Personal Finance
How Are You Going to Keep Them Down on the Farm?
A College Degree Is Not Enough
Two Workers for Every Social Security Recipient
Carlsbad, Palo Alto, Chicago, and Atlanta
There is something missing from this thing we are calling a recovery. For most in the US it does not feel like a recovery, and for good reason: the jobs aren’t there. But for some groups it is a recovery, and more. And that reveals an even bigger problem. Today, in a summer-shortened Thoughts from the Frontline, we look at the trends in employment as well as take note of a signpost we passed on the way to finding out that we can’t pay for all the future entitlements we have been promised. It’s a short letter but hopefully thought-provoking. At the end, I note a webinar and a few speeches I’ll be giving in the near future.
How Are You Going to Keep Them Down on the Farm?
Last spring, I mentioned I was working on a book on employment with Bill Dunkelberg, the Chief Economist for the National Federation of Independent Businesses. We were hoping to get it out by this fall. In the process of researching the topic, I began to see some new patterns in the employment trends that suggest we may be going through a generational transformation, led by both demographics and technology. And while it is ultimately positive, the transition will be harder on some groups than others. In the next few months we will take some time to explore these new trends, but let me quickly lay out a few areas for discussion.
First, we may be going through a technological shift in employment not unlike that in the Industrial Revolution. My discussions recently with Dr. Woody Brock give us some insight. In 1850 the largest group of workers in the US were on farms. By 1900 the largest group was domestic workers. (Data suggest that Great Britain had twice as many domestic workers per household as the US in 1900, and Germany some 50% more.)
“The number of people in paid domestic work increased dramatically throughout the late 19th century in most European countries. The United States experienced a similar situation, which continued into the early 1900s and was largely due to the growing number of middle- and upper-class families that wanted and could afford household help. The arrival of a great many unskilled immigrants who could find no other form of employment contributed this growth.” (Britannica online)
By 1870, one in five Chicago households employed domestic workers, who accounted for 60 percent of the city’s wage-earning women. Over the next half century, domestic service represented the leading occupation of women in Chicago and the nation.
What caused the shift from farming? It was partly technology-driven. Farming became far more productive with the introduction and improvement of the McCormick reaper, new plough designs, etc., along with the spread of railroads to bring the increased bounty to cities quickly and cheaply.
As the prices of agricultural goods dropped, smaller farms became less profitable and labor moved from the country to the city. Men generally became laborers, and women migrated to domestic work. In 1900, there were few labor-saving devices. Food had to be prepared from scratch daily. Doing the cooking, cleaning, laundry, sewing, child care, etc. made for a very full day. The growing middle class in Europe and the US employed domestic help.
A College Degree Is Not Enough
A person with a college education clearly has an advantage over those with only a high school diploma or less, but it is no guarantee of security. The Georgetown Center on Education and the Workforce published a study last week highlighting the problems.
But that graph only tells part of the story. “As the Washington Post’s Dylan Matthews has pointed out, the Georgetown report misleadingly sandwiches together plain-old bachelor’s degree holders with workers who have a master’s, doctorate, or professional degree. And according to data Matthews cites from the Economic Policy Institute, between 2007 and 2011, 98.3 percent of the job gains in that combined group went to the advanced degree holders. These days, it seems we’re really in a grad school economy.” (The Atlantic)
What we see is that a college degree is simply not the ticket it was when I was young. In today’s (Saturday) New York Times, they quote the Associated Press:
“About 1.5 million, or 53.6 percent, of bachelor’s degree-holders under the age of 25 last year were jobless or underemployed, the highest share in at least 11 years. In 2000, the share was at a low of 41 percent, before the dot-com bust erased job gains for college graduates in the telecommunications and IT fields.
“Broken down by occupation, young college graduates were heavily represented in jobs that require a high school diploma or less.
“In the last year, they were more likely to be employed as waiters, waitresses, bartenders and food-service helpers than as engineers, physicists, chemists and mathematicians combined (100,000 versus 90,000). There were more working in office-related jobs such as receptionist or payroll clerk than in all computer professional jobs (163,000 versus 100,000). More also were employed as cashiers, retail clerks and customer representatives than engineers (125,000 versus 80,000).
