In the past 100 years, the purchasing power of a dollar in the United States Of America has dropped nearly 95%. In economics we are taught that a small inflation rate is healthy for an economy and that it fosters job and company growth, but I often find myself questioning the legitimacy of these statements. The way I see it is that the inflation rate in this country might have helped companies grow, but at the expense of the poor and middle class.
Productivity has skyrocketed in the US since 1973 and companies have never been more profitable, yet the real wages of employees has fallen. Companies are raking in the money but instead of raising the wages of their employees, they are hoarding the money or paying it out in dividends to raise their share price. Companies today only care about taking actions that make their investors happy despite sometimes not being in the best interest of everyone. This is understandable as they are private entities, but with massive tax breaks and special treatment, the government is catering to a system that is slowly tearing our economy apart.
The only people that have the money to invest in the market and take advantage of rises are the middle to upper class who can actually keep money after their paycheck. The poor and lower middle class who are working paycheck to paycheck are finding it harder than ever to survive. Since the 50s the prices of consumer goods in regards to the average worker’s salary have risen almost exponentially. Where a family was able to survive on lower wages in the past, a lack of salary increases and a skyrocketing in the cost of living is creating a massive divide amongst Americans.
A large reason the middle class is dying is because while the poor/low middle class are struggling to survive with college loans, rent, ect. ,the rich are investing all their money into the stock market. As the companies who only care about investors, do what is best for their stock prices, a wealth gap that rivals any we have ever had in the US before is being created. The financial crisis in 2008 only helped to strengthen this divide, as the majority of people losing their homes and defaulting on their mortgages were the poor and middle class. Those who had cash at the time were able to pick up billions in cheap real estate and now own more than ever.
Inflation by the government and the use of Quantitative easing has only catalyzed the gap. While the majority of the country was trying to get their lives back together, the government was using inflation as a way of taxing their savings and income even further. The rich who had money to put into the market to avoid the inflation rate were able to profit massively. Quantitative easing forced people who were able to save to the stock market, but it also beat down those who were unable to save even further.
This problem is not a sustainable one as we have seen in history and eventually everything falls apart. If the current trend continues and people aren’t able to feed their families we will start to see radical movements in the US. If you wondered why so many people are scapegoating immigrants as the problem, its because they are losing their livelihoods to companies who only care about the bottom line. I foresee the situation becoming worse in the future, as another recession looms and the government unable to raise interest rates back to former levels, another round of high inflation could be coming.
-Calaber24p