The author talked about the worries of the United States in 2017, thinking that ordinary people were caught in “extreme anxiety or fear” at the time, but so far most people have not improved and their lives have been harder
This week the author focused on this neglected anxiety, the problem stemming from the failure of specific public agencies to complete their unique tasks.
Contrary to popular belief, the Federal Reserve System does not operate independently, nor does Trump act as the United States President does. According to the United States Constitution, the Federal Reserve has taken orders from Congress, and its monetary policy goal is to “promote the highest employment rate, stabilize prices, and maintain long-term interest rates at a moderate level.”
At present, the long-term interest rates in the United States are certainly at a moderate level. Although wages and the quality of employment may not be satisfactory, the employment rate is at an all-time high. As for prices, many goods and services are difficult to say, but their main customers are low-income people who account for 60% to 70% of the population.
The Fed believes that the average annual inflation rate of 2% is equivalent to “price stability”, but the decimals are afraid of long-term calculations. The chart shows that the consumer price index (CPI) of all items has increased by nearly 20% in the past 20 years. Moreover, the CPI may not be able to reflect the true inflation rate, and the price increase of some necessities may be far higher than the average level. No wonder the ordinary people are anxious.
However, the Fed did not notice the miserable situation of the common people or regarded it as a problem. Instead, it felt uneasy that the inflation rate had not risen to 2% for many years. So the Financial Times reported two weeks ago that the Fed may soon revise its policies.
The Financial Times points out that the Fed is considering introducing new regulations that allow inflation to exceed its target of 2%, and the interest rate policy has changed dramatically. The newspaper interviewed several former or incumbent policy makers, and showed that once the Fed fails to meet the standards, it may temporarily raise the threshold to accommodate the soaring inflation rate, so as to avoid the deep rise in US prices.
In other words, the Fed now hopes that the inflation rate will far exceed 2% for a long time, and disapproves that its low-interest policy may be the “culprit” of low inflation. My friend Avalon Advisors chief economist Samuel Rines recently discovered that no matter whether inflation is too high or too low, the Fed will temporarily ignore it as a problem. Whether it is the CPI or the Federal Reserve ’s favorite personal consumption expenditure price index (PCE) data, it shows that potential inflation is unlikely to rise soon.
The Fed believes that it has “tamed” inflation, but its Zero Interest Policy (ZIRP) and quantitative easing (QE) measures have pushed prices in the real world higher than the levels indicated by the CPI or PCE. High inflation mainly affects the prices of assets such as stocks and real estate, which in turn push up prices such as property prices. Aggregate inflation remains intact, only because of the development of technology and globalization, which lowers the prices of manufactured products, while the shale gas technology revolution is driving down energy prices.
For ordinary wage earners, rents keep rising and medical insurance is an astronomical figure. Children must bear a heavy load of debt when they go to college. Although the salary rose slightly, it failed to keep up with living expenses. However, politicians boast that economic improvement depends solely on its remarkable policies, and it is no wonder that ordinary people are worried.
Globalization drives up suicide rates
In addition, the author also mentioned that the white middle-aged man “died in despair”. The American Medical Association (AMA) released a report in November this year, showing that the average life expectancy in the United States has continued to increase for many years, but has fallen in the past three years. All-cause mortality has risen since 2010, and death rates have risen in some age groups even since the 1990s.
The AMA points out that the increase in mortality is mainly due to the increase in cases of young and middle-aged people dying from special causes (such as overdose, suicide, and organ system diseases). The problem has surfaced since the 1990s and has spread to various ethnic groups. The Ohio Valley (Ohio Valley) ) And New England are the hardest hit areas.
The United States has been plagued by the opioid crisis in recent years, leading to rising mortality rates. With the advent of globalization, a large number of factories in the Midwest and New England have closed, and the economic transformation has become a killer. The author compares his heart to himself. The under-employed blue-collar workers only know that they will be physically labored for a lifetime, in exchange for physical strain, but those in power are indifferent. Life is pressing, and some workers suffer from depression. Many of them have ended in tragedy and died of overdose or suicide.
Medical science can find treatments, but only Americans who can pay for the drug will benefit, including those 65 years of age with Medicare, poor people eligible for Medicaid, and through employers Contributors who work for medical insurance. So what about self-employed people or “gig economy” employees? They have very few medical benefits.
When people reach middle age, they are ineligible to apply for health care subsidies and purchase medical insurance through Obamacare. The premiums are also amazing. Take Luke Gromen, founder of My Friends macroeconomic research company Forest for the Trees, for example. He provides medical insurance for $ 1286 a month, or $ 15,432 per year, but plans to provide only basic medical examinations. To enjoy other medical items, he must Spend another $ 125,000. Assuming self-employed people make $ 100,000 a year, according to the Grumman case, 27.9% of total income is spent on medical insurance.
Let’s also assume that the self-employed person’s Social Security contribution exceeds $ 12,000 and Medicare’s contribution of $ 3,000, plus federal income tax, state and territory government taxes, and tax and medical insurance contributions are deducted, leaving only 4.5 Ten thousand dollars to support the family. If a family member is seriously ill, even if they buy medical insurance, they may still bear medical debts and even face bankruptcy. Of course, they do not intend to vote for politicians calling for tax increases.
Therefore, once the authorities raise the income tax, it will inevitably cause social repercussions. Remember the cause of the French “yellow vest” demonstrations? The French government levied a fuel tax, which was originally a trivial matter, but the public was already angry with the government, and the increase in taxes was even more fueling.
