Wednesday, September 18, 2013

Where is the Productivity?

The past 20 years have seen a technological revolution every bit as significant as the industrial revolution from two centuries ago.  The industrial revolution signaled the most significant and continuous increase in economic growth in recorded history, and lifted countless millions of the west out of the mud and into air-conditioned homes.  The poorest residents of almost any developed country live better today than did the richest king in the eighteenth century.

We have lived and are living through a similar, transformative time.  Yet, inflation adjusted household incomes have been stagnant for 25 years in the United States.  Where has all of the productivity gone?

This, of course, is one of the sinister results of central banking and monetary inflation.  The productivity has been skimmed off of the top. 

The productivity has allowed the visible effects of monetary inflation – specifically, higher prices – to remain hidden.  Productivity has lowered real costs, and monetary policy has skimmed the benefits of this lower cost into the pockets of the connected class.

The average household has seen none of it.

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