Tuesday, 13 September 2016

Why Is U.S. Consumer Spending Debt-Growth Dependent?

Answer: because the purchasing power of household income, as measured by the median household income divided by the M2 money supply, has never been lower based on data since 1986. 

In short, the growth in the quantity of money (which brings forth a decrease in purchasing power) has outpaced the growth in household income (which without an inflating money supply would represent an increase in the purchasing power of household income) since 1986. 

As an ever larger share of the money supply is being channeled elsewhere (than to household income), households need to borrow evermore money to make up for the loss of their incomes' share of the money supply. 

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