Logic Defied

Do not think it worthwhile to proceed by concealing evidence,
for the evidence is sure to come to light

—Bertrand Russell

The conversation, five years ago,  went like this:
Dave: “So, you’re saying we can fly to Paris for fifty bucks?”
Rod: “Yes, but you have to have fifty bucks.”

I had, for some years, argued that the inflation hawks had it wrong. Fed action doesn’t drive inflation, expanding social mood does , and the outlook for social mood was negative, implying deflation, not the opposite.

Now, thirty-five years after inflation peaked, conventional wisdom is coming to terms with reality:

Why the Fed should worry about deflation

  • Fortune Magazine
  • October 30, 2013, 9:00 AM EDT

Fortune is right to be worried. Deflation and unemployment go hand in hand:

inflation rate 1979 to present

Note that inflation went negative in ’09. It is sure to go negative and stay that way as social mood continues its trajectory back towards the levels reached in 1932.

The price of oil is free falling:

oil now

You will think, yea! I can fill up for less now! But falling gas prices is like going to Paris for fifty bucks, folks have to have the money to fill up, which looks increasingly problematic. A medical technician friend says he’s getting into home repairs. Not that he wants to, but he is seeing the signs. “I’ve been there longest and I’m the highest paid tech. They can easily get rid of me for a younger guy at an entry level salary.”

Or worse. He could be replaced by a robot:

robots for retail

This is OSHBot, Lowes newest employee, a frickin’ robot that, when you encounter it, will have scanned every item in the store and will tell you where to find it and how to use it if you need or suggest a better option!

Another friend works for Home Depot. He is a college graduate,and when he applied for the job the HR person said, “Why are you applying for this job?” “Because I need the work,” he replied. The real question is how long will Home Depot need him?

How, you will ask, can the market hold up in the face of an economy that won’t pay enough for college grads to get gas to get to their barista jobs at Starbuck?

Markets can remain irrational longer  than you can remain solvent

—Keynes

Matter of time.

Cheers,

Rod

 

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