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The most unsafe part of the recently released 4.2% headline inflation, the greatest since 2008, is the truth that greater labor expenses haven't even started yet, said Scott Rothbort, head of state of LakeView Property Monitoring.
Rothbort claimed that the economy is headed to a situation where we will have a lot higher rising cost of living yet reduced financial development, a problem called stagflation that prevailed in the 1970s.
" There are two elements to inflation. You have actually got the expense aspect, and that comes from products and also input prices, and also you've got the wage component, which originates from labor requiring a lot more incomes. What we saw in the 1970s was that it became a ferocious comments cycle," Rothbort told Kitco's support, David Lin.
The end outcome of this ferocious responses cycle is that small companies, which on an aggregate level add to regarding 50% of America's GDP, will be unable to afford paying much greater earnings as well as thus cut personnel, raising joblessness much more.
0:00 – Greater labor prices will come
9:14 – Greater joblessness
18:05 – How high can rising cost of living climb?
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We’re returning to the ‘70s era of social decay, crime, and stagflation – Scott Rothbort (Pt. 1/2)
The most dangerous part of the recently released 4.2% headline inflation, the highest since 2008, is the fact that higher labor costs haven’t even kicked in yet, said Scott Rothbort, president of LakeView Asset Management.
Rothbort said that the economy is headed to a situation where we will have much higher inflation but low economic growth, a condition known as stagflation that was prevalent in the 1970s.
“There are two elements to inflation. You’ve got the cost element, and that comes from commodities and input prices, and you’ve got the wage element, and that comes from labor demanding more wages. What we saw in the 1970s was that it became a vicious feedback cycle,” Rothbort told Kitco’s anchor, David Lin.
The end result of this vicious feedback cycle is that small businesses, which on an aggregate level contribute to about 50% of America’s GDP, will be unable to afford paying much higher wages and thus cut staff, increasing unemployment even more.
0:00 - Higher labor costs will come
9:14 - Higher unemployment
18:05 - How high can inflation rise?
__________________________________________________________________
Kitco News is the world’s #1 source of metals market information. Our videos feature interviews with prominent industry figures to bring you market-affecting insights, with the goal of helping people make informed investment decisions.
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