This page has been archived and commenting is disabled.
How Long Can The Top 10% Households Prop Up The "Recovery"?
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The question of "recovery" really boils down to this: how much longer can the top 10% prop up the expansion?
A flurry of recent media stories have addressed housing unaffordability, for example Why Middle-Class Americans Can't Afford to Live in Liberal Cities.
The topic of housing unaffordability crosses party lines: Housing Ownership Back to 1995 Levels (U.S. Census Bureau).
Other stories reflect an enduring interest in the questions, what is a living wage?and what is a middle-class income? These questions express the anxiety that naturally arises from the sense that we're sliding downhill in terms of our purchasing power--a reality that is confirmed by this chart:
Here's a recent story that delves into the question of "getting by" versus "middle class": How Much Money Does the Middle Class Need to Get By?
"Just getting by" in costly coastal cities requires an income in the top 20%: around $60,000 for individuals and $100,000 for households.
The article references MIT's Living Wage Calculator, which I found to be unrealistic in terms of the high-cost cities I know well (Honolulu and the San Francisco Bay Area). It appears the calculator data does not represent actual rents or food prices; the general estimates it uses woefully under-represent on-the-ground reality.
Current market rents in the S.F. Bay Area far exceed the estimated housing costs in this calculator, and that one line item pushes the living wage from $36,000 for two adults closer to $45,000 in my estimate--roughly the average wage in the U.S. (not the median wage, which is $28,000).
If you want to know where you stand income-wise, here is a handy calculator: What Is Your U.S. Income Percentile Ranking?
Here are the data sources:
Wage Statistics for 2013 (Social Security Administration)
2013 Household Income Data Tables (U.S. Census Bureau)
There are many complexities in these questions. For example, Social Security data does not include food stamps, housing and healthcare subsidies provided by the government, etc., so lower-income households' real (equivalent) income is much higher than the published data.
Then there are the regional differences, which are considerable; $50,000 in a Left or Right Coast city is "just getting by" but it buys much more in other less pricey regions.
As for what household income qualifies as "middle class"--it depends on your definition of middle class. In my view, the definition has been watered down to the point that "middle class" today is actually working class, if we list attributes of the "middle class" that were taken for granted in the postwar era of widespread prosperity circa the 1960s.
In What Does It Take To Be Middle Class? (December 5, 2013), I listed 10 basic "threshold" attributes and two higher qualifications for membership in the middle class. Please have a look if you're interested.
I came up with an annual income of $106,000 for two self-employed wage earners and the mid-$90,000 range for two employed wage earners, the difference being the self-employed couple have to pay 100% of their healthcare insurance, as there is no employer to cover that staggering expense.
$90,000 puts a household in the top 25%, and $101,000 places the household in the top 20%. $150,000 a year qualifies as a top 10% household income.
If we set aside income and consider net worth, net worth (i.e. ownership of assets and wealth) of most households is modest:
This shows the decline in household wealth since 2003:
Can an economy in which the majority of households are "just getting by" experience robust growth, i.e. "recovery"? If we discount the millions of households who are paying for today's consumption with tomorrow's earnings, i.e. credit cards, auto loans, student loans, etc., I think it's self-evident that only the top 20% (and perhaps really only the top 10%) have the income and net worth to expand a $16 trillion economy.
By definition, the top 10% cannot be "middle class." Yet it seems that these top 12 million households are propping up the "recovery"--dining out at pricey bistros, paying $200 a night for hotels, buying homes that cost $500,000 and up, paying slip fees for their boats, funding their children's college education with cash rather than loans, etc.
The question of "recovery" really boils down to this: how much longer can the increasing debt of the bottom 90% and the wealth of the top 10% prop up the expansion?
»
- 10583 reads
- Printer-friendly version
- Send to friend
- advertisements -
thankfully macro economics don't matter lest i be worried
Germany retail sales OCT (month over month)
prior ... +2.5%
expected ... -0.9%
actual ... -3.2%
saw that too...funny how it is completely buried from any news reporting while the dax goes sky high.
worth noting also that the dax had "technical issues" and was halted in the afternoon. i though the germans were going to get rid of hft and algos...
