Quote:
Originally Posted by eribrav
Inflation explained (really good cartoon)
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And here I was expecting cool animated infographics demonstrating the mechanism of output gaps.
---------- Post added at 10:47 PM ---------- Previous post was at 10:35 PM ----------
There are many factors affecting the average American beyond taxes and inflation. As noted above, the taxation on Americans is relatively low. And starting from 2009, the U.S. went through a brief deflationary period (negative inflation) and has consistently averaged around 2% inflation, which is a desirable rate. Sure, this doesn't include such thing as oil, but oil prices have been low because of low demand.
Of course, what I'm getting at is the near future: oil is set to rise. But this is a global factor, not a U.S.-only factor, so there is only so much the government can do.
The other problem is America's abhorrent saving rate. (Is it still zero? Negative?) Americans, on average, aren't saving money and they haven't been for years. In China, the savings rate has ranged between something like 30% and 40%—yeah, that's the equivalent of $3 to $4 of every $10 earned. Of course, that's the far end of the spectrum (China's rate is the global high), but it demonstrates what's possible. The issue is that a lot of Chinese know how to do without much of what would be considered the trappings of the middle-class (though there is no indication this won't change).
In the U.S. (and in Canada largely), there is a kind of expectation that comfortably middle class living is the norm: too big of a house, too many TVs, too many cars, replacing furniture too often, too many appliances—of course, the question arises: what does "too big," "too many," or "too often" mean? Well, if you aren't saving 10% of your income, then it's up to you to decide your limits.
Don't blame the government for everything. The problem isn't just with them. We live in the age of marketing, where spending is the norm, and saving is something to do "one day." The American way of life will continue to be difficult to maintain as the global economy rises. The disparity of wealth between the U.S. and poorer nations will flatten, which will make it increasingly difficult to find cheap labour and cheap resources/commodities.
We will all need to change our standards in terms of rethinking: what is a quality way of life?