Valuing Theories of inflation (by smokey)

RE: Valuing Theories of inflation	smokey	NEW 10/28/2007 12:05:15 PM
Wages would not only have to "rise, and reasonably quickly." They would have to rise unreasonably higher. Theappreciation in housing prices added 10-20 thousand dollars ofdisposable income per household per year to the economy yet it justplodded along. The depreciation of housing prices is now having theopposite effect. Therefore it would seem that wages would haveto rise exponentially in order to maintain spending at its rate duringthe housing bubble. Exponentially rising wages would put further upward pressure on prices. Example: Thetwo-wage-earner family today is worse off than the one-wage-earnerfamily of the fifties and sixties. The wives went to work and theincrease in family income helped to put upward pressure on pricesthrough the seventies and eighties. If inflation was only theresult of higher wages, then the economy would have a better chance ofsurviving. But a large part of inflation is due to the financial marketbubbles in commodities and energy. Highly leveraged speculatorscontinue to game the prices for necessities higher. Wages playingcatch-up would invite a hyperinflationary scenario wherein the currencywould become increasingly worthless within the economy. "Reasonable quickly" is already too late.