Inflation eats away the new peak in stock market: Dow is down 11 percent since 2000 adjusting for inflation. Looking at the stock market and the impact of inflation.
The Dow has now reached a new peak. The media is prancing up and down like a giddy school girl as if this had a significant impact on the bottom line for most Americans. Don’t let the details out that many companies have increased their bottom line by squeezing wages and cutting worker benefits. Yet the mainstream press can’t even get one thing straight with inflation. The Dow is actually down 11 percent from where it was in 2000 adjusting for inflation. After all, a dollar is only worth as much as it can purchase in the economy. The US dollar has been hit over this period as well. Real household wages are back to levels last seen in the mid-1990s. So the Dow “peak†is really more symbolic and many Americans realize this. Let us take a look at where the stock market stands today through the lens of inflation.
Debt based delusion: Fed spending far outstripping revenues, balance of trade, and business inventories decline.
One clear symbol of our new Gilded Age is that of the peaking DOW while food stamp usage is at a peak as well. Even though the DOW is only a reflection of a handful of companies, the media focuses on this as if it were a barometer of the real economy. It isn’t. Household net worth has fallen by 30 to 40 percent since the recession hit. But isn’t the DOW at a peak? Yes. But the stock market is only a minor part of the portfolio of most Americans. Also, most Americans derive their wealth from real estate which ironically is now being inflated not by families with growing incomes, but by big banks that are accessing cheap money/debt from the Fed and buying up available properties and crowding out average Americans. The net impact is higher rents and low supply. In other words we are inflating another financial bubble that is going to harm your typical American. Over half of Americans don’t even have a retirement plan in place. The government is blowing through money it doesn’t even have. Let us examine the current state of affairs.
The Sequestered Gilded Age: Top 20 percent of households control over 90 percent of all stocks and financial wealth: Bottom 40 percent of all households have an average net worth of -$10,600.
Income inequality is now at levels last seen in the United States during the Gilded Age. This was a time of incredible opulence for the few while the many struggled to get by. There is even a story of a Mrs. Stuyvesant Fish throwing a dinner party to honor her dog that arrived wearing a $15,000 diamond necklace. A very stark contrast to how most lived. In 1890 11 million of the 12 million families earned less than $1,200 per year. Of this group the average annual income was $380, well below the poverty line. While we think we are far removed from a time of such dramatic contrast, we now have a country where the stock market is reaching a peak, yet truly the benefits go to a small number of Americans. The top 1 percent controls 42 percent of all financial wealth (the top 20 percent control roughly 90 percent of all stock ownership and financial wealth). The bottom 80 percent of Americans control less than 10 percent of all stocks owned. People seemed shocked to find out that the average per capita wage in the US is $26,000. Is this kind of wealth inequality beneficial to our country?
New model of retirement, aka working forever. Americans woefully underprepared to face retirement and half of households have zero retirement plan.
Most Americans are incredibly unprepared when it comes to retirement. The goal posts keep shifting. Now for full retirement under Social Security people will need to retire at 67 versus 65. What is rarely discussed is that rising Medicare premiums are being taken out of monthly payments so the amount being received is already shrinking while the cost of living is going up. One startling piece of information that came out this year was that half of Americans are one tiny emergency away from being flat out broke. No wonder why we have a record 47.6 million Americans now on food stamps. When pensions were phased out starting in the 1980s many thought that the 401k or IRA would be the new way to save. Hey, Americans will stuff their money into the stock market casino and after 30 years, they would have a million dollar nest egg thanks to compounding. How did that work out? Let us take a look at where things stand today.