The Economy

It is really interesting. And smacks a bit of something similar in 1980 before inflation got really out of hand. Rich Curtain, who is the survey's chief economist noted it. What happened then was that there was rising optimism among low-income households because of their expectation that their wages would be rising. That turned out to be a precursor to a wage-price spiral that sent inflation through the roof. This is what I was noting yesterday in the discussion on here.

 

Outing alert: Goalmouth's grandpa was Jesse Livermore!

 

Is it a bad thing that I made a Jesse Livermore reference. ... but I had no idea who Brandi Love was?

Also, Jesse Livermore was known as the Boy Plunger. That would actually make a decent porn star name.

 

It's not the absolute CPI level year by year during that period. The point was the wage-price spiral. That disparity between the sentiment of the lowest earners to everyone else in 1980 may have been a precursor to clue people in about the double-dip recession that was coming. You are bringing up Paul Volcker. He jacked the Fed Funds rate because inflation was out of control. That brought about a nasty recession. ... Now jump ahead to today. Inflation is running very hot. Financial conditions, due to the Fed, are looser than they ever have been. In an astonishing way if you had fallen asleep in the 980s or 1990s and woke up today. If inflation forces Powell to raise rates aggressively. ... that optimism over wage expectations by low earners could be a similar signal to what it was then.

History never repeats itself, it sometimes rhymes, blah blah blah. Or it doesn't. SoI am not saying that that 1980 period is a script we are going to follow now, because I don't know. Rich Curtain was pointing out the similarities, htough.

I do know that generally the Fed has created a mess, on whatever timeline it plays out.

 

FWIW, that UMICH disparity in 1980 was prior to the election. It was during the summer when Carter was actually leading in the polls.

And it's simplistic to think, "Wages are higher for low-wage earners, they are getting a break for a change!"

The inflationary picture is such that their higher wages are showing up in generalized prices. And it's more than a wash. If you earn $1.10 today and it buys you what 90 cents bought you yesterday, your higher wages are meaningless. Your standard of living may be decreasing. In the case of those low wage earners, I am afraid that they are getting hit by the same forces that have hurt them throughout this period of Fed stupidity, except now the disparity between haves and have nots that they have been blowing out is going to widen. The Fed has been creating money and buying mortgage-backed securities every month, even as house prices predictably have gone through the roof (no pun intended). That is showing up in rents, up more than 3 percent in the last year if you look at the CPI report. ... and it is accelerating. That kind of thing hits low wage earners disproportionately.