The Insanity of Pushing Inflation Higher When Wages Can't Rise
Tuesday, September 5, 2017 23:19
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In an economy in which wages for 95% of households are stagnant for structural reasons, pushing inflation higher is destabilizing.
The official policy goal of the Federal Reserve and other central banks is to generate 3% inflation annually. Put another way: the central banks want to lower the purchasing power of their currencies by 33% every decade.
In other words, those with fixed incomes that don’t keep pace with inflation will have lost a third of their income after a decade of central bank-engineered inflation.
There is a core structural problem with engineering 3% annual inflation. Those whose income doesn’t keep pace are gradually impoverished, while those who can notch gains above 3% gradually garner the lion’s share of the national income and wealth.
As I showed in Why We’re Doomed: Stagnant Wages, wages for the bottom 95% have not kept pace with official inflation (never mind real-world inflation rates for those exposed to real price increases in big-ticket items such as college tuition and healthcare insurance).
Most households are losing ground as their inflation-adjusted (i.e. real) incomes stagnate or decline.
As I’ve discussed in numerous posts, the stagnation of wages is structural, the result of multiple mutually reinforcing dynamics. These include (but are not limited to) globalized wage arbitrage (everyone in tradable sectors is competing with workers around the world); an abundance/ oversupply of labor globally; the digital industrial revolution’s tendency to concentrate rewards in the top tier of workers; the soaring costs of labor overhead (healthcare insurance, etc.) that diverts cash that could have gone to wage increases to cartels, and the dominance of credit-capital over labor.
In an economy in which wages for 95% of households are stagnant for structural reasons, pushing inflation higher is destabilizing. The only possible output of pushing inflation higher while wages for the vast majority are stagnating is increasing wealth-income inequality–precisely what’s happened over the past decade of Federal Reserve policy.
The stagnation of wages isn’t supposed to happen in conventional economics.Once unemployment drops to the 5% range, full employment is supposed to push wages higher as employers are forced to compete for productive workers.
Alas, conventional economics is incapable of grasping the fluid dynamics of labor, automation, capital, globalization and cost structures dominated by monopolies and cartels in the 4th (digital) industrial revolution.
In sector after sector, employers can’t afford to pay more wages as labor overhead costs march ever higher while prices are held down by competition and oversupply. In other sectors, the rigors and supply, demand, stagnant sales and productivity push employers to automate whatever can be automated, and push tasks that were once performed by employees onto customers.
So why are central banks obsessed with pushing inflation higher? The conventional answer is that a debt-fueled economy requires inflation to reduce the debtors’ future obligations by enabling them to pay their debts with constantly inflating currency.
This same dynamic enables the central state to pay its obligations (social security, interest on the national debt, etc.) with “cheaper” currency. After a decade of 3% inflation, a $100 debt is effectively reduced to $67 by the magic of inflation. If wages rise by 3%, the worker who earned $100 at the start of the decade will be earning $133 by the end of the decade, giving the worker 33% more cash to service debts.
The government benefits from inflation in another way: incomes pushed higher by inflation push wage earners into higher tax brackets, and their higher incomes generate higher taxes.
All this wonderfulness of inflation is negated if wages can’t rise in tandem with inflation. In the view of the central banks, deflation (i.e. wages buy more goods and services every year) is anathema, and it’s not hard to understand why.
The private banking sector benefits from inflation as well. The lifeblood of banking profits is transaction and processing fees from issuing new credit. Since inflation enables households to buy more stuff with credit and service more debt, banks benefit immensely.
Deflation, on the other hand, is Kryptonite to bank profits; households earning less every year are more likely to default on existing debt and eschew new debt. As wages stagnate, an increasing percentage of the populace becomes uncreditworthy, i.e. a marginal borrower who isn’t qualified to borrow (and thus spend) more.
Unfortunately for the Fed and other central banks, there is no way they can push wages higher to keep pace with inflation. Short of creating $1 trillion in new currency and sending a check for $10,000 to every household (something central banks aren’t allowed to do), central banks can’t force employers to pay higher wages or force customers to pay higher prices to enterprises.
Pushing inflation higher while wages stagnate can be charitably called insane. Less charitably, it’s evil, as it strips purchasing power and wealth from all whose income isn’t keeping pace with central bank-engineered inflation.
