7 ms·

Wages are declining. Not the dollar amount, but the purchasing power. The fed can pretend that they are lowering inflation, but unless we have negative inflatio

Wages are declining. Not the dollar amount, but the purchasing power. The fed can pretend that they are lowering inflation, but unless we have negative inflation, the damage is done. The higher prices are here to stay. On top of that, the measures of inflation and unemployment aren’t even tracking half the thing that contribute to the health of consumer spending.

colechristensen 4y ago
Now we’re in the opposite situation where we need inflation, price inflation lower than wage inflation. Inflation that is greater than stock index growth. Inflation that lowers the real value of debts and amassed fortunes. Or a good old stock market and housing crash to wipe out accumulated concentrated wealth with measures to keep employment up.
bruce511 4y ago
So, coming from a country with roughly 5% inflation for like 30 years or more, let me take a moment to throw some oil on troubled waters. Sure inflation means prices go up. Equally it means wages go up. Ideally in sync, but naturally sometimes a bit less, occasionally a bit more. Future-income streams like pensions are (mostly) always inflation linked (in direct or indirect ways.) no-one with half a brain would consider a "fixed income" approach to retirement. The number on the sticker is just a number. It generally flows upward. Sure its bigger now than it used to be, but then again so is my wage. (as an aside, lowering the number is deflation, and that's really bad for an economy because it encourages people to not-spend, as it'll be cheaper tomorrow. And our word "economy" can loosely be translated as "amount of spending".) So, as long as your income is inflation adjusted you're fine. If it isn't, well, take a minute today to teach your children why they should always work for/save for/invest for inflation adjusted returns.
- djbusby 4y ago
  The USA problem (one of) is that your second point: wage go up -- isn't happening.
  - listenallyall 4y ago
    Historically, inflation was usually a function of higher labor costs, therefore wages and prices often rose together. Our current inflation is a result of external factors, so prices are skyrocketing but wages are rising much less quickly.
    - WalterBright 4y ago
      > Historically, inflation was usually a function of higher labor costs That's the wage-price spiral theory of inflation, and is faulty. Inflation is always a monetary phenomenon, where the money supply increases faster than the value in the economy. Increasing wages (without increasing productivity) does not increase the supply of money, and so the increased pay means there is less money for other purposes, which depresses prices. As always, the Law of Supply & Demand is at work here.
      - gruez 4y ago
        >Inflation is always a monetary phenomenon, where the money supply increases faster than the value in the economy. This feels trivial to disprove. For instance: 1973 oil shocks causes prices of oil to go to the moon. Inflation occurs, because prices are driven up by the price of oil. No money printing has occurred.
        WalterBright 4y ago
        There was a lot of deficit spending (money printing) going on then. The proof that oil shocks don't cause inflation is simple - when the oil prices come back down, there is no corresponding deflation.
        DSMan195276 4y ago
        How are you defining inflation such that it's not dependent on the price of goods? If it is dependent on the price of goods then obviously the price of oil going up produces inflation, since the price goes up without any change to the fuel itself.
- darth_avocado 4y ago
  Yes that’s how it should work, but that’s not how it works in reality. The obvious problem is that the wages haven’t gone up meaningfully. However, a bigger problem is that the “inflation” does not reflect the reality. For 20 years since 2000, the inflation has on an average been around 2%, a few times peaking at 3%. However if you look at some of the biggest expenses a household has: housing, healthcare, education etc., the inflation has been a lot higher.
