I’m a Fan
Okay, I’m not a PAYING fan anyways. (I don’t know why I felt a need to disclaim that.)
Fun Fact: OnlyFans is now a $2.3B industry with 120 Million active users. The company is private and the owners are set to make $400 M this year (pre-tax). They also recently announced they have 300 entertainers making $1M+ each.
What is the main economic dilemma for governments and central banks right now? How do you increase the broad money supply and force inflation - but at a perfect rate and the right type. Central banks are shooting for a 2% inflation target but after increasing the broad money supply by 26% last year, inflation is coming in at 5-7% this year (and that’s 100% understated). The Federal Reserve is employing chain-weighted inflation numbers. To contrast, Germany does not use chain weighted inflation methods and their inflation is almost 11%. With treasuries paying 1.5%, that means real rates are close to -10%.
There are many problems associated with high rates of inflation but two stick out the most. First of all, it pushes people out on the risk curve - the type of people who wouldn’t normally make speculative plays. Nobody wants to see their cash savings slowly disappear every year by 5%+ so they put their money into speculative assets like equities and real estate, searching for returns that outpace inflation - which further drives those asset prices up.
The second problem, however, is the scarier of the two problems. Inflation hits poor people and old people disproportionately hard. For the poor, even a modest increase in price erodes their disposable income - if they have one. For old people - on pensions and fixed incomes - their fixed income buys less and less each year.
The result can be civil unrest. Raising rent, grocery prices, and the price of most goods on a demographic which is already struggling almost always leads to class warfare. When the top three wealthiest individuals in a country have the same amount of wealth as the bottom 165 million people entire (50% of the same population) - the resentment is real.
Governments are panicking because if they keep increasing the money supply then everyday prices will outstrip affordability, and eventually, consumers will reject the new prices. But the central banks cannot deflate either because there is way too much debt outstanding in both the household and private sector. (The United States government would probably default on its debt if rates normalized to 5%.) Price inflation without wage inflation breaks almost every demographic (see the rise in Populism worldwide). Deflate, and the carnage will be EVERYWHERE. The great Central Bank plan: lie and tell everyone the economy is great, inflation is transitory (lol) and hope that kick starts the economy into new borrowing.
The mainstream media is pushing a false narrative that the economy is fine and booming. Everything is NOT fine. The stock market is booming but that’s putting a further strain on the economy in both directions: asset prices are running away while general prices are rising at an understated rate. People are being pushed out onto the risk curve because minimum wage jobs are a dead-end treadmill and the newest generations of workers recognize as much.
This brings me full circle to the comic illustrated above. The labor force is rejecting minimum wage jobs because they know it goes nowhere. This isn’t 1960 when wage earners could save and build a life. Now, a wage earner can’t even keep up with their bills and any excess they might have is eroded by inflation. This isn’t my opinion, this is a problem widely recognized by central banks and governments everywhere. Young people are forced further out onto the risk curve searching for a higher return. Millennials are not whining, they are simply stating facts and fed up.
