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Sunday, May 8, 2011

Inflation still no threat to economic recovery

Paul Krugman:

"First, do you see any sign that workers are about to (or are even able to) demand higher wages to compensate for the higher prices of gas and food?

Second, do you any sign that employers are getting ready to make more generous wage offers?
Third, have you heard anything about companies feeling that they have room to raise prices by substantially more than the rise in their raw material costs?

The answer to all three questions is clearly no. So what we have is a rise in raw material prices, which will largely get passed on the consumers, but no hint that this is spreading into a wider rise in prices; and with labor costs flat, that means we get a one-time jump in consumer prices, but no persistent rise in inflation."

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