Financial markets also lend great attention

Financial markets fear a return to an inflationary period. Central banks also. And, if this fear was well founded, long interest rates continue to climb, short rates would still pushed upward by the institutes of emission, including Americans and Europeans. As a result, the growth would sooner or later strongly braking and lastingly affected awards. Is inflation really back, after having broken in the 1980s by stringent monetary policies

First let's a distinction essential to answering the question between inflation and inflationary scheme, according to a distinction made by Michel Aglietta. What level of widespread price increase corresponds to this evil economic false marks of economic agents and wrong behaviour Is - this 2 or rather 3 or 4 The answer can only be sought in mathematics. It lies in the mechanisms that trigger from a hardly predictable threshold and that autoentretiennent then. This is the case of inflationary regimes. Beyond the rate of inflation variable depending on the circumstances and the country, agents, in a fight to preserve their purchasing power or profits, are trying to index wages or prices with each other, and this in a vicious autoengendré and self-sustaining. Of course, for inflation to feed itself and develops progressively, monetary must grow at the same time to provide the necessary fuel.

If it is necessary to resolutely combat inflationary scheme, is that it distorts the trust placed in the contracts, essential to economic life and growth: commercial contracts which fix the prices of the goods or of traded services, wage contracts, such as contracts for debt or debt. These contracts, on which rests the ability to look to the future and to forge expectations with reasonable confidence, require to function effectively, the stability of prices. Conversely, inflation low that is to say that has not exceeded the threshold from which fire indexing phenomena is quite acceptable, and far preferable to any deflation.

What is today

See, at first, that, despite global liquidity in sustained growth and strong increases in the price of raw materials since approximately 2003, including the oil price has increased by approximately 3, inflation has remained until today ' hui very contained. Non-energy and products, it rises in tendency to approximately 2.3 in the United States and 1.6 in euro area, and, if one takes into account all of the products in the price index, to 3.5 and 2.4 respectively. The coming global economic of many countries emerging which some are very populated has been a powerful anti-inflationary factor. Their very labour costs significantly lower than the OECD countries and their intense investment in the industry have not only brutally competed industrial countries traditional, but also induces a global overcapacity, their own people developing their consumption less quickly. The result has been a tremendous pressure on industrial prices down and the inability to pass sustained increases in raw materials business. However, this non-répercussion has not led to a decline in profits, logically expected. On the contrary, profits as a percentage of GDP were maintained both in the US than in the eurozone at historically high levels. They have even grown here and there. The explanation of this phenomenon is the second factor of the observed stability of prices. Share and across the Atlantic, companies were able to ensure high rates of profit, because they have been able to distribute less than purchasing power to their employees that they were of productivity gains. Since 2003, productivity per capita in the United States is high above 3 the year, while the real wage per capita progressed annually approximately 2. Euro area productivity gains have been about 1 for a near stagnation of purchasing power past three. Here again, the pressure due to the rise of emerging economies and their impressive reserve of labour has not provided hard bargaining to American employees power and even less to those of European countries, with a much more moderate growth and an unemployment rate significantly more high. Of course, these figures are averages, cover realities more diverse, if you look at specifically this or that European country, or if the services of the industry sector a distinction.

That will be tomorrow There is already in the United States that the use of production capacity has reached historically high levels and wages began to tend. Job creation continued to increase with a level of low unemployment, all pushing prices slightly upward. Financial markets also lend great attention. But us growth is also strong end of the year More structurally, if increases in prices of raw materials and oil, were to continue, the anti-inflationary effect of the overcapacity of production world declining elsewhere because of the growing world and labor costs very bottom of the emerging countries would continue to offset the effect of rising raw materials

And if the businesses, including industrial, OECD countries covered not or little power of setting their prices because of the emerging competitive pressure, will they continue to release of strong productivity gains, higher than the increases in real wages Can they maintain their rate of profit Will the favourable consequences in terms of productivity of the current technological revolution gradually be blunt In addition, the bargaining power of employees to broaden sustainable In fact, without better power of price fixing, companies, if they cannot maintain the previous equation on productivity gains and growth of real wages, can see that their profitability drop. If, however, they cover a better ability to their pricing, under the same assumptions, they try to protect their rate of profit by their prices thereby inflation.

Therefore, all of these quadrants that should be followed carefully to detect gradually if again an inflationary scheme may be caused by the brutal rise in prices of raw materials. Bet however, taking our share of risk that both the effects of globalization that those of the technological revolution, initiated in the 1990s, are not already stopped and behaviors of indexation of prices and wages are not about to be reset, even if inflation should mechanically to rise somewhat. Depend on it, for the next few years, the level of growth, so employment, and profits, therefore stock market.