Wage Rates Rising-Another Sign of Inflation? Mises on Why the Stock Market Rises First with Fed Money Printing And a Video Both Paul Ryan and President Obama Must Watch

There was a post on Robert P. Murphy's blog a few days ago that generated quite a lot of conversation.  Some of the more Keynesian leaning commentators kept asserting that without a subsequent rise in wages, major price inflation cannot occur.

Well, EPJ has this report:

Well, the wage surge is starting. Late last year, Google gave all its employees a 10% pay increase.  Now Microsoft is giving a pay raise to all its employees. FT reports:

Microsoft’s 90,000 employees are to receive a company-wide pay increase, in the latest escalation of the war for talent among technology companies.

The pay increases, announced on Thursday in an internal e-mail by Steve Ballmer, chief executive, are aimed particularly at software engineers at the early stage of their careers and mid-level employees with expertise that is in short supply.

Wenzel explains:

It makes sense that the pay raises are coming first in the high tech sector. In the high tech sector, you have competition for techies to design consumer software and business (i.e. capital goods) software. The high tech industry is in some sense the equivalent of oil in the natural resource sector. Because it faces demand from across the structure of production, it experiences increasing demand at almost all times, but especially during a period of serious central bank money printing. Since during those periods the capital goods sector will have the money to bid away software engineers from consumer businesses.

Awww, computer software is the equivalent of a capital good since so many businesses rely on software for operations (payroll, inventory, etc.).  Like the stock market, computer software acts a capital good and begins to rise when Central Banks engineer an inflation fueled boom.  Mises explains:

the moderated interest rate is intended to stimulate production and not to cause a stock market boom. However, stock prices increase first of all. At the outset, commodity prices are not caught up in the boom. There are stock exchange booms and stock exchange profits. Yet, the “producer” is dissatisfied. He envies the “speculator” his “easy profit.” Those in power are not willing to accept this situation. They believe that production is being deprived of money which is flowing into the stock market. Besides, it is precisely in the stock market boom that the serious threat of a crisis lies hidden.

Not sure where that quote is from, read it somewhere on the web.  I believe it is from Mises' The Causes of Economic Crisis.

Here is a video both Paul Ryan and Pres. Obama need to watch for their horrid budget proposals which fail to take into account rising interest rate payments.

Update- Another sign of wage hikes?  From EPJ:

Paul Kedrosky says the demand for engineers is super hot right now in Silicon Valley--as hot as 1998-99.

For some reason, I am unable to get upload the youtube video, but Kedrosky basically lays out (unknowingly?) a simple structure of production in asserting that once the software is designed and built, it must be shipped out and sold.  Hence, the increase in hiring of salespeople.  They will be the next line of workers to receive Bernanke's newly printed "wealth."

Update 2- Portugal revised its deficit upwards to 9.1% of GDP for 2010 (up from 8.6%) and Greek 2-year hits 23%: