The President says things are getting better. The economy’s improving. There will be prosperity for all in our time. But if you live outside the Washington beltway, and earn your living through honest means, you know this is essentially a delusion, an ignis fatuus.
Certainly there are pockets of real economic growth. In North Dakota, for instance, fracking technology has tapped into massive oil deposits from the Bakken Shale. The state’s unemployment rate is the lowest in the nation…just 3 percent.
Yet, by and large, things are still stuck in first gear. A new study by Sentier Research shows that Americans are worse off today than they were four years ago, at the bottom of the recession. In fact, by Sentier Research’s estimation, household income is down 4.4 percent. Here are some of the study’s key findings…
“Based on new estimates derived from the monthly Current Population Survey (CPS), real median annual household income, while recovering somewhat from the low-point reached in August 2011, has fallen by 4.4 percent since the “economic recovery” began in June 2009. Adding this post-recession decline to the 1.8-percent drop that occurred during the recession leaves median annual household income now 6.1 percent below the December 2007 level.”
According to this research, for households, the economy hasn’t recovered at all. Household incomes are not increasing. Moreover, household incomes are stuck well below where they were prior to and during the recession.
Why won’t the government admit this?
Hidden Forces of Economic Law
Obviously, they won’t admit it because then they’d have to admit their policies have failed. Additionally they won’t admit it because their policies of inflation mask the drop in incomes. Most people can tell something’s not quite right. But they’re not sure exactly what’s going on.
Twentieth century British economist John Maynard Keynes clarified it for everyone in his 1919 work titled, The Economic Consequences of the Peace…
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
Make no mistake; policies of inflation are the programs of the U.S. government – and most governments – these days. But most people look at their income statement and don’t adjust for inflation. They see that they’re making more money, or at least the same as before, and they know that, somehow, it doesn’t seem to go as far as it used to.
Fortunately, the fine folks at Sentier Research did the inflation adjustment for all of us…
Things Are Getting Better and Other Popular Lies
“After adjusting for changes in consumer prices, median annual household income declined during the officially-defined recession from $55,480 in December 2007 to $54,478 in June 2009. During the “economic recovery”, as the unemployment rate and the duration of unemployment remained high, median annual household income continued its decline, reaching a low point of $50,722 in August 2011. As of June 2013 median household income had recovered somewhat to $52,098 (seasonally adjusted estimates).”
Since 2008 Federal Reserve Chairman Ben Bernanke has tripled the Fed’s balance sheet while pushing the federal funds rate to near zero. Alone, either one of these policies is mere insanity. Alan Greenspan, Bernanke’s predecessor, and a dedicated spendthrift in his own right, was never reckless enough to try either one. Yet Bernanke has implemented them both – in tandem – as a great big monetary experiment.
By artificially lowering the price of money the Fed believes they stimulate demand and boost economic growth. Thus far, in the weakest recovery in the post-World War II era, aside from bailing out the big banks and permitting the Treasury to run up massive amounts of debt, the Fed’s scored a big fat goose egg for their efforts.
Naturally, the Fed’s actions are with the best of intentions. Yet, Americans are worse off today. Households are becoming poorer. They’re not gaining ground. They’re losing it.
“Now, today, five years after the start of that Great Recession, America has fought its way back,” said the President last month.
Despite what Obama says, you knew things were not getting better. Obama has told you otherwise. So has the Fed. They’ve been telling lies.
Sincerely,
MN Gordon
for Economic Prism
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