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IPFS News Link • Economy - Economics USA

Real Wages Continue to Fall as the Fed Scrambles

• https://libertarianinstitute.org, by Ryan McMaken

To find a higher rate of CPI inflation, we have to go back to December 1981, when the year-over-year increase was 9.6 percent.

March's surge in consumer price inflation is also the twelfth month in row during which the increase is well above the Federal Reserve's arbitrary 2 percent inflation target. March's CPI inflation rate was up from February's rate of 7.9 percent. The month-over-month increase (seasonally adjusted) was 1.2 percent, which was the highest since September 2005.

The price inflation was driven largely by increases in energy prices (rising 32 percent, YOY) and by "food at home"—i.e., grocery prices—which were up 10 percent. Used cars also continued to show big price increases with a year-over-year jump of 35.3 percent.

Not surprisingly, we find that wages are not keeping up with price inflation. While the CPI rose by 8.6 percent, average hourly earnings only rose by 5.56 percent.

This was a gap of 3 percent between price inflation and earnings, and the largest gap since April 2021.

Not coincidentally, this price inflation comes after two years of rapid increases in the money supply. M2, for example, has risen by 40 percent since January of 2020. M2 inflation had risen rapidly during the decade following the 2008 financial crisis as well. Today, $12 trillion of the existing $21 trillion was created by the central bank after 2009. That means 60 percent of today's entire M2 money supply was created in only the past fourteen years.


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