  - gruez 4y ago
    >However if you look at some of the biggest expenses a household has: housing, healthcare, education etc., the inflation has been a lot higher. Inflation (ie. the headline number you see) is already weighted to account for this. Claiming that inflation "does not reflect the reality" because a few of the basket items are growing in price faster than the weighted average doesn't really make much sense. You'd expect 50% of the items (by weight) to be growing faster than the index by definition. Also, even though housing grew faster than inflation, it's not by much[1] [1] https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1024.png?x91208 https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1...
- WalterBright 4y ago
  Inflation is how the government raises taxes without raising taxes. 1. Even if wages kept pace with inflation (and they often don't), the wage increases happen after the fact. They're at least a year behind. 2. The government defines how inflation is calculated. It's in the government's best interests to have the calculated figure be as low as they can get away with. The actual rate of inflation is likely considerably more than the official rate. 3. Inflation pushes you into a higher tax bracket. Not everything is indexed to inflation. 4. Inflation causes illusory capital "gains", and is taxed. 5. Anyone holding bonds that pays a fixed interest rate gets a haircut. 6. Most people, including the WSJ, neglect to adjust figures for inflation.
  - gruez 4y ago
    >The actual rate of inflation is likely considerably more than the official rate. Source? I don't mean linking to some site like shadowstats[1] that only claim the BLS is laying and publishes their own numbers without elaboration. I mean some sort of study that actually tries to gather price data in a methodical way (ie. no "here's my grocery receipts from 2020 compared to today"), presents them, and shows how the BLS data is inconsistent with reality. The BLS provides inflation data at a pretty high granularity[1], so you don't even have to replicate all of BLS's efforts to debunk them. [1] https://www.bls.gov/news.release/cpi.t04.htm https://www.bls.gov/news.release/cpi.t04.htm >6. Most people, including the WSJ, neglect to adjust figures for inflation. What does this even mean? Are you claiming that they never adjust for inflation? I find that hard to believe. On the other hand, expecting that they always account for inflation is a pretty high bar. As it stands right now, the most charitable interpretation is that you're claiming they adjust for inflation at anywhere between 1% and 99% of the time and you think that's not high enough, which doesn't say much.
    - WalterBright 4y ago
      They'll compare a price in one year with a price in another year and fail to discount the difference by inflation. > Are you claiming that they never adjust for inflation? Sigh. If you find it necessary to add adjectives, you've created a strawman. For example, if I say "humans have two legs" and you respond with "not all humans have two legs" that is a strawman.
- qbasic_forever 4y ago
  In America almost no one has pensions anymore. If you're lucky you have some money in a 401k or similar account that's gambling on the stock market always going up. Nothing in retirement accounts is resistant to inflation. Wages aren't going up as fast as price increases, plain and simple. People are facing something like a 40% increase in rent, groceries, etc. over the last couple years. No one is getting 20-40% raises (not without a major career change or advancement, and that doesn't scale to everyone).
  - bruce511 4y ago
    For the most part the stock market goes up, and part of this rise is caused by inflation. If the market overheats then there's a correction, but the long term trend is steadily upwards. Thus the stock market is a good hedge against inflation, but should be balanced with cash to guard against short-term fluctuations. There are certainly products and markets where supply does not meet demand. Housing in some local areas (SF etc) can be climbing steeply, whereas in other areas its flat or declining. This is not inflation. This is market-driven-economy.