“According to government projections released last month, only three of the 30 occupations with the largest projected number of job openings by 2020 will require a bachelor’s degree or higher to fill the position — teachers, college professors and accountants. Most job openings are in professions such as retail sales, fast food and truck driving, jobs which aren’t easily replaced by computers.”
Boomers Are Breaking the Deal
I was talking with my youngest son, Trey, yesterday. I gave him my “old” car last year, which now has about 90,000 miles on it. He said he needs to have his spark system replaced. That launched me onto a nostalgic trip, telling him about how we used to replace spark plugs when I was a kid. I explained what a gapping tool was and then went on to detail the rest of the topic. After about five minutes, he remarked that it must have been expensive to have this done. “No,” I said, “we learned to do it ourselves. Everyone could. It was just part of the ritual of getting a car and growing up. Your grandpa helped me the first few times, and then I was on my own.”
Today, I could no more help Trey learn how to replace whatever they have in his car that is an ignition system, assuming I could even find it, than I could figure out how to fix my computer.
When I was young, a car with 90,000 miles on it was getting quite old, and things had to be constantly fixed or replaced. Today, 90,000 miles is just getting started. Cars don’t wear out like they used to.
And apparently the same can be said for the Baby Boomer generation. In the past, as you approached 65 you began to think about retiring. Today, not as many people are ready to “hang up their spurs.”
The next chart is from the St. Louis Fed FRED database. The blue line is the employment level of those 55 years of age and older (scale on the left), and the red line is the employment level of all workers (scale on the right).
Note that the number of employed 55 and over has risen more or less steadily since before the beginning of the Great Recession, growing by over 4 million, while the number of jobs for all workers has dropped by 8 million and is still down by over 4 million.
Since the end of the recession, the number of jobs has grown by less than 3 million, all of which have been gained by those in the 55 year and older category! And then some: Boomers have taken “market share” from those who are younger.
The “deal” with previous older generations was that they would retire and move on, making way for the next generation. Boomers are breaking that deal. Not only are we working longer, but we intend to keep on working as long as we jolly well feel like it, and then live on to a ripe old age and collect all those retirement benefits. I will be 63 in a month or so and have no intention of slowing down. And few of my peers are thinking of what retirement looks like, either.
While the unemployment rate is fairly low and even for those 35 and older, younger workers are suffering more, and that partially explains the underemployment noted above. As I remember, when I was in my early 20s, you took the job you could get and then looked around for something better. But the bills got paid.
Just as employment went from the farm to the city, it now seems to be undergoing a new transition. I told my kids they needed to get a college education. As it turns out, I misled them. While a college education is important, they also now need a skill that an employer wants; a degree is not enough. And that is one of the reasons why Boomers, who have had the time to develop the skills, are taking job-market share.
Two Workers for Every Social Security Recipient
We will go into all this deeper in later letters; but before we close, let me briefly note that Mish Shedlock pointed out in his gonzo blog a few weeks ago that:
- As of 2012-06 the civilian labor force was 155,163,000.
- As of 2012-06 there were 111,145,000 in the private workforce.
- As of 2012-06 there were 56,174,538 collecting some form of SS or disability benefit.
- The ratio of SS beneficiaries to private employees has thus passed the 50% mark (50.54%).
Think about that a minute. There are now half as many people getting some kind of Social Security benefit as there are workers in private employment paying into Social Security. And the trend is clearly advancing. This cannot be sustained. And solving the Social Security problem is the “easy” part of the budget debate. Health care is far more difficult.
We read that one in eight families is now getting food stamps and that over 50% of US families get some form of government check each month, while the percentage of workers in the private workforce is shrinking. There is a limit to how much you can take from out of the private sector and still have a growing sector to take something from. But that is a topic for a later letter.
Carlsbad, Palo Alto, Chicago, and Atlanta
I will be doing an inaugural “Fireside Chat” with Barry Ritholtz on Tuesday, September 11 at 1 PM Eastern. This webinar will be hosted by my friends at Altegris Investments and will be available to accredited investors and financial professionals. If you have already registered with the Mauldin Circle (and are in the US), you will shortly be receiving an invitation to attend. If you have not, I invite you to go to www.mauldincircle.com and register today, so you can hear Barry and me discuss the latest news and, of course, touch on the election and what it means for investors.
