Saturday, May 14, 2022

Wage price inflation

We are in an inflationary period and the most common type of inflation is called wage/price inflation. The government, once again, is responding instead of anticipation. Now they are faced with a solution that may be worse than the problem, at least for the short term. The Fed must raise interest rates to slow the economy which will raise the cost of things like mortgage and auto loans. As wages increase along with everything else those who are not working will face higher prices without the benefit of higher wages and this should encourage them to rejoin the workforce. Having more people working will increase productivity and that will fight inflation because it will increase supply. The government should encourage private business to increase production starting with oil and gas. This will lower the cost of home heating and more importantly the cost of transportation which effects all products.

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