Since productivity is slowing, and PPI is growing faster than CPI. Something has got to give. As long as CPI grows slower than PPI, it will be corporate profits taking the hit. Big problems for America heading forward.
This is a very common fallacy. Actually the growth rate of real earnings is relatively constant...implying that nominal earnings go up and down with inflation. As a result what tends to happen is the mkt becomes 'cheap' in periods of high inflation and 'expensive' in periods of low inflation. http://www.nber.org/papers/W10263 edit: the inflation boogie man seems to be the latest hot buzzword. Wasn't it just a few years ago we were worried about deflation?