The Cost Basis of our Economy is Spiraling Out of Control

If we had to choose one “big picture” reason why the vast majority of households are losing ground, it would either be the stagnation of income or the spiraling out of control cost basis of our economy, that is, the essential foundational expenses of households, government and enterprise.

Clearly, both rising costs and stagnating income cause households to lose ground, i.e. their income buys fewer goods and services every year.

I’ve often covered the dynamics of stagnating income for the bottom 95%, and real-world inflation, i.e. a decline in purchasing power.

But neither of these dynamics fully describes the relentless upward spiral of the cost basis of our economy, that is, the cost of essentials and the foundations of the economy: education, healthcare, energy and labor.

These expenses are pushing the costs of virtually every good and service, public and private, higher in a self-reinforcing spiral. The costs of education are spiraling out of control, stripping households of income as an entire generation is transformed into debt-serfs by student loan debt. The soaring costs of healthcare are a core driver of higher costs in the education complex (and goverment in general), and to cover these higher costs, counties raise property taxes, which add additional cost burdens to households and enterprises as rents rise.

Rising rents push the cost structure of almost every enterprise and agency higher.

Then there’s the asset inflation created by central bank ZIRP (zero interest rate policy) which has inflated a second echo-bubble in housing that has pushed home ownership out of reach of many, adding demand for rental housing that has pushed rents into the stratosphere in Left and Right Coast cities.

Let’s look at a few charts that illustrate the relentless rise in the cost basis of our economy:

Do you reckon these two charts are connected–soaring costs and ballooning administrative payrolls?

Student loan debt is soaring above $1 trillion, guaranteeing profits to lenders and debt-serfdom to the students exiting with degrees that are in over-supply, i.e. possessing little scarcity value in an over-credentialed economy:

The echo housing bubbles in many locales exceed the nosebleed valuations of the previous bubble:

And how do we pay for these spiraling out of control costs? By borrowing more, of course:

Courtesy of Lance Roberts, here’s a chart depicting how households are filling the widening gap between income and expenses with debt. This is another self-reinforcing spiral of rising costs, as debt accrues interest, adding costs at every turn of the spiral.

What will it take to radically reduce the cost basis of our economy? A fundamental re-ordering that breaks up all the cartels and quasi-monopolies that push prices higher even as they deliver lower quality goods and services would be a good start. 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Coming soon…

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  • diogenes

    I speaks volumes about where this author is coming from and who he addresses that he doesn’t mention the skyrocketing costs of the most basic necessities: food and shelter.

  • Sparticus

    Here is a hint for the Author: The Stock Market is Getting WELFARE to buy Corporate Wares and this is JERKING UP COSTS OF LIVING: DOW 25,000 … COME ON!

    Labor has been FLAT For 40-years so take that out of your Equation. This is why people cannot live today.
    This is a product of GREEDY EXPORT TO SLAVE LABOR NATIONS AND THE IMPORT OF SLAVES TO DRIVE LABOR DOWN! Also, you had the GIMP generation who short sold US Industry and Labor Unions for their early retirement. There is ZERO REP for the Worker; but the Banker Owns the Government! WAKE UP AND SMELL THE COFFEE!!!

    Housing is a JOKE … “Anyone with a Brain” can see it is being PUMPED by WALL STREET and bought with FREE government CHEESE being handed out to bankers by the TRILLION.

    If Americans were humans they would have fought back. So, on that note, I can only Complain to the Creator because HE F`d it all Up! What Are Americans? Half-breads? Criminals? Waste Product?

    • Sparticus

      The Above may be Harsh, but in a land with over 1-million Laws, and endless Prisons, one has to ask, “What Kind of People tolerate such Abuse?”

      I can think of only ONE KIND … LAME, FEARFUL and Cowardly People: SLAVES.

    • Leslie


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  • Tom M Eagle

    Hi Charles;You hit the hit the nail with the hammer here.I see people paying more for health insurance than food.I see hamburger buns are as much as the beef hamburger now?I’m in the cattle business and compare prices all the time.People will paid more for sweet food, that is snack food and cookies,cakes and pies than beef.I see that milk is cheaper than soda pop and beer and wine.For basic food is not high.

    The west coast US exports 5.5 million tons of livestock hay overseas.(Capital Press).About 90 precent of the soft white wheat is exported too.For the hay market you are export you’re irrigation water here.It takes a lot of water to grow alfalfa hay.

    For the last thing here.A lot of ground should never been farm in Eastern Washington State.The lost of top soil here will be gone in time.You can see the lost of top soil on the hills now.Thanks,Tom M Eagle

    • Natalie


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  • Sparticus

    This is all Wall Street and Wall Street being Given Welfare by the US government. Prices are run up on the exchanges –by false valuations– nothing is supply and demand anymore. Why do you not mention the Trillions given to Corporations and Bankers to buy their own Wares? Dow 25,000 is responsible for the increase in cost of goods. Government is also buying commodities, shorting gold, and playing with the paper to fix prices all with the help of corporate and other proxy agents. If the market keeps going up so will prices.

    • Sadie


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