{"id":163,"date":"2011-05-18T10:35:54","date_gmt":"2011-05-18T14:35:54","guid":{"rendered":"http:\/\/www.sdaconseil.com\/blog\/?p=163"},"modified":"2011-08-11T23:10:01","modified_gmt":"2011-08-12T03:10:01","slug":"field-trip-to-the-us-mid-west-indianapolis-st-louis-kansas-city-bad-omen-for-the-middle-class","status":"publish","type":"post","link":"https:\/\/sdaconseil.com\/?p=163","title":{"rendered":"FIELD TRIP TO THE US MID-WEST (Indianapolis, St-Louis, Kansas City) : BAD OMEN FOR THE MIDDLE CLASS."},"content":{"rendered":"

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(18 May 2011)<\/em> Traffic in Indianapolis consists of small bursts twice a day.\u00a0 Residents wish to believe they have traffic problems. But cars and trucks move swiftly on 6-lane highways around this city of 800,000 people.\u00a0 Traffic runs more freely than a race car on the tracks of the Indy 500.\u00a0 You could think that the local economies would be as fluid, but high speed highways can be deceptive.\u00a0 Things are not looking as bright as before for the middle class in Middle America.\u00a0 The writing on the wall tells us\u00a0that \u00a0it could get a lot worse before it could get any better.<\/p>\n

Suburban man is feeling severely pinched nowadays.\u00a0 Manufacturing jobs have marginally but steadily slipped out of the region for quite some time.\u00a0 New jobs look elusive and part-timers are a growing lot. The economic recovery is looking brighter for Wall St than Main Street.\u00a0 House prices have tumbled and remain sickly attached to the bottom.\u00a0\u00a0 The US dollar is following the same path.\u00a0 A lower dollar might throw a saving line to exporters, but suburban man is finding imports and foreign travels a good deal dearer.\u00a0\u00a0 It turns out as well that 2011 is the year of belt tightening in state and municipal budgets:\u00a0 Transport and education services are down or else cost more.\u00a0 Petrol prices at the pump hurt all gas guzzlers and cereal boxes in supermarkets have downsized.\u00a0 \u00a0In a nutshell, salaries remain capped while running expenses are ballooning.\u00a0\u00a0\u00a0 Middle class is asking when will their outlook turn around?\u00a0\u00a0\u00a0 Perhaps, not for a long while.<\/p>\n

Official inflation has generally remained subdued in the USA, helped by a neat trick dreamed up by bureaucrats: \u00a0that of excluding food and energy from the official indices.\u00a0 This adjusted rate worked wonders when the Fed was preoccupied to constrain wage inflation, in the later part of the 20th<\/sup> Century.\u00a0\u00a0 Inflation in manufacturing goods and services used to transmit into wage inflation. This self-feeding mechanism was dreaded by central bankers.\u00a0 \u00a0The rise of China as the factory of the world broke down that relationship.\u00a0 For the ten years before the financial crisis, middle class enjoyed what looked like a free ride:\u00a0 the recurring benefits of lower prices on manufactured goods from China.\u00a0 And it played wonderfully into the business model of Wal-Mart.\u00a0 But the relentless growth of China and other BRIC nations is changing once more the economic picture for the West.\u00a0<\/p>\n

China’s own middle class is rising and their wealth is now reaching a point where the demand for metal and food commodities and energy is creating rarity situations. Jeremy Grantham, from GMO, a well renowned investment outfit, published a bell ringing report (www.gmo.com):\u00a0 ‘Time to wake up, days of abundant resources and falling prices are over, forever’<\/em>.\u00a0 \u00a0\u00a0In a nutshell, commodity price curves have shifted upwards.\u00a0 It is not just a question of prices being pushed up in a cycle before coming down, but of a permanent shift in the price curve, upwards.\u00a0 This could just indicate a turning point:\u00a0 After 10 years of deflationary prices exported by China, we might just be in for 10 years of soft inflationary prices in food and energy.\u00a0 Exactly those items kept outside the official inflation rate!\u00a0 Suburban man should be worried.\u00a0 If interest rates eventually move up, as they should, there will be one more hole in the belt tightening.<\/p>\n

Can Washington reverse the economic predicament for the middle class?\u00a0 Not immediately if key interest groups keep charging their political masters with missions to protect their specific interests. This could escalate into a war of lobbying and protecting. \u00a0From what I heard on radio and television shows, smart bi-partisan policies working for the long term good of the country are likely to remain the exception in the near term.\u00a0 Observers are troubled:\u00a0 What policies will allow the economy to grow beyond the point needed to repair balance sheet damage and kick up employment?\u00a0 Wall St is showing an amazing resilience as the elite companies have been quick to adapt to new conditions.\u00a0 But Wall St, keen to arbitrage the low costs of Asia, will not come to the rescue of suburban man.<\/p>\n

Washington politics, and in many other Western countries, will remain a risky business:\u00a0 How to redesign lifestyles in the face of rising anger amidst the ranks of middle class.\u00a0 Bad omen.<\/p>\n

Andr\u00e9 Du Sault.<\/p>\n","protected":false},"excerpt":{"rendered":"

(18 May 2011) Traffic in Indianapolis consists of small bursts twice a day.\u00a0 Residents wish to believe they have traffic problems. But cars and trucks move swiftly on 6-lane highways around this city of 800,000 people.\u00a0 Traffic runs more freely than a race car on the tracks of the Indy 500.\u00a0 You could think that […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3,8],"tags":[47,56,57,59,58,95],"_links":{"self":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/163"}],"collection":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=163"}],"version-history":[{"count":5,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/163\/revisions"}],"predecessor-version":[{"id":196,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=\/wp\/v2\/posts\/163\/revisions\/196"}],"wp:attachment":[{"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=163"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=163"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sdaconseil.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=163"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}