The inflation delay, minimum wage hike
Inflation is a tough subject to handle and everyone has a differing opinion on how it works. The Keynesian theory, used by the government and the Federal Reserve points out that short term inflation can be a way to spur economic growth. On the flipside, it hurts in the long term by rising prices.
Obviously over the long term inflation of the money supply isn’t a positive economic event, that is something that all economic schools of thought agree upon. But what we are seeing today could be the delay of inflation. Inflation is quick to hit the commodities and freely traded products that have a variety of producers and vendors. Oil and gold, the perfect examples, are standard all the way around. When the money supply is heightened, commodities like these see the first punch.
Now commodities are dropping in price but it’s likely we’ll see inflation in the aisles as opposed to in the markets. A greater money supply means people can spend more for the same amount of goods, and do so. The problem is that its easy to drive up the price in a liquid market like commodities but doing the same in day to day activities is nearly impossible.
After almost 9 months of the Federal Reserve lending out of control, the commodities markets have exploded and now starting to ebb. Next we should see inflation in the day to day, for the new car brakes, for the latte, everything but the kitchen sink.
Further adding to the inflationary factors is the federal minimum wage hike. Everyone, every business, everything is going to be paying more at the bottom. Millions will be affected by the upcoming and already here, minimum wage hikes. This is said to be raising the pay of 2 Million Americans, adding more costs to the books of large corporate employers and likely to the sales totals for most retailers. Inflation is on.
It’s difficult to convince people to accept a pay rise lower than inflation as they know they will be worse off in real terms, even if it is for the good of the economy as a whole.