The US economy is trapped between two economic barriers that effectively are whittling away America's global dominance: the Federal Reserve Bank and the minimum wage laws.
Both of these constructs are limiting to economic growth and the only way to liberate the economy, so that it can grow by itself without having to take on $6 or $7 in debt for every $1 in GDP, is to simultaneously get rid of both the Fed and the minimum wage.
To take a step back for a second, let's examine how these two key economic architectural pillars work together and against each other. The Fed, as it is now widely understood; coops the treasury function in the economy by lending money to the treasury who then lends it out to the rest of the economy, kicking back interest income to the Fed for no reason other than rent seeking (the Fed has inserted itself into the mix and take free fees, nothing more). The Fed's role is completely unnecessary and merely creates a fee stream for the Fed who is incentivized to keep lending even to sectors of the economy that are suffering under the weight of an enormous credit bubble.
A good example today would be housing. Housing is already trading at historic bubble levels but the Fed keeps lending to speculators who pump up this bubble more as a means to extract more usurious fees. A disastrous corollary of the Fed's money lending spree is that the world is now awash with cheap goods from countries that try to out print the Fed to assist their exports. Ironically, the central bankers point to these import prices as proof of "deflation" legitimizing their money lending scheme – and corrupt governments go along with the corruption – by not including housing in their official inflation reports.
Another disastrous by-product of the Fed's money fire hose blasting virtually free money into the economy is the fall in wages. Because corporations can “grow” by using cheap money to buy other companies (and fire as many workers as possible) there is no leverage for workers to negotiate better wages that would at least keep up with the distorted housing market (causing a net effect of losing purchasing power, even when the cost of imports is dropping).
This is where minimum wage laws come into effect.
Minimum wage laws are needed to combat the cheapening effect the Fed is having on the purchasing power of wages. To truly keep up with this, wages should be tied to money supply – or an index of house price appreciation – instead of the government's published “inflation” number codified in the CPI. All the major economies in the world (with exception of China) are reporting the disappearance of the middle class and this is why.
Blinkered (usually right-wing) policymakers and media pundits decry that it's “anti-market” to have minimum wages set by government decree. But these same pundits and politicians say nothing about the government's decree keeping interest rates at the central bank near zero percent – as a favor to their banker backers – to enable cheap speculation in “assets” like housing.
Only by abolishing both the Fed and minimum wage laws can we restore some balance to free-market forces. Getting rid of only minimum wage laws only while keeping the Fed intact will only exacerbate the current trend toward disenfranchisement of all those who work for wages while enriching the easy money speculators who add nothing to the economy but pain and misery. As an interesting experiment; note how the overwhelming majority of comments below screech about how minimum wage laws are terrible with no mention of the context of this blog whatsoever. Such is the success of the propaganda from American oligarchs who have conditioned Americans to hate workers who rely on wages to survive.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.