Mssr. Cantillon nods in recognition.
From the Wall Street Journal via MSN, July 30:
There’s a growing gap between Americans who are battered by high inflation and interest rates and those who are actually benefiting
The third year of America’s inflation fight is widening a split at the heart of the economy.
The stock market is soaring, household wealth is at record levels and investment income has never been greater. At the same time, some families’ pandemic-era savings are running dry, and delinquencies on credit card and auto-loan payments have jumped.
Warning signals are flashing for more low- and middle-income Americans, exposing a division between people whose gains are being whittled down by elevated inflation and borrowing costs and those who are benefiting from high asset prices and bond returns. The crosscurrents are scrambling the outlook for the U.S. consumer—a bedrock of economic growth, corporate business plans and Wall Street investments.
Inflation had damaged President Biden’s re-election bid long before he dropped out of the race. Now, analysts expect Vice President Kamala Harris will broadly pitch an extension of his agenda, even as many voters blame it for exacerbating price pressures. Former President Donald Trump, meanwhile, has proposed policies including tax cuts and tariffs that many economists warn could buoy inflation going forward.
While voters decide who they fault for price hikes and which candidate might offer remedies, America’s economy continues to defy expectations of a slowdown and muscle ahead of other wealthy nations. The U.S. job-creation machine has boosted wages, recently outpacing inflation. Investors are now growing more hopeful that the Federal Reserve can tame inflation without wreaking widespread havoc.
But that could hinge on the continued resilience of consumers—and whether spending by high-earners can counteract slowdowns elsewhere. As economists await interest-rate cuts that could relieve pressure, the cumulative impact of higher prices and borrowing costs is starting to curb some Americans’ ability to keep up.
“This is the most money we’ve ever made and this is the brokest we’ve ever felt,” said Nicole Lewis, a mother of three who lives north of Flint, Mich.
Pay raises since the pandemic helped Lewis and her husband, now a city manager, double their earnings to what had previously seemed unattainable: more than $90,000 a year. But price hikes for everything from groceries to auto insurance still forced the couple to siphon funds from savings.
The 35-year-old Lewis now buys many basics on credit, juggling cards to protect her credit score without letting outstanding debt snowball. Trips to the beach and bowling alley are out. Shopping at thrift stores is in. She is now leaving her job as a medical assistant to become a teaching aide, a gig that will come with a $1 an hour pay bump while helping her cut back on child care.
“The top whatever-percent has all this money,” Lewis said. “Those people don’t live like most Americans.”
Wage gains have kept full-time workers’ weekly median earnings roughly steady since early 2020, when taking price hikes into account, according to the Labor Department. But Lewis and many others who have earned raises say they are still fighting their way back from the initial inflationary shock after the pandemic hit.
Middle- and lower-income Americans generally faced faster inflation than the affluent from 2006 to 2023, according to a Labor Department analysis, thanks in large part to housing and insurance prices. New York Fed researchers say aggressive moves to fight inflation also disproportionately hurt the poor through higher borrowing costs and a weaker labor market....
....MUCH MORE
Of course this is not a new phenomena. The Cantillon ref. acknowledges his observation—"Essai sur la Nature du Commerce en Général" c.1730—that those who are first in line to receive the increase in money supply benefit to the detriment of the rest of society.
And In September 2013's "Ben Franklin on Labor Economics (or how to create an underclass)" I intro'd with:
The easiest way to create a dependent class is to price them out of the real estate markets.
"In countries fully settled…those who cannot get land must labor for others that have it; when laborers are plenty, their wages will be low; by low wages a family is supported with difficulty; this difficulty deters many from marriage, who therefore long continue servants and single...."
Some previous posts:
"Redefining the Working Class Beyond white men in hard hats"
There seems to be something akin to an actual plan to charge the plebs everything they earn to cover food, shelter, and basic necessities and further, to drive them into debt servitude to the tune of 5% - 10% of annual income per year....
Unless You Deeply Understand How Inflation Hits Different Groups, You Don't Understand Inflation
When I say 'deeply' I mean having the empathy and imagination to actually 'feel' the emotions that result from having to comparison-shop food prices and then food prices vs other necessities."Evidence – And an Explanation – For the Recent Surge in Inflation Inequality"
It all comes down to financial assets and whether a person benefits from rising asset prices.
Lower income households feeling pressure: Campbell Soup CEO
Canned soup.
The laptop warriors who treat inflation as some sort of political game of 'gotcha' and one-upmanship are a bunch of sick mofos.
Is More Or Less Income Inequality Better For Market Returns?
Mesdames et Messieurs, welcome to Le Théâtre de l'Absurde...
