In the past 100 years, the purchasing power of a dollar in the United States Of America has dropped nearly 95%. In economics we are taught that a small inflation rate is healthy for an economy and that it fosters job and company growth, but I often find myself questioning the legitimacy of these statements. The way I see it is that the inflation rate in this country might have helped companies grow, but at the expense of the poor and middle class.
Productivity has skyrocketed in the US since 1973 and companies have never been more profitable, yet the real wages of employees has fallen. Companies are raking in the money but instead of raising the wages of their employees, they are hoarding the money or paying it out in dividends to raise their share price. Companies today only care about taking actions that make their investors happy despite sometimes not being in the best interest of everyone. This is understandable as they are private entities, but with massive tax breaks and special treatment, the government is catering to a system that is slowly tearing our economy apart.
The only people that have the money to invest in the market and take advantage of rises are the middle to upper class who can actually keep money after their paycheck. The poor and lower middle class who are working paycheck to paycheck are finding it harder than ever to survive. Since the 50s the prices of consumer goods in regards to the average worker’s salary have risen almost exponentially. Where a family was able to survive on lower wages in the past, a lack of salary increases and a skyrocketing in the cost of living is creating a massive divide amongst Americans.
A large reason the middle class is dying is because while the poor/low middle class are struggling to survive with college loans, rent, ect. ,the rich are investing all their money into the stock market. As the companies who only care about investors, do what is best for their stock prices, a wealth gap that rivals any we have ever had in the US before is being created. The financial crisis in 2008 only helped to strengthen this divide, as the majority of people losing their homes and defaulting on their mortgages were the poor and middle class. Those who had cash at the time were able to pick up billions in cheap real estate and now own more than ever.
Inflation by the government and the use of Quantitative easing has only catalyzed the gap. While the majority of the country was trying to get their lives back together, the government was using inflation as a way of taxing their savings and income even further. The rich who had money to put into the market to avoid the inflation rate were able to profit massively. Quantitative easing forced people who were able to save to the stock market, but it also beat down those who were unable to save even further.
This problem is not a sustainable one as we have seen in history and eventually everything falls apart. If the current trend continues and people aren’t able to feed their families we will start to see radical movements in the US. If you wondered why so many people are scapegoating immigrants as the problem, its because they are losing their livelihoods to companies who only care about the bottom line. I foresee the situation becoming worse in the future, as another recession looms and the government unable to raise interest rates back to former levels, another round of high inflation could be coming.
-Calaber24p
The problem is that the government shouldn't be in charge of regulating the economy. I've never seen an instance where they do a good job at it.
Recession is a sweet simple word to describe real economic carnage to describe the pain that people feel in their daily lives.
"Oh, it's just a recession. We'll get out of it eventually".
NO! We're not going to get out of it. There is no signs of a plan. We're just in the middle of one of the worst economic storms in the last 50 years and there is no land in sight.
I think we need to come up with some newer, more colorful words to describe the current state of the world economy.
As soon as I think of one, I'll let you know. :)
The government regulates the economy so it can bail its own ass out. If you think of another word let me know :)
THIS REALLY MAKES ME GLAD THAT THE LAND MASS IS NOT DIVIDED LIKE WEALTH. If I've got the land, I can do quite well without that much wealth. The resources eventually become more important to have access to. Thanks for putting this together. Even that pesky "property tax" is nothing more than paying rent to the government for what you "own".
Also, did you ever find that girl that smelled like gooseberries?
Sadly in some places like NYC land is divided even worse than how our wealth is. And yeah I found her lol.
Yeah, I believe it. Such things are part of the reason that I wound up moving to Arkansas of all places. If I can get my hands on some cheap land with low property taxes while it still exists in America, I figured that I had better, for the sake of my family.
Glad you got your girl!
While everything you write here makes sense, what can one do to protect themselves from this obvious evil inflation? The answer seems to be gold and silver and maybe crytpo currencies like Bitcoin and Steemit but Gold is just not going up like expected over the last 20+ years. The more I think about it the more it seems like the stock market is the answer. As crazy as it sounds, stock prices factor in Inflation. For example if the dollar was to suddenly lose 50% of its value tomorrow did Amazon or Apple or Google as companies suddenly also lose 50%? It feels like the answer would be no and the stocks of those companies would double over night to remain unchanged. what do you think?
Yeah Im a fan of diversification, I think precious metals bit and especially stocks help fight against inflation if you have the money to invest. Look at how well VDC has done in the past 10 years. VDC is a consumer staples fund that takes account of companies that sell things people will aways buy no matter how bad the economy is.