- WalterBright 4y ago
  > deflation, and that's really bad for an economy That fits in with the government wanting to downplay inflation. That alone should make you suspicious of such theories. > it encourages people to not-spend, as it'll be cheaper tomorrow. And our word "economy" can loosely be translated as "amount of spending".) Economies are not driven by spending. They are driven by the creation of value. Being driven by creating money and spending it implies one is getting something for nothing, which is a giant red flag for a mistake in reasoning.
  - piva00 4y ago
    The creation of value is derived from consumption of that value, no? If something is created and has value then someone will be a consumer of such, increasing spending. If something of value is created and no one consumes that it's an oxymoron. Creation of value only exists through spending. If money is more valuable later I will hold onto my money for longer instead of spending, velocity of money goes down, less money being traded hands mean more people are less willing to part with their money to invest in some value-creation as that's riskier than holding onto cash that will be more valuable in the future. Rinse and repeat.
    - WalterBright 4y ago
      > Creation of value only exists through spending. Nope. If I grow carrots, I create value. No spending required.
      - piva00 4y ago
        Sure, you created value, for whom? In the case there's no spending: if it's for you and immediate neighbours there's a limit to that value, you can just feed so many carrots to people, over that threshold you are just creating waste, not value. You can donate them but that requires transportation and incurs costs, someone has to take those costs, which will cause spending. So it's tied to spending, if you can't sell carrots then what value do you have for the rotting ones you can't eat? Value does not exist in a vacuum.
- atkailash 4y ago
  [dead]
- jjtheblunt 4y ago
  > no-one with half a brain would consider a "fixed income" approach to retirement what if self funded from extensive savings, which generate dividends, and of which enough exists for decades of fixed income?
  - bruce511 4y ago
    If your investments are generating dividends, they they are linked to inflation (indirectly). But your point is fair, if i have plenty of cash saved I can live on that capital till I die, for some definition of "plenty".
- sacnoradhq 4y ago
  That's not how it works in America. The real purchasing power, adjusted for inflation and costs of living, of the middle and lower has been falling for decades. There is a massive increase in income at the top. Also, look at CEO to worker pay ratios. Americans, if not moderately-to-very rich, don't know how bad they have it compared to the rest of the modern world. https://www.epi.org/publication/charting-wage-stagnation https://www.epi.org/publication/charting-wage-stagnation
  - bruce511 4y ago
    I agree. American employers have failed to raise wages and American workers have accepted this as OK. That's not the fault of inflation its the fault of a passive workforce. Contrast to France where workers are organised, and motivated, and the slightest sign of pain leads to rioting. While it's easy to "blame inflation" for the decline in real wages, that's not the root cause of the problem. Of course every employer keeps talking about inflation as the cause - it deflects from the real cause.
    - sacnoradhq 4y ago
      Absolutely. There are tens/hundreds of millions of aspiring American billionaires who believe hard work for peanuts or a lottery ticket are their salvation. If American workers had any sense and self-respect, they would capture more of the value they create by forming worker-owned co-ops rather than give their blood, sweat, and tears over to investors (those who own capital and wealth) of publicly-traded companies. Lone wolf, self-absorbed, rugged-individualism doesn't scale well beyond about 1 person. The prevailing lack of both community and solidarity in the US are sources of major social and economic failure. Many Americans believe less regulation, fewer laws, and greed magically result in wealth flowing from the heavens.
