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| Over the past year, wage increases were more than inflation increases, but if you look at the 3 year average the worker is behind. These numbers make it appear that the worker is now not behind as much as they were last year, but the problem is that shortfalls accumulate over a number of years. In other words, when the money isn't there you might drive a car without doing the maintenance you would have otherwise been able to afford (the maintenance was not done last year and the can was kicked down the road). Then it eventually catches up to you and even though your wages did increase this year, this may also be the year the "chickens come home to roost" so to speak. Thus that extra increase is spent on trying to play catch up and there really isn't that much disposable income left.
I just got a list of emails from our county showing a number of Sheriff's sales coming up. This is a symptom of that "can" having been kicked and how inflation and interest rates have played a part. For quite a few years, the inflation in the housing market allowed people to refinance and use their home equity as a buffer, but now that housing markets have stabilized, they can no longer just use their house as an emergency fund. Further, if they try to refinance they will be paying a higher interest rate. Thus, it is no surprise that we are seeing more defaults. A "can," can only be kicked down the road so long.
I'm not sure how this will all shake out, but often we do not see the results of one year's financial situation until another year. I think back to when dad almost lost the farm in the 80's. His decisions to build the sheds and buy the new tractors in the late 70s led to us being in trouble in the 80s. My best friend's dad was very frugal in the 70s and they actually did very well through the 80s. We had nicer tractors in the early 80s and they had nicer tractors in the late 80s. Further, they were able to build in the 90s when others were just holding on. The point is that this economy is not affecting everyone in the same way, but that does not change the fact that interest rates and inflation are having a definite effect on a lot of people and that will impact the economy as a whole to a certain extent. How much of an extent is still to be seen. | |
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Is the Economy good or bad??
