Economists seem to blithely go about their lives on the assumption that we are living in a period of very low inflation in the U.S.
We aren’t. Take out healthcare, housing and education from the cost of living indicator and we have been in a deflationary period for roughly 25 years. Just like the Japanese. These three components of our living costs are rising because they are domestically produced and not subject to international competition. One word: unions.
That tells us why we really have deflation. We are part of the world where we get the benefit of lower cost and more efficient production from the entire planet. Not just China; India, Vietnam and Indonesia are low cost producers. Their labor force is not ‘cheaper’, these workers are well paid. They just don’t have to pay high property taxes for union controlled city governments, outrageous income, sales and luxury taxes, eat out at expensive restaurants three nights a week, pay babysitters $1,200 a week for their child and their dog.
American wages are not high, they are outrageous compared to the ordinary world where families still exist, where food is local and unions do not run everyone’s life.
What does the reality of deflation mean to real humans? The world around us is getting easier to live in, unless you have to deal with any of the three union forced inflators. Life is actually getting cheaper and easier. Enjoy it.