70s style stagflation silmpy will not happen in the next year or two.wage inflation is flat. what we are seeing now is asset prices falling back in line with salaries and destruction of the debt that fuelled the pre-2007 boom. no matter how inflationary the policies of the government are wages are going to be stuck at their current levels due to a collapse in the job market and rising unemployment.unless we see double-digit year over year inflation in wages this is definitely not the 70s. if it had been the 70s, then for the past 8 years we would have seen aggressive negotiating on the part of strong unions for wage hikes to keep up with the rising cost of gas and food. the prescription would also be to hike rates to 20% like Volker did and he was allowed to do that because of the relatively low amount of debt that consumers were carrying (due to the debt devaluing due to the inflationary forces). what we find ourselves in now is a situation where we are leveraged to the gills and no way of seeing asset inflation not unwind in asset deflation instead of wage inflation.maybe in 10 years the 70s will be back, but its not happening today (and as much as everyone talks smack about the $USD and the chinese dumping it, what we're seeing is a flight to the $USD which is taking down commodities and foreign currencies and a massive strengthening wave in the $USD. and as long as the world believes that US treasuries are the only safe harbor in the storm that will make it so). Rate this comment: 0 0

by Ferizal 11:24:56 PM 2012.12.08