Looking at a long-term chart of wages, adjusted for inflation, we see that real US earnings stopped going up in the early ‘70s. Today, an average American worker earns about the same as he did in 1972. Now, that’s a Long-term Primary Trend!…a trip to nowhere over half a century.
Getting back to normal probably won’t happen. Too much of our economy now depends on very abnormal interest rates. As real rates go up, businesses, households, and the federal government will be unable to refinance. They will go broke, default, or, in the case of the feds, print more money.
US inflation came in a tad higher than expected this week. Which absolutely hammered markets in the US. Europe is in for a miserable winter of inflation too. And Australia is far from immune.
The Fed is expected to raise its key rate by 75 basis points (0.75%) at its meeting next week, putting more pressure on debtors. Some people are urging the Fed to go easy, fearing — correctly — that they might drive the economy into a deeper recession.
There’s an expectation that the government will come to the rescue should the markets tank heavily because of these coordinated rate rises by the central banks. But what if it’s different this time around?
Like so many Great Campaigns in history, the costs are likely to fall primarily on the poor, the weak, and the children. The price of energy could double; but the ‘deciders’ won’t have to explain to their children why they can’t afford heat.
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