Prices and Wages

We're talkin' 'bout the dollar bill
Now what are we all to do
When the money's got a hold on you?
--Simply Red

One way to assess severity of inflation is to compare prices to wages. If prices increase more than wages, then inflation is bound to be felt by wage earners.

Food prices, for example, have been increasing much more than wages. Even if the reported CPI seems low, wage growth has been even lower. That taxes purchasing power at the grocery store.

While government can fudge price data, it cannot fudge real production. Stagnant real production means stagnant wages. Stagnant wages in even a 'low inflation' environment means restrained purchasing capacity. Each item purchased costs relatively more in wages. Less purchasing power is a central condition of inflation.

Sooner or later people will get it, regardless of the fairy tales told by officials.