Economic Reality: Bottom 50% Of Americans No Longer Matter

Tyler Durden's picture

Authored by Mike Shedlock via,

The Fed likes to brag about the “We saved the world” recovery.

However, the unfortunate truth of the matter is a record Half of American Families Live Paycheck to Paycheck.

Does it Matter? Let’s investigate.

Unprepared for Nearly Anything

  • 50% are woefully unprepared for a financial emergency.
  • Nearly 1 in 5 (19%) Americans have nothing set aside to cover an unexpected emergency.
  • Nearly 1 in 3 (31%) Americans don’t have at least $500 set aside to cover an unexpected emergency expense, according to a survey released Tuesday by HomeServe USA, a home repair service.
  • A separate survey released Monday by insurance company MetLife found that 49% of employees are “concerned, anxious or fearful about their current financial well-being.”

Deleveraging? Where?

A Fed study shows U.S. Households Will Soon Have as Much Debt as They had in 2008.

The Federal Reserve announced Friday that the U.S. has $1 trillion in credit-card debt. Consumers hit that number in the fourth quarter of 2016, but eased on revolving credit during January 2017. The Fed announcement showed revolving consumer credit hit more than $1 trillion once again in February 2017.


“Credit card debt is rising quickly, but delinquencies are still really low,” said Matt Schulz, a senior industry analyst at the credit cards site “Many Americans are doing a good job of controlling their debts, but eventually with big debts and rising interest rates, it’s likely that something will have to give.”

Paycheck to Paycheck “Good Job”

Excuse me for asking but if half the nation lives paycheck to paycheck, is that really indicative of doing a good job at managing debt.

And as for “low delinquencies”, I remind you of my April 26 article Subprime Credit Card Losses Bite Capital One: Income Down 20%, Charge-Offs Up 30%.

Nonetheless, I remind you of an important perception.

We Saved the World

Two Reasons Not to Worry

  1. The stock market and housing are still going strong. We heard the same thing in 2007 but it’s different this time.
  2. The bottom 50% of the economy simply do not matter.

The real crux of the matter is point number two.

The Fed does not give a damn about the bottom half of the economy even though it spouts continual lies about “income inequality.

The Bottom 50% Do Not Matter

As long as the Fed can keep stocks and home prices elevated, there is no concern about the food-stamp, rent-subsidized, Medicaid-supplement, disability-income, Obamacare-subsidized 50% of Americans struggling paycheck-to-paycheck.

That money rolls in guaranteed, month after month!

That 50% cannot afford a house is irrelevant as long as suckers keep paying $500,000 to two-bedroom shacks in LA.

The game is to keep asset prices up so that the top 50% keep spending. The bottom 50% are taken care of by government (taxpayer) subsidies noted above.

Here’s the real deal: Fed Expects a Second Quarter Rebound, Higher Equity Prices.

Repeat Performance

The Fed needs to keep asset prices elevated even though it’s pretty clear concerns are mounting over bubbles.

Can the Fed save the world again?

Previously, the bottom third did not matter. Then the bottom 40% did not matter. Now the bottom 50% do not matter.

That statement is a bit over the top. By how much I don’t know. But the trend is clear, as is the fly in the ointment.

Brexit was the first warning shot. Trump was the second.

As soon as the bottom 65% don’t matter, those 65% may vote to take matters into their own hands.

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clade7's picture

From a lifetime of obscure historical study, what you state here I believe to be correct...good on you for the post..its puts things in perspective...

just the tip's picture

excellent assessment.

i binge watched youtube videos of the 2008 stock market events this weekend.  sunday actually.  i woke up this morning with the opinion that the best thing that could have happened is if all the wall street banks had gone belly up.  and yes, i am well aware of the consequences of that statement.  i am also aware of the consequences of who would put the pieces back together, at that point in time.  that doesn't inspire any confidence in the alternative either.

i would say what i think should have happened to them, the white house, and the fed.  but i will not.  i have a very dark opinion of what should have been done.  it has nothing to do with trials and or jails.  just a very dark opinion.

Big Twinkie's picture

Just where did 65% come from?

They chose that number so it would happen at exactly the same time my kids cut the grass or pick up their rooms: Later.

Making Merica Great Again's picture

Our liquidty is stronk. tm

aqualech's picture

I repeat myself: the role of the FED is to maximize indebtedness.  The bubbles are just collateral effects.  The end game is the USA in hock to the banks up to the eyeballs and when there is default there will be the biggest bail-in you've ever imagined.  The bottom 50% is already there - penniless debt slaves.

FreeShitter's picture

Time (been time) to drain the swamp from the barrel of a gun.

DistortedPictures's picture

When are people going to be responsible for themselves? They are broke mostly due to poor decision making and funny enough, greed.  Many poor people are fucking greedy also.  They don't have money for an emergency, but I guarantee they have most of the following: 

expensive cable bills

a large screen tv

some sort of computer game console

tons of unhealthy, crappy food in the kitchen

booze and drugs

cell phones

cell phone contracts

car payments

car rims


credit cards

the list goes on.

