Of Two Minds

We’re getting a real-world economics lesson in rip-your-face-off increases in prices, and the tuition is about to go up–way up. Inflation will be transitory, blah-blah-blah–I beg to differ, for these reasons. There are numerous structural sources of inflation, which I define as prices rise while the quality and quantity of goods and services remain the same or diminish.

People caught on that the returns on the frenzied hamster wheel of “normal” have been diminishing for decades, but everyone was too busy to notice. The superficial “return to normal” narrative focuses solely on first order effects now that people can dispense with masks and social distancing, they are resuming their pre-pandemic spending orgy with a vengeance, which augurs great profits for Corporate America and higher tax revenues.

The higher they push phantom “assets” based on exponential increases in leverage, the greater the air gap between essential tangibles and fantasy. Inflation is in the news, but there are a couple of things about inflation that don’t get much coverage.

For about 1 in 4, Social Security provides at least 90 percent of their income. How many retired workers are getting less than $1,000 per month in Social Security benefits?

What does it say about our “prosperity” if we can’t even afford to equal the purchasing power of the minimum wage paid 50 years ago? It says the 1% got the mine and the bottom 90% got the shaft. Given the rising prosperity we keep hearing about, shouldn’t we be able to provide minimum wage workers the same purchasing power they enjoyed 50 years ago in 1970?

That the era of stability has ended and a new era of increasingly chaotic volatility has begun is not on anyone’s radar as a possibility. The standard debate about the future of the economy is: which will we get, high inflation or a deflationary collapse of defaults and asset bubbles popping?