I will be in Chicago on September 19, presenting at the RDA Financial Network Investor Forum, from 6:00 to 7:30 PM. The Forum will be held at the Chicago Marriott Oak Brook. This event is sponsored by Steve Blumenthal and my friends at CMG. (And congratulations, Steve, on your marriage last month!) If you would like to attend please email Linda Cianci at Linda@cmgwealth.com” target=”_blank”>Linda@cmgwealth.com.
I will be speaking at the Casey Investment Summit in Carlsbad, California on September 7-9 and then in Palo Alto Sept. 12-13, at an investment conference again sponsored by Altegris Investments.
It is time to hit the send button. I am a little under the weather tonight, but deadlines are deadlines, so I write on. But I do see a lazy weekend in front of me, with friends, good food, and great conversation. And I hope you’re enjoying your summer, too!
Your not ready for summer to be over analyst,
John Mauldin
subscribers@MauldinEconomics.com“>subscribers@MauldinEconomics.com
Copyright 2012 John Mauldin. All Rights Reserved.
In the years 2007-2012, Nobel Prize winning economists Paul Krugman and Joseph Stiglitz — along with celebrity economist Jeffrey Sachs and practically all their colleagues — failed to notice the most-important thing to happen in their field. But not noticing things came naturally, easily to them. In fact, you might say they had built their careers on not noticing things, especially the most-important thing in economics.
It was part of their professional training. It was what allowed them to be economists and to win coveted prizes and key posts in a very competitive occupation. Had they been more reflective…and more observant…they would probably be teaching at community colleges.
But that is just a part of our story. By the late 20th century, economists — especially leading economists — had ceased being useful. They had become a nuisance. They closed their eyes to what an economy actually is…and to how it works…and focused on their own world — a make-believe world of numbers and theories, with little connection to the world that most people lived in. And now in the 21st century, they are up to mischief. And part of the mischief involves not noticing things that are right in front of their noses.
The most-important single feature of modern economies is growth. Without it, neither businesses, households nor governments can pay their bills. Without it, pension funds…private and public…go broke. Without it, the stock market is doomed….and bonds get crushed when debtors can’t pay.
In fact, without growth, every government in the economically developed world faces catastrophe. Its revenues stagnate while its costs — largely driven by open-ended health and pension obligations to aging populations — continue to expand.
By the year 2012, in fact, every major government in the developed world is already in trouble. Some more than others, depending on their ability to borrow money… or to print it. The US, Japan and Britain are still technically “solvent” because they control the currency in which their debts are calibrated. They can always print money to pay their debts; creditors do not have to worry about a simple default. Greece, Italy, Spain, Ireland, Illinois and California, on the other hand, are already keeping lenders up at night worrying that they will not and cannot pay their bills.
Even on these terms, Japan and Britain stand out, each with total debt of more than 500% of GDP. But even this Everest of debt was overlooked by most economists. Rather than look out the window, they hunched over their computers and studied their formulas and their numbers, apparently unaware of the avalanche that was headed their way.
Ultimately, an economy must pay its bills. And it can do so only by drawing on its own savings and output. Debt is money that has already been spent. It is like sin; it may be fun when you are doing it, but there’s always a price to be paid later on. Debt repayment is a painful part of the cycle. And sometimes it is so painful…so enormous…that the bill can never be settled.
Britain and Japan had had their spending sprees. They had their carefree days. How will they now pay their debts? You can forget paying them “off”; no one even imagines that such a thing is possible. But they must be serviced. A lender must get something for his trouble, even if it is a pittance.
Typically, lenders demand a pound of flesh for every 20 or so pounds they lend. The present period is unusual in that regard. Growth rates are so slow, savings rates so high and lenders so fearful, that they no longer require much in the way of yield. They are happy to take no real flesh at all. The U.K. 10-year bond yielded all of 1.68% in mid-August 2012, well below the rate of consumer price increases. As for the Japanese equivalent, investors were content with 0.8%. If there were any consumer price inflation at all, investors would lose money.