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Source: http://charleshughsmith.blogspot.com/2017/09/the-insanity-of-pushing-inflation.html
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Main task of 21st century society and all social change movements
- Aim at transition to the new society of everything gratuitous services !
Otherwise, the General cleaning of Earth is imminent
Sep.2, 2017; Renewal: Sep.5 T. Tatsmaki (Japan)
All movements for change of societies on the Earth are buried in the plutocratic slave life under the capitalist system of plutocratic slave domination tyranny, and both Japanese Opposition parties and labor unions decay by activities of slight reformism.
Why don’t they aim at abolishment of the plutocratic slave domination tyranny?
British Princess Diana was killed under the pretense of an automobile accident after having told a close friend that British king’s family members are shapeshifters of reptilian humanoids.
The takeover ruler of the Earth: The planet of reptilian humanoids (4-D reptile type humanoids covered whole bodies with scales) of the Lizard and its boss: a planet of draconian lizards (5-D flying lizards with 2 legs: the official emblem of UK capital London coty) – those were swept away on April 11, 2017 by the Creators.
Important Information: Illuminati consisting of Rothchilds’ clique and their stooges: Rockefellers’ clique which are shapeshifters of reptilian humanoids of the Lizard were swept away in the end of May, 2017 by Creators and disappeared.
In Germany, a large social group is promoting the movement for “Living without Money!” and struggles.
In the UK SPGB and CPGB: The British Socialist Party and the British Communist Party are promoting the movemet for the strategic goal of “Abolish Money!”. British workers are staged a demo under a banner of “Abolish Money!” in London against G8 summit.
However, Americans and Japanese are lagging behind them.
Japanese Opposition parties have cover up these important informations in the human history due
to the plutocratic slave imbecile thought that is spreaded by education systems, parties, cooperatives, MSMs: NHK and commercial broadcast stations, labor unions, etc. These are information crimes. It is impermissible by social justice.
Chairman of JCP Kazuo Shii stated openly in late years: “we aim at the reform within the framework of the capitalist system” in Japan, and he made JCP to go over to the side of imperialism.
The U.S. imperialism has forced a major military exercises by the US-S.Korean allied forces of 200,000 people scale every year for two months from Mar.1 till May 1 and continues warmongering military exercises to WW3 through the 2nd Korean War (KW2) . They are continuing the similar warmongering military exercises from Aug. 21, 2017.
The small country North Korea carries out launch tests of ICBM and IRBM to the US, facing the crisis of the national life and death. Underground nuclear test in the North-east of N.Korea is neuclear warhead explosion tests to the US.
Japanese homeland traitor to the US Abe Admin, MSMedias, the ruling and Opposition parties have criticized N.Korea one-sidedly and virtually support the warmongering to KW2 by the US imperialism aiming at WW3.
The leadership of China demanded to stop the military exercises by allied forces of the US and SKorea. President of RF Putin stated on Sep. 5, 2017 that the crisis of NKorea can lead to the catastrophe of the Earth. EMP warheads of NKorea, Russia and China enable to turn the US into barbarous society due to destruction of all electro-magnetic infrastructures.
However, both KW2 and WW3 are never permitted by the Creators. According to a notice from the Creators,Yellowstone Supervolcano of 3 states scale in the US West and other 4 major volcanoes will erupt in Oct. 2017, and volcanic ashes more than 7m will pile up all over the US, and the US empire being the worldwide fortress of plutocratic slave domination of humankind will be annihilated.
The Creators have given everything gratuitouly. Therefore, the Earth must transit to the new society of everything gratuitous services. But, the Earth is under tyranny of plutocratic slave domination, as the Earth is under takeover domination by reptilian humanoids of a planet in the Lizard, which is stooges of draconian lizards of the planet in the Draco.
Therefore, these planets were swept away for normalization of the cosmic order by the Creators on April 11, 2017.
Thus, the Earth and about 20,000 planets of evil and corrupt civilizations will be swept away by the Creators in October, 2017. After that, these planets will transit to the 5-D planets and societies.
On 5-D planets there are humanoids having the light bodies with 12 DNAs, and they live on cosmic energy from the Creators. There are no illness and no crimes. Their life span is about 2000 years. They can create and vanish small objects, as a indian Sai Baba once created a wrist watch of Seiko brand made in Japan and a rice bowl in a Japanese TV image.
http://etatsmakijpn.over-blog.com/2017/08/the-doomsday-of-usa-and-the-earth-comes-soon.html