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11/02/2015

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Good treatment - especially since whenever Brennan's Laws are cited upfront, entertainment is certain to follow.

Most everyone is aware that this area of macroeconomics is a huge hot button for me - principally because I fear that only the true "Econs" out there really understand all/much/some/none of this.

So, while inflation is an empirical "thing", I'm not sure a lot of people really understand it very well (I don't). Consequently it exists both as a "thing", as well as an abstraction - in many people's minds. I think that occurs at least partly because it is so complex - and people need to pare that down and make it simpler, so that they can understand it - and make their correct (or incorrect) cause/effect inferences that you describe. I'd draw paralles to American Indians doing a rain dance, or tossing folks into volcanoes to ensure the success of the pineapple crop.

(thank goodness there are no volcanoes in Maryland)

Great observations, Chris, as always.

But although there may be no rain dances or volcanoes in Maryland, there are still clear parallels. Similar primitive tribal rituals and human sacrifice behaviors regularly occur right across the border. And some within your state, too, I'll bet. ;-)

Low inflation actually helps employees who are low in range "catch up" while those at the high end, presumably being paid well already, don't have the justification for a huge increase, if any.

Despite low inflation, salary and wage expense goes up along with the cost of benefits. I guess inflation is not actually the cause of prices rising and salaries going up? Could it be the reverse?

To keep it simple, keep all salaries low and prices will come down. Isn't that economics 101? Supply and demand?

Although I totally agree with "Brennan's Laws," the unfortunate reality we are seeing with upward pay pressure has little to do with inflation, and everything to do with the demographics of not enough people to fill many open jobs, and especially GOOD jobs that pay well (engineering, IT, accounting, skilled trades, STEM-related, etc.). It's an employee's market right now - maybe that's just Wisconsin, but I don't think so.

Karen: quite correct about low inflation being good for most people. The cause and effect relationship between prices and payroll is a lot more complex and confusing, I fear. Low salaries will affect discretionary dollars for spending, but the CPI would not be directly affected by pay because it doesn't measure it at all. Not sure how supply/demand basics balance out when perceptions affect human behavior.

Deb: Skilled candidates for vital jobs are indeed scarce in most places, but many people can't connect with such opportunities and thus remain unemployed or underemployed. WI openings don't help job seekers in AL or NY. Maybe virtual work will help match jobs with seekers. Hope so.

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