andy_ppp 4y ago
The reason is that in both the global financial crisis and COVID we printed loads of money the rich kept it, effectively stealing from the poor to give to the wealthy. Of course printing in the UK ~£1.1tn will cause inflation and the poor will probably vote for fascism next time around. But at least asset prices continue to rise!
seizethecheese 4y ago
Wages are declining, sure, but from an artificially high peak. https://fred.stlouisfed.org/series/COMPRNFB https://fred.stlouisfed.org/series/COMPRNFB Also, wages and inflation are very highly coupled. Wages are a key component of prices.
- gruez 4y ago
  > Wages are declining, sure, but from an artificially high peak. https://fred.stlouisfed.org/series/COMPRNFB https://fred.stlouisfed.org/series/COMPRNFB Specifically, from all the service workers that were laid off during the pandemic because pandemic related shutdowns (eg. restaurants, resorts)
jasmer 4y ago
Yes, but that generally shouldn't mean reduced sales in nominal amounts but rather inflation adjusted amounts. Notably, the 'low end' retail outlets tend to boon in rough times. TJMaxx is doing just fine. What Walmart is signalling is not good... but if the Dollar Store is signalling down sales it's really bad. If the Dollar Store is signalling up sales, during a downturn, but Walmart is signalling down, that might actually mean Walmart is becoming a bit more middle class than we might want to think. Which is a whole other story. Note Dollar Tree does seem to be moving consistently forward [1] so this very well might be a shift in spending from Walmart to truly discount places. A quick check for ALDI USA sales (if you can find them) might fill in the blanks of this story. [1] https://www.macrotrends.net/stocks/charts/DLTR/dollar-tree/revenue https://www.macrotrends.net/stocks/charts/DLTR/dollar-tree/r...
- coliveira 4y ago
  Whatever the reason, this is not a good sign for the US economy. In a growing country, more people should be able to shop on more upscale stores compared to the past. In the US people are now moving to lower and lower scale stores, initially to WallMart and now to dollar stores. It tells that the US consumer is now moving to the lower spectrum of purchasing power.
  - jasmer 4y ago
    First, Western economies are cyclical, this is a low-point, so we have to kind of average over time, and we have to account for 'surpluses'. 'Walmart' standard of living is basically magnificent for anyone living in 1980 for example. Almost 'upper class'. It's unthinkable the quality, quantity and amazing expression of goods, selection that you can get in Walmart now, compared to 'average shopper' in 1980. Fish, lobster, sushi, vast array of breads, fruits out of season, innumerable array of packaged foods, toys and sports equipment as far as they eye can see, clothing that costs as much as a coffee. etc. and technologies that we could not have dreamed of. I'm not saying there isn't a problem, I'm just pointing out two areas, the later of which is generally overlooked.
sacnoradhq 4y ago
Purchasing power for the middle and lower have been declining for 50+ years. Total wealth is being wildly redistributed to just a handful of people. I don't see how the average US citizen can afford to raise a family. I've seen janitors sleeping in their cars because they can't afford rent.
rapjr9 4y ago
I wonder if people are spending because they feel desperate or are having a kind of PTSD reaction to the pandemic. The money they got from the government has run out, credit card debt is reaching record highs once again, yet people keep spending. Maybe they still feel traumatized and are spending to make themselves feel better with new stuff. Maybe they just got used to overriding their budgets when certain types of spending seemed essential during the pandemic (storing more groceries meant fewer exposures for example). If so, raising interest rates is going to have zero effect on this kind of spending, though running out of credit could bring it to a halt (and likely trigger new problems). People keep saying there is a growing mental health crisis and maybe this is part of it.

