Welcome to the land of the poor and rich – Trading the middle class for economic extremes.
The extremes in the US have gotten more pronounced in this economic crisis. It is hard to imagine a country where 46 million people are living with the assistance of food stamps while 6 of the 400 top income earners pay no federal tax. I’m sure that just like most Americans you pay your fair share of taxes. Of course the real burden has fallen on the middle class since the recession hit in 2007. Most of the ultra-wealthy have their money vested in the stock market and since the lows in 2009, the market is up well over 100 percent. The number one asset of the middle class in housing is still down over 30 percent from the peak and is trying to squeeze out a gain in 2012. So you ask who in reality is paying for all these bailouts and transfer payments? A massive amount of the burden is falling on the middle class and debt.
Long live the debt ceiling – approaching the fiscal cliff by spending $1 trillion more than is being taken in. A breakdown of government spending and revenues.
History does love to repeat itself especially when it comes to debt bubbles. At the rate the US government is burning through money, we are likely to breach the debt ceiling limit even before we enter 2013. We’re about $400 billion away from the $16.39 trillion limit but considering we’ve already spent $700+ billion that we don’t have this year, that lofty goal is likely to be met. We’ve talked about the fiscal cliff and how the US dollar has essentially fallen off this position decades ago. Yet the political talk is simply ignoring one of the most important items that will face this nation and we’ve known this scenario was coming for well over a decade. Things appear better than they are because we are spending money we don’t have. Does this sound familiar? In the 2000s you had people buying massive homes they couldn’t afford and leasing cars that cost more than annual salaries of most individuals. That didn’t exactly end well. Yet today, we continue to spend money that is simply not there. To think this will carry no consequences is simply naïve.
US Dollar already went off a fiscal cliff – what does a falling dollar mean to US families? Masking de-leveraging via debt markets.
People tend to have a short-term memory when it comes to financial panics. Even when told that the US dollar has lost over 90+ percent of its purchasing power since 1914 when the Federal Reserve was first established, many just assume this is normal. Inflation is as common as air. Today’s purchasing power of one dollar is equivalent to 4 cents to put this in perspective. The Fed is trying to inflate its way out of the massive debt we are facing. We all know a fiscal cliff is approaching. We’ve known this for well over a decade. Yet we continue to spend and witness a slow decline to the purchasing power of the US dollar. Much of the current economy is fueled by debt markets expanding but a saturation point will be reached. Breaking points do happen and you need only look at Europe to see what happens when the scales tip. What does a weaker dollar mean to American families?
The other side of persistently high unemployment – Underemployment rate shoots up to 15 percent but is actually more problematic because of the civilian employment-population ratio.
Spending time examining the employment report shows continuing trends that appear beyond the headline figures. The number of Americans unemployed or marginally attached to the work-force increased to 15 percent and appears to be a new staple of our current workforce. A key data point is the civilian employment-population ratio that shows a continuing drop. The US is on a multi-decade trend where we have fewer working adults as a share of our overall population. This is not a positive trend where we have an aging population with less affluent younger workers. The headline rate is only a brief snapshot in time but the bigger trend of a shrinking middle class is all too prominent.