US productivity numbers for the first quarter of this year were disappointing, to say the least. Analysts expected Q1 productivity to rise by point 0.7%. Instead, it came in at nearly half that, rising by 0.4%. This was only a slight improvement over the 0.3% increase in the final quarter of 2017.
There wasn’t a whole lot of chatter about sluggish productivity in the mainstream financial press, but in his recent podcast, Peter Schiff pointed out that it could have significant ramifications for the economy – and on your pocketbook. If you’re counting on productivity to keep a lid on consumer prices, you have a big problem.
“That is the only way to keep prices from rising when you’re creating all of this money is to have an increase in productivity.”
As Peter pointed out, rising productivity doesn’t prevent inflation. It merely masks it. Most Americans don’t understand what inflation actually is. In fact, the mainstream has effectively redefined the term, as Ron Paul explained during an episode of his Liberty Report. Peter provided a succinct explanation of inflation during his podcast.
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“Remember, a lot of people think that inflation is what happens to prices. It’s not. Inflation is what happens to money. That’s where the word comes from. Inflate means to expand and prices don’t expand. Prices go up, prices go down. What expands? The money supply. It expands during inflation, it contracts during deflation. A result of an expansion of the money supply inflation is that prices tend to rise. But they might not rise. If productivity is rising faster, prices might not go up at all.”
So, even if…