A real recovery, sufficient to begin healing the
enormous damage to our workforce and pull government debt out of its death
spiral, would be obvious. We wouldn’t have economists peering at spreadsheets
with electron microscopes to detect it. Why should anyone celebrate an economy
that leaves most workers with declining wages and a growing burden of debt?
Even left-wingers agree, uncomfortably, that
“income inequality” got much worse under Obama, as the rich got richer, while
the poor… didn’t. Left-wing analysts will tie themselves in knots trying to
shift blame away from Obama and his policies for this state of affairs, with
arguments that boil down to “this proves we need even more central planning and
socialism to make everybody equal!”
Much of the debate over the maybe-recovery concerns
the manipulation of government reports: the sense our vast bureaucracy is
cooking the books to make the economy look more robust than it really is. A
persistent complaint concerns the way inflation has been hidden, or almost
redefined out of existence. (Ed Butowsky discussed this bureaucratic
sleight-of-hand on Breitbart News Radio in November, noting that the government
began concealing consumer inflation decades ago with some eye-popping formula
changes.)
Now comes a fascinating article from Wolf Richter
at Business Insider, which brings inflation games, currency manipulation, and
near-zero interest rates together, into a unified field theory of how very low
nominal consumer inflation has concealed skyrocketing asset inflation… leaving
middle-class and low-income workers stuck with flat wages and debt slavery.
Governments across the industrialized world made
themselves look better by tinkering with the money supply, lowering the bar for
macro-economic success… and sold the Little Guy shackles of debt, at discount
prices.
Richter’s key insight is that quantitative easing
(QE, or “central banks printing lots of money” in layman’s terms) and near-zero
interest rates for loans caused very little consumer inflation, with a few
notable examples, so we’ve been treated to plenty of headlines about how
inflation is totally under control… but QE caused “rampant asset price
inflation, with stocks, bonds, real estate, classic cars, art … all
skyrocketing over the years.”
In other words, the things rich people buy and
trade have inflated, but most of life’s necessities and modest luxuries have
not. That’s because, as Richter puts it: “The money never went to consumers in
the form of wages. They would have spent most of it, thus driving up demand
that could have created some inflationary pressures in consumer prices. But
they never got this money.”
Unfortunately, because QE funneled money into big
corporate and investor interests, wages flattened or declined, while household
spending power for the poor and middle class declined. Low interest rates made
it easy for them to borrow money to make up for lost purchasing power,
especially for a few big-ticket purchases that have inflated enormously over
the years – particularly health care and higher education. President Obama’s
mind-boggling expenditures on both of those goods have done absolutely nothing
to slow their inflation – on the contrary, ObamaCare’s meddling with student
loans caused that debt bubble to explode.
Richter’s sobering diagnosis of what the Federal
Reserve has done to workers:
The Fed keeps a hawk’s eye on wages, especially in
the lower 80% of the workers. Its goal is to provide cheap labor to corporate
America. And when wage inflation ticks up, the Fed can get quite radical about
rate increases.
But because cheap labor makes for bad consumers,
the Fed is trying to make cheap debt available to them, turning them into debt
slaves, problem solved, for the moment.
So this is one lesson we learned: QE channeled to
financial and corporate entities causes asset price inflation, not consumer
price inflation. And it tends to exacerbate wage deflation at the lower 80% of
households.
One of the exceptions is rent. When residential
property prices soar, rents tend to follow. And rents have increased sharply in
many cities. But unlike stocks, people have to live in these units, and when
rents move beyond their reach, all kinds of things happen, including property
price crashes.
That sounds like a far more clear and terrible
example of “trickle-down economics” than anything liberals have attempted to
slander with the term. Obama built on years of monetary manipulation to create
an economy where the government is printing dollars and stuffing them in the
pockets of big corporations and wealthy investors, vainly hoping they would
invest the money in a way that created jobs, while the media cheerfully pumped
out politically-useful stories about a roaring stock market. (Richter notes
that what actually happened was a tsunami of money pouring into high-risk,
high-yield investments, producing the combination of gluts and shortages that
truly free markets are highly resistant to.)
Efforts to create a “perfect economy” tend to
collapse into such absurdities as ballooning debt to pay skyrocketing prices
for an increasingly poor higher-education product, or phantasmal dollars
pouring into unproductive sectors that end up drowning in money. Central
planners have a unique ability to annihilate wealth, leaving society with
staggering debt levels – including our almost incomprehensible state and
federal government debt – but very little to show for it.
Free markets can be rougher on some people in the
short term, but they are far healthier over the long run. Winners and losers
are discovered by fortune, rather than being assigned by political fiat, and in
the process genuine needs are met. Wealth rises and falls, but it doesn’t just
evaporate. By now everyone should understand that only real demand, and the
exhilarating competition to profitably meet it, produces a robust job market
and wage growth. (Did anyone really need further lessons on that score, after
watching President Obama laugh it up after he discovered there’s no such thing
as the “shovel-ready jobs” he extravagantly promised?)
The Western world is moving rapidly toward a
stagnant feudal system populated only by rich aristocrats, rich government
officials, and a vast lower class that needs welfare transfer payments to
survive. Debt-burdened workers with flat wages, shaky job prospects, and
government subsidies for their basic needs are serfs, not a vibrant and
independent middle class of entrepreneurs selling their labor to the highest
bidders.
If that vision of the future sounds nightmarish to
you… well, you’re not a socialist. The Left sees the final and irreversible
subjugation of the Middle Class at hand. Low-inflation, low-interest,
low-growth debt slavery produces a society with little energy or inclination to
challenge its ruling class.
Instead, be respectful of your betters and
dutifully supply them with your votes, and they might just knock a few points
off the interest rates on your loans, or kick your subsidies up a bit. Currency
manipulation has combined with socialist politics to turn the road to serfdom
into a superhighway.
