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Inflation cure? You decide

A View From the Edge

It seems to me that there are different approaches to the inflationary woes we’re all facing. One is based on the financial institutions making sure their assets and power remains intact. Another way is to build the economy and strength of the workforce.

The bankers’ way is to slow the economy but prop up the major financial institutions. And usually that is the methodology preferred by people in the FED and banking community. A cascade of events goes like this:

Raise interest rates, which causes a slow down in the economy because people pay more money to credit cards (raised interest), to mortgage bankers (raised interest) and on car financing. Of course, this hits the middle class the hardest.

Raised interest rates cause people to have less money to spend so they buy less. The poorest scrape to make ends meet, the middle class slips a rung or two on the ladder.

People buy less and therefore manufacturers and importers can sell less.

Selling less stuff, manufacturers and importers lay people off, raising the unemployment toward the magic 5% unemployed figure that American industry traditionally wants (this causes mobility of the workforce, causes people to be desperate for a lower-paying job, and stops labor unions negotiating higher wages and benefits).

Inflation, when calculated including property values, school tax and property tax based on government re-calculated property values and rent costs — inflation goes way up. This is the real inflation number, not the silly figure put out by the government. Furthermore, those who do negotiate better wages to compensate for real inflation will pay even more in income and local and state taxes. Take a step forward and two back. This hurts the middle class even more.

So, as wages rise, people pay more income tax. As Nixon did, Reagan/Bush did, as Bush/Cheney did, this increased IRS tax revenue causes the fixed Treasury notes’ value to diminish (buying power) and can result in a lowering national debt (to a surplus in 2001).

A $100 Treasury note based on yesterday’s tax revenue may take 10 years to repay. If real inflation takes hold (which the bankers and the FED condone) that $100 dollars can be repaid in 5 years or less. Think I’m kidding? During Reagan’s presidency, inflation ran at 13.5% but after 5 years dropped to 4.1% and the prime FED rate then ran at 20.5% all to “cure inflation.” House prices doubled then tripled. House prices were never calculated in the official inflation rate. Bankers did not lose a dime.

And the average worker’s hourly pay? Let’s look at GM back then and now… $21/hr. compared to $32 today. In 40 years, the average assembly worker at GM has had a pay rise of 50%. Meanwhile let’s look at the pay scale for the head of GM. In 1980 Murphy earned $422,000 including bonuses. And today? $29,000,000, an increase in 40 years of 680%. Bankers’ salaries’ profile is pretty much the same.

So, what can we do differently? Inflation has causes, many of which are outside of our control, but that we can, as a nation, decide to conquer. If oil prices are the driving force, we can release federal reserves (these millions of gallons of oil belong to the people). If labor shortages are causing industry to suffer and run less economically, then we can invest tax monies to retrain people, move people to new industries. This is within the government’s purview.

Fighting inflation will cost money. Taxation will have to increase, but does it make sense to increase the tax on working people earning middle- and lower-class wages? From a business perspective, that’s assuring people will buy less and bankrupt industry faster. Companies making windfall profits over the price of oil and energy should want to contribute more, if only to maintain their corporate viability longer-term. Executives earning $1,000,000 or more should look back at industry in the time of the USA’s greatest economic expansion during the Eisenhower years and realize that the 90% tax rate of the ‘50s built the middle class and an American rejuvenated industry. Even Kennedy had it at 70%. In a sense, that is real trickle-down economics (but the bankers hate me for saying so).

Real inflation numbers are avoided by the captains of the financial institutions, including the FED, precisely because no one in those institutions has an honest window or understanding of a living wage. You cannot blame them for wanting to maintain their status quo. But you can ask them why they want to destroy the long-term US capitalist system that is based on an expanding, thriving middle class.

 

Peter Riva, a former resident of Amenia Union, now lives in New Mexico.

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