THE INCREDIBLE SHRINKING DOLLAR
that they don’t need as much. They’re happy to get by with one less vacation, or fewer nights out... Or in many cases, the plethora of government-aid programs has made it more attractive to just stay home. Whatever the reason, it’s clear that businesses are finding it more and more challenging to find workers. They’re raising wages, but the money has to come from somewhere. Higher prices are here, and their effect on supply chains, labor, and thus the overall economy is still a real unknown.
But realistically, how can a business pay more without reducing its profitability?
DAILY PRICE HIKES The real danger here is that we’re entering an environment where businesses will not be able to function as normal or successful. Take Scott’s story... How can a roofing company provide a customer with a quote and a completion date if it has no idea when the materials will even be made available or what they’ll cost? Americans have never quite experienced hyperinflation, so there’s little appreciation for how bad this could really be. Sure, people remember the 1970s, and those were lousy years... But to really understand the disaster that inflation represents, you need to examine the economies of Latin America. A friend of mine worked for an American investment bank in Rio de Janeiro in the 1990s. I was stunned when she explained to me how they used to pay her every day. Not once a week or bi-monthly like most institutions – a daily paycheck . They had to because the currency was soaring... And by the next day, your paycheck could be worth less. It’s hard to imagine, but between January and March of 1990, hyperinflation took hold in Brazil. Monthly inflation rates were in the 70% to 80% range . For the next 10 years, Brazil grappled with high- double-digit monthly inflation and hyperinflation (defined as more than 50% for a month).
And then there are taxes... Washington desperately wants to tax
businesses more. And on the Democratic side of the aisle, there is little-to-no appreciation for what that might mean for businesses themselves. Indeed, White House Press Secretary Jen Psaki showed her economic naiveté when she claimed in a press briefing in late September that it would be “unfair and absurd” for companies to raise costs on consumers in response to the Biden administration raising the corporate tax rate. And it seems President Biden shares that sentiment... In a CNN town hall over the summer, he had no sympathy for a small-business owner that was struggling to find servers at his local restaurant. The answer, according to Biden, was to simply “pay more for wages.”
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October 2021
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