Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: endgame who wrote (71345)	11/19/2007 11:47:58 AM
From: benwood	Read Replies (2) of 116555

The problem is that if inflation is running 7% higher than the "official" inflation, then chances are you are getting 3% raises. That large gap in the past 5-6 years has been made up by tapping into equity (i.e. debt), increasing credit card debt, and decreasing savings. That avenue of sustaining the standard of living (and economy) has been washed out by a flash flood. There will be nowhere to hide with another six years of highly underreported inflation. The gov't debt will start to inflate away, but the rub will be that personal debt will not inflate away because personal wages for the most part will not keep pace, hence no benefit for citizens but much pain. And the relative decline in taxes in real terms will mean either tax rates must go up or gov't spending must go down, with both of those remedies causing further problems and amplifying pain. And the pressure to mitigate that dilemma by instituting huge gov't programs will be enormous. The debt ceiling may actually end up rising faster than the drop caused by a inflation and a devaluing dollar. What a mess. What a tangled web the gov't weaves, when first it practices to deceive.

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