It is true that the United States has the best medical system in the world, but it is also the most expensive in the world. Last year, the OECD conducted a study of many countries and found that the average medical expenditure per person in the United States is more than $ 10,586 per year, the highest in the world, and $ 5,986, which is second to Germany. India packs the tail, with locals paying an average of $ 209 per year. Medical spending has negatively impacted the economy, and the United States must discuss reforms to the healthcare system without delay.
Low economic benefits of university
Medical spending is just one of the annoyances of Americans, and education is equally nerve-wracking. As the scope of work becomes more complex, young people must receive more education, so parents push their children into college. As the demand for admission to universities increases and the pace of degree growth slows, tuition fees continue to rise, and students (and their families) must borrow to pay tuition fees.
Is it worth the money to go to college? Although the Fed still believes that the average inflation rate of 2% is too low, in fact, real wages have fallen since 2000. Despite higher university tuition, graduates have failed to reap the economic benefits. Suppose that readers graduated from college in 2000 and had to set up books, they must provide books for teaching. However, they found that college tuition has skyrocketed by 130% in 20 years, which is much higher than the inflation rate. In addition, the head of the family must provide comfort homes to take care of the health of their children. Expenditure is compulsory and the increase is much higher than the inflation rate.
The author expects that even if the Fed is dovish, CPI / PCE inflation will not rise. According to the current policy of the Fed, it is expected that asset bubbles will occur, the prices of some products will fall, and the prices of other commodities will rise or remain stable. Unfortunately, relevant measures have failed to resolve the worries of the elderly.
However, in addition to the Federal Reserve, Trump also thought that inflation was not a problem. He tweeted on December 2 stating that the Fed must reduce interest rates (little currency) and relax monetary policy so that the United States can compete with other countries.
If Trump’s widely adopted inflation indicators, such as the CPI, are true, but a long-term inflation rate of 2% is definitely not equal to “little inflation.” In fact, Trump is so wrong that the necessities of the American middle class, in which millions of voters voted for him in the last election, have become increasingly expensive.
Therefore, politicians must introduce policies to improve the lives of the middle class so that they can afford daily expenses again, but lowering interest rates must not work. Recently, my friend Bleakley Advisory Investment Director Peter Boockvar pointed out that the average price of a new car in the United States is 34,000 US dollars, and the median annual household income is 64,000 US dollars. New cars are expensive, and because millions of people cannot cope with urban rents, they have to relocate to distant suburbs, drive to work, and work for meager jobs.
Millennials living in elders
When I collected information, I found that columnist Emily Guendelsberger’s article in Time published the bitterness of low-paid work.
Gerndelsberg lamented that he never thought it would be so hard to work for Amazon for two weeks, walking 15 miles a day and squatting hundreds of times. Physical labor can still cope, but the productivity of the robot must be reached, and the mental stress generated is difficult to bear. Technology forces workers to be incredibly efficient, squeezing them every minute and every second. The bar code scanning gun she uses, like a personal digital manager, is supervised and timed for every process. Whenever a job is completed, the bar code scanning gun immediately sends a new job, and the time is instant. If the “Snake King” time (called a time off task by Amazon) is too long, it will notify the manager. Workers can only sit idle for 18 minutes, including time to go to the toilet and drink water. The working environment is scary, it feels isolated, and it’s crazy to repeat rigid work.
Although the income of the poor in the United States is still higher than the global average income, Philippa Dunne, editor of The Liscio Report of My Friends Financial News, pointed out that the living standards of the older generation (post-war baby boomers) are far higher than Gen X Millennials. Although economic theory states that gross domestic product (GDP) growth ultimately benefits everyone. But some people have a hard life and can’t wait at all, preferring to adopt a radical solution. With technology eroding high-paying jobs, low-income people are living hard, and it is simply difficult to “wait for good times.”
To make matters worse, the recession is inevitable. The Wall Street Journal conducted a survey. One-third of the economists surveyed believed that the recession would come next year, and nearly two-thirds expected to hit in 2021.
Quill Intelligence Chief Executive Officer Danielle DiMartino Booth pointed out last week that during the seven months to October, non-manufacturing job growth slowed, with the growth rate falling by less than 2%. The ADP employment report also confirms this, showing the loss of non-manufacturing jobs in various industries. The Sino-US trade agreement deadline and the Federal Reserve Board injected liquidity into the market and continued to dominate the market trend. The economic cracks continue to widen, and although they can finally survive, the market will pay attention to related issues only after the US non-agricultural data weakens.
Therefore, it is not surprising that 80% of the population at the bottom of the income pyramid feel anxious and depressed. Unless there is a recession in November next year, past history suggests that Trump will succeed in reelection. Although the recession may be avoided next year, it may not be avoided in 2021 or 2022, and the Democratic Party may return to the White House in 2024. The US federal government’s fiscal deficit continues to swell, and the annual deficit may soar to more than $ 2 trillion. I expected that Democratic candidates who followed the populist route would easily enter the White House, then ordered a tax increase, and the economic downturn made a comeback. The Federal Reserve will launch large-scale quantitative easing measures and introduce a zero-interest policy.
The above problems will not only occur in the United States, but also spread to other developed countries. The Fed believes that the inflation rate is maintained at 2% and pursues a zero-interest policy. The federal government has a large fiscal deficit, which helps the economy to some extent, which is incredible. Political differences in the United States have left Democrats and Republicans unable to compromise, meaning the problem will only worsen. The author is worried that it will not be possible to unite the American people until the extremely anxious “big reset” is approaching. Recalling the tragic situation of the 1930s, I hope that this time it is economic turmoil rather than large-scale wars that awaken the people to unite.