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asset inflation is a lot more dangerous than wage inflation

Actually its not just a difference of degree but an inverse relationship.

Wage inflation, if slow and steady, is a sign of a very healthy economy as some English guy with three names wrote in real long, boring book a long time ago.

Asset inflation, also known as "irrational exuberance," is a is a sign of an economy that is due for a "correction" unless those who have overvalued their assets can find ways to extract short-term profits from them by driving down wages.

So we have a choice, one or the other. For the last 10 - 15 years, we've chosen the latter. Its about time we start to wonder if we shouldn't be getting back to policies that promote the former.

by desmoulins (gsb6@lycos.com) on Thu Aug 9th, 2007 at 07:37:46 PM EST

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