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Thanks for posting, but it's hard to draw any conclusions from that. It would be helpful if they'd also list the numbers above and below middle class. They use 67-200% of median to define middle class. Nothing wrong with that. But also note that median household income has declined since 2000 in real terms, ~10%. That is the meaningful number, IMO. That means there is a lower bar to get into the middle class category than there was in 2000, by their definition. It might have shrunk as much from people exiting on the high side as the low side.
Until total debt comes down in % of GDP we aren't going anywhere. If you want to devalue the dollar then up the wages. Wage driven inflation devalues the dollar. It also devalues our debts. At over 350% of GDP total debt, government, personal and corporate debt, we aren't in a position to take on more debt.
That chart you linked is mostly private debt. We can print $, and erase most of that. Give every adult $10k. Those with debt get a $10k reduction. Those without get $10k with restricted use. Restricted to minimize inflation. Rinse and repeat as necessary.
We don't need inflation. Devaluing the $ means the international exchange rate. They are two very different things.
That chart you linked is mostly private debt. We can print $, and erase most of that. Give every adult $10k. Those with debt get a $10k reduction. Those without get $10k with restricted use. Restricted to minimize inflation. Rinse and repeat as necessary.
I hate to say it but I've argued that point long and hard.
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Originally Posted by rruff
We don't need inflation. Devaluing the $ means the international exchange rate. They are two very different things.
How does everyone devalue their currency against all others at the same time? By increasing wages across the board. Inflation. But using it to wipe out our debts. Japan, the EU, US.
How does everyone devalue their currency against all others at the same time?
What you are describing doesn't effect the trade balance. Domestic inflation and international exchange rates are two different things. High inflation isn't good, so why not deal with debt in a more direct manner?
The trouble is everything is measured in terms of CASH FLOW.
How many high school graduates knew what NET WORTH was over the last 50 years?
I don't know if my high school had an accounting class when I was there in the 60s. And the trouble is that accounting classes are taught as though the objective is to get a job as an accountant not to do the best job of managing one's own wealth and money.
Be a good consumer, go into debt for junk designed to become obsolete. Don't track how your NET WORTH goes down.
What you are describing doesn't effect the trade balance. Domestic inflation and international exchange rates are two different things. High inflation isn't good, so why not deal with debt in a more direct manner?
If you look at the Japanizes model. they use a high domestic savings rate that can only be used for investment in their country to balance trade, that and effective protectionism. The savings rate can be used to balance trade.
The problem remains how do all countries devalue their currency at the same time. They can't. So they can all devalue the debts at the same time by unilaterally increasing wages. Up the minimum wage laws everywhere. It brings the debts down, relative to income. Everyone needs to be doing this.
Wage driven inflation is not something we have looked at in the past. it is a new animal.
If you look at the Japanizes model. they use a high domestic savings rate that can only be used for investment in their country to balance trade, that and effective protectionism. The savings rate can be used to balance trade.
Japan has used high fiscal debt to reduce the value of the yen and maintain a high trade surplus. And this is a country with few natural resources that imports all their fuel! They have only recently decided to shift policies toward trade parity.
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The problem remains how do all countries devalue their currency at the same time.
For what purpose? Devaluing the US$ wouldn't be done to reduce debt directly, but reduce the trade deficit and increase investment in domestic production.
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So they can all devalue the debts at the same time by unilaterally increasing wages.
I think you mean "universally". It would result in high inflation, absolutely. Plus you act like "increasing wages" is something that can just be done. No one has that ability. Central banks can however manipulate the $ value and the government can issue cash to pare down debt.
Japan has used high fiscal debt to reduce the value of the yen and maintain a high trade surplus. And this is a country with few natural resources that imports all their fuel! They have only recently decided to shift policies toward trade parity.
We need to be doing more of what they did to get a big trade surplus. It was their land bubble that did them in. They needed to inflate it away, and didn't.
Quote:
Originally Posted by rruff
For what purpose? Devaluing the US$ wouldn't be done to reduce debt directly, but reduce the trade deficit and increase investment in domestic production.
All the countries are trying to do that at the same time. All of them. They can't.
Quote:
Originally Posted by rruff
I think you mean "universally". It would result in high inflation, absolutely. Plus you act like "increasing wages" is something that can just be done. No one has that ability. Central banks can however manipulate the $ value and the government can issue cash to pare down debt.
Actually we can unilaterally do it. They can universally do it. If we put a tax penalty (of 110%) on the capital gain from owning corporations that use labor at less than US minimum wage then we can unilaterally impose higher wages everywhere.
If they decide to do it on their own then it would be universally.
The minimum wage law has the power to raise wages just like that. The central banks can only influence wages. And with debt as high as it is everywhere there ability to get wage inflation is limited.
Although the topic intuitively makes sense, I do not think the survey is correct. In the report, the definition of middle income is "those making between 67 percent and 200 percent of the state’s median income". If the median income goes up, the percentage of that may go down for various reasons (more move up or move down). A good example is North Dakota. We all know there was an oil boom and the median income increased. However, the percentage in the "middle income class" dropped.
Last edited by fzx; 03-20-2015 at 01:46 PM..
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