Thursday, September 13, 2012

The Swan Song of Stagflation

My Budget 360
America’s purchasing power is shrinking, and so is its middle class. Since household incomes have been stagnant for well over a decade, any increase in price on one item affects the cost of other goods. Meanwhile, government debt has passed the $16 trillion mark.
Some items, like health insurance and college tuition, have gone into a bubble-like price rise. Gas is up over 100% since 2005. The household making $50,000 per year in 2005 is still making $50,000 in 2012, but seeing a larger chunk of its disposable income being sucked up by fueling the family vehicle.
When students graduate with massive loans, by default they are unable to afford their education, especially when their initial income can’t service the monthly minimum payment. Who’s lending them the money? Since government and banks are joined at the hip, loans are being made with no thought as to how these borrowers are going to repay the money. The banking industry doesn’t care since this money is federally backed. This is the same formula that fuelled the housing bubble.
It shouldn’t be possible to get $100,000 loans for a fashion, sculpture and performance degree. It is possible because banks, schools and government are all part of the machine that allows young Americans to go into massive debt for degrees that have little merit in the economy. This crony-based system extracts rents from the working and middle classes, and makes the CEO/presidents of these schools wealthy while banks skim cash paying out million-dollar bonuses and the government (the public) serves as the sucker when things go bust.
So the US continues inflating its way out of its massive debt. The markets are back to levels last seen in 2007; there are 46 million people on food stamps; the overall workforce participation rate is dismal; and the Fed is gearing up for QE3 to inflate away the mess and help its banking buddies. 
There are many millionaires in Congress. They work for big money; all we need do is examine the data to see what is really going on
source: mybudget360

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