How the financial elite have dismantled the American middle class – top 1 percent share of wealth at levels not seen since the Great Depression. Goldman Sachs offering average bonuses of $430,000 while a record 43,200,000 Americans receive food stamps.
The U.S. economy is now operating like a finely tuned engine bent on dismantling the middle class and protecting the tiny elites in our nation that have learned to manipulate both political parties to their financial benefit. This did not occur over night but started in the 1970s when the U.S. government and investment banks juiced up the nation with deficit and debt spending. A single family cannot go into debt for a very long time without consequences but a rising housing market hid much of the inequality developing in our system for a very long time. It was an illusion of stability. The top 1 percent in our nation now control 43 percent of all financial wealth. These are levels not seen since the years before the Great Depression consumed the global economy. The fact of the matter is the top 1 percent has massively gained in real financial terms because of political maneuvering and selling out the middle class. Since these people protect their wealth through investment banks and tax breaks politicians have not dared touch these sacred cows or even asking banks to pay for their decades of personal irresponsible lending. In the end the elite have created a system where the working and middle class are paying for their own demise.
Financial trends of the new American economy – Higher educated workforce with harder time finding and keeping jobs, median retirement account for Americans at $2,000, global stock market growth, and housing bust covering up inflation in other areas.
The Great Recession is revealing some fundamental challenges in our economy. One of those challenges revolves around the exceedingly expensive college degree and its ability to translate into employment. As a percent many more American’s have a bachelor’s degree today than say in 1992 yet unemployment for college educated Americans is at modern record highs. Another profound challenge facing American families is retirement savings (or lack thereof which is more likely the case). Retirement is largely becoming a luxury that only a handful of families can count on. As we look back at the last decade not all global stock markets were created equal and this is evident when we compare the US stock market to those abroad. Finally we will examine what areas are seeing major price increases all the while overall inflation appears to be muted to average Americans.
The road least pillaged – S&P 500 up 90 percent from bottom but housing values down 30 percent nationwide. Wealthy store most of their wealth in stocks while most Americans have their net worth in housing. 2010 record year in foreclosures and the upcoming lost decade in housing.
There are few investments in the US that are so heavily subsidized like housing. Residential and commercial real estate included benefit from favorable government policies to increase demand. Some of these policies may have merit but a large part of the housing market has been injected with so many perks that the true value of a home has been stripped out. This is what makes the crash in real estate even more dramatic. Real estate has and is declining in value even in spite of all the generous benefits of owning. How can that be when the government has made buying a home such a lucrative financial move on paper? First, the purpose of buying a home has been lost in the massive investment banking and government casino machine. Instead of buying a home for a steady 30 year time period home buying turned into a giant operation where churning sales was favored over sustained and stable growth. This was a mission set back in the 1930s when the government stepped in to subsidize the housing market. The intent was to create stable communities and pride in owning a home. Much of that was picked away like meat from a carcass as Wall Street figured out a way to develop archaic investment instruments to turn housing into another commodity like oil or stock options. For all of the tragic financial issues in housing we are now likely to see a 2011 through 2020 Japanese like stalling out in home values.
The gambling economy – Nevada GDP contracted 6.4 percent during the crisis. A state where 1 out of 4 people is unemployed or underemployed. States trying to balance budgets with gambling and casinos.
Nevada has really taken a hard hit from the current recession. Most Americans at some level have felt the repercussions of the current financial crisis but Nevada has felt the pangs of the crisis much deeper. Nevada now holds the highest unemployment rate of any state in the country. Nevada’s GDP is $131 billion with approximately $97 billion coming from the Las Vegas area. Where Vegas goes so goes Nevada. Las Vegas is also facing major challenges from the commercial real estate debacle. Gambling revenues that depend on an economy with healthy discretionary spending have taken large hits and many of the commercial developments made large bets on continued growth. That proposed growth has not come to fruition and unlike a stock that can plunge to zero, it is hard to undo a large condo project with very little buyer interest. Whereas some areas of the economy might recover sooner, areas that depended heavily on real estate and leisure spending are falling on difficult times.