Inflation rates have been going down for more than 30 years. Ever since the CPI hit a high of 11% in 1980. Investors must think they will continue going down forever. If that is so, nations such as Japan and Britain will continue to carry their debt at vanishingly low interest cost. But it would be a strange world in which markets went only in one direction. And it will be an even stranger world in which foolish investors fail to get what’s coming to them.
The word normal is in the language for a reason. It was coined to describe what usually happens after something very extraordinary has happened. It is rare for lenders to lend below the rate of consumer price inflation. In effect, they are consenting, at the get-go, to a loss. What normally happens after investors do such a thing is that they do lose money — far more than they expected. Interest rates normally give lenders a 2-4% real return on their money. So if inflation rates were to hit the mark central bankers have set for them — about 2% — and if lenders were to want the interest payments that they normally expect, Japan and Britain would have to devote about a quarter of their entire annual output just to service debt. That’s another way of saying that one out of every four dollars of GDP must be used to pay for things that were consumed…used up…and probably already amortized…years ago.
There’s another word, in English, that describes the likelihood of that happening — zilch.
But deeper than the numbers or the words themselves or the particularities of the situation circa 2012 was a whole theory of government…a “social contract” now in jeopardy. The modern social welfare state was invented by Otto von Bismarck in the mid-19th century. The idea was simple. Governments required the consent and support of the masses. That was the lesson that Republican France had taught the world and that Bismarck had learned. You could get a lot more out of “citizens” than you could out of “subjects.” The subjects of Frederick the Great might reluctantly pay their taxes…and might join his armies. But they would always keep a distance — emotional and physical — between themselves and their masters. War and government were Frederick’s business, not theirs. Monarchs might retain the loyalty of their subjects. They could claim some of their money, too. But even the Sun King, Louis XIV, the man for whom the term “absolute monarch” was coined, was lucky if he collected 10% of the kingdom’s GDP in taxes. As for his soldiers, every one of them wanted payment. In real money.
In the course of the 19th century, monarchy was gradually replaced by some form of representative democracy or republicanism. Not that democracies were necessarily better in any moral or practical way. They did not necessarily improve the lot of the people who lived in them, neither materially nor judicially. Why were they such a hit? It may have been that defensive weapons — repeating rifles — had become cheap and effective. It was much more expensive to keep an armed, subject population in line. Or it may have been a result of the spread of ideas via cheap newspapers and books. Or it may have been merely that because of the Industrial Revolution, people were getting richer and could afford more government.
Readers will find more on the role of government, its growth and efficiency, later. For now, let’s just note that parliamentary, participatory democracy became fashionable in the 19th century. The main reason was probably because it is easier to squeeze and bamboozle a citizen than it is a subject. The real genius of modern democracy is that it makes the citizen feel that the government and its workings are somehow the product of his own aspirations. If he wants more money for his retirement, he presumes he can get is — provided only that enough fellow citizens share his desire. If he wants to go to war, that too is up to him and his fellow voters. If he wants to spend more money on space exploration or ban people from saying prayers in bars, the majority — of which he feels he should be part — can do that too.
There is hardly anything he and his fellow lumpenvoters cannot do — just so long as they are of one mind on the subject. That is why you so often hear people say, ‘If we could only get together on this…” They believe solidarity is the key to success. Whatever the majority wants, it gets.
Even kings had bits in their mouths and a hand on the reins. According to the “divine right of kings” doctrine, a king was a servant of God. A king was subject as well as monarch. God himself had given them the post; they could not refuse it. Nor could they refuse to carry out the job on the terms that they believed God had prescribed. God could pull on the reins whenever He wanted.
Often, monarchs were ridden by those who claimed to represent God. In the famous example from the 11th century, Pope Gregory VII got into a dispute with Henry IV, the Holy Roman Emperor. Henry was excommunicated. How much harm Gregory’s excommunication would do him, Henry might not have known. But he didn’t want to find out. He dressed as a penitent and waited three days outside the Pope’s refuge at Canossa. Then he was admitted and forgiven.
The democratic majority, on the other hand, recognizes no authority — temporal, constitutional nor religious — that can stand in its way. And thus it deludes itself to thinking that it is the master of itself, its own government and its own fate.
“The government is all of us,” said Hillary Clinton.
More to come…
Regards,
Bill Bonner
for The Daily Reckoning
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Australian Dollar Danger!
