disparity
The Great Disparity – Another Inevitability
Nov 15th
Based on the ideas I present in The Great Inflation, comes the idea of the great disparity.
American shoppers are splitting again: The affluent are finally starting to buy, picking up designer clothes at places like Nordstrom, while those on the lower economic rungs are still scrimping by, heading to Walmart for the basics.[Source]
This will get worse, and worse and worse. The middle class, and the poor are completely dependant on jobs to make money. The lucky middle class, and poor have job wages that are continually decreasing if not remaining the same.
There is a certain amount of inflation that happens every year. Based on this website the rate of US inflation is 2.5% +- .5%. This means that each year an employee must make 2.5% more money in order to have the same value of income as compared to the previous year. This is clearly not happening, wages are the same if not decreasing!!! Because of this each and every year more and more middle class people are becoming relatively poor. I say relatively poor because even the poor people in this country are extremely wealthy!!; compared ot the poor of other countries (digression, but true).
The rich will always be rich because their money is in the form of an investment. Something that will increase in value as a rate greater than inflation. Because of this the vast majority of rich people are completely immune to inflation. The great disparity will come as the middle class, and the “relative poor” succumb to the inevitability of increased inflation.
The only way the middle class will grow stronger is to experience increased wage, or the available of new forms of employment at a higher wage. Education does not help. I have a 120,000$ Electrical Engineering degree. It does not produce income at or even near that dollar amount.
The Inevitable Great Inflation
Oct 31st
This is an inevitability.
The United States printed more money for this bailout than any other time in history. No other country, for all of human history has done what America has done. Trillions, upwards of 10 trillion, possibly more has been printed. This is in addition to the 800 billion or so used of taxpayer dollars. This has created a debt, more than than any country in the history of the world. To pay for this debt the US has issued treasuries, bonds, and other loans to compensate. These loans will only pay back a portion of the debt created, and the rest of the borrowing will have to be payed with TAXES.
For the loans to payback the debt interest rates will need to be raised. They will need to be raised at least to preceding hights, if not higher. Were talking 15-30% or more. Right now interest rates are at 0%. The zero percent interest rate is to help stimulate the economy, allowing companies to borrow money and only pay back the exact amount that was borrowed. The effect of the 0% interest rate is wearing off, and is no longer stimulating growth. The debt is still there, and if businesses are not paying more taxes, and people aren’t buying more things (sales tax), the government will not be able to meet the tax income necessary to pay the bills. The only way to compensate is to raise taxes, and to begin to raise interest rate to increase income. This is inevitable.
What will happen when interest rates rise? Loans will become less interesting. Who will take out a million dollar loan having to pay back one million three hundred thousand dollars? How about a corporation taking out a ten billion dollar loan? This will seriously stifle business growth. What about Rite Aid borrowing money for the products on their shelves? Product supplies like Rite Aid for example, will still have to borrow the money to have the products on their shelves; and to compensate the prices of their products will rise accordingly. This effect will happen for ALL products and services.
This is the great inflation. All products and services will dramatically inflate in price. Salaries will remain the same; I don’t see congress raising minimum wage, do you? Therefore people living paycheck to paycheck will be making the same amount of money but everything else will substantially increase in price. The middle class will be significantly pused toward the poverty level, the poor will remain poor, and the rich won’t know the difference.
Two issues come to mind. The povery line is a crazy notion in the US. Poverty in the US is not povery as compared to the rest of the world. A person making minimum wage in the US is most likely in poverty. But a person making minimum wage in the US is making incredibly more money than a person from all of south and central America. In south and central America the minimum wage is much less than $5 per day!!!! Therefore a person in povery in the US is relatively not in povery compared to over a billion people in central and south American. This does not take into account povery in India, and China. Their minimum wages are even lower!!! Cents per day!!! Maybe 50 cents. So overall the US has a lot of inflation that can occur and even the poorest of Americans will still be much richer than the poor people of 2/3 of the rest of the world!!
The other issue is the rich. Rich people will benifit beyond belief from a tremendous inflation. If a 30% interest rate comes about, then a family with 10 million in the bank will be making 3 million 300 thousands dollars a year all with FDIC insurance. Their money is guaranteed along with their interest rates. This is scary. The rich are protected from the scariest aspects of inflation.
From the great inflation will come the great disparity. As stated above the poor will be poor, the middle class will become poorer, and the rich won’t notice the difference. The middle class in the US is on the way out. They are on the decline, and will be pushed into poverty. The immediate future of the US is the possible elimination of the middle class.
This is the direction that the US is going. This is pure logic, and rationality, this is scary.