It’s Not a Recession, But It Sure Feels Like It

What is it when the economy is growing, but the workers – the middle class don’t reap any gains from it? There must be something witty to call this time period?

As I wrote in my Peanut Butter and Pasta post, I believe there is a recession coming. It might not technically be a recession because of the growth of the global economy, but it is a reduction of buying power. It is a continuation of the flattening out of the quality of life trend line.

So how did we get here? We are consumers. We buy things and pay for them later. As long as someone will lend us money to buy things we will buy. Hold right there. The housing market collapse put a strain on the borrowing power of the banks, who in turn can’t lend money everyone else. But I feel like most Americans knew this day was coming and is fine with paying their debt down.

But here is what also happened and it is mentioned in a great article by Katie Zezema in the NY Times today called Food Banks, in a Squeeze, Tighten Belts, pay increases stopped coming for the average American. The productivity gains aren’t trickling down. Also, global demand for products is forcing prices up. The same productivity gains that aren’t reaching normal Americans are reaching citizens in other growing countries. Granted, much of their income is oil based, but some of it isn’t either. The internet is getting so cheap now that new avenues are opening up.

If I am average American, I bought consumer goods on credit card with the idea that I would make more than I currently do and my house would appreciate at least 10% a year. Unfortunately for this line of thinking, the average American pay increases are pegged to inflation or 3% and selling your house for a profit isn’t viable either.

I see two outcomes as possibilities. The first is that the attention on green technologies will spark a breakthrough, the US will lead that transition, and American workers will get their productivity gains in their pay checks. The second is that some place like India will develop the next great innovation and the US won’t be a position to lead it.

Finally, my submission for my opening question is… submission.


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