Inflation, deflation and coming corporate finaning crisis

There were arguments about wages in the inflationary environment. Pundits are arguing that wages will catch up with inflation. That may be true in 1970's but will prove to be incorrect in the next inflationary cycle (however short or long it will be).

People will for sure ask why this time is different than 1970s. The reasons are simple:

Back in the 1970s, US was a manufacturing power house. When inflation hit and dollar drop, the demand for US industrial goods were strong and US industries overseas were doing much better. In this envuronment, companies will have to pay higher wages to retain its key employees thus prevented stagnant wages and large scale layoffs.

Now fast forward to present time, US manufacturing lost millions of jobs to overseas, thanks for the internet that allowed knowledge transfer and low wages that both allowed manufacturing moving to overseas. US does not possess massive manufacturing advantages any more, the advantages that US has does not support large scale domestic employments. Thus, in the coming years, the wages will be staying stagnant for most people, but inflation will kick up to high gear.

The other reason is:
When the last bubble goes break, meaning the bond bubble bursting, the interest rate will be much higher. Corporations will face this high interest rate for their financing needs. If the cost of financing goes skyrocketed, and the inflation rate is high, the only option left for companies will be laying off people to maintain its profit marging. That will also put downward pressure to the wage inflation.

We will face this stagflation very soon.

WXC has a lot of landlords, they all believe that landlording is the only way to preserve their wealth. I beg to be different. In the stagflation environment, landlord will get hit by stagnant rents, and high cost to maintain their properties.

The key to survive is to have assets to compensate the higher inflation brought real estate doom in order to get through the stagflation cycle, which I do not believe will last for longer than ten years.

When dollar crash, we will need to embrace the eventual deflation: all roads lead to deflation, which no one sees it at present time. How sad. (landlords will then face the real estate killer wave, by then, it may be the time to pick up depressed assets if so one desire. As of now, real estate is the trap to get suckers to fall.)

Be safe, keep away from real estate.