colechristensen 4y ago

Now we’re in the opposite situation where we need inflation, price inflation lower than wage inflation. Inflation that is greater than stock index growth. Inflation that lowers the real value of debts and amassed fortunes. Or a good old stock market and housing crash to wipe out accumulated concentrated wealth with measures to keep employment up.

bruce511 4y ago

So, coming from a country with roughly 5% inflation for like 30 years or more, let me take a moment to throw some oil on troubled waters. Sure inflation means prices go up. Equally it means wages go up. Ideally in sync, but naturally sometimes a bit less, occasionally a bit more. Future-income streams like pensions are (mostly) always inflation linked (in direct or indirect ways.) no-one with half a brain would consider a "fixed income" approach to retirement. The number on the sticker is just a number. It generally flows upward. Sure its bigger now than it used to be, but then again so is my wage. (as an aside, lowering the number is deflation, and that's really bad for an economy because it encourages people to not-spend, as it'll be cheaper tomorrow. And our word "economy" can loosely be translated as "amount of spending".) So, as long as your income is inflation adjusted you're fine. If it isn't, well, take a minute today to teach your children why they should always work for/save for/invest for inflation adjusted returns.

djbusby 4y ago
The USA problem (one of) is that your second point: wage go up -- isn't happening.
- listenallyall 4y ago
  Historically, inflation was usually a function of higher labor costs, therefore wages and prices often rose together. Our current inflation is a result of external factors, so prices are skyrocketing but wages are rising much less quickly.
  - WalterBright 4y ago
    > Historically, inflation was usually a function of higher labor costs That's the wage-price spiral theory of inflation, and is faulty. Inflation is always a monetary phenomenon, where the money supply increases faster than the value in the economy. Increasing wages (without increasing productivity) does not increase the supply of money, and so the increased pay means there is less money for other purposes, which depresses prices. As always, the Law of Supply & Demand is at work here.
    - gruez 4y ago
      >Inflation is always a monetary phenomenon, where the money supply increases faster than the value in the economy. This feels trivial to disprove. For instance: 1973 oil shocks causes prices of oil to go to the moon. Inflation occurs, because prices are driven up by the price of oil. No money printing has occurred.
      - WalterBright 4y ago
        There was a lot of deficit spending (money printing) going on then. The proof that oil shocks don't cause inflation is simple - when the oil prices come back down, there is no corresponding deflation.
        DSMan195276 4y ago
        How are you defining inflation such that it's not dependent on the price of goods? If it is dependent on the price of goods then obviously the price of oil going up produces inflation, since the price goes up without any change to the fuel itself.
darth_avocado 4y ago
Yes that’s how it should work, but that’s not how it works in reality. The obvious problem is that the wages haven’t gone up meaningfully. However, a bigger problem is that the “inflation” does not reflect the reality. For 20 years since 2000, the inflation has on an average been around 2%, a few times peaking at 3%. However if you look at some of the biggest expenses a household has: housing, healthcare, education etc., the inflation has been a lot higher.
- gruez 4y ago
  >However if you look at some of the biggest expenses a household has: housing, healthcare, education etc., the inflation has been a lot higher. Inflation (ie. the headline number you see) is already weighted to account for this. Claiming that inflation "does not reflect the reality" because a few of the basket items are growing in price faster than the weighted average doesn't really make much sense. You'd expect 50% of the items (by weight) to be growing faster than the index by definition. Also, even though housing grew faster than inflation, it's not by much[1] [1] https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1024.png?x91208 https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1...
WalterBright 4y ago
Inflation is how the government raises taxes without raising taxes. 1. Even if wages kept pace with inflation (and they often don't), the wage increases happen after the fact. They're at least a year behind. 2. The government defines how inflation is calculated. It's in the government's best interests to have the calculated figure be as low as they can get away with. The actual rate of inflation is likely considerably more than the official rate. 3. Inflation pushes you into a higher tax bracket. Not everything is indexed to inflation. 4. Inflation causes illusory capital "gains", and is taxed. 5. Anyone holding bonds that pays a fixed interest rate gets a haircut. 6. Most people, including the WSJ, neglect to adjust figures for inflation.
- gruez 4y ago
  >The actual rate of inflation is likely considerably more than the official rate. Source? I don't mean linking to some site like shadowstats[1] that only claim the BLS is laying and publishes their own numbers without elaboration. I mean some sort of study that actually tries to gather price data in a methodical way (ie. no "here's my grocery receipts from 2020 compared to today"), presents them, and shows how the BLS data is inconsistent with reality. The BLS provides inflation data at a pretty high granularity[1], so you don't even have to replicate all of BLS's efforts to debunk them. [1] https://www.bls.gov/news.release/cpi.t04.htm https://www.bls.gov/news.release/cpi.t04.htm >6. Most people, including the WSJ, neglect to adjust figures for inflation. What does this even mean? Are you claiming that they never adjust for inflation? I find that hard to believe. On the other hand, expecting that they always account for inflation is a pretty high bar. As it stands right now, the most charitable interpretation is that you're claiming they adjust for inflation at anywhere between 1% and 99% of the time and you think that's not high enough, which doesn't say much.
