Posted on http://www.washingtonsblog.com/
, on December 26, 2014
Real household income has declined in the Bubble Era
across the entire income spectrum:
Here is real median household income and labor’s share of
the economy: both are in structural decline, and inflating asset bubbles has
done nothing to reverse either trend.
WHY WILL CHRISTMAS 2014 BE THE
LAST CHRISTMAS IN AMERICA? IT’S SIMPLE: declining wages cannot support
an ever-expanding mountain of debt.
The Federal Reserve has played a game for six long years
of lowering the cost of debt (i.e. the rate of interest borrowers must pay),
which has enabled stagnating wages to support ever heavier debt loads.
There is an endgame in sight to
this financial trickery, a point of diminishing returns to lower
interest rates: the Fed can’t drop rates lower than 0%. Borrowers simply can’t
qualify for more debt, regardless of interest rates.
The extreme fragility of an
economy based on ever-expanding mountains of debt piled on declining incomes is
apparent: if the Fed can’t raise interest rates even a tiny quarter
point without threatening to collapse the unstable pyramid of debt-based
affluence/ consumption, what does that say about the fragility of the “growth”
(supposedly running at a hot 5% annually) and “prosperity”?
Claiming that a few hundred
dollars in lower gasoline costs per household will enable a desert of
declining income to bloom is the equivalent of claiming that an inch of rain in
Death Valley will transform the desert into a lush tropical rain forest.
Remember the lackluster Christmas
of 2014 well; the endgame of expanding debt will play out as every
endgame does: furious moves by central bankers will prolong checkmate but not
transform the inevitable loss into a win. Media sound and fury are no
substitute for rising real household wages and incomes.
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