Authored by Mike Shedlock via MishTalk.com,
The Fed likes to brag about the “We saved the world” recovery.
However, the unfortunate truth of the matter is a record Half of American Families Live Paycheck to Paycheck.
Does it Matter? Let’s investigate.
Unprepared for Nearly Anything
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- 50% are woefully unprepared for a financial emergency.
- Nearly 1 in 5 (19%) Americans have nothing set aside to cover an unexpected emergency.
- Nearly 1 in 3 (31%) Americans don’t have at least $500 set aside to cover an unexpected emergency expense, according to a survey released Tuesday by HomeServe USA, a home repair service.
- A separate survey released Monday by insurance company MetLife found that 49% of employees are “concerned, anxious or fearful about their current financial well-being.”
Deleveraging? Where?
A Fed study shows U.S. Households Will Soon Have as Much Debt as They had in 2008.
The Federal Reserve announced Friday that the U.S. has $1 trillion in credit-card debt. Consumers hit that number in the fourth quarter of 2016, but eased on revolving credit during January 2017. The Fed announcement showed revolving consumer credit hit more than $1 trillion once again in February 2017.
“Credit card debt is rising quickly, but delinquencies are still really low,” said Matt Schulz, a senior industry analyst at the credit cards site CreditCards.com. “Many Americans are doing a good job of controlling their debts, but eventually with big debts and rising interest rates, it’s likely that something will have to give.”
Paycheck to Paycheck “Good Job”
Excuse me for asking but if half the nation lives paycheck to paycheck, is that really indicative of doing a good job at managing debt.
And as for “low delinquencies”, I remind you of my April 26 article Subprime Credit Card Losses Bite Capital One: Income Down 20%, Charge-Offs Up 30%.
Nonetheless, I remind you of an important perception.
We Saved the World
- Wall Street Journal Oct 4, 2015: How the Fed Saved the Economy
- Washington Post August 26, 2009: Ben Bernanke: The Man Who Saved the World
- Forbes Oct 5, 2015: Ben Bernanke On How The Fed Saved The Economy
- January 12, 2013: How Tim Geithner Saved the Banks—With Ben Bernanke’s Help
Two Reasons Not to Worry
- The stock market and housing are still going strong. We heard the same thing in 2007 but it’s different this time.
- The bottom 50% of the economy simply do not matter.
The real crux of the matter is point number two.
The Fed does not give a damn about the bottom half of the economy even though it spouts continual lies about “income inequality.
The Bottom 50% Do Not Matter
As long as the Fed can keep stocks and home prices elevated, there is no concern about the food-stamp, rent-subsidized, Medicaid-supplement, disability-income, Obamacare-subsidized 50% of Americans struggling paycheck-to-paycheck.
That money rolls in guaranteed, month after month!
That 50% cannot afford a house is irrelevant as long as suckers keep paying $500,000 to two-bedroom shacks in LA.
The game is to keep asset prices up so that the top 50% keep spending. The bottom 50% are taken care of by government (taxpayer) subsidies noted above.
Here’s the real deal: Fed Expects a Second Quarter Rebound, Higher Equity Prices.
Repeat Performance
The Fed needs to keep asset prices elevated even though it’s pretty clear concerns are mounting over bubbles.
Can the Fed save the world again?
Previously, the bottom third did not matter. Then the bottom 40% did not matter. Now the bottom 50% do not matter.
That statement is a bit over the top. By how much I don’t know. But the trend is clear, as is the fly in the ointment.
Brexit was the first warning shot. Trump was the second.
As soon as the bottom 65% don’t matter, those 65% may vote to take matters into their own hands.
72% of Americans haven’t put aside any money for their own burials.
Why would I care what you do with the trash when I’m gone? As far as I’m concerned you can just throw it in the dumpster.
NOOOOO ! Have your loved ones, or closest friends bury you … and plant a favored perennial, shrub, or tree over your corpse ….. you’d most likely make excellent compost !!
I haven’t either. But then again, a cardboard box and a BBQ can’t cost that much.
I can’t wait to hear from all the self righteous commentators.