SYDNEY, Aug 24 (Reuters) – …Fuelled by Chinese-led demand for its coal, iron ore and other resources, Australia’s economy was one of the few in the developed world to sail through the global financial crisis without sliding into recession.
But questions over whether the decade-long bull run in commodities has ended have become louder in recent weeks as data shows China heading for the slowest pace of annual growth in more than a decade, driving down the prices of copper, iron ore and other raw materials.
We have been very bearish on the Australian dollar. The reason is a simple one. It is the belief that as China goes, so goes the Australian economy.
The rationale is clear: the Australian mining sector is the driving force for GDP growth in Australia. Continued prosperity in the mining sector is a direct function of demand for commodities from China. We believe Chinese growth is falling fast, much faster than official statistics indicate. If this is true, the Australian economy has peaked in this cycle and soon the Australian dollar will feel the pain of this deceleration in growth.
From Professor Michael Pettis, finance professor at Peking University [our emphasis]:
China’s official GDP growth rate has fallen sharply – … Beijing announced that GDP growth for the second quarter of 2012 was a lower-than-expected 7.6% year on year, the lowest level since 2009 and well below the 8.1% generated in the first quarter. This implies of course that quarterly growth is substantially below 7.6%. Industrial production was also much lower than expected, at 9.5% year on year. In fact China’s real GDP growth may have been even lower than the official numbers. This is certainly what electricity consumption numbers, which have been flat, imply, and there have been rumors all year of businesses being advised by local governments to exaggerate their revenue growth numbers in order to provide a better picture of the economy.
Some analysts believe China’s growth was flat for the second quarter. But China never lets its official numbers get in the way of a good story. As you can see in the chart below, exports are tumbling across all regions. We expect this to continue. Not only because of a deepening recession shaping up in the Eurozone – the largest customer for China – but because of a secular change in consumer demand globally.
It has been about four years since the credit crunch crisis, and the US consumer is still deleveraging, i.e. paying down debt despite the fact the US government is creating more debt in a desperate attempt to maintain growth.
Though we don’t have the number for European consumers, but given how badly their economies are performing, you can expect this pattern to be similar across Europe. In fact, we suspect it could be worse as unemployment across the Eurozone is now at an all-time high and rising. So, it is quite plausible to believe the trend in China’s GDP growth will continue to fall…
…especially when you consider that Chinese manufacturing is now shrinking based on the latest Purchasing Managers Index numbers (below 50 represents contraction). Though US PMI is still expanding slightly, PMI numbers are falling for all three of the globes major growth and demand drivers:
China’s Model is flawed for the Shape of Global Economy
The reason a secular decline in global consumption is so dangerous for China is because its entire model is predicated on a sustained rise in external demand. No longer can the world absorb China’s trade surplus. [According to Professor Pettis, China’s trade surplus by 2007 as a share of global GDP “had become the highest recorded in 100 years, perhaps ever, and the rest of world found it increasingly difficult to absorb it.]
China has made massive internal infrastructure investments over the years. And this internal investment ramped up dramatically after crisis of 2008 in an effort to sustain growth. Instead, it has created huge levels of excess production capacity across many of its key industries leading to a surge in debt and bad loans not yet realized.
China’s business conditions continue to deteriorate. Cement, coal and steel prices are still falling. Overcapacity is severe in most industries. Local governments pressure loss-making enterprises to continue production to sustain local GDP. Hence, commodity prices are falling below total costs. Soon the prices may fall below variable costs.
There is another testing point ahead. If local governments want to sustain production levels, they have to arrange bank loans to support loss-making production. The central government has loosened up liquidity control. Bank lending conditions have been eased. Approvals for corporate bonds have been accelerated. It is possible that production levels would be sustained into the fourth quarter despite falling commodity prices. Of course, the financial system will suffer bad assets from propping up loss-making production.
Andy Xie, Caixin Online
The natural transition for China would be more dependence on internal consumer demand, since external demand it falling. But it is not that simple.
Keep in mind that massive internal investment is effectively a transfer of wealth from the household sector of the economy (China has lowest percentage of consumer demand relative to GDP than any country in history). This is done by artificially lowering deposit rates, and forcing consumers to keep money inside the country. This is a standard developing country model. But it is extreme in China.
