The business cycle keeps working perfectly, as it should. You just need to know what to look for.
Slower economic growth causes commodities to decline. Lower commodities are the main reason for inflation to decline (see graph below; click on graph to enlarge).
This is good news because lower inflation increases our purchasing power.
The problem is that we are becoming less efficient. Productivity growth is declining. Why to we care? Because when productivity growth declines, unit labor costs start rising faster.
Why do we care? Because when unit labor costs start rising faster, profits decline.
Why do we care? Because when profits decline, business cuts costs by borrowing less, making fewer investments, and hiring fewer people.
Bottom line. We need to make investments that increase our productivity. We can have as many stimulus plans as we wish, but if they do not increase our productivity it is like throwing money down the drain!
More, much more when you read older posts and subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
2 comments:
Mr. Dagnino,
Thank you for all the information. I've learned a lot from your books and your bloggs.
I tried getting to your website (www.peterdag.com), but is not available as of 12/9/08. What happened to it?
Have agreat day,
Sal
Our web site works properly. Is your subscription expired?
Best,
George
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