[ Thanks to Obama. .. AVOID this to continue by no voting
HILLARY, if she get impunity.]
Central banks are obsessed with
boosting inflation, but the “why inflation is good” arguments make no sense for
households being ravaged by inflation. The basic argument is
that inflation makes it easier for debtors to service their debts.
But this is only true if income
rises along with costs. If income stays flat while costs rise,
households lose ground–debt remains a burden as the purchasing power of income
plummets.
Central banks and the mainstream
media make two fatal errors when discussing inflation.
1. They assume an inflation rate that lumps all costs/prices
into one number is meaningful. But the “headline” consumer price
index (CPI) is meaningless for two reasons:
A. The “headline” CPI
is easily manipulated by underweighting sectors with double-digit cost
increases such as higher education, rent and healthcare, and by gaming
hedonics and other adjustments.
B. Households and
enterprises that are exposed to sectors with double-digit cost increases
experience inflation at rates that are far higher than those households and
enterprises that have little to no exposure to soaring rents, healthcare
premiums and college tuition.
2. They lump all inflation-adjusted household income into one
“headline number” of median household income. This is a meaningless number because it combines the top 5% of
households that are experiencing strong income gains in the “recovery” with the
95% of households experiencing stagnant or declining purchasing power.
Take a look at these charts:
1-
A better measure of how households are doing is to compare
GDP (gross domestic product) and wages: if GDP is rising but
household incomes aren’t keeping pace with GDP, then households are doing
worse–which is exactly what’s happened in the “recovery”:
2-
The share of GDP devoted to wages is another basic measure of
household well-being: the wage/salary share of the economy has been declining
for 45 years: Image address at:
http://www.oftwominds.com/photos2016/wages-GDP5-16a.png
3-
Meanwhile, the top 5% is riding
high: notice
how the spending of the top 5% has pulled away from the stagnant spending of
the bottom 95% during the “recovery”:
4-
Any household paying soaring
healthcare premiums and co-pays is being crushed: See image at: http://www.oftwominds.com/photos2016/US-healthcare4.jpg
5-
Ditto for households experiencing
double-digit rent increases: See
image at http://www.oftwominds.com/photos2016/rent5-16a.png
Rising inflation crushes the
purchasing power of the bottom 95% whose incomes are not rising along with
double-digit cost increases in big-ticket expenses. Central
banks seeking to boost inflation are waging financial war on the bottom 95% of
households.
Join me in seeking
solutions by becoming a
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….
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