I Fucking Hate cnbc!
Line them up against the wall!
the FEDERAL RESERVE, which is not Federal at all, does not pay taxes! The whole system is a sham. The government borrows its own fucking money at interest, and by the time it trickles down it is taxed and retaxed. What a beautiful fucking thing if you are on the right side of the coin. Fractional banking- They are counting on our complacency and stupidity.
Of course they are federal, they're the govenment mafia's accountants......
So who are the people who are: --dining out at pricey bistros, paying $200 a night for hotels, buying homes that cost $500,000 and up, paying slip fees for their boats, funding their children's college education with cash rather than loans, etc.
Government employees, of course. They have guaranteed pensions and so they can live it up. Everyone else has to save for retirement. If you don't believe me spend some time in the Washington DC area. The wealth and spending astounds.
In California where teachers enjoy $107,000+ annual pensions when retiring from their 9-month-work years, plus hundreds of thousands more in free retiree health care benefits... nearly 30% of the state’s school children are either illegal immigrants or do not speak English. Whites students are now a minority in the system, as they are in the nation, according to the AP.
Of course they are federal, they're the govenment mafia's accountants......
!
please, the top 10% have benefitted tremendously from the ongoing fraud.
If they are smart they will get the fuck out of dodge before the fucking retribution begins.
Its compulsive LoP, they will remain until the bitter end.
They are also pretty helpless, strange to say, outside their comfort zone.
I hear they're also good eating...
But seriously; now that you mention it Winston, it would be interesting to see how many of them could manage a few basic household 'skills' that used to be taken for granted, like changing a flat tire or the oil in their their BMW, or installing a faucet or light fixture, unclogging a drain, or tracing a fault in a sprinkler system.
If you got some of these 'Marie Antoinettes' out of their palaces, they couldn't function in the 'real' world...
What are you doing to stop the fraud, LOP?
Many in the top 10% are just ordinary wage-earners. Should they just drop out of society and live off the grid (in poverty) to starve the beast?
SHRUG
You're wrong. It's not the top 10% that benefitted. It's the top 0.1%.
The small business owners, doctors, and engineers didn't get any of the stimulus money or ZIRP loans. Nobody bought their worthless investments at par. Even the small community banks and credit unions were robbed. The money all went to Wall Street and multinational corporations.
finally CHS is coming to the realization that all this "class" talk was always about wealth, not income
ancient Greeks and Romans usually made a census and divided the population in five classes, not three. and this kind of thinking stopped in Europe only shortly before WW1, where you could buy seats of five classes in most trains, analogous to the first, business and economy classes in post-WW2 public transport
Pareto is the guy that found out that wealth, if left undisturbed, gethers in a 80/20 "separation", which mathematically is a "power law" curve
so if you really have to take this politically agreed approximation of a division in three classes, it follows that the middle class is the top 20%... minus the top 20% of the 20%, which means:
lower class: 80%............. middle class: 16%............ upper class: 4%
what America had, for a long time, is not a middle class in the sense of wealth, but in the sense of aspiration and opportunity
in comparison to others, post WW2 American Society was not built on the foundations of wealth, but on the more modern ones of leverage, high income, lots of risk, little reserves, lots of chutzpah and innovation and creativity (but also a lot of help from neighbours and family)
and lots of social mobility, meaning that everybody could, in his life, be for a short time at the top, like 1 out of 8 in the top 1% of earners
anyway: the American Post-WW2 Middle Class was the wonder of the world. Until the 70's, I'd say. If I had to put an exact date, I'd say until August 15th, 1971
I think it can't be stressed enough that this period was truly exceptional. only the current rise of the Chinese Middle Class is (very modestly) comparable
Spot on.
