Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21
Scan Computers - How to Test New Systems CPU, GPU and Hard Drive Stability With Free Software - 4th Jun 21
Hedge Funds Getting Bullish on Gold - 4th Jun 21
THERE ARE NO SOLUTIONS When the Media is the VIRUS - 4th Jun 21
Investors Who Blindly Trust the ‘Experts’ Will Get Left Behind - 4th Jun 21
US Stock Market Indexes Consolidate Into Flagging Pattern – Watch For Aggressive Trending Soon - 4th Jun 21
Microsoft (MSFT) Stock Trend Analysis - 3rd Jun 21
No More Market Bloodbath – Beyond Cryptos - 3rd Jun 21
Bank run, or run from the banks? - 3rd Jun 21
This Chart Shows When Gold Stocks Will Explode - 3rd Jun 21
The Meaning Behind Gold’s Triple Top - 2nd Jun 21
Stock Market Breakout Or Breakdown – What Does The Next Big Trend Look Like? - 2nd Jun 21
Biden’s Alternate Inflation Universe - 2nd Jun 21
What You Should Know Before Buying Car Insurance - 2nd Jun 21
Amazon (AMZN) Stock Summer Prime Day Discount Sale - 1st Jun 21
Gold Investor's Survival Guide - 1st Jun 21
Silver and Copper to Benefit from Global Electrification Push - 1st Jun 21
Will Gold Shine Under Bidenomics? - 1st Jun 21
Stock Market Buy the Dip, Again?! - 1st Jun 21
Stock Market Consolidation Ahead - 1st Jun 21
Stock Market Summer Correction Review, Crypto CRASH, Bitcoin Bear Market Initial Targets - 31st May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Deflation Application

Economics / Deflation Jun 22, 2017 - 06:05 PM GMT

By: Charles_Sizemore

Economics Once in a while I see a financial news headline so obviously ridiculous, I feel I should look at the writer with pity in my eyes and pat them on the head, the way you might comfort a child that just dropped his ice cream cone on the floor.

“Inflation is Right Around the Corner, Yellen Insists.”

Of course it is…

In defense of the columnist who wrote the story, these weren’t necessarily his views. He was simply relaying the Fed Chair’s comments from Wednesday.


My real pity is reserved for Ms. Yellen herself. If she actually believes that inflation is on the horizon, she’s clearly not very good at her job. She might even be delusional.

Yellen believes that a firming job market will lead to higher wages and a general increase in prices. And 20 years ago, that would have been true. A tight labor market leads to rising wages, which in turn forces companies to raise their prices to maintain profitability.

But what Janet Yellen fails to understand is that, in this age of technological disruption, labor becomes disposable as soon as it gets pricey.

Consider the unglamorous world of fast-food.

Over the past decade, labor activists have aggressively pushed the “fight for $15,” or a nationwide minimum wage of $15 per hour. This directly affects fast-food restaurants. They tend to hire young or low-skilled workers who earn minimum wage (or close to it).

Hey, I get it. They’re looking out for the little guy. But in pushing for higher wages, they are simply speeding up the inevitable death of entry-level jobs.

Take Panera Bread and McDonald’s.

Both companies have made major investments in kiosks that allow customers to skip the line, and most of their major competitors have either already started doing the same or intend to start soon. (Your local grocery store may have been doing this for years, too.)

It doesn’t stop there.

Starbucks has an iPhone and Android app that lets you order coffee and even pay for it on your phone.

I can order from my neighborhood Domino’s on a mobile app and have my pizza waiting for me in less than 10 minutes.

All of these cases have one thing in common: Cheap technology has replaced a human cashier or order-taker.

When Ms. Yellen talked this week about inflation on the horizon, I also wonder if she’s never shopped on Amazon or one of its online competitors.

As more shopping shifts online (first-quarter e-commerce sales in 2017 increased 14.7% year-over-year, for example), there’s far less demand for physical retail stores… and the army of clerks and cashiers than man them.

Amazon is also quickly making the delivery boy redundant with aerial drones… and driverless cars and trucks will soon squeeze out millions of truck and taxi drivers. All of this works to lower costs, not raise them.

And it’s not just entry-level workers on the chopping block. Goldman Sachs made news this week by announcing that it’s using technology to automate some of its more labor-intensive investment banking tasks.

No one is going to cry over the sight of unemployed investment bankers. But if banking jobs can be automated away, then why not attorneys or even doctors?

You might laugh, but Cologuard, the company behind the do-it-yourself colon cancer test, now allows a cheaper lab technician to screen samples. That’s a lot less expensive (not to mention more comfortable for the patient) than having a highly-trained proctologist perform a colonoscopy.

And the trend applies to music and media too.

Cable TV is dying a slow death. Cheaper streaming options like Netflix have turned the economics of the business inside out. And younger consumers are so accustomed to getting music for free (or close to it), that getting them to pay for it is next to impossible.

You get my point.

Today, more than at any time since the Industrial Revolution, technology is eliminating expensive labor. This is deflationary, not inflationary. And it’ll contribute to the great deflation Harry sees ahead.

It’s also, ultimately, a very positive thing. Efficiency creates a higher standard of living over time, even if the transition can be painful to live through.

That’s a longer story for another day.

For now, suffice it to say that inflation won’t be a problem any time soon. If you’re betting on higher bond yields or higher commodity prices, you’re likely to be sorely disappointed.

In an environment of stable or falling prices, current income is the name of the game. And I write a newsletter dedicated to finding exactly that.

In Peak Income, I look for outstanding income opportunities that are off Wall Street’s radar, and produce consistent returns to help you accomplish your goals. Click here to learn what investments I’m recommending right now.

Charles Sizemore
 Portfolio Manager, Boom & Bust Investor

https://economyandmarkets.com/author/charles-sizemore/

Copyright © 2017 Charles_Sizemore - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in