Monday, April 30, 2007
America's Two Economies
I have been looking (sort of) a good piece on America's schizophrenic economy. I have been hearing about a) how good the country is do (High GDP growth, high stock market) b) how poor the middle class is doing, working long harder hours just to stay in place. Here is the piece that is paints the picture of life on the ground in America right now. This more than anything is why the Bushites are failing.
Notice all the references to inflationary effects: "groceries and gas going through the roof" and "You haven't noticed that eggs are more precious than hens teeth, and that onions now top a dollar a pound." This is what we call bad news. I had stumbled across an article that was suggesting that America's official inflation numbers were created using Enron style accounting. I suspect that real consumer inflation is a bit higher that the official numbers.
This is the type of thing that makes people angry and desperate. I remember 1993 election here in Canada were Jean Chretien didn't not have much of a plan for running Canada but he did offer hope. People grabbed that hope with both hands and swept the Liberals to power. It was a middle class revolt. That is what is brewing in America: a middle class revolt.
My sense is if you make a half a million a year or more, you're feeling pretty good about how things are going. You're benefitting from higher worker productivity and lower costs for the companies you hold stock in, and your portfolio's soaring. So you're able to shop at Neiman-Marcus and Tiffany's. We depend on you to keep those consumer spending numbers high. You haven't noticed that eggs are more precious than hens teeth, and that onions now top a dollar a pound. You don't lay awake at night wondering how you're going to afford to send your kids to college. Even if Junior is a delinquent and flunking out of his third private high school, you know you'll find a college somewhere that'll take him, because you can afford the full load of tuition and room and board.
On the other hand, the rest of you aren't so happy. You're the worker being squeezed to support that growth in corporate productivity, so you're being worked harder and longer for the same pay (if you're lucky). And, what with groceries and gas going through the roof, and the value of your house declining, you're probably losing ground in your long term financial planning. You've been priced out of the market of sending your kids to a private college unless you hand over the keys to your house and the account number of your 401(k). So you stay on top of your kids to make sure they can compete academically and get admitted to a good public university. You shop at Marshalls or TJ Maxx, and yes, those hackers have your credit card number. Let's not even talk about how much you're spending on health care. We used to call you middle class.
Notice all the references to inflationary effects: "groceries and gas going through the roof" and "You haven't noticed that eggs are more precious than hens teeth, and that onions now top a dollar a pound." This is what we call bad news. I had stumbled across an article that was suggesting that America's official inflation numbers were created using Enron style accounting. I suspect that real consumer inflation is a bit higher that the official numbers.
This is the type of thing that makes people angry and desperate. I remember 1993 election here in Canada were Jean Chretien didn't not have much of a plan for running Canada but he did offer hope. People grabbed that hope with both hands and swept the Liberals to power. It was a middle class revolt. That is what is brewing in America: a middle class revolt.