My father (5 kids and a wife to support) was blue collar his whole life. He always owned a home, we always had health insurance, we always had cars, he always had a job, my mother never worked, all his kids went to private school, he hated the stock market, he didn’t know Jack or shit about investing. He never went to college or trade school and he never even had a life plan. Lucky? Or maybe the times were just better? Show me where anyone in this country can do this today. Especially on a large enough scale to put a dent in the downward spiral.
50% don’t matter? Government policy, corporate monopoly, unfettered welfare, unfettered turd world immigration and/or technology didn’t cause much of this? How about the federal reserve…no responsibility? Even though using their money is a requirement?
Give it to me almighty self righteous TBP self proclaimed kings of success. What happens when the % reaches 60%? 70%?
I agree, in order to succeed you have to do whatever you can with the tools, education, environment and political/ economic climate you’re given. But there never has been and never will be a time when 100% of the population will have the IQ required. What now?
I think the times were better. I got married in 64. Had first real job in 65 at $5600 per year and I worked a part time job for 6 bucks an hour. Bought a new house in 66. Four rooms and bath with an unfinished second floor for $15, 990 at 4,25%. Had four kids by 69. Continued working second job for 18 years. Wife went to work part time when fourth kid was in grade school and then full time when he was old enough to be on his own. Had an in ground pool by 77. Lived paycheck to paycheck like everyone else. Bought used cars and drove them into the ground. Put all four kids through college with only one having any student loans. His senior year tuition, room and board was $12K. He’s a CPA and Town Treasurer now. All the others were cheaper. Didn’t save a dime for retirement until 91 and my wife and I retired in 99. Yes, there was some luck along the way, with much of that coming from house price inflation and a couple of other factors, like good health and no major medical expenses. But when I look back, it seemed a lot easier to handle things and I wonder what changed. Technology? Lifestyle?
Dave,
Yes, the whole point of my comment was to show how times were MUCH better in times past.
1) a man could support him, his wife and kids on an uneducated income.
2) your first home ($15,999) was 1.33 times your yearly $6 job. That in itself is completely and MUCH better than now. In fact show me anywhere in the country where the median home price isn’t at least 4 times yearly median income for the same area.
3) pensions and healthcare was seen as an obligation(?) of the company.
4) one could have lifelong(?) job security if you weren’t a dipshit.
There are many more examples.
So times used to be better. They have in past been much worse as well. The question that needs to be asked is why does that matter in the here and now.
I’m only saying these things so people might have some understanding for the next generation. They are, in some very real ways, fucked. The % is going to continue to go up.
So, again, my question is…now what?
Saying things like…so what, times are harder, is like questioning why past generations stood up and didn’t take it anymore.
Not that I have a whole lot now. But I have enough. My Dad retired from paper mill with a full boat pension. Defined and for life at 63.
I dont have a company pension. If I want money for retirement I have to save it myself. Will likely have to work past 70. Still even with all this I dont think it is right to expect my Dad feel sorry for me?
And even in these hard times there seem to be loads of folks with money for latest iPhone and big screen TV.
In all of human history, how many generations featured retirement for the masses?
Retirement for the masses was only possible because of the false promise of fiat money.
The only real difference between your father’s experience (same as my grandfathers btw) is that the aforementioned fiat currency had not yet been devalued by 98%+ in his time as it has been today.
The one big difference between your father’s situation and mine is that I chose not to have kids which eliminates most of the expense your father faced. Perhaps making it too expensive and onerous to have children was part of the plan? ‘Murican kids would always cling to their guns, rights and sovereignty. Perhaps importing turd world vermin was part of the plan all along?
What happens when the percentage equals 60%-70%? I think we’re seeing it now……increased erosion of rights, purchasing power and sovereignty along with dilution and destruction of our culture. If you’re an owner/controller then I dare say that your opinion on how things are going will differ greatly from that of the sheople.
As far soliciting comments from the self righteous TBP’ers………..I’m quite confident that if I had been college educated in any of a number of technology related fields instead of skipping college, I could have probably repeated your father’s results. A big part of that success would be related to removing myself from the pervasive doctrine of consumerism. I know dozens of families making double or triple what I make and yet they are broke as a joke. However, they do enjoy snowmobiles, jetskis, boats, RV’s, all the latest technology and a small fleet of brand new cars as well as homes to makes all the other Jones’s envious with a sweet little fly away vacation each year to top it off. If they just cut out all these little “extras” I’ll bet they could repeat your father’s results too but they’ve decided or been programmed to kneel before the Gods of Stuff.
