Source: Zero Hedge
Just when you think that the worst has come, been and gone, there
will be more stuff hitting the fan in the very near future and that
should serve as a lesson to the next head of the Federal Reserve that
central banks don’t usually necessarily have the people in mind when
they take things over and end up doing a pitiful job. But little
reminders are just nudges in the ribs and there is a lot more needed
than somebody elbowing the Federal Reserve of the United States right
now.
Inflation is set to rise in the United States and that will be beset
the people that have savings as well as drag the retirees down and
create more hardship than is being experienced and endured by the people
already today.
The Federal Reserve has been unable so far to bring about any form of
positive inflation level in the US economy and the current inflation
rate stands at 2%. But the economy is not growing enough and it is
certainly not seeing worker salaries approaching anything near the
increases in prices that are taking place. Prices are just outpacing
salaries and jobs aren’t being created.
That’s the problem with using U3 unemployment levels and not U6 unemployment
levels (including all the people that have been discouraged from
seeking employment as well as those that are underemployed in the
economy). The latter stands at nearly double the official figure issued
by the Bureau of Labor Statistics. Just looking at the figures for
Friday 6th September that were issued by the Bureau it can be seen
that 312, 000 people gave up looking for employment and dropped out of
the job market due to discouragement through not finding work. In one
survey carried out people actually stated that they were dissatisfied
with the job market and they would prefer to wait for the right job to
come along.
The Federal Reserve has expanded its balance sheet by $3.6
trillion and the administration is touting the benefits of what it
believes Quantitative Easing has
actually done in the job creation area. But, if for one moment we do
take U3unemployment as the rate, then it doesn’t look like money well
spent. Since we are still in the area of just-in-time economics applied
to the employment sector. The jobs are few and far between and they are
certainly not being stored somewhere for someone to come along later and
snap up; they are being created slowly and sluggishly, if at all.
Whatever happens, whether that be a push or pull in the Federal Reserve
balance sheet the effect ripples into the lives of people slowly but
surely, for good or for bad.
Inflation has been fixed at the target rate of 2.5% by the Federal
Reserve and unemployment needs to come down to under 6.5% (from the
official 7.3%). Then interest rates can be raised. For the time being
however it’s only the speculators that have managed to reap the rewards
of low interest rates. The American people have just temporarily
imagined that they were wealthy by being able to contract cheap loans
and get granted easy credit. But, soon they will realize that they are
only debt-wealthy and that will be the crunch in the future when
interest rates rise again.
Financial imbalances and excessive inflationary pressure can only be
hiding just round the corner in the not too distant future. Some
analysts believe that we will be in for a period of stagflation,
unemployment will be high and inflation will have set in in a stagnant
economy. It has been predicted that prices will rise for the US
consumers by at least 10% in the next 30 years.
So the Federal Reserve wants inflation and it will most certainly end
up getting it. But, it will probably get more than it bargained for.
Although, it is very much debatable as to whether or not the guys at the
Fed have actually considered what will happen afterwards.
Or do they also actually believe that the improvements are really
there and the figures are a true representation of the economic health
today of the USA?
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