Inflation? Don't Hold Your Breath

With the Federal Government throwing nearly $7 trillion at the credit markets to try and ease the pain of the financial meltdown, many are beginning to worry that we're on the verge of runaway inflation. However, at least three headlines we saw this morning suggest that the prospect of inflation may be a lot further off the horizon than most people think.

"AK Steel To Cut Pay Of Salaried Employees 5% Indefinitely" - CNN Money

"U.A.W. Makes Concessions in Bid to Help Automakers" - NYT

"Trucking Firm YRC, Union Set Tentative 10% Wage Cut" - WSJ

When was the last time you heard about a company cutting salaries across the board, or a union agreeing to a pay cut?

Comments

[herbert hoover:]

"When was the last time you heard about a company cutting salaries across the board, or a union agreeing to a pay cut?"

During the Great Depresion. Looks like we're heading that way.

2008 Dec 04 10:37 AM

[Robert Nabloid:]

Everyone around my area is still getting raises and prices still rising. A few unions might cut back on salaries, but the unions for people I know all have increases built into contracts going three years ahead and the companies are doing fine at the moment... no need to restructure. Of course it's different everywhere and in different industries... all I'm saying is that wages aren't being cut across the board.

2008 Dec 04 12:47 PM

[cptnproton:]

This seems like a rust belt story to me.

2008 Dec 04 12:52 PM

[anarchist:]

How can this drivel get into Seeking Alpha? Two paragraphs making a prediction of enormous consequences based on a couple of articles found in three questionable sources.

2008 Dec 04 01:46 PM

[MarvinMBA:]

I went into Ace Hardware and bought a galvanized pipe 3/4 times 36 inches threaded on both ends and the price was over 10 bucks...this is inflation in my opinion...MarvinMBA

2008 Dec 04 02:35 PM

[Kinabalu:]

Look at the airline industry in the early '80s. It's a roadmap for what Detroit should be doing right now.

Western Airlines new CEO in 1981 cut 1/3 of the management staff in the first week after he arrived. The remaining management employees took 10% pay cuts and were asked to work 10 hours a day, six days a week. The work schedule lasted for about 4 months. The pay cuts were permanent. During that time the several unions that represented 90% of Westerns's workforce were asked to make extensive permanent pay and work rule changes to their contracts. The timing of management adjustment first then union contract adjustment was an essential part of the strategy, and probably a major reason it was successful..

Western was probably the most successful airline in terms of adjusting to airline deregulation. It was acquired by Delta in 1987. The unsuccessful ones simply disappeared.


On Dec 04 10:37 AM Herbert Hoover wrote:

> "When was the last time you heard about a company cutting salaries
> across the board, or a union agreeing to a pay cut?"
>
> During the Great Depresion. Looks like we're heading that way. <br/>

2008 Dec 04 04:08 PM

[Alex_G:]

Yes, CNN, NYT and WSJ are "questionable sources."


On Dec 04 01:46 PM anarchist wrote:

> How can this drivel get into Seeking Alpha? Two paragraphs making
> a prediction of enormous consequences based on a couple of articles
> found in three questionable sources.

2008 Dec 04 06:36 PM

[norespect:]

inflation comes from an increase in the money supply... not some idiot's pay cut

2008 Dec 04 07:35 PM

[Jimbo:]

There may be another answer to the paradox of pay cuts, staff cuts, and work rule changes versus higher prices: It's called "stagflation"

2008 Dec 05 10:04 AM