Courtesy of Pam Martens.
Janet Yellen Testifying Before the Senate Banking Committee on July 15, 2014
Plunging yields on U.S. Treasury notes and bonds, record low yields on the sovereign debt of countries in the European Union, together with plunging industrial commodity prices, are sending a crystal clear message to stock markets: there is a glut of supply and too little demand from consumers.
Such a supply-demand imbalance brings about price wars. Thus we have Saudia Arabia slashing prices on oil to its customers in an attempt to grab market share, triggering a global price war in oil; supermarket pricing wars in Britain; gas station pricing wars in the U.S.; mutual fund fee pricing wars; magazine price wars. There is even a chicken nuggets pricing war.
Collapsing yields, collapsing commodity prices are the result of distorted income dispersal, otherwise known as income inequality.
Last August, researchers at the Federal Reserve released a study showing the fragility of the U.S. consumer. The Fed’s Division of Consumer and Community Affairs found that 52 percent of Americans would not be able to raise $400 in an emergency from their checking account, savings or borrowing on a credit card that they would be able to pay off when the next statement arrived.
There is a delicate equilibrium of income distribution that sustains growing economies. When income distribution becomes insanely skewed to the top 10 percent, deflation is the inevitable outcome.
…
