In his State of the Union address, President Obama announced that he is raising the minimum wage for new federal contract workers to $10.10 an hour. Challenging lawmakers and states to do the same. In essence, hoping that the his action will lead to an eventual rise in nationwide minimum wage.
Here is the behind the scenes explanation of why he is doing it, why it will not work and why these idiotic economic policies by the FED and by the US Government are killing the US Economy.
Now, prior to understanding what is behind this move, you must be made aware of our overall economic environment. While it seems complex, it is quite easy.
As of right now the US Economy is being pushed and pulled by two opposite forces. Inflation and deflation. How is it possible?
Technically speaking we are in a deflationary environment. It is a naturally occurring cycle where the prices of goods and services go down due to over capacity, credit decline/collapse and stronger currency. If you think about it, deflation is great for both consumers and businesses.
Yet, our Federal Government and the FED’s are terrified of deflation. Why? Because they have a massive pile of debt that they have to pay back. A little over $17 Trillion.
The problem is, there is no way in hell they will be able to pay this debt pack under normal circumstances and no way in hell X 10, in a deflationary environment.
The only way out of this mess is through inflation or war. That is why the FEDs have been working overtime printing money and trying to inflate our debt (and our money) away. With mixed results.
Hence the reason behind our current deflationary and inflationary forces. Forcing some prices (ex: food) to go up while other prices to decline or collapse (ex: asset prices or services).
The bottom line is, the Government needs inflation at any cost. This brings us to President Obama’s pledge or push to increase nationwide minimum wage. Again, it has nothing to do with getting people out of poverty and everything to do with inflating away national debt and destroying the dollar.
Yet, unemployment (or true unemployment) remains high and in such an environment wages will have to stay low. No matter what President Obama does, he has very little pull in free markets and when there is a readily available oversupply of work force, wages will stay where they are.
The bigger issue here is blatant destruction of the US Economy and the US way of life through pure economic stupidity. What you are witnessing now is the end of the road and an eventual collapse of the house of cards that is the US Economy.
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