Zero Hedge: One of the enduring mysteries for conventional economists is why wages aren’t rising for the bottom 95% even as unemployment is low and hiring remains robust. According to classical economics, the limited supply of available workers combined with strong demand for workers should push wages higher.
Opinion: On Thursday, the US Treasury reported: Core PCE (personal consumption expenditure, excluding food and energy) inflation year-over-year slipped to 1.4% in July from 1.5%:
“U.S. Treasury yields turned lower Thursday after a soft inflation reading, extending a five-month streak of weak core prices data and underlining doubts about the Federal Reserve’s ability to raise interest rates one more time this year.”
Why is 1/10 of 1% important?
The Federal Reserve is charged with controlling short-term interest rates. The primary goal of the Fed right now is to reduce its $4 trillion in debt incurred during three rounds of quantitative easing (QE/money printing) that was supposed to make the economy well again.
In order to reduce its debt, the Fed needs interest rates to go up without choking off the anemic Obama recovery of 1.4% GDP. The problem is that one metric for measuring the recovery would be for inflation to rise from 1.4% to 2.
It ain’t happening, and one of the primary reasons is that QE made the rich uber-rich, while the middle class pay has remained stagnant.
It is rather simple really. The major banks were bailed out when the Fed printed new money to purchase the massive amounts of troubled housing bonds. The banks used that money to buy stocks and bonds and, wham-o Batman, gigantic wealth was created for the top 1%, while the average family languished under rising food prices and massive health care cost (Obamacare) increases.
Think back to the last three administrations. How many times did you hear that government’s primary goal was/is to help the middle class?