Tuesday, April 3, 2012

The Creeping Cost Of US Inflation Brought On By Our Toilet Paper-Status US Dollar

There are unintended consequences when policy aims at depreciating a currency in favor of bolstering an ailing banking system.  The Federal Reserve has been on a multi-decade mission to lower the value of the US dollar.  The primary purpose of this mission is to inflate banks into solvency as they try to work their way out of the massive financial crisis.  The amount of troubled real estate loans is still impressive when we look at the temporary sanctuary being provided by the Federal Reserve on their overloaded balance sheet.  This luxury is not afforded to your common household and consequently many Americans are now facing higher and higher costs in items like energy even though demand is slightly lower.  This occurs for a variety of reasons but a main driver is the declining purchasing power of the US dollar.  This permeates over into the employment market that is largely being driven by lower wage positions.  Inflation is creeping back into the economy.

Consumer inflation now edging back up
Since our economy is fantastically debt based and debt is the medium of exchange, more debt is likely to produce higher prices given the same amount of goods.  Typically this equation is leveled at the money supply but our system is one in which debt rules supreme.  While households are in the painful process of deleveraging, debt has increased overall because of banking bailouts but also government spending.  For this, we are seeing consumer inflation pickup:
consumer inflation
The inflation rate has been moving up since the crisis hit a trough in 2009.  Americans are facing higher prices in a variety of sectors including healthcare, energy, food, and higher education.  Ironically inflation is hitting in many of the cornerstones of what was once thought to be part of a middle class lifestyle.  The recent push in prices has largely come from the higher prices in energy:
Total energy costs are up 7 percent over the last 12 months while wages have gone stagnant.  Gasoline has seen the largest push up in the last year moving up by 12.6 percent.  Looking at food, the total cost of food has gone up by 3.9 percent over the last 12 months.  Of course much of this is synergistic with the rise in energy given that food is transported and also produced with high levels of energy usage.  The interesting point here is that energy usage overall has not necessarily surged in the US to justify this movement.  This is largely being driven by an overall depreciation in the US dollar:
us dollar
The US dollar has lost over 50 percent of its purchasing power since the 1980s.  It is no coincidence that global goods like food and energy are now more expensive.  This is problematic since Americans are seeing little growth in their wages.  The stagnant wage dilemma has been in effect for well over a decade now.

Impact of low wage employment
Just take a look at some of the top employment sectors in our economy:
employment by sector
The top three employment fields in our country are:
1.  Office and administrative support work
2.  Sales & Related
3.  Food preparation and serving related
In the past, a large portion of our labor force was in good paying manufacturing positions.  Now, the low wage labor force dominates. This is a major driving force for the slow disappearance of the US middle class.  Some of the higher paying positions require high levels of specialization and schooling, certainly in healthcare and technology positions.  These industries however employ a smaller part of the entire labor force as the chart above indicates.
Overall there are many challenges looming on the horizon.  There is definitely a divide in the country where the middle class is shrinking.  Many of the good paying jobs are in what are known as the STEM fields (science, technology, engineering, math) and on the flip side you have many colleges for example catering to fields that are lower paying yet charging absurd fees pushing many students into enormous debt.  The for-profits in many cases produce degrees that yield very little return once students graduate.
This is why another interesting chart to examine is the number of positions opening up and those being hired:
job openings job hires
While job opening have certainly moved higher up, I find it interesting that actual hires have been rather steady since the recession ended.  Could it be that many of the jobs in demand are simply not finding the needed skills in the current market?  This trend is likely to accelerate and many on the edge of the middle class are being pushed off into the working poor.  46,000,000 Americans are on food stamps even though we are years into a recovery.  Since many of these people have less disposable income and a larger portion of their money goes to food and energy, the massive inflation in these two segments of our economy are going to hit them much deeper.  If you look at banking profits thanks to generous bailouts by the Federal Reserve and subsequent depreciation of the dollar impacting the working poor, you should get a better sense which segment of our population is taking the brunt of this economic restructuring.


Anonymous said...

Hi, its nice post on the topic of media print, we all know media is a enormous source of information.

Feel free to surf to my weblog: sign And symptoms of Asthma

Anonymous said...

Great infoгmation. Lucky me ӏ recently found
your blog by accident (stumbleupоn). I've saved as a favorite for later!

My blog - short hairstyles

Anonymous said...

Having a business online will need you less money in contrast to opening
for restaurants or any type of business.
It may also help you figure out what your mission statement could be.
You can perfect it, but you can't perfect it until you.

Also visit my web page: Howtomakemoneyonlinehq.Info

Anonymous said...

When I made the goal to start traveling, I had no money and didn't know even know where or when I was going, but I needed a passport before I could do either, so guess where I was the next day. These installation disk can be used to install the hard disk on your computer (Most are packaged with backup software). The more detailed you can write out your plan, the better.

my web-site :: http://howtogetapassporthq.org/

Anonymous said...

Another available treatment option that can be done at home without a prescription is a topical ointment.
This article may be freely reprinted or distributed in its entirety in any ezine, newsletter, blog or website.
Females and males have the same chance of developing them.

Feel free to visit my blog - dermasil skin tags (www.kvdesign.net)

Anonymous said...

You can even move your hands unevenly or alternatively pinch more material
from each hand to create different designs.
Wearing a power tie outfit to work is implied declaration of your intent to eventually work your way up to the boss' corner office with the great view. Needless to say, the entrepreneur must also require thorough hands on knowledge about visa regulations, immigration procedures, places of tourist interests, political situations, accommodation and transportation trends, festivals, history and culture, and all other aspects of the designations offered.

Stop by my web site; step by step how to tie a tie [howtotieatiehq.org]

Anonymous said...

(Click here to learn more about overtraining) This step also includes
motivation and dedication. More Workouts: One needs to tone
up the extra weight one gains so that one doesn't end up obese. This is why one needs to exercise regularly to gain muscle mass.

Feel free to visit my website: how many calories do i need to gain weight (howtogainweighthq.org)

Anonymous said...

My brother recommended I might like this web site.
He used to be entirely right. This put up truly made my day.
You cann't imagine just how much time I had spent for this information! Thank you!

Feel free to visit my weblog; Auto Insurance Quote

Anonymous said...

The title, of course, should be the name of the website, so set it as appropriate based on the
example below. Many domains offering free web sites also feature free online tutorials that will help you
write your web pages. A style sheet is a separate file that contains all the instructions for the styling
for your website.

Also visit my blog post; how to make a good website for free - -

Anonymous said...

Right now it sounds like Wordpress is the best blogging platform out there right now.

(from what I've read) Is that what you're using on your blog?

Here is my webpage ... loans home ()

Anonymous said...

I usеd tο be able to fіnd goоԁ infoгmatіon from youг blоg posts.

Feel frеe to visіt my blog рost - how to get rid of acne

Anonymous said...

Howdy just wanted to give you a quick heads up and let you know
a few of the images aren't loading correctly. I'm not sure why but I think its a linking issue.
I've tried it in two different browsers and both show the same results.

Here is my web site ... how to make french toast