WHAT THE HELL IS GOING ON? (PART TWO)

In Part One of this article I exposed the establishment narrative of a strong economy as rubbish by providing hard data regarding imploding gasoline usage, failing bricks and mortar retailers and plunging restaurant sales.

“Inflation may indeed bring benefits for a short time to favored groups, but only at the expense of others. And in the long run it brings ruinous consequences to the whole community. Even a relatively mild inflation distorts the structure of production. It leads to the overexpansion of some industries at the expense of others. This involves a misapplication and waste of capital. When the inflation collapses, or is brought to a halt, the misdirected capital investment—whether in the form of machines, factories or office buildings—cannot yield an adequate return and loses the greater part of its value.Nor is it possible to bring inflation to a smooth and gentle stop, and so avert a subsequent depression.” – Henry Hazlitt – Economics in One Lesson

Inflation is the opium of the masses. The establishment’s interest in dumbing down the masses through government controlled public school indoctrination couldn’t be clearer than examining the chart below. The average non-thinking, math challenged, iGadget distracted, media controlled pawn thinks their household income has risen by $6,000 since 2008 because they have no understanding of Fed created inflation.

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  • LeseMajeste

    That’s one of the main dangers in letting some private banking families control a nation’s finances and economy thru ownership of that country’s central bank.
    Kill the FED and let the US Treasury start issuing debt-free currency and watch the economy take off. At the same time, declare all of America’s debt to these gangsters null and void, since it is ‘odious’ debt and need not be repaid.

    • Charlie Primero

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  • WillDippel

    Here is an article that looks at a novel method of measuring the affordability of housing in the United States:

    http://viableopposition.blogspot.ca/2017/02/housing-affordability-in-united-states.html

    With the Federal Reserve rattling the “interest rate cage” on a regular basis, even a small increase in mortgage rates could prove to be problematic for America’s most overvalued real estate “owners”.

    • If you have a fixed-rate mortgage you are generally OK as long as you don’t have lots of credit card debt, though do watch-out for rapidly-increasing property taxes as the interest rate rises.

  • I wrote this yesterday in-response to an Investopedia news item entitled “What Income Class Are You?”. I studied this issue in 2013 and wrote a much more-detailed study then on this same subject involving 50 common readily-comparable consumer items rather than the dozen I included in this piece yesterday.

    One reason that gasoline use and mall retail sales have dropped is because more then 25% of all department store retail sales are now done online, (reported last summer in-fact), but the other major reason has been grossly-under-reported retail price inflation that has exceeded wage growth by more than triple since 1968.

    My piece from yesterday: Part One:

    There are several ways to look at what constitutes middle-class. One such way might be to eliminate the top 1% because the demographic is so heavily-skewed to the high side and find the median of the bottom 99%, which is less than $41,000.

    It is interesting that Investopedia chose to report the floor of the top 1% rather than the median of that demographic, which was $1.37 million a year ago, a level which grew by more than 40% between 2010 and 2015.

    Our full median household income today is $56,500, which is down by more than $3000 since the year 2000, despite the fact that our average cost of living is up substantially since 2000.

    Here in Metro-Denver the cost of readily-comparable items is up by 250% or more since 2000. Health insurance is up by 500% since 2000, public utility costs are up by 350%, college tuition is up by triple, retail food is up by triple, and rent is up by close to triple too. The median home price within the city limits of Denver has more than doubled since 2007.

    Let’s go back a bit further, to 1968. Back then the Federal non-tipped minimum wage was $1.60/hour, while the tipped minimum wage was $1.15/hour. Also back then a 12-ounce can of soda pop was a dime in a machine, a pack of cigarettes was 40 cents, a gallon of regular gas was 27 cents, a pound of chicken parts was 26 cents and a pound of hamburger was 29 cents, a single ride on the NYC subway was 20 cents, median rent for a 2-BR apartment nationally was $75, undergrad resident tuition at Western Michigan University was $24/credit-hour, 3 games of bowling was $1.00, as was a full-price adult evening movie ticket. A good used car in 1968 was about $500, and it cost $120/year to insure it.

