How many Americans live paycheck to paycheck? A nation living precariously close to the financial edge.
The fuel that drives our economy is spending. There are few nations that rival our ability to spend. We spend with the gusto of a shop-a-holic. The assumption is that we simply have the money lying around to spend at this level. That is simply not the case since most Americans are flat broke by most standard definitions. For example, I was reading through the recent Money magazine and found that 55 percent of households making $100,000 a year or less are living paycheck to paycheck. This is the bulk of our entire nation. The median household income in the US is $50,000. This was from the most recent survey conducted this month! The economic recovery is now going into its fifth year yet Americans are no closer to planning for a stable retirement. Most Americans are not adequately planning and preparing for retirement. In fact, a retirement train wreck is barreling down on us. If 55 percent of households are living paycheck to paycheck, then stashing money away for the far away future is probably not on their immediate radar. We have become a nation that is precariously living on the financial edge.
Inflation is all around us if you know where to look: Spiking food costs, rising home prices and rents, and more expensive energy.
Inflation is accepted as a normal part of our economy similar to how we take it for granted that the sky is blue. It is close to a religion where people simply believe that inflation is part of the economic fabric of our nation. Yet inflation with no subsequent rise in wages is tantamount to a loss in living standards like a lumberjack slowly chopping away at a big pine tree. Inflation is a slow process and erodes purchasing power through a variety of avenues. We sometimes need to step out one generation to see how massive the changes are in the system. Even today inflation is hitting the pocketbooks of most Americans. First, inflation adjusted wages are simply not keeping up. You spend more at the grocery store and get the same or even less amount of goods. Sending your kids to college? More of your money is being allocated to this purchase compared to the previous generation. Housing? The large push of investors in the market has caused housing prices and rents to go up. What this means for most Americans is that more income is being siphoned away into housing. All of these are very tangible impacts of inflation so why is it that central banking policy is practically ignoring all forms of this erosion of living standards to continue monetary easing?
What goes up, must come down: The façade of the current stock market rally.
Do you remember what you had for lunch yesterday? Probably. What about two weeks ago? Probably not. Our mind isn’t designed on remembering every single detail of every single event but has adapted itself into remembering important events. Our brain is designed to look forward and for the most part is resilient. This is why the stock market rally starting in 2009 has washed away the memories of the market crashing down for many people. This also gives us a financial blind spot. The stock market has had a nice run since 2009 rising 168 percent as measured by the S&P 500. Many of the reasons for the crash were never fully addressed including too big to fail, debt strapped consumers, and a national debt that is getting to a level that is simply unsupportable. This market rally has occurred under the guise of favorable policies to the banking system. The Fed has punished savers and has created massive incentives for large pools of money to flood into every corner of the economy including the real estate sector. This has crowded out many regular households.  Yet the stock market is turning and a modest correction is coming over the horizon. I have seen no articles that give a clear reason as to why the stock market should be up 168 percent in five years despite the underlying weakness in the economy.
Goodbye American middle class: New report reveals that 62 percent of Americans earn $20 or less per hour. Household income stuck in neutral for a generation.
The latest figures from the Bureau of Labor and Statistics (BLS) reveals that 62 percent of Americans earn $20 or less per hour. And this only examines those that actually have a job. Most of the new jobs added since the Great Recession ended have come in the low-wage segment of our economy which seems to be adding the bulk of employment. These are certainly interesting times that we live in. The US has close to 130 million jobs. 18 million jobs pay less than $10 an hour and 63 million pay between $10 and $20. These two segments makeup 81 million jobs so it is understandable why the two income household is more of a necessity rather than a luxury. The median household income in the US is roughly $50,000 per year. Adjusting for inflation income is back to levels last seen in the 1980s. Americans feel poorer because their purchasing power has been eroded by inflation and also the swarm of lower paying jobs that now dominate the market. The US middle class is shrinking and to ignore this is to ignore the actual facts.