"The Fed’s 2% inflation target is a source of growing liberal discontent"
This seems odd. The people most damaged by inflation are those without assets, the poor and working classes, traditional Democrat constituencies. If interested see Fed Vice-Chair (now director of the National Economic Council) Lael Brainard after the jump.
Class War: Fed Governor Lael Brainard On "Variation in the Inflation Experiences of Households"
We've been observing this dynamic for many years:
As Commended To Our Attention By The World Economic Forum: Pods For Poor Plebs To Live In
One of the things that stands out about price increases is their disparate impact on various income levels and wealth classes. Some of our comments on this brutal reality:
December 2011
...One way to foment social unrest and even violence is to promote policy's that contribute to the rising costs of necessities, food, fuel etc.
I'm looking at you Professor Krugman.
It doesn't matter to people who are getting squeezed that the iPhone 4's price is dropping or that the BLS's hedonics say they're getting better quality in new cars when the price of gas refuses to go below $3.00.
June 2022
There seems to be something akin to an actual plan to charge the plebs everything they earn to cover food, shelter, and basic necessities and further, to drive them into debt servitude to the tune of 5% - 10% of annual income per year.
September 2022
The laptop class and above are impervious to price hikes for food, it just doesn't register.
Whereas for the working class this winter there will be no spending beyond food, fuel and housing.
With maybe a shared subscription to Better Huts and Gardens for some survival tips.*
And not to put too fine a point on it:
Understanding The Practical And Political Effects Of Inflation
with these back-links:
"The Cantillon Effect: Because of Inflation, We’re Financing the Financiers"
....As noted earlier today in the outro from "The Cantillon Effect and Populism":
There are currently no pure-play pitchfork manufacturers and it has been a long-cherished dream (since 2008!) to fill the void and/or live up to my junior high school personal file description: the instigator was....October 10, 2023
"China Considers Stimulus, Higher Deficit Spending To Counter Property Bust"
I smell
OscarCantillon.In which case the thing to do is determine who will get the money first and be that person. If it is not possible for you to quickly become a member of the Chinese nomenklatura determine how to make a portfolio bet on those who are already members of the privileged class. As noted a few years ago:
One of the rules of politics is "if your country goes communist you want to be as far up the apparatchik totem pole as you can get."
Preferably a commissar or above, putting you and yours closer to the commissary.
In a socialist paradise all pigs are equal but Hugo Chavez's daughter is a billionaire.
(actually $4.2 billion)
March 2021: If interested see also any number of posts on Mr. Cantillon's revelation*:
Cantillon Effect: Why Wall Street Loves Fiscal Stimulus (and you should too)
That is, you should if you have financial assets.
If not, you're doomed to a life of poverty at whatever level the powers-that-be think they can get away with....
*****
*...The key episode in Cantillon's life was his involvement with John Law and his monetary schemes. Cantillon was opposed to the inflationist theories of Law, but he understood how the schemes worked and what their fatal flaws were. Thus, he was able to create a large fortune from the Mississippi System and South Sea Bubble. In the aftermath of these financial debacles, Cantillon wrote his famous Essai, breaking out of the muddleheaded mercantilist thinking of his day to make a pathbreaking contribution to our knowledge of method, theory, and policy. Shortly after writing the Essai, Cantillon was murdered under mysterious conditions, and his Essai remained unpublished for more than 20 years....
Tips For Doing Business In Totalitarian Countries
As this will be an ongoing series I'll keep this introduction brief..
Your overarching goal must be to achieve invisibility. Be the grey man/woman. As Chairman Mao said:
"The guerrilla must move amongst the people as a fish swims in the sea"
One
of the easiest things to do, if you are a citizen, is join the party.
You don't have to be ostentatious about it, just join. And as we learned
studying the Nazis, an earlier number was better than a later one.
As noted in the introduction to "“A Communist Doesn’t Whine — He Shows His Teeth” Communists In Weimar Germany":
One of the rules of politics is "if your country goes communist you want to be as far up the apparatchik totem pole as you can get."
Preferably a commissar or above, putting you and yours closer to the commissary.
In a socialist paradise all pigs are equal but Hugo Chavez's daughter is a billionaire.
(actually $4.2 billion)
As to where you might find opportunity, if your country goes full Weimar with the money printing, pull your beach chair up to a spot beside the fire hose and let the splashes of the sweet, sweet trillions refresh you.
Also smuggling is always a good choice, command-and-control economies tend to create huge distortions in supply/demand dynamics.
Much more to come including case studies from the former East Bloc and the pros and cons of joining the nomenklatura.