What will it take to radically reduce the cost basis of our economy?
If we had to choose one “big picture” reason why the vast majority of households are losing ground, it would either be the stagnation of income or the spiraling out of control cost basis of our economy, that is, the essential foundational expenses of households, government and enterprise.
Clearly, both rising costs and stagnating income cause households to lose ground, i.e. their income buys fewer goods and services every year.
I’ve often covered the dynamics of stagnating income for the bottom 95%, and real-world inflation, i.e. a decline in purchasing power.
But neither of these dynamics fully describes the relentless upward spiral of the cost basis of our economy, that is, the cost of essentials and the foundations of the economy: education, healthcare, energy and labor.
These expenses are pushing the costs of virtually every good and service, public and private, higher in a self-reinforcing spiral. The costs of education are spiraling out of control, stripping households of income as an entire generation is transformed into debt-serfs by student loan debt. The soaring costs of healthcare are a core driver of higher costs in the education complex (and goverment in general), and to cover these higher costs, counties raise property taxes, which add additional cost burdens to households and enterprises as rents rise.
Rising rents push the cost structure of almost every enterprise and agency higher.
Then there’s the asset inflation created by central bank ZIRP (zero interest rate policy) which has inflated a second echo-bubble in housing that has pushed home ownership out of reach of many, adding demand for rental housing that has pushed rents into the stratosphere in Left and Right Coast cities.
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