SpyMasterTrades on Nostr: It's no surprise that the #labor force participation rate has declined during the era ...
It's no surprise that the #labor force participation rate has declined during the era of excessive #monetary easing.
The faster new #fiat currency is created, the faster wage earners' purchasing power declines. This in turn acts as a disincentive to work (i.e. to convert one's labor into fiat currency that decays in value). It also acts as an incentive to leave the labor force and live off of financial investments, which hold purchasing power far better than wages. If financial assets inflate faster than #wages, eventually this becomes unsustainable.
It creates the labor #scarcity we are now seeing. Since the #unemployment rate does not include persons who are not looking for work, and this cohort of persons continues to grow, it falsely creates the illusion of a robust economy. However, economic growth is far from robust. #GDP growth is barely hanging onto the -2 standard deviation of its long-term mean. The #Fed obfuscates this low growth, even in its real GDP numbers, by using deflator metrics that dramatically understate the rate of new fiat currency creation.
Suddenly, this has become a problem for the Fed. With GDP artificially propped up and unemployment artificially understated, the market is demanding far more monetary tightening than the central bank is capable of providing without causing a liquidity crisis. Already a #liquidity crisis is inevitable from all the rate hikes that have occurred.
The central bank now finds itself having to navigate an impossible paradox: there's no way to continue engaging in excessive monetary easing while also containing high inflation. Yet, there's also no way for central banks to not continue excessive monetary easing while sustaining extreme #fiscal deficits and highly #leveraged financial markets.
The faster new #fiat currency is created, the faster wage earners' purchasing power declines. This in turn acts as a disincentive to work (i.e. to convert one's labor into fiat currency that decays in value). It also acts as an incentive to leave the labor force and live off of financial investments, which hold purchasing power far better than wages. If financial assets inflate faster than #wages, eventually this becomes unsustainable.
It creates the labor #scarcity we are now seeing. Since the #unemployment rate does not include persons who are not looking for work, and this cohort of persons continues to grow, it falsely creates the illusion of a robust economy. However, economic growth is far from robust. #GDP growth is barely hanging onto the -2 standard deviation of its long-term mean. The #Fed obfuscates this low growth, even in its real GDP numbers, by using deflator metrics that dramatically understate the rate of new fiat currency creation.
Suddenly, this has become a problem for the Fed. With GDP artificially propped up and unemployment artificially understated, the market is demanding far more monetary tightening than the central bank is capable of providing without causing a liquidity crisis. Already a #liquidity crisis is inevitable from all the rate hikes that have occurred.
The central bank now finds itself having to navigate an impossible paradox: there's no way to continue engaging in excessive monetary easing while also containing high inflation. Yet, there's also no way for central banks to not continue excessive monetary easing while sustaining extreme #fiscal deficits and highly #leveraged financial markets.