I would add that post WW2 American society was also built on an abundance of natural resources.
possibly. unfriendly europeans and asians would, possibly, talk about an abundance of new markets leveraging up the return-on-scale of the Great American Corporation model, all fuelled by a Wall Street stock market overtaking London as the main financial center of the world. but lots of resources for sure helped
and now something truly radical: what happens, when the "natural" Pareto distribution is... disturbed? Like when monetary or legal or industrial policy matters influence wealth distribution? Well, was usually done through monopolies, and so you could see Robber Barons and Monopolists, as in the Gilded Age
but monopolies are crass, and too easy to identify. so oligopolies have to serve, instead. means, in Greek "A Few Make The Market" (polein=sell, oligo=few)
and what happens when A Few have the markets in their hands and money rules the world? the Few + Power = oligarchs
and this is something many societies have encountered in their history, and it always comes to how to cope with this situation
the Robber Barons of the Gilded Age and later had their monopolies broken up through "anti-trust" laws. like Standard Oil or Bell Corporation
the French nobility had their heads chopped off, but no, historically this is an... outlier
Solon the Athenian law-giver, for example, instituted the so called Timocracy. the higher the wealth, the higher the... taxes, but also the higher the political participation. meaning only a knight or higher could achieve certain honours/duties in the state, like having certain political roles
plenty of possibilities, but most start with either stopping the extreme flows upwards or... taxing them differently
for example.... restoring the tax laws from 1952
Stay strong, I think we finally have an opportunity here to completely crush the bottom 90%.
So far the plan is working flawlessly. I'm highly optimistic it will succeed.
anyone have the vegas odds on which developed country's citizens take to the streets rioting first?
Hey I do my part propping up the 90%. Unfortunately I'm not part of the 10% either.
None. The House is going to win that bet. That's what The Ebola is for.
can you imagine the chaos that would ensue if uncle sugar turned off the welfare spigot to the bottom feeders in our country? it would be epic and we would have the walking dead in nearly ever city….except some small towns (under 50,000) could probably handle it.
"By definition, the top 10% cannot be "middle class." Yet it seems that these top 12 million households are propping up the "recovery"--dining out at pricey bistros, paying $200 a night for hotels, buying homes that cost $500,000 and up, paying slip fees for their boats, funding their children's college education with cash rather than loans, etc."
You're welcome.
a lot of the growth from faux 10% with maxed out credit
won't be long till true picture emerges (ie: recession)
$200 per night for a room is a niggardly amount.
I love it when peopole use that word. Everyone freaks the fuck out, but it's not what they think it is. Still, I wouldn't be using it in the wrong part of town too often,
It's an Old Norse word. I don't think the old Norse new about Africa.
The current Norse know all about Africans, given that they've imported them by the million to their countries.
A few years ago a journalist got fired from one of the MSM outlets for using that word. Despite it having no racial undertones at all it was deemed 'insensitive' of him to use it. True story, We live in a madhouse.
Holiday in express.
You would know that if you had stayed at one. /s
That comment works for those that have seen the comercials. LOL
King Dollar crushing it
up over 1%
DXY +150 bps since FOMC minutes came out a few weeks ago worrying about usd strength
was it just mere hours ago Lance was calling for dollar decline?
haha
Obola: You didn't earn that income!
Hitlary: You only got that job because of the government!
Congress/Government: I can see your tax burden is not quite high enough, my charts tell me you still have disposable income!
FSA: Reload my SNAP card and give me another O-Phone!
Average working stiff: Fuck this cart is getting seriously hard to pull!
How Long Can The Top 10% Households Prop Up The "Recovery"?
I don't know, how much more can the bottom 90% be conned out of?
seems bottom is 99,999%
We're all in this together!
"how much more can the bottom 90% be conned out of"
10%?
Look, you're worried about things that aren't going to be a problem for YEARS AND YEARS AND YEARS. Just roll with it. Everything will be fine. You'll see.
No, I'm not worried, J-Yell's looking after all of us, I know that, I know she cares about the average guy and has his back.
"zerohedge @zerohedge 3m3 minutes ago
SCHAEUBLE SAYS GROWTH CAN'T BE HELPED BY PRINTING MONEY. #Ref!"
This is said after how many billions and billions of printed money?
Once they are debt saturated, spend their life making ends meet....no room for expanding anything.
