Abraham Thomas and the rest of the Quandl.com team gave us permission to publish the following presentation.
The Fed has been trying to boost employment by keeping interest rates way low.
The theory is, companies will be more willing to borrow and invest in their businesses if banks are giving them good opportunities to do so.
The Fed has acknowledged its easing policy has not come without costs, especially for savers.
But on the surface, inflation has remained stable.
It’s not quite so simple, however.
In many key areas middle class folks count on, prices have gone up severely.
The following charts demonstrate the extent of the problem.
But wait. Let's dig a little deeper into the numbers. What are the things people spend money on? Consider the essentials first. Food prices are rising faster than inflation:
Food, energy, shelter, health care, education, professional services — all rising faster than CPI. In some cases, significantly so. Meanwhile, what has been growing slower than CPI? You guessed it: wages.
You would think that low interest rates night ease the burden. But no. LIBOR (the rate at which banks borrow money) may be close to zero, but the average credit card interest rate is unchanged from 10 years ago at 12%
It's not just the banks that are doing well. The combination of stagnant wages, reduced payrolls and high prices benefits all companies:
Who owns these stocks? It turns out that 80% of all stocks are owned by the richest 10% of Americans:
(This number is up from 75% at the turn of the millennium; stock ownership is becoming more, not less concentrated).
- the prices of many essential goods are rising far faster than CPI
- wages, on the other hand, are rising slower than CPI, and many Americans remain unemployed
- to plug the gap, families have to resort to credit card debt at ruinous interest rates
- which contributes to the record profits accruing to banks and large corporations
- whose stock prices are at all-time highs, helping the rich who own most of these stocks
No wonder the 99% are angry!