Passing Facts on the End of Progress.

Ludwig von Mises Institute ^ | September 11 | Jeffrey Tucker

[Leisler]

Just a few observations from the latest Census report on Income in America.

Real median household income declined by 3.6 percent between 2007 and 2008, from $52,163 to $50,303, following 3 years of annual income increases (Figure 1, Table 1, and Appendix A). The decline in income coincides with the recession that started in December 2007.

Real median income declined for both family (3.3 percent) and non-family households (4.0 percent) between 2007 and 2008

Households of each race category and those of Hispanic origin had declines in real median income between 2007 and 2008

Native- and foreign-born households, including those maintained by a naturalized citizen, had declines in real median income between 2007 and 2008.6 Income remained statistically unchanged for households maintained by a noncitizen

The South, Midwest, and West regions experienced declines in real median household income between 2007 and 2008, while income in the Northeast remained statistically unchanged

Real median earnings of both men and women who worked full-time, year-round declined in 2008, following increases in 2007. Men's earnings declined by 1.0 percent to $46,367 and women's declined by 1.9 percent to $35,745.

[Leisler]

This chart illustrates the issue. It comes down to no income increases in 10 years. Add inflation, growing population and immigration, and you get falling incomes.

A comment, from the comment section.

K Ackermann

"And we pulled all that demand forward with easy credit. I have no idea if there is any meaningful information in the debt to GDP ratio because I have not seen what a "normal" number is.

The 2 times household debt reached 100% of GDP was 1929, and 2007, and that is what bothers me. We are only a year into the real teeth of this... whatever it is, and huge amounts of resources have been used to mitigate some aspects of it, but have done so using a policy of reflation.

The only way that I believe that policy works is by assuming that everything was at the correct level before the crisis. If it wasn't, then we are making it worse. If there is any correlation to the GD, then we are only in the early innings, and we still 'owe' an even sharper correction.

What is driving capital formation right now? To me, it seems like a weak dollar is driving speculation, but that is just floating on air if there is no demand behind it.

If debt is the truth behind a large portion of the downturn, then reflation will do more harm than good. Additionally, it would mean we have large structural problems, as we are geared for consumption. We might literally be wired for failure.

Savings are climbing, but they are fighting the ZIRP(zero interest rate policy) . I'm watching corporate bonds closely. If the spreads stay flat or tighten, then money is getting to the right places. If they start to widen, get ready to pull the trigger on anything tied up in equities. The market has furious growth priced in, but I am blind to where it will come from."

[Hawthorn]

Interesting. But also ironic, since Ludwig von Mises didn’t believe economists should use statistics and graphs!