Leah Archibald: So we’ve heard today, Peter Zeihan is predicting a steady inflation over the next 10 years, but pretty much for the foreseeable future. That’s not what we’ve wanted. And I wonder if it’s because we’ve come out of a long period, by “We”, I mean American manufacturing where inflation was held low…
John Pilla: Very low.
Leah Archibald: We had ample supply of labor, and we had ample access to capital.
John Pilla: Wages were held really low also.
Leah Archibald: And now the labor pool is drying up. We notice that they’re aging out of the workforce, and also capital is harder to come by. So it makes sense to me that we’re seeing inflation. What doesn’t make sense is we all expect there’s gonna be some magic that government is gonna do to stop it, we’re not gonna have to do this anymore.
John Pilla: So the things you were mentioning include the new contracts for the auto workers, which is quite a… It’s a harbinger of what happens in industry, they’re very public with those contracts, and they’re all getting pretty sizable increases in base pay over the next few years. Nothing crazy, but 4% or 5%, 6% a year possibly, which means that’s where inflation will end up going if we just go there. So I was intrigued by what he said, but I was also a little disappointed because I don’t like 6% inflation, nobody does. But he had a lot of other things about where the world’s going, where the economy is going to be, where the economic power will end up and it was all really intriguing.
Leah Archibald: He was saying, this is the lowest inflation is going to be, expected to be higher in the future. I don’t feel like manufacturers are there now, believing that the inflationary period is going to last forever.
John Pilla: They are not there. One of the things they tell you in ECON 101 is you look at the money supply, like the Federal money supply M1, all the loose money in the United States, and it sky-rocketed over where it was years ago. It started when we started COVID and we were paying people to stay home and paying people to take care of little kids because there weren’t childcare places, and that money supply has just tipped over and started back down. I was hoping that would be bringing inflation into a tame state, so we’ll see.
