The new Gilded Age – The psychology behind the aspirational rich in America and how people allow banks to swindle their financial security away.
A couple of weeks ago a survey of the ultra-rich by Fidelity Investments showed that most of these millionaires did not feel rich unless they had $7.5 million. Keep in mind that one out of three Americans do not have one penny to their name, not even stashed in the beat up mattress. It is also the case that the average per capita income in the United States is $25,000 so it must be odd to hear millionaires saying that they don’t feel wealthy until they reach the $7.5 million mark. The top 1 percent already have over 40 percent of all financial wealth in this country but apparently this is not enough. What the survey found implicitly is the wealthy want even more from an already shrinking pie and they are more than willing to sacrifice the American middle class to achieve their benchmark of wealth. Why aren’t people on streets revolting against inequality that resembles that of the Great Depression? We didn’t have a Gilded Age because the working class enjoyed this period. So why the continued silence on behalf of the public? Part of the reason stems from many in America believing that someday they will wake up and have $7.5 million in the bank and they want to make sure the government doesn’t touch any of their hard earned money. Once again, one out of three don’t even have a dollar to their name and the average per capita income is $25,000. Many have bought into the aspirational propaganda and in fact are protecting the same Wall Street investment banks that have robbed their homes, crushed American jobs, and are stripping away the rights that working and middle class Americans have fought for over the last century. Apparently some are not aware that we are living in a new Gilded Age. Instead of railroad tycoons we now have the master’s of the universe on Wall Street.
No quantitative easing for oil – The Federal Reserve can digitally print money into existence but this does not create more oil. Federal Reserve has a comic book section?
The Federal Reserve continues to support a flawed banking system that has ignored the urgent calls for reform in spite of the greatest financial collapse since the Great Depression. Bankers and fellow politicians understand that each day that passes without serious reform allows one more day for the painful memories of 2007, 2008 and 2009 to be slowly erased like castles in the sand. It was rather clear who led us into this mess in 2007 and most would agree it was the financial sector and their ill advised reward systems. It was greed run amok yet today you have some politicians trying to argue in favor of the banks that fault is really too hard to ascertain or place on only one group therefore no real changes can take place. At the very least hands off the compensation packages of the top 1 percent in the financial sector that have pilfered the wealth of the nation is their core argument. The Federal Reserve is not a government institution and contrary to public perceptions is mainly designed to protect the banking interests, not the interest of the people. Searching for more data I stumbled on comic books put out by the Fed.
The financial elixir that is falling home prices – Lower home prices good for the economy – Median U.S. home price down to $157,000 taking up 3 times the annual household income instead of the bubble peak of 5. Adding jobs while home prices move lower? Banks big winners when home prices remain inflated.
It is interesting that in the short-term horizon of our economy falling home prices are occurring while jobs are being added. The banking sector during the early days of the crisis made it abundantly clear that falling home prices would lead to economic collapse. Yet the opposite is occurring. Why? First, inflated home prices eat up a deeper portion of a household’s income. With a large portion of our economy dependent on consumption this funnels consumption into a largely unproductive sector of our nation. The banking sector is largely linked to the real estate industry so it benefits their bottom line for home prices to simply go up even if household incomes have gone negative for over a decade. So it should come as no surprise that as home prices continue to move even lower that somehow jobs are being added. Middle class Americans will be better off with a boring housing market with 30 year fixed mortgages and a sizable down payment requirement of at least 10 percent so resources can be focused on more job supporting growth that also allows us to export abroad (there is zero exports with housing).
Federal Reserve punishes savers by subsidizing big banking bailouts – Two largest U.S. banks offer a paltry 0.05 annual percentage rate while increasing service fee charges and upping loan interest rates. S&P 500 not cheap.
The challenge most Americans are facing is first, trying to save money. If that hurdle is accomplished the next tougher question becomes where the money should be placed. The Federal Reserve by default with a negative interest rate policy has punished savers at the expense of massive debtors. The Fed for many decades since the 1960s had held the Fed funds rate over 5 percent. What this also meant was that Americans if they decided to step aside from the risky stock market would at least yield a decent return in U.S. Treasuries. Those days seem to be long gone with the funds rate near zero. Banks are using their easy access to the Fed to borrow cheap and to lend at much higher rates. They are also borrowing cheap and investing in global stock markets. The two biggest banks in the U.S. give depositors merely a place in the bank’s digital vault and pay almost no interest.