“Inflation” and America’s Accelerating Class War

“Inflation” and America’s Accelerating Class War by Charles Hugh Smith for Of Two Minds

Those who don’t see the fragmentation, the scarcities and the battlelines being drawn will be surprised by the acceleration of the unraveling.

I recently came across the idea that inflation is a two-factor optimizationproblem: inflation is necessary for the macro-economy (or so we’re told) and so the trick for policy makers (and their statisticians who measure the economy) is to maximize inflation in the economy but only to the point that it doesn’t snuff out businesses and starve workers to death.

From this perspective, households have to grin and bear the negative consequences of inflation for the good of the whole economy.

This narrative, so typical of economics, ignores the core reality of “inflation” in America: it’s a battleground for the class war that’s accelerating. Allow me to explain.

“Inflation” affects different classes very differently. I put “inflation” in italics because it’s not one phenomenon, it’s numerous phenomena crammed into one deceptively simple word.

When “inflation” boosts the value of homes, stocks, bonds, diamonds, quatloos etc. to the moon, those who own these assets are cheering. When “inflation” reduces the purchasing power of wages, those whose only income is earned from their labor suffer a decline in their lifestyles as their wages buy fewer goods and services.

They are suffering while the wealthy owners of soaring assets are cheering.

The Federal Reserve and federal authorities are not neutral observers in this war. The Fed only cares about two things: enriching the banking sector and further enriching the already-rich.

The banking sector makes money by lending newly created currency to borrowers. No borrowers or new loans–banks go broke. So the Fed must generate the right kind of “inflation”: it must lower the cost of borrowing money (deflating the cost of borrowing) by reducing the rate of interest borrowers pay, and it must “inflate” the market value of the collateral banks and Wall Street need to support more debt: commercial buildings, homes, stocks, bonds, etc.

This “inflation” of asset valuations makes those who already own these assets richer, while impoverishing those who must buy them with wages that are losing purchasing power. The Fed doesn’t care if small businesses go broke or households slide into poverty; the Fed’s only concerns are maintaining “inflation” in asset valuations and “deflation” in the cost of borrowing, so that debt-serfs, zombie corporations, local and federal government–everyone–can borrow more money, further enriching banks and Wall Street.

This is the sole goal of the Fed. Everything else is distracting PR.

There are downsides to this, of course, but they fall on “the little people” so economists, the Fed and federal officials don’t bother to even track the downsides. Thus we have the nonsensical games government statisticians play to keep official measurements of “inflation” low. This serves to obscure the reality that real-world “inflation” in the cost of education, childcare, health insurance, rent, and so on–all the big-ticket household costs–is soaring, stripping away the purchasing power of wages.

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