- In an economy in which wages for 95% of households are stagnant for structural reasons, pushing inflation higher is destabilizing.
Most households are losing ground as their inflation-adjusted (i.e. real) incomes stagnate or decline.The official policy goal of the Federal Reserve and other central banks is to generate 3% inflation annually. Put another way: the central banks want to lower the purchasing power of their currencies by 33% every decade.
- In other words, those with fixed incomes that don’t keep pace with inflation will have lost a third of their income after a decade of central bank-engineered inflation.
- There is a core structural problem with engineering 3% annual inflation. Those whose income doesn’t keep pace are gradually impoverished, while those who can notch gains above 3% gradually garner the lion’s share of the national income and wealth.