Monday, April 25, 2011

Dear Paul Krugman: "Here Comes Wage Inflation"

Regular visitors know that I have lost all respect for Paul Krugman.
It wasn't his vile political filth, posted 132 minutes after Rep.Gabrielle Giffords and 18 others were shot in Tucson.
It wasn't his kneejerk defense and advocacy of the slushfund that was the 'stimulus'.
It was his QE2/commodity inflation babble starting just after Bernanke's Jackson Hole speech. As I said in March:
...Listening to folks like Krugman can cost you serious money if you decide to, say, become a perma-bull on wheat because of global warming without learning the meteorological term 'blocking high'.

The funniest refutation of the good professor that I've heard was a precious metal short lamenting the horrible silver harvest of January '11.
From Economic Policy Journal:
Paul Krugman has famously said he sees no inflation threat:

....there’s nothing here to suggest any reason to consider inflation a problem.
Recently he has been creating a bit of an escape hatch, in late March he wrote:
What would it take for me to decide that I needed another major rethink? A major surge in domestically-driven inflation — in particular, a surge in wages — would do it.

Well, the wage surge is starting. Late last year, Google gave all its employees a 10% pay increase.  Now Microsoft is giving a pay raise to all its employees. FT reports:
Microsoft’s 90,000 employees are to receive a company-wide pay increase, in the latest escalation of the war for talent among technology companies.

The pay increases, announced on Thursday in an internal e-mail by Steve Ballmer, chief executive, are aimed particularly at software engineers at the early stage of their careers and mid-level employees with expertise that is in short supply.
It makes sense that the pay raises are coming first in the high tech sector. In the high tech sector, you have competition for techies to design consumer software and business (i.e. capital goods) software. The high tech industry is in some sense the equivalent of oil in the natural resource sector....MORE
EPJ is keeping track of Professor Krugman's inflation chatter, I'm sure we'll be checking in again.
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