Inflation Is Rising, Pay Isn't

From the Kaplan Test Prep Post:

Inflation is back, with higher prices for food and fuel hammering American consumers, and this time it really hurts.

It’s not just that prices are rising, it’s that wages aren’t.

Previous bouts of inflation have usually meant a wage-price spiral, as pay and prices chase each other ever upward. But now paychecks are falling farther and farther behind. In the past three months, consumer prices have been rising at a 5.7 percent annual rate while average weekly wages have barely budged, increasing at only a 1.3 percent annual rate.

And the particular prices that are rising are for products that people encounter most frequently in their daily lives and have the least flexibility to avoid. For the most part, it’s not computers and cars that are getting more expensive, it’s gasoline, which is up 19 percent in the past year, ground beef, up 10 percent, and butter, up 23 percent.

Inflation is typically the symptom of an economy overheating. Workers can’t keep up with the demand for the vast array of things they make. Abundant dollars pursue scarce goods and services, forcing prices and wages up. The solution is simple enough: Central banks, such as the Federal Reserve, hike interest rates, applying brakes to the economy.

But the current price spike is in some ways more pernicious than the last great U.S. inflation — the steep increases of the 1970s — and harder for policymakers to address. Today, raising interest rates might make a weak economy even weaker, stifling what meager growth there’s been in wages. Moreover, higher interest would make the nation’s massive budget deficits even more expensive to finance, taking an additional toll on the economy.

Few would argue that the U.S. economy, with its 8.9 percent unemployment rate, is overheating at the moment. Rather, the global economy — in particular developing nations such as China and India — is growing so rapidly that it’s straining the available supplies of all types of raw materials.

Yeah, maybe China and India are gobbling up all the available supplies of raw materials and thus causing the rise in prices.

Or maybe all the banksters Helicopter Ben has been showering with Federal Reserve largesse are creating a commodities bubble with all that cheap money.

I suspect it's number two on the menu, but either way, the vast majority of people are going to be screwed by rising prices and stagnant wages.

In the past, the oligarchs have been able to turn that anger against poor people, ethnic people and lately public employees and union members.

But that's get harder to do as it becomes clearer and clearer that the top 5%, who now own almost 64% of the country's wealth, are doing pretty swell while it's the rest of us who are suffering and falling behind.