What’s going on, Yellen
LET me explain to Fed chief Janet Yellen what is going on in the US economy. It appears she needs to know.
At her press conference on Wednesday, Yellen said of the inflation rate being suppressed, “I will not say that the committee clearly understands what the causes are of that.”
I am confounded by her committee’s lack of basic understanding of the velocity of money and its effects on the inflation rate.
Over the past 10 years, wages for America’s middle class have been flat. Some studies suggest that when inflation is figured in, wages are at the same level as in 1995.
A large minority of the American workforce over the past eight years has lost decent-paying jobs that supported them having a house, a car and medical insurance. Now they are forced to take multiple part-time jobs with no benefits just to make ends meet.
Another aspect under her purview is the lack of interest paid on savings deposits. Banks have been giving pennies for each $100 put into a savings account, all the while putting their cash on the Fed’s balance sheet and collecting a handsome rate of return.
Another point of contention: It’s a convenient narrative to say that Amazon is decimating the retail sector. But let’s face it, many Americans who used to shop at malls can no longer aspire to own a new set of clothes each season.
First of all, they no longer have a job that requires anything more than a pair of yoga pants and a shirt, or a pair of jeans and a team jersey.
These Americans have hard decisions each and every week on how to spend their meager wages.
They shop the rim of grocery stores — the outside ring where cheap protein lives — for milk, cheese and eggs. This is how they survive, not thrive.
Everything I wrote suggests that money has no velocity now. So if a dollar earned does not translate into many dollars spent as it moves through the system, because members in that system are either struggling with the present or fearful of the future, then you have disinflation.
The lack of inflation is no mystery to me. All the policies over the past decade have curbed economic growth. Just ask anyone you see shopping the rim.