Wednesday, May 16, 2012

Stagnant Wages

The Wall Street Journal's economics blog has a little entry on stagnant wages and shows the graph above. In one sense this is good news for the Fed who is trying to keep interest rates low to spur on the economy - the real worry about inflation is when it seeps into wages and starts a feedback loop that is hard to contain. So they don't appear to need to worry very much about core inflation pressure right now and there is no reason to tighten up. But there is a potential flip-side to all the liquidity they are currently pushing:
In one sense, the Federal Reserve‘s quantitative easing may have helped investors, but it backfired on workers. Steve Blitz, chief economist at ITG Investment Research, makes the point that in an open global economy the Fed has managed to raise inflation through its QE programs, but not wages. “As a consequence, consumer growth softens rather than accelerates,” he says.
It is an interesting thought except for the fact that it is completely wrong. Here is a graph of inflation data from the Cleveland Fed:

As you can see, inflation has been and remains quite low.  I am surprised the WSJ wouldn't have thought twice about this. Yes, gas prices are hurting consumers, but this has nothing to do with QE.


The Oriole Way said...

"I am surprised the WSJ wouldn't have thought twice about this."

Have you read the Wall Street Journal lately? Inflation is everywhere! But those dang guvmint statistical wizards are lying about it while Savers have their wealth stolen by Takers.

Ricardo T. Sanchez said...

Since the newscorp acquisition, quality writing at WSJ has decreased as censorship has increased. I stopped my subscription. I won't pay for propaganda.

R said...

Other than the WSJ sucking, anyone else wondering how long the monetary base can increase before we see devaluation of the dollar? I am. I have no idea how to gauge that tipping point though.[1][id]=BASE