It sounds as if you mostly(?) agree.
I agree that the fed is devaluing our currency which makes it harder to get ahead but I do not agree that a family cannot get ahead today. It will require serious sacrifice just like it always did.
You sure as fuck won’t get ahead by sitting on the sidelines or accepting money for nothing from uncle sugar.
I agree with that. I’m saying the % is going to continue to climb. I really believe this time is different. Technology and the NWO will defacto enact a caste system.
Personally I think it’s up to the sheople. If they choose to remain sheople, expecting more and more from govt and their (s)elected leaders, the percentage will absolutely continue to climb. If the sheople decide to confront their oppressors then it could go the other way. I’m not hopeful and I’m sincerely glad that I’ve reached the final season in my life. I’m only interested in watching The Great Regression if the sheople decide to resist. I already know what lies down the other path.
IS – if the sheople do not have an alternative system devised and ready to implement, anything they might do will only make matters worse. Who will they confront is one issue.
But what will they demand is a horse of a different color. We want jobs! Ummm. Geee. That will not work. They need a detailed plan with a system that can be implemented and which will resolve the issues. See any of that running around?
So, it is gonna be a clusterfuck.
I understand. We will (already are) devolve into George Carlin’s world where the sheople are just smart enough to operate the wheels and levers to keep the graft machine running but not smart or aware enough to question any of it.
Sheople are already posting every single detail of their lives online and taking the bait in the push for a cashless and gun free society all while demanding more govt and more free shit! Woo Hoo!
I wish I could come back every twenty years or so so I can see how that’s working out for them.
Wip – blue collar work at high wages was effectively a mirage – there was perhaps a two or three decade blip that arose after WW2 where blue collar workers made a nice middle class wage.
The foundation of this was that the US came out of WW@ virtually unscathed, compared with any of its potential competitors. Half of the population was employed in manufacturing (compared to 10% today). The current manufacturing workers – 10% of all workers – produce the same percent of GDP today as they did in 1950, when half of all workers were in manufacturing.
Unskilled/uneducated workers making a good wage was not a realistic scenario. World competition, and the continued, and continuing, productivity increases in manufacturing saw and end to the scenario where unskilled/poorly educated could make a good wage.
There never was “lifetime” employment security, by the way. There was always productivity gains eating away at job security. Mfg employment grew steadily, in numbers but not as a percentage of workforce, until 1980, when it collapsed away.
This chart demonstrates the issue re manufacturing:
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This one illustrates that low education has lost its appeal to mfg employers:
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The loss of manufacturing jobs, and hence the blue collar middle-class, was a function of ever increasing productivity, complacency re the US’s place as dominant manufacturer leading to horrific quality and thence to Japan and others providing competition.
It was not some evil plot. Manufacturing and the blue collar workers it employed was always doomed. Ever increasing efficiency and technology and external competition would always see to its demise as a major driver of the middle class.
Well, I don’t see a solution. All I see is what Reverse Engineer used to say…I see 7 million dead people. Except that number is awfully loooow.
The author’s dubious premise is that voting could actually change government policy. One quick glance at the new Budget agreement reached this morning suggests otherwise.
Voting no longer matters. And hasn’t for a long time.
Long pitchforks and torches.
A good sized portion of the bottom 50 or 65 % are the people who have voted themselves all the Free Shit. Their intelligence and logic is suspect. When they rise up they most likely will do exactly the wrong things.
What did anyone expect when we live in a culture where ‘Its about me’ – political leaders in all parties, corporate leaders, small business, all are motivated by incentives to focus on themselves. Votes, power, salary, bonus, promotions, etc.
EVERYONE focuses on themselves, to some degree …. the socio and psychopaths do it in spades !!! THAT”S where biggest problem lies !
And a note to Mish : ROBOTS and AI are not the cure all …. savie ?!
Agree polecat, however real capitalism was always the balance to that. The TBTF doctrine and the fed bailing out banks has allowed the unchecked growth of fiat, and the bad investments that come with it. Lack of risk is what has accelerated the bad behavior. If you were a ‘leader’ and you knew that you would be in bankruptcy if you stepped too far over the ledge, you backed off. Now, why back off, the taxpayer will always be there to catch you….
one trillion divided by 300 million = 3333.1/3 (credit card debt)
Just a number.