    Today’s Federal non-tipped minimum wage is $7.25/hour. The can of soda is between $1.25 and $1.50 today, the smokes average $7.00 a pack nationally, gasoline is cheap today at $2.40/gallon, chicken parts are $3.29/lb. and hamburger is $3.99, NYC just raised their subway single ride cost to $3.00, median rent for a 2-BR apartment nationally is just over $1.000, WMU undergrad resident tuition is now $445/credit-hour, 3 games of bowling is $12-$15 depending on where you are, and a full-price evening movie ticket is $12-$18 these days. A good used car is as much as $7000 or more, and car insurance is now $1500/year.

    Let’s see, the 49-year inflation rate on our Federal non-tipped minimum wage is 453%. The can of soda pop is up by between 1250% and 1500%, so let’s take the median figure, 1375%. The cigarettes are up by 1750%, gasoline is only up by 889%, chicken parts are up by 1265%, and hamburger is up by 1376%. A single ride on the NYC subway is up by 1500% since 1968, median rent for a 2-BR apartment is up by 1333%, WMU resident undergrad tuition is up by 1854%, 3 games of bowling, again let’s take the median of 1350%, and the same with the movie ticket, which is 1500%. The used car is up by 1400% and the cost to insure it is also up by 1250%.

    Let’s add-up all these price inflation numbers. 1375% + 1750% + 889% + 1265% + 1376% + 1500% + 1333% + 1854% + 1350% + 1500% + 1400% + 1250% = 16,842, and now divide by the 12 items = 1403.5%. Now take 453 and divide it by 1403.5, which equals 32.27, which means that today’s Federal non-tipped minimum wage has just 32.27% of the average retail purchasing power against these 12 common readily-comparable consumer items that the 1968 minimum wage of $1.60/hour had. Today’s non-tipped minimum wage should be $22.45/hour to have the same level of average retail purchasing power against these 12 common items, and the tipped employee minimum should be $16.14/hour.

    • Part Two

      Some items aren’t readily-comparable, such as trucking rates or airline fares in a regulated versus deregulated operating environment, or the cost of microwave ovens made by US union labor subject to our 1970s-environmental protection and labor law versus microwaves made today in China by non-union workers without any environmental protection nor even workplace health and safety laws. Fast food hamburgers today have less beef content and are smaller in size and weight than their 1968 counterparts were too.

      Yes, it is hard to believe that in 1969 as a 12-year-old kid that I was earning $5.00 to caddie 18 holes at our local country club plus an average $1.00 tip for 5 hours of work, which then had 1403.5% greater average retail purchasing power than today. Today in-order to have the same level of retail purchasing power the same job should pay $84.21.

      It is little wonder that Social Security is operating in the red and so is government, as both are funded on a percentage of wages-paid or profit-taxed basis, and it is little wonder that young adults these days are running-up obscene amounts of college debt when they are paying more than 4 times as much of their income for tuition today as the same demographic paid in 1968.

      Do also note that average worker productivity is up by 40% since the 1960s and has not been fairly-compensated either.

      So in-fact the term “middle-class” is a relative term, with little in-common between our middle-class of the 1970s versus our middle-class today, especially with the upper 1% income demographic hogging increasingly more of total income, leaving less and less for the rest of us peons to fight over.

      Just remember, bottom 99% median household income is under $41K today, with an effective retail purchasing power of $16,400 in 2000-value dollars and $2921 in 1968 dollars against the average cost of the dozen common items above. Today’s median family household income of $56,500 only has $22,600 in year-2000 average retail purchasing power, and only $4,025 in effective 1968 average retail purchasing power.

      Starting to see what the problem is now? Today’s definition of middle-class in the US has markedly-less average retail purchasing power than our middle-class enjoyed either in 2000 or in 1968, which leaves a lot less spare income to invest in the stock market, in real estate, (or down at the mall for that matter too).