Thursday, September 8, 2011


I just had to give kudos to hedgie Doug Kass for coining the term "Screwflation" .... granted, he first defined the term back in June, but since I do everything I can to avoid reading mainstream financial pages, I missed it until now. 

Nevertheless, it's brilliant and exactly reflects why the current economic downturn is so troubling and troublesome. 

To use his own words: 

In the 1970s, when growth was stagnant and inflation was high, economists spoke of "stagflation." Four decades later, there's another threat to a sustainable trajectory of economic and corporate profit growth. It's "screwflation," which combines inflation with the screwing of the struggling middle class. Like stagflation, screwflation also threatens the general health and valuation of the U.S. stock market.


While the U.S. economy, in real terms, has more than doubled in the past 30 years and corporate profits will soon attain a new peak, median real wages have made little recent progress, and surging food and energy prices (among other cost pressures) now eat up middle-class incomes. Moreover, the lost decade of flat stock prices and an unprecedented four years of declining home prices have further weakened the confidence and purchasing power of the middle-class screwees.

The structural weakness in the labor market also makes this cycle unusual, and far worse for many, long-term, than the downturns of the 1970s. Unemployment has exacerbated screwflation's impact on all but the wealthiest Americans.


So we have structural weakness in the labor market and a plutonomy dominating the profit taking and wealth accumluation.

What he doesn't say, of course, is that we've also got a radical right committed to preventing the government from doing anything about it. Instead, they're committed to eroding worker's rights (further hurting labor), slashing budgets for safety net programs (further hurting labor), and deregulating industries (further helping the pluotocrats).  

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