  - WalterBright 4y ago
    They'll compare a price in one year with a price in another year and fail to discount the difference by inflation. > Are you claiming that they never adjust for inflation? Sigh. If you find it necessary to add adjectives, you've created a strawman. For example, if I say "humans have two legs" and you respond with "not all humans have two legs" that is a strawman.
qbasic_forever 4y ago
In America almost no one has pensions anymore. If you're lucky you have some money in a 401k or similar account that's gambling on the stock market always going up. Nothing in retirement accounts is resistant to inflation. Wages aren't going up as fast as price increases, plain and simple. People are facing something like a 40% increase in rent, groceries, etc. over the last couple years. No one is getting 20-40% raises (not without a major career change or advancement, and that doesn't scale to everyone).
- bruce511 4y ago
  For the most part the stock market goes up, and part of this rise is caused by inflation. If the market overheats then there's a correction, but the long term trend is steadily upwards. Thus the stock market is a good hedge against inflation, but should be balanced with cash to guard against short-term fluctuations. There are certainly products and markets where supply does not meet demand. Housing in some local areas (SF etc) can be climbing steeply, whereas in other areas its flat or declining. This is not inflation. This is market-driven-economy.
WalterBright 4y ago
> deflation, and that's really bad for an economy That fits in with the government wanting to downplay inflation. That alone should make you suspicious of such theories. > it encourages people to not-spend, as it'll be cheaper tomorrow. And our word "economy" can loosely be translated as "amount of spending".) Economies are not driven by spending. They are driven by the creation of value. Being driven by creating money and spending it implies one is getting something for nothing, which is a giant red flag for a mistake in reasoning.
- piva00 4y ago
  The creation of value is derived from consumption of that value, no? If something is created and has value then someone will be a consumer of such, increasing spending. If something of value is created and no one consumes that it's an oxymoron. Creation of value only exists through spending. If money is more valuable later I will hold onto my money for longer instead of spending, velocity of money goes down, less money being traded hands mean more people are less willing to part with their money to invest in some value-creation as that's riskier than holding onto cash that will be more valuable in the future. Rinse and repeat.
  - WalterBright 4y ago
    > Creation of value only exists through spending. Nope. If I grow carrots, I create value. No spending required.
    - piva00 4y ago
      Sure, you created value, for whom? In the case there's no spending: if it's for you and immediate neighbours there's a limit to that value, you can just feed so many carrots to people, over that threshold you are just creating waste, not value. You can donate them but that requires transportation and incurs costs, someone has to take those costs, which will cause spending. So it's tied to spending, if you can't sell carrots then what value do you have for the rotting ones you can't eat? Value does not exist in a vacuum.
atkailash 4y ago
[dead]
jjtheblunt 4y ago
> no-one with half a brain would consider a "fixed income" approach to retirement what if self funded from extensive savings, which generate dividends, and of which enough exists for decades of fixed income?
- bruce511 4y ago
  If your investments are generating dividends, they they are linked to inflation (indirectly). But your point is fair, if i have plenty of cash saved I can live on that capital till I die, for some definition of "plenty".
sacnoradhq 4y ago
That's not how it works in America. The real purchasing power, adjusted for inflation and costs of living, of the middle and lower has been falling for decades. There is a massive increase in income at the top. Also, look at CEO to worker pay ratios. Americans, if not moderately-to-very rich, don't know how bad they have it compared to the rest of the modern world. https://www.epi.org/publication/charting-wage-stagnation https://www.epi.org/publication/charting-wage-stagnation
- bruce511 4y ago
  I agree. American employers have failed to raise wages and American workers have accepted this as OK. That's not the fault of inflation its the fault of a passive workforce. Contrast to France where workers are organised, and motivated, and the slightest sign of pain leads to rioting. While it's easy to "blame inflation" for the decline in real wages, that's not the root cause of the problem. Of course every employer keeps talking about inflation as the cause - it deflects from the real cause.
  - sacnoradhq 4y ago
    Absolutely. There are tens/hundreds of millions of aspiring American billionaires who believe hard work for peanuts or a lottery ticket are their salvation. If American workers had any sense and self-respect, they would capture more of the value they create by forming worker-owned co-ops rather than give their blood, sweat, and tears over to investors (those who own capital and wealth) of publicly-traded companies. Lone wolf, self-absorbed, rugged-individualism doesn't scale well beyond about 1 person. The prevailing lack of both community and solidarity in the US are sources of major social and economic failure. Many Americans believe less regulation, fewer laws, and greed magically result in wealth flowing from the heavens.