Budget % = 65% SS, Medicare, Medicaid, Income Security,
and mandatory interest for debt
35% Defense, Military, Incidentals/all else
https://en.wikipedia.org/wiki/Social_programs_in_the_United_States
Political immigrants/asylum seekers are not really mentioned.
Those #s would be helpful to have. There are 80 means tested
“programs” from tanf (cash) to child care to Pell grants.
We are a socialist country.
Those 65% might take matters into their own hands by voting! That’s laughable. Capt W called it on that budget that gives Dems everything they want. AGAIN.
If Voting mattered they wouldn’t let us do it.
certainly cheap illegal labor had nothing to do with it ?
monger – I can only imagine the mad rush of unemployed Americans to take up those fruit picking jobs when the illegals are eventually evicted.
Way back when, I was involved in a major study of illegal immigrant wages. Broadly, there were two groups – fruit pickers and the like, making peanuts, and skilled laborers, who earned as much as American born skilled laborers.
The illegals need to be expelled in my opinion. All of them. But there will/would be a very significant void with respect to certain jobs that Americans will not be overjoyed to fill – farm work being the most visible one. Cost of farm produce will skyrocket as farmers pay more and more and more in order to attract Americans willing to do that work, or go out of business.
What’s wrong with that? In a capitalist system, we are looking for equilibrium, no? Why should the owners of capital be able to undercut labor? Why should the owners of capital, if they are able to undercut labor, be able to forbid importing of cheaper products (think pharma)?
Why should the owners of capital be able to build regulatory moats around their monopolies? Some of the greatest businesses ever created would not be able to get off the ground in the system/regulatory environment we have now.
We’re going to end up with a caste system.
Well, given only 2% of workers work in agriculture, the other 98% would see the price of fruit, vegetables, meat, etc. skyrocket, with no increase in their wages. It will be a problem for them, for sure and certain.
If we had a truly capitalist system, we would not even be talking about this. We have a crony-capitalist system. The ‘owners’ decide what is going to succeed, and what is going to fail. The Fed decides by virtue of the fact it can print the currency used, so the ones that receive this currency first, can decide what investments are made. The rest of us, unable to access said currency, must impress the ones that have access to it, in order to receive some of it. That is the problem. Everything else stems from that.
If we want to fix all of this as a society, we simply have to remove the power of the fed to print money. Then, those that currently have the capital, must work to keep it, and the rest of us can charge those with the capital a price to maintain it.
The problem is the migrants are not migrating back and treasonous business people hire them for sub standard wages or they falsify certified payroll reports and you have an underground economy that displaces would be entry level jobs for Americans . This errods local tax bases and now your local government pensions are bankrupt as welfare roles expand thanks to welcome mats by business . There are recruiters that encourage illegals to come to meat packing jobs etc… Now tell me Americans won’t do those jobs . That’s why hundreds line up when a business gets busted by immagration agents to take those jobs . Americans just won’t put up with abusive labor practices and shitty pay anymore . There are 2 reasons why working people need a union 1) the company is abusive and requires a legal go between to protect working people . 2) people are poor employees and the only way they could have a job is with union protections . The product being produced by many school systems prove why teachers have a union . I know it’s the parents too : perhaps if there were gainful employment with sustainable income for parents there would be a stable home that produce something a good teacher could work with !
Our government taxes the American farm worker to help fund government employees lavish benefits that the tax payer can never have that produces what we have now . A generation of people who know the job game is rigged for average working people so a few get in a government position teacher , police , fireman etc … Those that cannot find a government job , perhaps a minority of people will find some gainful employment but when 95 MILLON got the message . The salary offered won’t allow you to keep the lights on among other things and you will still qualify for an EBT card . Like the airline pilots told not to wear their uniform when they apply for public assistance !
All of us average people in fly over/fuck over land were thrown overboard 40 plus years ago . As for my dead carcus overboard as shark bait or crab bait and as you look out on the Atlantic you can say old boat guy is out there he was a good chum !???
And a Punny one too.