I don't believe there has been any expansion.....and cant be. And when there are increased sales who is it benefiting? Corporations with their plants in other countries.....
Only so many times you can pay one credit card with others....
And with a trashed Yen, strong dollar....good luck to US industry returing.
preach it, bro
It took Richelieu France about 40 years to Overtake the Spanish-Austrian Hapsburgs as the pre-eminent nation in Europe. It took another 140 years for the decadence and privileges of the aristocracy to ignite the French Revolution.
So, relax, and don't hold your breath! This process -which began in 1981 with Reagan- has a century more to go before society flips over.
St. Reagan?
Blasphemer.
Longer than most gold bugs can remain solvent.
They'll do it as long as it takes to re-establish some kind of balance. If they are the only ones propping the economy, it will grow, or shrink, to the appropriate size. Meaning a sharp deflation which will restore some purchasing power to the 90%.
The 90% form the foundation the world of the 10% is built on. It can only hold if that foundation is firm and secure. Taking bricks out of your foundation to build a third story is really a pretty stupid idea, when you think about it.
Financing the US comes from the sale of Saudi Oil and taxes on Canadians and Austrailians. It comes from old European Aristocratic money. Central Banks and Departments of treasury are the same. Everything is based on what Goldman Sachs says can or cannot happen. Ask Blankfein if he is worried about Putin. The answer to the title may be that simple.
I wonder how much of that net worth is in paper assets and residential, non-productive real estate. The banks are stress tested. I wonder how the various quintiles would do under various stress-test scenarios.
How long do you have?
No it boils down to stock buybacks. Figure out when those end and you have figured out when earnings collapse.
This is similar to cannibalism when there is no food, or real demand, left.
They all know they're eating themselves alive.
It's a zombie apoc on WS.
Whether a bank buys the stock directly, whether the bank loans money to a hedge fund to buy stock or whether a bank loans money to a company to buy its own stock, the source of the money is always the same.
Which cup is the pea hidden underneath?
How many Mercedes-Benz's can I fit on my estate?
I'm going to Home Depot to remodel my garages.
That should help the economy?
Subprime loan schemes on autos, multi-family homes, condos, et cetera
are augmenting the top 10% on that very prop up. The question really is
how long can subprime borrowing continue? Defaults will not remain at 5%
and will increase over time leading to the next implosion on Wall Street.
By my calculations of all this qualitative, and quantitative calculus, the systemic crash will manifest by mid March 2015 unless the monied classes
cough up some cash to prop it up further. Moreover, I cannot fathom Warren Buffet and Bill Gates coughing up cash to support this failure
of a system. The monied classes will panic in the end when they realize they held their own salvation in their bank accounts for too long rendering their leverage useless when all is said and done. Titanic II is aimed directly at an ice field and the dudes on the watchtower are playing with their 'crack'-Berries/I-Phones IMHO. What is worse is that Internet is being dumbed down by NSA PSYOPS and that ilk leaving us all on a constant search for yield on news articles via Internet. MSM is not worth a view anymore and the PSYOPS have moved to online territory. Tim Berners Lee envisioned enhanced democracy via Internet communications and the WEB, but censorship via NSA/PSYOPS is on constant attack. Frankly, Berners Lee should have realized he was inventing a modern day battle field when he designed the WWW. Command & Control NSA/USA is ruining the Internet with censorship and dirty tricks campaigns that need to be haulted if we are to not split off into waring factions.
the top 10% will prop up the economy for as long as they need the 90%'s serf labor, and not a moment longer.
9.00075 of that 10% are bying gold bars, million dollar houses, and going to christies auctions the same as i go to garage sales looking for a bargin, their turning their paper assets into something more tanglable.
their also readying to retire as soon as the govt. raises taxes, then we'll find out how liquid fiat dollars are.
the top 9.00075 most worked hard, and hired people that knew how the game was played, the others were players in the game, so they know when to fold em.
also if you hadn't noticed they were buying back stocks with your money to raise share-price just before they sold their shares, the only fiat their leaving on the table is their retirement plans, maybe.