What will be the tipping point for the US Economy?  For those old enough to remember the 70's it was inflation that sunk the economy.  So what is inflation?  Inflation is a collection of items bought by the average consumer such as bread, gasoline, housing, utilities etc.  Inflation gave then President Jimmy Carter fits.  It wasn't his fault.  Previous President Nixon had taken the US dollar off of the gold standard which helped to limit inflation.  President Nixon reasoned should the US economy be limited by a commodity pulled from the ground with nil utility value.

The reasoning was good but in reality good old Austrian Economics rules.  You don't know what is going to happen until you test it on real people.  Well the people selling the US oil at the time didn't like getting dollars that were discounted so to counter Nixon's maneuver the OPEC oil cartel joined together creating a virtual monopoly.  They reduced supply and raised the price for a barrel of oil.  Oil is a universal product that goes into everything in the commodities basket that is measured for inflation. 

When inflation emerges a chain reaction starts.  Government payments like Social Security, salaries, and budgets are indexed based on inflation.  These payments all go up.  Then the working person wants more pay to cover increased living expenses.  In the 70's labor unions were prominent.  Workers went on strike for more pay.  A vicious cycle followed.  A new president followed too, President Reagan.  He knew inflation was so devastating because of the loss of confidence in the government and for investing in businesses.  The cures for inflation are efficiency improvements, reduction in labor costs and the perception of no inflation.

Reagan chose to adjust how inflation was measured.  He took out the housing number justifying as a home is a one-time purchase over a lifetime and not an annual purchase by the average consumer.  This brought the inflation number down reducing the government indexed payouts. 

So what will bring the US economy down?  Nothing will except the expanding government payroll and the increasing number of hungry people.  When China stops buying US debt and starts building up a military inventory this will mark when the US has passed the tipping point.  

What will be the tipping point for the US Economy?  For those old enough to remember the 70's it was inflation that sunk the economy.  So what is inflation?  Inflation is a collection of items bought by the average consumer such as bread, gasoline, housing, utilities etc.  Inflation gave then President Jimmy Carter fits.  It wasn't his fault.  Previous President Nixon had taken the US dollar off of the gold standard which helped to limit inflation.  President Nixon reasoned should the US economy be limited by a commodity pulled from the ground with nil utility value.

The reasoning was good but in reality good old Austrian Economics rules.  You don't know what is going to happen until you test it on real people.  Well the people selling the US oil at the time didn't like getting dollars that were discounted so to counter Nixon's maneuver the OPEC oil cartel joined together creating a virtual monopoly.  They reduced supply and raised the price for a barrel of oil.  Oil is a universal product that goes into everything in the commodities basket that is measured for inflation. 

When inflation emerges a chain reaction starts.  Government payments like Social Security, salaries, and budgets are indexed based on inflation.  These payments all go up.  Then the working person wants more pay to cover increased living expenses.  In the 70's labor unions were prominent.  Workers went on strike for more pay.  A vicious cycle followed.  A new president followed too, President Reagan.  He knew inflation was so devastating because of the loss of confidence in the government and for investing in businesses.  The cures for inflation are efficiency improvements, reduction in labor costs and the perception of no inflation.

Reagan chose to adjust how inflation was measured.  He took out the housing number justifying as a home is a one-time purchase over a lifetime and not an annual purchase by the average consumer.  This brought the inflation number down reducing the government indexed payouts. 

So what will bring the US economy down?  Nothing will except the expanding government payroll and the increasing number of hungry people.  When China stops buying US debt and starts building up a military inventory this will mark when the US has passed the tipping point.