From his FNN days in LA to the CNBC merger to the host of Squawk Box to creating all of the popularly used on air nicknames to his final spot hosting from 9am to 11am, Mark Haines was the consummate professional.
And now to the topic at hand. With so much attention paid to commodity inflation lately, I thought a good item to discuss inflation in general.
Longtime readers have known that since 2007, I have been in the deflation camp, not believing for a minute that serious, structural and systemic inflation was anywhere in our immediate future. And I still share that view today. Comparing this period to that of the 1970s, or Argentina, Zimbabwe or the Weimar Republic is just plain absurd in my opinion.
But digging a little deeper, the “real” unemployment rate, taking into account the underemployed and discouraged (U6) is almost 20%, according to Gallup. I am not sure anyone can use this data to support the inflation argument.
Turning to one of the most important measures of systemic inflation, wages and wage growth, you can see below further evidence that supports my thesis that structural inflation is not a problem. Think about what happens when everyone makes more money than last year and the year before. Most people spend it! More dollars chasing the same number of goods and services. So prices rise. When wages fall or stay flat, like they have most of the past 11 years, you have fewer or the same dollars chasing the same number of goods and services. Prices stay flat or fall.
Remember, inflation is measured by price changes on year over year basis. If oil goes up 100% in 2011 and remains at that same level in 2012, inflation is actually 0% in 2012 even though prices are high. It’s the year over year change that signals inflation.