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Rising unit labor costs like that are bad now especially if you are hoping that inflation is going to come down because one way the official measures of inflation you know the CPI one way to keep the CPI from going up is to have growing productivity because as productivity increases costs come down and that allows the government to create some inflation that doesn't show up in the CPI meaning let's say we're so productive our productivity is so high that prices would have come down by uh three percent but the government creates a bunch of inflation and instead prices go up by two percent well we have five percent inflation but you only see two percent because you don't see the price cuts that never happen or another way to put it let's say inflation would have been 10 but because of rising productivity uh and prices let's say they would have dropped by five percent and now inflation is only five percent at least that's what's reported so Rising productivity makes these inflation numbers look good but on the other hand if we're getting following productivity is going to work in Reverse if productivity is going down well then prices might be going up based on falling productivity then you add inflation on top of that and it makes it worse so if you're hoping that you're going to get lower CPI numbers you need to hope for more productivity to basically reduce the inflation that the FED is creating to help get the FED out of jail by the economy lowering costs in the face of the fed's inflation which is Raising prices but if productivity is not helping out then that goal is going to be much harder for the FED to achieve and of course all this talk about wages going up people want to talk about wage increases those are nominal there's only one way that you can get real wages to go up and that's if productivity goes up workers have to be more productive to earn more if they're not more productive it's impossible for them to earn more they can only earn more if they deliver greater productivity to their employer because that's the only way their employer can actually pay them more so when you see falling productivity you know that real wages can't go up in fact they have to go down in order for people to maintain their jobs otherwise they're going to have to get fired so this is bad news it didn't get a lot of coverage but it should have everybody is hoping that the fed's war on inflation is working that all these rate hikes are taking a toll and that inflation is going to come down to two percent well this Consumer Credit number and this is one of the biggest numbers we've had in a while uh you know I think it was like the second biggest jump in credit card debt that we've had if you're getting this big jump in consumer credit that shows you that the FED is losing the inflation War because I've said this on this podcast before the way Rising interest rates are supposed to fight inflation is by making it more expensive for consumers to borrow money and if they can't borrow as much money well then they have to borrow less and if they're borrowing less they're buying less so spending comes down demand comes down because credit is more expensive and therefore less available so consumers borrow less they spend less that reduction in demand helps bring down prices well what do these numbers tell us that's not happening yes the FED is Raising interest rates but that's not stopping the consumer from continuing to borrow and spend so that means that these rate hikes are not nearly enough to get the job done and what are the reasons for that is that interest rates are still negative so it still makes sense to borrow money if the rate you're borrowing at is less than the inflation rate now I know like people who are buying on their credit cards you know and they're paying 20 interest I mean that's way above the inflation rate but they're still borrowing right none of this has worked none of this has stopped people from using their credit cards If the Fed wants to make Headway in fighting inflation people have to leave those credit cards in their wallets they have to stop buying stuff on credit right that's the demand you know inflation it's not just money supply but credit it's an expansion of credit and credit continues to expand and what does that do that drives up prices we need credit to contract that's what we need that's not happening and you know this whole idea and I've mentioned this before people keep saying the way the FED is supposed to fight demand is cause people to lose their jobs right we want people to be unemployed so they stop spending look you can be unemployed and keep spending right because people get unemployment benefits when they're unemployed they spend that they don't lose their credit cards your credit card copy doesn't take your credit card away when you're unemployed in fact you probably use it more when you're unemployed because your unemployment benefits are lower than what your paycheck used to be so you use your credit card more so people keep spending when they lose their jobs so that's not going to do it and I've said many times the last thing we want is for people to stop working because if we have an inflation problem that means we have too much money and not enough stuff so we either need less money or more stuff or some combination one way you get more stuff if you have more people working making the stuff but if people lose their jobs then there's less stuff because they're not making it so that means more upward pressure on prices so if the FED really wants to fight inflation the last thing they want is people to be out of work they want people working what the FED wants is the people who are working to stop spending people have to save don't go out and buy stuff take what you earn and save it that's what we need and the other thing about savings is now that represents money that can be loaned to businesses to invest in capital to produce even more so we want people working and saving so we can make Capital Investments so we can grow the economy economy with more production that's what would help to bring down prices we don't want to just throw people out of work so they can keep on spending without producing and that's what's happening people are losing their jobs and they still spend and to keep people who have their jobs they don't care about Rising is they're spending anyway so these numbers show you that there is no progress being made on inflation everybody wants to pretend that we're getting closer to the two percent goal we're nowhere near getting back to two percent as I said this is a fantasy nobody is willing to accept the fact that those days are long over foreign
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