‘Screwflation’ The word of the year

Douglas A Kass at Barrons

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.

He doesnt define it but does note that for the past 30 years median incomes have not risen, The concept seems similar to the millibandian ‘squeezed middle’ which he of course struggled to define.

He didnt invent the term its been knocking around since december last year. According to George Wolf.

Most average family investment portfolios have showed zero gains (at best) after the bubbles and busts of the last decade. The values of hard assets like homes have plunged while household debt levels have remained high. Consumer inflation may not be a big problem, but good-paying jobs are being eliminated. And, when the long-term unemployed find work, skilled Americans are forced to settle for part-time work and low-paying service jobs with few benefits.

How might we define an index of ‘screwflation’ – how about the real rate of decline of disposable earnings of those on median income after tax and debt payments.

The office of national statistics even publish a nice graph showing how screwed we are.

Growth in median gross weekly earnings of full-time employees by sex, United Kingdom

Subtract inflation and taxation and you have your screwflation index

Those who belive in rational expectations would say we have already made the claculation – no we just know that we are screwed.

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