I think that is why people like Donald Trump and Bernie Sanders have so much appeal... People know these stats and they see these numbers and they just want CHANGE... even if they aren't quite sure what is the best route to go.
Definitely, people who talking about extreme changes will just continue to gain more traction in the future. Just look at 1930s Germany if you want to see what happens when people cant survive in the current system, and turn to radicalism to fix their problems.
Good Point!
I know I am in the minority here, but I will say it anyways.
At any point in time, people will complain about the economy. Everyone complains about taxes (even though we have some of the lowest taxes of any major nation). We can bash the system and say we spend too much on this, too little on that, or on the wrong things. Which really is a spending policy of our own desire and one which very few are qualified to understand at a nation level.
It is easy to put up a chart on purchasing power decrease due to inflation, but that is a 'straw-man' argument. You must also take into account the long term earnings growth as well. A little inflation is a good thing, as it signifies growth. Just like unemployment at a certain level is a healthy thing at a nation level (availability of workforce and upward transition opportunities). But most will not see it from that perspective, as the simple view ie unemployment=bad is much easier to understand.
So, I would submit selectively choosing a few graphs and charts about a hugely complex subject (macro economics), in a limited environment supports the Dunning-Kruger effect and not beneficial to anyone. Instead, lets take a pragmatic approach and first agree we are not Nobel Prize winning economists on nation-state macro economics.
Instead, lets look at some practical points of our economic system.
I will leave it at that.
My point is, if we want to complain, how about we also express what we are grateful for as well? Make it a balanced conversation with Pro's as well as Con's. Because one other thing American are known for is complaining when we have so much. ie. 1st world problems. Lets choose not to be that way.
@calaber24p
Your article is simply not true. The world has been overly better off, including Americans over the past 300 years or so. Life is improving despite of economic recessions. Proof with evidence here
The rich invest their money in industries that employ the poor and middle class. Otherwise they wouldn't be rich or becoming richer. The wealth gap might be increasing but so does life quality.
Never in history you can go to a shop called McDonalds and have a full meal with just a dollar. You are just measuring the haves and havenots with your own version of equilibrium. If I have a house and a steady job and you have also a house and steady job but also earn 100000% times more, I am still better off rather than compared to 100 years ago where you had a house and job and I was living in the streets while our wealth was only 100% wide.
Don't worry. America has no "hunger" problem. Quite the opposite. It has a problem of abundance (if you could call that a problem).
if you dont consider half a dozen burgers as a meal then I dont know....
but the amount of money people had was also lower, one reason being the type of money people were using. Real precious metals and such.
I think people are starting to realize the connection between real wages and the lack of gold standard. The biggest mistake for labor of the last 50 Hearst was the organized labor didn't fight for the gold standard. Now they have to negotiate to stay even instead of make real gains.
If you feel it is time to replace the economic system, then we simply need to use the legal authority the people of the United States granted themselves in Article 5 of the US Constitution. The legal right to rebel as it is known by calling a constitutional convention to bring the government back in line legally and most importantly peacefully. During the convention you may propose any new form of economic system, and therefore you could easily return the right to create currency to the Government or to the People, and we could replace the Federal Reserve system with crypto-currencies if you wanted or any system you desired. I would suggest printable crypto-currencies to decentralize the monetary powers making money the servant of the citizens instead of the other way around.
Unless the people do something this Federal Reserve debt monetary system can literally go on forever, just constantly printing more and more currency.
I think this statement makes the assumption that the companies that grow will hire labourers. In todays "outsourcing" economy, I don't believe that is the case.
evil
when every tiny aspect of our lives is FINANCIALIZED - this is what results.
Everyone needs to be properly educated on improving their means of life values as we all have that right to this. Hopefully more people will be able to improve their lives with better understanding and availability with nw technologies.
Interesting article, I think that a lot it of our present economic problems are because of government and politicians manipulating things to their selfish benefit which has been going on for many years and getting worse.
Wont be long before the 40% is forced to live in a dot that big.
New book abaut this Bredline Britan.
We are living the decadence of the modern capitalist system, at end capitalism will end always in rich oligopoly
Thank you for the interesting text including informative pictures.
To stabilize the situation of the middle class will be one of the main tasks of the actual generations.
I think it to be very likely that true solutions for the middle class problems will not be within government programs. The nanny-state will not be the future.
Hopefully there will be serious competition in the money sector in order face the inflation problem occurring in state monopoly money systems.