The grand financial recovery myth – 8 charts reflecting the true beneficiaries of four years of taxpayer bailouts. Transfer payments make up 22 percent of household income and public debt surpasses annual GDP.
While the economy is recovering in raw GDP terms the working and middle class Americans are having a smaller and smaller piece of the pie. The recovery is disproportionately flowing to a tiny fraction in our population and largely is based on targeted bailouts to the financial sector. After four full years of bailouts and transfers to the banking sector it is clear that the inflation of the stock market has occurred only because of government support of failed banks (many who are now reaping profits overseas). This also explains why unemployment is still stubbornly high and each month we keep shattering records for those receiving food stamps. The upcoming decade if we continue down this path may be known as the great middle class swindle. The evidence is rather conclusive that the current safety net resurrected by taxpayers has largely benefitted the same banking system that has led us down this unfortunate financial path. Let us examine 8 charts regarding the current state of the economy.
How the Federal Reserve continues to conduct shadow bailouts for the banking beasts and sets the world economy on FIRE. Fed balance sheet now at a record $2.84 trillion as wages decline and banking profits soar. Fed balance sheet now equivalent to 20 percent of U.S. GDP.
The Federal Reserve is primarily concerned with one thing and that is to protect the interests of the banking industry. The Fed has no desire or need to protect the underlying economy. If they can get away with allowing banks to jump from one bubble to another they will do so. The success of the overall economy is only consequential if it aligns with the deeper interests of the banking cabal. This weekend former Fed Chair Alan Greenspan mentioned that simply bailing out Greece was a temporary measure. When pressed he went back into “Greenspeak†and rambled on in his typical obtuse language. The reason why global banks fear Greece is not because of the country itself, but because the country has billions of dollars in debt that global banks hold. These banks do not want to pay for their bad bets and would rather shift the cost to the overall population in general. The Fed balance sheet here in the U.S. is now up to $2.84 trillion, another record that gets no airtime in the press. The Federal Reserve continues with clandestine bailouts only to protect the interests of the banking elite.
College education becomes a predator’s lounge for Wall Street and the government – Since 2000 the real cost of college is up by 23 percent yet the real earnings of college graduates is down by 11 percent.
The cost of going to college seems to defy the rules of fundamental economics and basic gravity. Over the last decade the real earnings of college graduates has fallen yet the cost of a four year education continues to go up almost oblivious to this fact. These kinds of dislocations in markets typically signify bubbles just like we experienced in the housing market. Home prices soared without any underlying change in fundamentals except the fact that loans were made more accessible. The same can be said for a college education. The cost of attending a college has surpassed virtually every sector in our economy yet college graduate earnings have not enjoyed a similar rise. Then why is the cost soaring? Is it simply because banks know that the government will back every penny in student loan debt? Is it the multi-million dollar workout facilities? Is it the laws that shackle students into debt that isn’t removed even through court ordered bankruptcy? The college dream just like buying a home is part of the American dream narrative and many are willing to go into massive debt without questioning the value of what they are paying for (or going into debt for). The Wall Street and government predators know this.
Who’s afraid of the middle class? As housing values reach new lows the stock market is up 100 percent from the 2009 trough. Too bad over 30 percent of Americans have $0 in savings.
The methodical shrinking of the American middle class is difficult to witness. What is even more troubling is this outcome was set in motion over a decade ago and little attention has been shed on what used to be a cornerstone of America’s success. Systematic robbery is now part of the financial fabric of our country. The fact that trillions of dollars in bailout money have flowed into the banking system yet little net effect has been reflected for the middle class is a testament to this deep capture. If you would only watch the mainstream press you would think everything is okay. Then again, we are talking about the megaphone of the financial system that failed to alert the country to the biggest credit bubble in our history. Why would they call any attention to a system they developed and exploited and ultimately exited with a taxpayer golden parachute? The really unsettling aspect of this financial crisis is that the trajectory is only accelerating in terms of stripping the middle class bare.