There is presently some radio chatter regarding economic overheating as a result of the ‘generous stimulus packages’ of recent political necessity. There is copious counter-chatter about fundamental conditions (such as on-going labor shortage, supply chain difficulties) and their inhibitory character, medium term. Additionally, there are current actual attempts to strong-arm the labor force (especially the wage earner) into compliance (such as proof of work-seeking prerequisites for state dispensed federal benefits, etc.) alongside threats and coercion to return to on-site work rather than remote work (especially for salaried employees). This indicates and corresponds to a perceived labor shortage and overall manageability.
While noting and then accounting for a certain amount of political hash and drama around ‘inflation’, as well as political stridency over national monetary policy, especially vis-a-vis the ‘generosity’ of the recent stimulus payments; we would like to remark that it is traditional to fret about inflation and couple it to increasing public access to money from the consumer side. The prevailing propaganda seems to be that it is somehow better to restrict public access to money and facilitate enormous zero-interest loans to preferred borrowers, private enterprise and secret members of a cloistered ring of privilege and influence. This stimulates short-term borrowing to leverage in gigantic stock purchases which drive the market price up or down in a manipulated direction, earning the preferred borrower over-sized profits at zero interest on the principle. Obviously, the neighbor next door cannot get the wherewithal to do such a thing, so the net effect is to line the pockets of the billionaire (with taxpayer’s money) at the further expense of the citizen (who earns near zero percent on his savings). The thinking behind this strategy is that impoverished citizenry will be more docile when it comes to abuse of the labor force. Poor folks will need to earn uncompensated wages for their money because there will be no alternative. This exploitative strategy has long been the staple of our command and control business hierarchies that indenture the bulk of our nation’s people.
Tight monetary policy coupled with rigorous efficiency approaches have driven wages down below sustainable levels for decades now, ongoingly. Sub-standard wages then, do not afford our consumer-driven economy any traction, which leads to over-borrowing, high credit burdens, diminished profits, bankruptcies, defaults, and foreclosures; as well as monopolizing circulation to utilities and rent. The new policy of direct stimulus payments has greatly eased this systemic economic burden and should be institutionalized in the form of a U.B.I. (universal basic income). However already, there is great hollering about inflation and labor shortage. Personally, I believe that employers ought to quit hollering and offer interesting and gainful employment or meaningful careers. Whatever my personal perspective on this might be, the following are my predictions on how this will play out:
There will still be some increase in pay for wage earners, but mostly in the form of sign-on bonuses and not for those already employed. This will influence current employees to quit and sign on often, just for the added incentives. Of course this will further exacerbate the labor shortage and, being loathe to pay the laborer anything near his worth, management will elect to invest heavily in coercion and strong-arm tactics to intimidate workers into staying. Whether this works or not will depend on the ability of public conscience to resist such affronts and maintain coherence in their own best interest. If the strategy works and labor breaks, then look forward to entrenched poverty and a miserable work environment. If labor holds together, then look for dirty lobbying and legalized strong-arm tactics. The rallying cry will be ‘loss of jobs’ and ‘double-digit inflation’.
Look for inflation to rise, especially for consumer goods and basic commodities as both short-term greed and a squeeze-play strategy emerge that tries to deplete the public’s reserved funds. However, cheap and short-sighted ploys such as this nearly always result in medium and long-term disaster and the burden to the consumer economy will demand emergency relief. This coupled with labor instability and supply shortages will exacerbate the false inflation which will ‘reverse-rebound’ into a full-scale recession. The only available solution will be federal resumption of the direct payment stimulus program but now coupled with industry bail-out measures. So the medium-term outlook is for continued stimulus, whether proactive or reactive.
Longer term prospects will await scrutiny of the bail-out measures and their effectiveness. Ultimately it is unsustainable to prop up the market with zero-interest. Federal escalation of the common interest will reckon with any problems due to so-called ‘over-heating’. Eventually, excessive deficit will need to be pared down with increased taxes, which will also contribute to ‘cool down’ and perceived ‘overheating’.