It’s very possible IMO, that a lot of the money being created (the Fed has added over 4 Trillion to the economy since 2008) is ..
One thing that popped into my mind was how the vast increase in foreign goods could affect the equation. I would assume that if I make a purchase of a foreign product through Amazon, that transaction gets logged as velocity; if I make the same purchase on AliBaba, I would assume that it does not.
Every year it is predicted to be up anywhere 3–5%. In the end it never is. Consumers are and have been on life support since 2008.
Yes, I’ve noticed this too.
I’ve been trying to think of a better proxy for measuring this for some time. This may be a bit outside of the box for some, but one measurement I considered was spending on children’s art and athletics. If a family is doing well financially, the kids are in dance lessons/take piano lessons/play baseball/soccer/football. If not, those things have to be the first to go, for any reasonable parent trying to manage a budget.
One way to look at this is that we are “paying” with our standard of living, but in ways that are very difficult to measure. In a nation where even a middle class home seems to have multiple TVs and multiple computers and game consoles and expensive athletic shoes and NFL-branded jerseys, you can argue that we had, on average, a rather opulent standard of living that we could afford to skinny down a bit. So, Christmas becomes 5 gifts instead of 10, smartphones and computers are asked to stay in service a year or two longer, etc. Perhaps the auto industry keeps stats on how long on average the American keeps a new car. That would be an interesting indicator.
That all said, it appears anecdotally that America is being incrementally impoverished, but in ways that today don’t show up in traditional statistical data collection. Of course, EVENTUALLY, that excess standard of living will be burnt off, and the phenomenon WILL start to show up in traditional datasets, as families find that they need to (for example) move to even less expensive meals that involve even less protein. Potatoes and cabbage are cheap ways to feed a family.
It has been shown that consumers haven’t had an increase in income since 2001. They have relied on debt to emulate wage growth that did not happen. Meanwhile utilities, interest, health care, etc have all risen in cost, usually well above the rate of inflation, as in health care and higher education.
I think you’re using the wrong stat, and if you use the right one…..it’s even worse.
For instance, if you use real weekly household income, which peaked in 1999:
…you obscure the even larger problem, because household income is a tweakable stat which can be goosed by (a) more household members working, and (b) household member working more hours.
Here’s the scary one:
I am not crazy about this chart, because I think it intuitively logical that by aggregating ONLY manufacturing sector workers, you fail to pick up the movement of jobs from that sector to the service sector. At any rate, point is that real average hourly wage peaked in 1973–4, and if I were to find a real-dollar dataset that includes ALL workers (that dataset is suspiciously difficult to find) I suspect that the slope established between 1983 and 1995 would show a dot-com wage bump, then a reversion to the original slope that would show today’s wage somewhere down around the $17 an hour level or less.
There is a serious reduction in consumer’s ability to spend and IMO that’s what we see in money velocity. The question is, what to do about it.
Clearly. What we’re seeing, I believe, is a secular shift; the average GLOBAL hourly wage is a point of gravity in a global economy. Low wage nations see their wages rise in response to that gravitational pull, while high wage nations see their wages fall. You cannot have both a global economy and maintain wages at the pre-global level.
Solution? For the sake of discussion, let’s suggest macroeconomic heresy:
Falling wages is not a problem in and of itself; the problem is the erosion of purchasing power. That’s a ratio between total wage and total cost of living (for one’s desired lifestyle, reasonably chosen.)
So here’s the heresy: if you can’t get average wage up, allow cost of living to fall? (Deflation)