Inflation

One proof of the market is that economics is obscure. Because of patronage there is no advantage stating the simple obvious. As I am not getting a grant, I can be direct.

Inflation is manifest differently in each of its many components. My parents bought their house for almost $12,000 in 1959. That was about twice my father’s yearly salary. Today the house is almost half a million in Zillow which would be about ten times the salary of a comparable position, give or take. There are some equivalents. Maybe there is a correspondence between a year’s college tuition and a new car. The social security cutoff seems to be about what it takes to comfortably support an upper middle-class family of four.

Inflation has two classes: wage inflation and capital inflation. There is no government control of capital inflation. Wage inflation is controlled by four government agencies. The Department of Labor supervises unions. Immigration is restricted. Commerce allows imports. The Federal Reserve controls interest rates, at its simplest by buying and selling bonds. Raising interest cost chokes off small business, the business which competes for labor.

This time, the Federal Reserve was slow to raise interest rates because they failed to recognize a structural change to wage inflation. Terror works, particularly institutional terror. Unlike many, Mexicans care about their kids; they didn’t want Immigrations daycare program. Immigration and Naturalization determines who is legal. It is the illegal immigrants who set the marginal cost of labor. Without our slaves the United States has to rationalize our markets, which is more expensive.

In earlier times if shipping containers were piling up at the ports someone would have told Jose to recycle them. Joe will refuse. It’s not enough money to risk jail.

When you see crews hired out of 7-11 again, you will know that “inflation” is declining. Without marginal competition, the Fed is pulling a busted lever.