The geniuses in the financial markets – and they must be geniuses because they’re paid far more than we are – think next year will be an absolute ripper. Workers will be getting their first decent pay rise in six years or more. Say, 3 to 4 per cent. Whoopee. Gee, thanks guys.
And, because the inflation rate doesn’t rise sustainably unless it’s being driven up by rising wages, an inflation rate approaching 3 per cent couldn’t happen without annual pay rises averaging 3 to 4 per cent. By the way, I’m not just being disparaging in describing the financial markets as a casino. As Professor John Kay explained in his book, the buying and selling of currencies, bonds and other real and derivative securities each day in the world’s financial market dwarfs the number of transactions needed by real businesses to conduct their ordinary affairs.Indeed, Kay told me those genuinely necessary transactions could be put through in about a quarter of an hour a week.
Because Wall Street has the greatest single influence over what happens in the global financial markets, these guys know more about what’s happening – and likely to happen – in the American economy than their own.
Rates can and will go lower (negative) in the next crisis.
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