Living standards in decline as real wage growth stagnates

Living standards in decline as real wage growth stagnates, by David Uren.

There has been no improvement in living standards since 2011, with record low wage increases only just matching the subdued rise in prices.

There has not been such an extended period of stagnation in household incomes for 25 years, since the depths of Australia’s last recession, according to analysis by the ANU Centre for Social Research and Methods researcher, Ben Phillips. …

A survey by Essential Research last week found households overwhelmingly believe their general living standard is deteriorating, with only 13 per cent seeing an improvement and 49 per cent saying it is getting worse.

Nearly all professional economists are Keynesians, because you cannot get a PhD in economics without being a Keynesian. In the 1950s all western university departments went Keynesian, with the help of money from banks and prods from government (mainly consultancies, grants and hiring practices). Banks and governments are the biggest beneficiaries of the Keynesian theories, which were rightly regarded as crackpot before the 1930s.

(Yes aggregate demand mattes, but it does not drive the economy, In truth, production comes before consumption. Lowering interest rates by decree not just increases demand in the short term, it wrecks the economy in the longer term through mal-investments due to the abundance of artificially cheap “capital.” Real capital is not money and cannot be printed, so this creates a debt bubble and eventually a monetary crisis.)

Here is the reason behind the recent fall in living standards (US figures, but are essentially the same throughout the West):

David Evans, money supply

The bubble in money manufacture created the appearance of rising living standards, just as technological advances, cheap non-western labor, and deregulation were actually improving real living standards.

Now the money bubble has stopped growing — hence the of declining living standards. The financial smarties are still creaming off most of the benefits of money manufacture and productivity growth, only now there isn’t enough left over to trickle down to the rest of us.

The economy hasn’t collapsed yet, but it will when total debt levels drop back to their usual 150% of GDP. Reversion to the mean always happens sooner or later, one way or another.

As it happens, the true money supply in the US has been dropping quickly in the US for the last three months, like it last did in about 2006. This is how a collapse would start, but this probably won’t be the collapse yet because the central banks can stave it off a bit longer and keep us in economic limbo.