Inflationary Pressures

Today’s key issue may start with this article by John Wasik, followed by this Commentary on the article by the Big Picture. All of the Message in both Pieces was intrinsically true. The Scenario may be best presented in the sphere of Household Capitalization, where the evaluation is adjusted for the loss of value of the Dollar. Another obvious discrepancy resides in the Government’s refusal to separate Health Care and Pension benefits Costs from the rise in paid-out actual Wages. There has been much juggling at the BLS to hide distractive elements from Public view.

The real culprit behind the mess is not actually the BLS, though its leadership has not fulfilled its duty-bound responsibility to provide accurate, understandable numbers. Congress, at the behest of Business Interests, has provided a Tax format allowing Business to obviate the destructive impact of Inflation on their Profits structure; but the manner in which it was conducted, threw both the actual impact of both Tax and Inflation on the Consumer and Households. Reality states that Profits have been running in excess of 300% (Some would claim 500%–like me) of the Inflation rate, and has been doing so for a great number of years. Some people (at least Me) do not believe that Inflation can be reduced under any Construct model, if the Profits of Business enterprise exceed 300% of the Inflation rate; this being a ratio relevance with the consideration that Business Profits are an additional source of Inflationary pressure. Remember here that this is an Estimate of the reduction in the rate of Inflation, not a Statement that Business Profits cannot exceed 300% without an increase in the rate of Inflation.

The above analysis remains one of the reasons why I am more sanguine about a potential Recession, though I still do not believe a Recession is imminent. It is also the rationale why I find that Fed funds rate reduction so disappointing. It not only released the funds necessary to fuel the Inflationary pressure existent in the Economy, but allowed the nominal Profits of the past years to escape reduction to major degree. I have come to the conclusion that those massive Business Profits of the Past are exactly that balloon which must be reduced, in order for Inflationary pressures to be vented. lgl