Friday, May 30, 2014

Households Are Finding It Tougher Going

Because real income is down, while prices are up.  Real GDP reportedly shrunk during the first quarter for the first time in three years, while the food prices are rising at an annual rate of 22%! This is a consequence of Quantitative Easing Infinity. Monetary inflation via credit expansion fosters malinvestment which consumes capital and constrains economic progress. At the same time, it encourages increases in spending, which result in higher prices.

Friday, May 16, 2014

Yellen and Company Get Another Shot of Xanax

It has been nicely documented how leadership at the Fed past and present continue an irrational fear of deflation.  Well, they should be feeling even better than they were this time last month. The BLS reports that the CPI increased at an annual rate of 3.6%. That is the highest rate since last June. Most disturbing is that the pace of the increase is picking up as well. Indeed prices rose in April at a rate a third faster than the did the month before. Not to be left out, in April wholesale prices rose at their fastest pace in a year. Can you imagine how bad things would be if there was no deflation????

Thursday, May 15, 2014

Rainy Days and Bad Economics Always Get Me Down

It is reported that dozens of fast-food workers in Pittsburgh endured the rain this morning to join a demonstration by other similarly-employed workers around the world "demanding hourly pay of $15 and the right to unionize." While it is entirely possible that the word "demand" was used by the reporter and not by any of the protesters, the fact remains that such language misconstrues the fundamental nature of exchange. In a market economy, even one as hampered as ours, the labor contract is voluntary on both sides. No business can force people to work for it. That would be slavery. On the other hand, no one can force a firm to hire someone (at least not yet).

This means, of course, that to get hired to begin with, workers must make it worth their potential employers' while. If the marginal worker does not contribute more than $15 an hour in revenue for the entrepreneur, he will not be hired and paid that wage. To do so would be economic suicide. If fast-food restaurants would capitulate to such demands, some workers would benefit to be sure, but at the expense of others who would face a reduction in hours, be let go,  or would not be hired in the first place.