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Friday, February 5, 2010

More on Wage Inflation

Earlier this week EconomPic detailed that now is not the time to worry about inflation.

Commodity driven inflation absolutely can pose major problems, but it is usually wage inflation that feeds into any out-of-control inflation spiral. Thus, keep the following in mind when thinking about whether inflation will be a major issue over the near term horizon.
The "following" was a chart of the change in compensation over the past decade. In response, reader Boatman commented:
in the largest inflationary period in US in modern times wages were flat (78-82). i was there. tomorrows problem is todays opportunity. this is gold buying time,find the bottom & pull the trigger.
Memories are a funny thing because that is just not true. Inflation fed through wages until Volcker stamped it out by dramatically raising short-term interest rates.



That said, I personally think gold can (and will) go higher, but for different reasons (see here and here).

Source: BLS