andy_ppp 4y ago

The reason is that in both the global financial crisis and COVID we printed loads of money the rich kept it, effectively stealing from the poor to give to the wealthy. Of course printing in the UK ~£1.1tn will cause inflation and the poor will probably vote for fascism next time around. But at least asset prices continue to rise!

seizethecheese 4y ago

Wages are declining, sure, but from an artificially high peak. https://fred.stlouisfed.org/series/COMPRNFB https://fred.stlouisfed.org/series/COMPRNFB Also, wages and inflation are very highly coupled. Wages are a key component of prices.

gruez 4y ago
> Wages are declining, sure, but from an artificially high peak. https://fred.stlouisfed.org/series/COMPRNFB https://fred.stlouisfed.org/series/COMPRNFB Specifically, from all the service workers that were laid off during the pandemic because pandemic related shutdowns (eg. restaurants, resorts)

jasmer 4y ago

Yes, but that generally shouldn't mean reduced sales in nominal amounts but rather inflation adjusted amounts. Notably, the 'low end' retail outlets tend to boon in rough times. TJMaxx is doing just fine. What Walmart is signalling is not good... but if the Dollar Store is signalling down sales it's really bad. If the Dollar Store is signalling up sales, during a downturn, but Walmart is signalling down, that might actually mean Walmart is becoming a bit more middle class than we might want to think. Which is a whole other story. Note Dollar Tree does seem to be moving consistently forward [1] so this very well might be a shift in spending from Walmart to truly discount places. A quick check for ALDI USA sales (if you can find them) might fill in the blanks of this story. [1] https://www.macrotrends.net/stocks/charts/DLTR/dollar-tree/revenue https://www.macrotrends.net/stocks/charts/DLTR/dollar-tree/r...

coliveira 4y ago
Whatever the reason, this is not a good sign for the US economy. In a growing country, more people should be able to shop on more upscale stores compared to the past. In the US people are now moving to lower and lower scale stores, initially to WallMart and now to dollar stores. It tells that the US consumer is now moving to the lower spectrum of purchasing power.
- jasmer 4y ago
  First, Western economies are cyclical, this is a low-point, so we have to kind of average over time, and we have to account for 'surpluses'. 'Walmart' standard of living is basically magnificent for anyone living in 1980 for example. Almost 'upper class'. It's unthinkable the quality, quantity and amazing expression of goods, selection that you can get in Walmart now, compared to 'average shopper' in 1980. Fish, lobster, sushi, vast array of breads, fruits out of season, innumerable array of packaged foods, toys and sports equipment as far as they eye can see, clothing that costs as much as a coffee. etc. and technologies that we could not have dreamed of. I'm not saying there isn't a problem, I'm just pointing out two areas, the later of which is generally overlooked.

sacnoradhq 4y ago

Purchasing power for the middle and lower have been declining for 50+ years. Total wealth is being wildly redistributed to just a handful of people. I don't see how the average US citizen can afford to raise a family. I've seen janitors sleeping in their cars because they can't afford rent.

rapjr9 4y ago

I wonder if people are spending because they feel desperate or are having a kind of PTSD reaction to the pandemic. The money they got from the government has run out, credit card debt is reaching record highs once again, yet people keep spending. Maybe they still feel traumatized and are spending to make themselves feel better with new stuff. Maybe they just got used to overriding their budgets when certain types of spending seemed essential during the pandemic (storing more groceries meant fewer exposures for example). If so, raising interest rates is going to have zero effect on this kind of spending, though running out of credit could bring it to a halt (and likely trigger new problems). People keep saying there is a growing mental health crisis and maybe this is part of it.