Agreeing that uncontrolled inflation has the potential of creating economic and social chaos is easier than envisioning a means of solving the problem.

The pain of inflation caused by higher pricing of necessary goods and services is disproportionately borne by those within the general population who have less purchasing power. The profits generated by increased pricing of goods, services and assets is disproportionately lavished on those having higher levels pf relative wealth.

Therefore, the situation will become critically political, with a vast number of people suffering economic pain, while the relatively few benefits. Some form of revolution will result in the absence of a solution.

The increasing of wages and personal subsidies, without an increase in prices will cause business losses and enterprise closings, with resulting increased unemployment. However, the unemployed will have to be fed.

As it is likely that the private sector will not be able to solve the crisis, the government will have to take over the production and distribution of essential goods and services. Of course, this is socialism, as generally feared by those with assets to protect.

Companies with higher revenues per employee will likely do better than those requiring a greater number of employees. The larger the company the more likely they will be seeking to do more business, while employing fewer people.

Surviving, smaller, and newer companies will be those increasing their staffs, and since they are more closely associated with their customer bases, better able to adapt. It is smaller companies, most of which will be privately owned, which may be the ultimate solution to the coming crisis.

It is possible that the owners and some of the managers of larger companies will find benefit in breaking their companies up into smaller, more specific customer-focused organizations.

In many cases, the capital needs of companies will be better met by the sale of revenue royalties to investors, rather than equity issuance, which is dependent on reported profits. This would be better for all concerned.

 

 

Arthur Lipper, Chairman                 arthurlipper@gmail.com
British Far East Holdings Ltd.