[quote=livinincali]How does inflating asset prices translate to inflating wages especially in our high unemployment globalized world. It’s certainly possible that the inflation shows up mostly in the commodities that we consume, leaving less for shelter. That’s always been the problem with the fed’s method. They can increase the money/credit supply but they can’t dictate where that inflation will show up. In the late 1990’s it showed up in the stock market in the mid 2000’s it showed up in housing. In order to win the fed’s money printing game you need to be invested in the next bubble and get out before it pops.[/quote]
I didn’t say anything about inflating wages in my post. But, since you brought it up, my wage have been inflating well above inflation number for the last 10+ years. So, even if I stop seeing wages increasing at faster than inflation and start seeing it increasing slower than inflation, it wouldn’t change my statement. If you noticed, I said I have a fixed rate mortgage. If my wage increase at 1/2 of the inflation rate and inflation is high, I still would be better off, since my shelter cost would decrease as a percentage of my total income every year that we see high inflation. However, I don’t see wages in my profession going down in the near term. I’m being bombarded by head hunters all the time and it’s has been increasing in frequency lately. It’s no longer small start up in the bay, but the big boys are ramping up too.
Also, you pointed out that in order to win the fed’s money printing game, I’d need to invest in the next bubble. I totally agree. Housing is one of those assets that will take full advantage of inflation. Even after this crash, many places are still higher than where they were in the mid 90s, much less 80s.
