Tag Archives: Inflation

Talking About Income: Inflation & Median Income

By Luke Pretz

Numbers about income are thrown around recklessly in general conversation about the economy, often to justify the status quo and make people feel ‘lucky’ about their table crumbs. Talking About Income is a series where we peer behind the numbers and explore how income, its distribution, and makeup have evolved and shape our economy today.

Wallets

Forty years ago, according to US Census Bureau data, the median household income was $11,800. Two years ago the median household income was $51,939. At first glance these are some very encouraging numbers giving the impression that incomes are growing a lot.  Those numbers seem to suggest that maybe the capitalism of the last 30 years — a variety that has cut social insurance, crushed unions, minimized taxes for the rich —  was a really beneficial. In the context of an economy that has grown from $5.4 trillion to $16.3 trillion maybe it was  actually the case that growth did trickle down to the working class as proponents of free market capitalism suggest. However, when we apply some simple economic tools to these numbers we uncover the not so surprising truth: the average worker and their family hasn’t  improved their position all that much. The pie has grown, but our share, even in absolute terms, has stayed the same. Read more

Is the Fed powerless to stop inflation if the economy recovers?

Steve Matthews and Michael McKee at Bloomberg seem to think so. But a simple idea occurs to me: if the Fed is really worried that banks will cause inflation by drawing down reserves, can’t the Fed just raise the required reserve ratio (that’s the percentage of a bank’s deposits [your checking account, for example] that it is required to keep in it’s reserve account at the Fed)? This seems too simple. Am I missing something or are Bloomberg’s reporters?