Beginning of a wage price spiral?

Simon Ree is a best-selling author, speaker, Jeet Kune Do Instructor and a guru investor.

Born in Australia and living in Singapore (the Wall Street of Asia) he had a 25yr career at Goldman & Citi before becoming a full-time options trader. He recently asked

It doesn’t matter what industry. It doesn’t even matter what country. Every businessperson I speak too is having immense trouble hiring staff. Where did everyone go?

I believe the correct answer is:
"They didn’t go anywhere. We are witnessing the beginning soa wage-price spiral.

There are 8b people in the world.

Everyday, 8b people produce 8b units of stuff.
They earn 8b units of income and buy 8b units of stuff.

But when world governments suddenly print money.
8b people suddenly have 9b units units of income.
Though they produce only 8b units but are trying to buy 9b units of stuff.

It is a distraction to focusing on things like “Actually 2 billion stayed home during COVID. So when central banks printed money that actually means we produced less but are trying to buy the same amount.” I include it here because it is unavoidable that some will think that way.

The point remains that when central banks print money (under any set of circumstances) you wind up with the equivalent of X day’s income chasing the goods and services produced by a X-minus-1 day’s labor and capital.

The “worldwide labor shortage” is just a symptom.

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Simple version:

Ten workers make ten bags of potato chips.
The government prints up money so, on payday, those same workers go out and try to buy 11 bags of potato chips.

It is neither a labor shortage nor a problem with closed borders.
It is plain old inflation pure and simple.

In America there’s so many men around the ages of 25-35 who are not part of the labor force, more so than at any time in our nations history. Criminals, drug addicts and lazy asses living off mommy. I love to know how many of them are getting freebees like food stamps, disability, housing allowances, etc? Many American parents are raising a bunch of losers. We would be talking about labor shortages is they were actually productive members of society in the labor force?


There’s going to come a day when mommy is gone and so is their free ride.

Maybe. But if that were the case
1.) It would be a US thing. Instead we Simon Ree an Australian living in Singapore saying “I see the same thing in every country.”
2) We would see some sort of downtrend in the labor force level.
I don’t see any lack of labor (except for the COVID dip)


I’m still gonna go with my thesis.
The Fed printed money, so
the money available to buy potato chips on day 2
exceeds the number of potato chips made on day 1. (aka classic inflation)

Normally demand for stuff on payday is not more than was produced during the week. But when magic money falls from the sky, suddenly the employed, the unemployed, retirees, and everyone else starts trying to buy more stuff than was produced. If managers misread it, if they think it is permanent and try to expand capacity they will try to hire more people. (classic wage-price spiral)

Hear, hear! I see these slobs in grocery stores in pajamas tagging along behind them moms asking for junk food, like little kids, even though they have thinning hair and a full beard.

I really don’t think that’s it. First off, because at least one observation from an astute and trusted overseas observer says the “labor shortage” is worldwide. Are these “bearded grocery store slobs” also a phenomenon in Thailand Indian Singapore and Australia? If not, then another explanation is necessary.

Try this, the chart below on the left is US civilian labor force since 2000.
Notice that the current level is almost exactly the same as it was immediately pre-COVID.

The chart below on the right is the US GDP since 2000.
GDP is conventionally thought of as the amount of goods and services produced and sold, but it can also be thought of as the amount of goods and services purchased. (By definition the two have to be the same.) Notice that the current level is HIGHER THAN the immediate pre-COVID level.

Using that same second definition of GDP we can say “The US has the same number of workers and those workers are buying more stuff.”
That would be a true statement, but one has to ask “Where does the money come from?” I’ll keep it simple and give you three choices:

  • a.) Their bosses are rally nice and gave them nice raises
  • b.) They depleted their savings and ran-up their credit cards.
  • c.) It was magic money from the sky, like Fed-printed stimulus.

The so-called labor shortage, you see, is just a good old fashioned inflation bubble, It’s not a real labor shortage. It is as permanent and as real as

  • $600,000 houses and
  • $660/share netflix stock
  • $67,000 bitcoin and $1million NFTs of a pet rock.

Well, Eagle Keeper did say “In America” so that’s what I responded to. I think the whole “still living at home in their 30’s and 40’s” thing is mostly an American phenomenon, certainly a first-world issue. In the third world they’d either make themselves useful or starve.

True on both counts.

My chart are similarly only from the US economy, but I have seen the same (or similar) “quantitative easing,” stimulus spending and other macro factors impacting economies worldwide.

Now I have a trustworthy anecdote that the so-called “labor shortage” is worldwide as well.
Certainly the US may be able to solve it if tattooed basement dwellers went to work or if we launched a smooth (instead of piecemeal) guest worker program, but the lack of those does appear to be worldwide so is not likely the cause.

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I can’t speak for other countries just one of the many disturbing trends happening here in the US:

Almost one-third of all working-age men in America aren’t doing diddly-squat. They don’t have a job, and they aren’t looking for one either. One-third of all working-age men. That’s almost 30 million people!

I think if you do some data mining you will find the number are

  • 70% are working
  • just under 20% of working age males are not working for a damn good reason
  • just over10% are in the “disturbing” category.

More importantly the size of the work force is the same as it was immediately pre-COVID, the 10% number is not all young and did not suddenly happen it is a long slow-growing trend.

Two things that not the same as pre-COVID and not slow-growing are

  • the sudden influx of helicopter money
  • the sudden cries of “labor shortage.”

Labor force stayed the same. Helicopter money went up. Demand went up.
What caused the “labor shortage” the sudden increase in helicopter money or the relatively unchanged labor force?