Hayek’s Solution

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There’s no shortage of worrisome trends on the macro stage, but perhaps the most troubling is the trend in real (inflation-adjusted) hourly earnings and personal consumption expenditures. Both have been falling persistently on a year-over-year basis. Some economists see this as a dark sign for the business cycle. It’s also a test of Hayek’s idea that falling wages will plant the seeds of economic recovery. By that standard, macro salvation is coming.