The winners in such a system, known as financial repression, are the net borrowers. In China this is local governments, state owned enterprises, and real estate developers. The losers are consumers. This should help explain why consumption penetration is so low.
The reason this model is now becoming untenable is because external demand is not creating the wealth necessary to keep household income growth rising. It is why we are seeing increasing levels of unrest throughout China. But the powers-that-be, who have benefitted mightily from this growth model, have a vested interest to keep things as they are. Just keep lowering interest rates and providing us more credit, we will keep building…
But credit allocation to the already powerful players means income inequality is soaring in China. Those with political power do well, those without it do badly. More from Andy Xie [our emphasis]:
Addressing income inequality has become fashionable. There is speculation that the government will unleash a plan for improving income and wealth inequality. Unfortunately, the discussions so far are misleading at best and could incite social conflicts. Rapidly rising income inequality in China is not a result of market competition. It cannot be compared to what occurred in mature market economies at all. The rising inequality is due to asset bubbles and gray income. Both are due to rapidly rising money supply that has increased government’s role in the economy and fueled asset bubbles.
The concentration of monetary resources in the state sector has led to surging gray income. It is the other important factor in income inequality. It translates monetary growth into inflation. The cost of inflation has been spread among the general population whose fruits from labor have been devalued against rising prices. One could argue that China’s rising inequality is a policy result.
Speculative gains and gray income are a form of inflation tax on the people. They are sustained by rapid monetary growth. Hence, China’s rising inequality is a policy choice, not a consequence of market competition.
The discussions over inequality are misconstrued as rich vs. poor, as in other countries. This is totally wrong. It should be about asset bubbles, excessive monetary growth, the excessively big government role in the economy and the resulting surging gray income. There is a widely circulated view that Chinese people hate the rich. This is totally wrong, too. It is not about who is rich, but about how one becomes rich. Chinese people suspect that most riches in China are ill gotten. Unfortunately, this view is true. With widespread excess capacity, few entrepreneurs can get rich through normal market competition.
Thus, attempts for real reform in the Chinese model will be met with strong resistance from the most powerful within the country.
There are three likely outcomes here:
- A hard landing as all this wasteful spending is finally marked to market as export growth continues to deteriorate. But another jolt of credit to the system will prolong this final outcome; and only make it worse. So it is possible we see growth rebound slightly on more credit near-term.
- A lost decade situation similar to Japan’s bubble pop back in 1989. Growth and income fade’s together as policymakers and the powerful players refuse to unleash the household sector.
- A rebalancing and transition to more domestic-driven demand. This would require freeing up interest rates, letting the currency rise, and opening the capital account to allow consumers to invest outside the country. This would mean lower GDP growth for sure, but rising household income is more important to the average Chinese citizen. They would be quite happy with that tradeoff, and it would insure rising social stability.
If the US economy and European economy—China’s customers—do not recover soon, we expect a hard landing will be the path for the Chinese economy. We are not optimistic that China will be able to overcome powerful internal interests in order to follow the best path, option #3.
So, either way, we see China’s growth continuing to decelerate. It’ current growth model is dead in the water and will have to change either the easy way or the hard way. Therefore, this deceleration or crash in growth will hit the Australian economy hard. It is why we continue to believe the Australian dollar is trading at an extraordinary premium to reality.
Note: This article was originally sent to Jack and JR’s subscribers of the World Currency Trader which covers currency ETF and currency ETF Options trading ideas. It is a publication of Weiss Research and edited by Jack and JR Crooks. If you would like more information on this publication you can contact Jack and JR at info@blackswantrading.com
We hear so often about the insidious gyrations of the three “FLATIONS.’
There is, of course, inflation which we have been inured by our leaders to tolerate – as a “good.” Then there is the feared and poorly understood notion of deflation.
Even the process of inflation is poorly understood. The Federal Reserve tells us they must target 2% to 4% price inflation. But that means that each year your income (particular currency) buys less so you must earn more to keep up with inflation. Lately, at least for the past decade or so, everyman’s earnings have not increased in pace with these targets or the actual rate of inflation.
The “D” word, deflation, is an enigma, misunderstood and seldom mentioned by our leaders. But it is feared much more than inflation.
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