Archive for March 27th, 2007
by Thomas E. Brewton
Contrary to the popular understanding, higher wage rates and higher oil prices do not cause inflation. They are symptoms of the real danger.
News reports express concern that the tightening labor market and increasing oil prices will lead to increased inflation. This is an upside-down view of reality.
Inflation is nothing more nor less than an increasing ratio of money to available goods and services.
Higher prices – rising wages or higher oil prices, for example – result from two things.