Inflation

As some of you may know the Feds have consistently raised interest rates for the past couple of meetings they have had until this most recent one. Finally, a breather from rising interest rates to stem off inflation. It got me thinking. What exactly does inflation look like and what is causing it? Costs of goods and services continue to get higher for a few reasons. Rising labor costs and rising energy costs are the big culprits. What keeps inflation in check normally? Innovation and increased productivity. We have reached heights in productivity that we could have only imagined 100 years ago. Im sure we will continue to find ways to be more productive but only in certain areas. We are very efficient and will continue to be so. "Offshoring" seems to be the current option to increase producitivty on a per dollar basis. If we can get someone in another country to produce something that an American will produce at double the labor costs, dollar for dollar, most companies will be better off even if they have to ship things further rather then produce things where they are consumed. Ultimately, this will prove to be unsustainable and its one of the major reasons energy costs continue to rise. A serious compounding factor.
I forsee a political battle over energy issues very soon because it really has to do with the mighty dollar and how we live. Energy will soon supercede all other issues politically and I am curious to see how this next presidential election plays out. I seriously smell a Democratic victory.
But I digress. Simple as it is I have some ideas to help make a more sustainable economy that keeps inflation in check. One issue. Currently, VC firms and Banks are sitting on vast amounts of money they don't know what to do with. Why? Because they cant find enough good ideas to invest in. The world still lacks enough entreprenuers to successfully sustain innovation at a rate fast enough to sustain the economy. Crazy notion, no? Why again? People can't be educated fast enough. Dumping alot of that money back into the economy in a form that adds value would help deflate, but thats just it. It doesnt have an avenue to flow.
And thats my biggest economic theory that I adhere too. That once the money stops moving and being useful we get stagnation. The biggest fear right now is the fear of an economic term called stagflation. Increased inflation with little to no growth in the economy. Basically this means that for every dollar you earn today you have less you can actually buy with it, therefore, you purchasing power is decreased. In essence, you are now getting paid 95 cents for what you were previously paid a dollar to do. And the other bad thing? As if that wasnt bad enough... is that the government cant control them both directly at the same time. It can only stimulate growth or reign in inflation. More and more the ropes that tie the two together are coming apart as it matters less and less what interest rates are set at. Money will flow where it will when it will.
Of course, all this is at the aggregate level and in theory. On an individual basis, some people barely notice and some people are greatly affected. Whats my point? To a certain degree these things are uncontrollable and we are all just going along for the ride. Yet, some things are controllable. Using strategic intiatives we can combat these issues head on and subdue this world even further. I feel like we have already put the bridle on the horse, now we just need to keep practicing the riding part and we will do just fine. ;-)
Side note: about the MBA. I just love business in general so Im not sure if I will go after accounting or not. We shall see, as always. Finance continues to interest me because Im so interested in the startup phases of any business. Its where a lot of the action is at too. Anyhow, off to ponder my thoughts further...