Another week passes, another rally in make believe land, and another inflation report being pumped by the Bubblevision mafia as “better than expected” as per this report:
The reality is that main PCE number at 5% is over double the Federal Reserve’s target level of 2%.
The other harsh reality is that for the first time in history Personal Consumption Expenditures as a whole, in other words all goods and services consumed in the United States has exceeded personal income in total.
Let that sink in as my readers review this chart from the St. Louis Federal Reserve FRED website:
If one looks at real personal income based in 2012 dollars as the Bureau of Economic Analysis (BEA) does, then the stagnation in actual income growth since the pandemic should not be shocking:
To give my readers a historical perspective of just how significant this is, here is the sixty year chart with data from the first graph depicted above:
For the first time in measured history, the American consumer does not have enough income to cover expenses and spending. While this might seem like a bold blanket statement, those who reside in the lowest 70th percentile of income earners in America have been, and shall continue to go further into debt to maintain payments for healthcare (as mandated by law), education, foodstuffs, transportation, housing, and other services such as utilities, etc. In other words, to maintain a basic lifestyle of subsistence, not extravagance no matter what their social media and television shows tell them to do.
Let this sink in as the deflationistas proclaim inflation is over, but nay, I think we have two more nasty quarters of mild increases in month over month inflation with annualized rates far above the Fed’s target level forcing a nasty choice when they meet on June 13-14th. If they fail to nip the inflationary pattern of consumer spending and splurging along with the speculative bubble by that meeting, then a repeat of the late 1970’s Burns’ Fed may well be a direct comparison.
However, with the current heroin junkie like spending habits of the Federal government and many states, the Fed’s hands could be tied. Inflate or die may take on new meaning, especially if other economies around the world elect to abandon the dollar and export their inflation into the United States while refusing to buy any American issued debt, be it government or private. Heading into an election year, this is ominously beginning to seem a lot like a modern day version of 1979, with few if any exit ramps for an irresponsible Fed and even more economically illiterate Federal Government establishment.