For starters, it might raise a few eyebrows when a researcher at the St. Louis Fed suggests that the United States is “already bankrupt.” But the difference between any strong central bank or government, and an individual facing bankruptcy is pretty significant. The government can take money from other people, and use those funds to pay its obligations. The individual cannot. The monetary authority can print new bills, with which to pay its creditors. For the individual, we would call that counterfeiting, and it will land you in jail.

Prof Kotlikoff said that, by some measures, the US is already bankrupt. “To paraphrase the Oxford English Dictionary, is the United States at the end of its resources … it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds”

Prof Kotlikoff said: “The United States has experienced high rates of inflation in the past and appears to be running the same type of fiscal policies that engendered hyperinflations in 20 countries over the past century.”

I don’t want to go into lengthy discussion of medicaid, social security, FannieMae, or any of the myriad federal garbage-bins into which citizens’ hard earned money is tossed on a daily basis. I want to look at inflation from a different perspective. Now, of course we know that inflation hits those the hardest who are living on a fixed income (like social security recipients), but what does it do to the bottom rung of income earners? Minimum wage today certainly isn’t what it was 10 years ago, is it?

The previously established Federal Minimum Wage ($5.15) went in to effect in 1997. Today, it is argued that raising the minimum wage is necessary to provide the working poor an income on which they can survive. The same rhetoric then was used to advance it, from the previous minimum wage of $4.35, as is being used now throughout the various states in efforts to raise it (in some places) as high as $13, but broadly, to raise it to the $7/hour range. Ignoring the merits (or lack thereof) of this particular argument, what does this rhetoric suggest about the current pace of inflation in the United States?

To borrow from a commenter over at Catallarchy, “[I]f a formerly descent (sic) salary devalues into unacceptable poverty only nine years later, I’d say we have a problem with someone devalueing (sic) the dollar.”

I’d say the commenter is spot-on. Giving them more money… I fail to see how this is anything but a very, very short-sighted tourniquet to a very serious problem. Assuming there is a net increase in income earned by the minimum wage earners (despite likely increases in unemployment, or decreases in hours worked) the augmented income will merely be distributed round the economy, purchasing the various goods that they used to purchase, and perhaps a few new ones. This cannot not have an effect on prices – it will bid them upwards. The prices though, lag behind the increase in wages earned, and the effects won’t be immediately noticeable. But eventually they will catch up, and we’ll be left with the same problem: minimum wage won’t be enough anymore.

Lather. Rinse. Repeat.