From Kris Sayce – Port Phillip Insider (Australia)-
Most folks misunderstand inflation. They believe inflation is just rising prices. But that’s not it.
Inflation is the printing of money by central banks. It can also be the creation of credit by retail banks…especially in a low interest rate environment.
The manifestation of these policies then have various impacts within an economy. One of those can be higher prices. But, it can also be lower wages.
How? Inflation creates what the Austrian School of Economics calls malinvestments. That means, cheap money results in businesses making decisions and taking risks that they otherwise wouldn’t in a normal interest rate environment.
Businesses may expand and make new investments in their business. Part of that expansion could involve hiring new staff. But just because the business is hiring new staff, it doesn’t mean they’re offering top-dollar wages.