A relatively tight labour market in the United States may put upward pressure on inflation,

It may. Or, perhaps, it may not. That's the opinion of St. Louis Federal Reserve President James Bullard, commenting from Beijing, China on May 23.

His statement goes along with everything we've been taught about economics in the world of higher education and the popular media. Higher wages, in this case brought about by a labor shortage, result in inflation, which, according to Fed chair Janet Yellen, is needed at a level of ideally 2%. Like Goldilocks and the bears' porridge, the inflation must be just right.

While many economists and ordinary folk feel that higher wages for American workers would be a good thing and spur retail purchases that would make life more lucrative for Chinese manufacturers and American merchandisers, evidently the Fed people aren't in complete agreement. With a record number of Americans not even bothering to continue a futile search for employment, it's rather difficult to believe that there is a general labor shortage, as opposed to one in certain fields. That's not the crux of the issue, however.

There is, or should be, a question about whether the Fed is talking about price inflation, when a dozen eggs go from 85 cents a dozen to $1.95, or monetary inflation, when the sawbuck in your billfold will only purchase half as much of anything as it did only a few years ago. Let's just accept that if there's a general increase in wages across all occupations, from restaurant dishwashers to Division I college football coaches, that there will be some effect on prices across the board. People will have more money to spend and will be inclined to do so. Prices for popular items will be bid up and to some extent production costs due to wage increases will rise as well, requiring price increases. Wage increases, however, are not mandatory. Employers can avoid bigger paychecks through mechanization and layoffs. A major reason for increased production costs is an increase in component and raw material prices. A tariff on Chinese steel will raise prices in the US without workers in steel mills jumping to a higher tax bracket.

There are other things that have an effect on the amount of money in circulation and prices. Increased home prices are an example. People that bought a house for $100K and then sell if for $200K now have theoretically twice as much money as they once did. They can buy all kinds of neat stuff. Since real estate in the US is changing hands all the time, usually at a profit for the seller, it's obvious that more money is then available for other purchases. But this isn't mentioned because every homeowner regards their house not as a place to live that depreciates over time as the shingles blow off and the paint fades, but as a super savings account that they can live in until it's sold to pay for nursing home care. Real estate sales have to be inflationary, by design, in the current American context.

The US stock market is expected to go up in value steadily over the long haul, though some companies disappear completely and others don't perform up to expectations. And it has done so. The Dow Jones Avg. flirts with a new record daily. On average, stocks are trading at 25 times earnings, a multiple considered insane just a few years ago. When someone buys a share of stock for $25 and later sells that share for $50 he has doubled his money, he's gotten a raise. For some reason, this isn't considered inflationary or bad, it's considered great. The seller now has twice as much money as he once did, to buy other shares or perhaps a Rolex watch, free range chicken or tickets to a Cubs game. The more people with discretionary income to buy fancy watches, hormone-free hens or the rare opportunity to see a competitive team on the North Side, the higher the prices will be for those items. According to the US government and the Fed, that's the definition of inflation.

When the Fed, or anyone else, cries the inflation wolf over wage increases remember that they're not worried over similar increases in the prices of company shares and residential housing.



  

Insanity Is Normal In The World of Art

The painting above is Jean-Michel Basquiat's "Dustheads", completed in 1982. It was purchased at auction  in 2013 for somewhat less than $49 million by Malaysian Jho Low. Mr. Low, now the object of investigation by police agencies all over the world, sold this fabulous work of art a few days ago for $35 million, according to reliable sources. Basquiat, having died in 1988 of a heroin overdose in his studio at age 27, wasn't able to share in the financial gains of his artistry, or losses, either.

Jean-Michel Basquiat, himself.

Will Obama Apologize For Atomic Blast?

US President Barack Hussein Obama is scheduled to visit the Hiroshima Peace Memorial Park in Japan some time in May and pundits of various stripes are concerned about what kind of an impression he might give to his hosts. They're worried that he could express regret that the US Army Air Corps was ordered by Democratic president Harry S. Truman to drop an atomic weapon on two Japanese cities inhabited by civilians, if anyone in a global conflict can be considered a civilian. This opinion piece in today's Wall Street Journal gives the stereotypical justification for vaporizing Japanese teen-age girls walking to school.  http://www.wsj.com/articles/obama-truman-and-hiroshima-1463007656

Perhaps detonating a weapon of indiscriminate mass murder against civilians really wasn't much of a novelty for a country that had no problem exterminating the original natives of the country and interning US citizens that happened to be of the wrong race. Be that as it may, several of the arguments put forth by Father Wilson D. Miscamble of the University of Notre Dame are open to debate.

One of the most common justifications for Fat Boy and Little Man (the names given to the two weapons) was that their use made unconditional surrender likely and an invasion of the country unnecessary, saving the lives of many thousands on both sides. Well, who says an invasion was needed at all? With no remaining military capability, the Empire of the Sun was no threat to anyone. MacArthur could have sent the battleship Missouri into Tokyo Bay and told the Japs over a giant loudspeaker to stay home and leave the rest of us alone. Invading Japan would have been an incredibly expensive exercise in revenge against a civilian population that didn't fly Zeros or attack Pearl Harbor.

You'll notice that despite some serious situations in the world since those fateful days in 1945, neither the US, nor anyone else, has dropped a nuclear weapon. If it was such a good idea then, why wasn't it an option on several occasions in Korea, Iran, Viet Nam, and other places?

Of course, the sickest aspect of the entire affair is that nation/states that have disagreements between their leadership and governments have the ability to hold the general populations of their enemies and even their own countries hostage to mass murder.