum, and there is scant evidence that inflation ever results. Economic growth, and productivity increases are deflationary and more than offset any price increases. The Federal Reserve interferes with that market process. Interest rate increases interfere not only with demand, but supply. If you want moderation in the economy tell the Federal Reserve to stop inverting the yield curve.
If you still insist that low unemployment causes inflation then come up with some examples. You may want to dig up A.W. Phillips' paper from the 1950's. Though you will find correlation, you will not find causation. And should you look in the United States during the past forty years you'll find that low unemployment is more correlated with low inflation than anything else.
We’re not talking about low unemployment, we’re talking about too low unemployment. And the inflation started showing up pretty well in the *late* 98-99 and early 00s.
There is no doubt that a good unemployment number between 4.5 - 5% is very beneficial to the economy and is highly desirable. What is not desirable is an overheating labor market with unemployment below 4% which contributes to inflation (not the sole cause of), tho in itself that would be a pretty good indicator of an overheating economy.
Can u hear the sound of crickets???...or do u need my address?
Inflation is an increase in all prices, caused by too much money created by the Fed. If wages, say of movie stars, rise too much, higher ticket prices will lead to fewer people buying those tickets or buying the same number of tickets but less of the other goods they normally buy, causing those prices to fall.
As long as the Fed doesn't boost the money supply too much, the higher and lower prices will offset each other.
Too low unemployment can cause dislocations and inefficiencies, not to mention lower corporate profits, but it does not cause inflation.
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