Live simply, save, pay cash for what you need and reduce, reduce, reduce.

They are fucking tools.  Not all victims are guiltless. 



Making Merica Great Again's picture

Don't forget netflix, spotify, tinder subs.

MissCellany's picture

I'm werkin' on it...

I only have two of the items on your list -- car payment and credit cards -- the first will be gone later this year, the second I use for most expenses (to earn the rewards, which more than cover the annual fee) and pay the balance off monthly...

Putting in a small garden this season and some apple trees that will bear fruit in a few years...

But dang, it never gets easier. Downwardly mobile for years, scraping to save a little each month... been ready to go Galt for years if only I could.

Donate Moar's picture

So I exited a stressful job and decided to work on small engines, and various odd jobs.

These are NOT high dollar items.  Maybe $50 to repair a mower or similar.

I HAVE DISCOVERED the OWNER is far more difficult to deal with than the engine.

Totally backasswards.  

Is anybody thankful that I repaired their equipment?  NO, unless I do it for free.

The more I have to deal with people,   the less I want to deal with people.

Good luck with the garden. 

Nature abhors a vacuum and a garden and will seek to destroy both quickly and efficiently.


Creepy Lurker's picture

People in this thread have chosen the third way. (There is always one.)

I lived in a housing bubble. Sold the bubbly house and moved back to where I'm from, house and land getting close to being paid for, like the vehicles. Just finished the raised bed garden project, starting on a hoop house soon.

Withdraw. Go Galt. Interact as little as possible with the system, take care of you and yours, fuck the rest. Work toward resilience.

MissCellany's picture

Boy do I hear you on that people problem, friend. In recent years I've come to believe I was born to be a hermit.

HumanMan's picture

Gardens work best with nature, IMO. Find or encourage local plants and animals that are known to be helpful with your chosen crops and it's associated parasites. Nature is your garden's greatest enemy until you do things her way, at which point she becomes your garden's greatest ally. If you want to go really deep in to this method, check out agroforestry:

Blankenstein's picture

You left a big one off the list vacations to the beach, Vegas or a professional sporting event.  When I used to visit Facehole more frequently, there were always pictures from someone taking a trip to one of those three.

south40_dreams's picture

Ms. de Rothschild says to have them eat cake.

Duc888's picture



Fine by me, keeps me off their RADAR.


No problems here.

brushhog's picture

We spent the weekend at my father-in-laws with my wife's family. There were about 4, 30-ish couples there with children or expecting. All we heard about were money problems. One guy is working 50 hrs a week now and at the end of the month he has 300 dollars left over after his bills are paid. Even the old man is 6 years from his pension and living week to week.

After we left, on the way home my wife  said "we have it the best out of all of them, we want for nothing". Now as we pulled away it was a stark contrast to see our old-but-paid-for pick-up truck compared to all those brandy-new cars and trucks. Every 5 minutes their iphones were going off, or they were texting, or doing god-knows-what on those things. We were the only ones ( including the old man ) who dont have cellphones of any kind. I'm in my forties and Ive never had a loan, and havent owned a credit card since the late nineties. We do this on about 30k a year AND we're raising a kid....AND we have a solid savings. Our fun usually happens at home, we cook all our meals, go hiking and fishing. The others are still paying for last year's vacation to the Bahama's.

I guess my point is that alot of people put themselves in these situations by the choices they make. Almost anyone working a full time job with benefits can have savings, no debt, and not have to live week to week. Its a choice. Americans today have no concept of doing without, or delaying gratification until they can legitimately afford it. Everyone seems to believe that they should have a new car, vacations, Iphones, a big house, and etc. It's like a lifestyle that they just assume HAS to be lived. So alot of these people living week to week are making a conscious CHOICE to do that, I dont really have much sympathy accept in those cases of the truly unfortunate.

I am Jobe's picture

“Sometimes people don't want to hear the truth because they don't want their illusions destroyed.” 


? Friedrich Nietzsche

darteaus's picture

And when you pointi it out to them, you just made an enemy.

WillyGroper's picture

dat's da trufe.

all that's needed is a small mental adjustment to no longer care.

the logic there is, if they don't care, why should i?

WillyGroper's picture

absolutely...when it's their illusions destroying them.

darteaus's picture

We are all our own worst enemies.

Fiscal Reality's picture

Excellent post. Most of our conditions are the result of the choices we voluntarily make. It's never too late to change the future.

Big Twinkie's picture

I think the bigger problem is that the middle class is being bled like a pig.  You're bragging about how you live like peasants and have money left over.  Let's rewind 60 years and see how the American dream looked then:  Graduate from high school and get married at 18.  Go to work in the steel mill, buy a house, a car and a boat.  Wife stays home and raises the children.  No one gives a second thought to the cost of college or health care.  No credit cards, no mounting debt. After 40 years, retire with a pension that lets you continue that lifestyle to the grave.

What has changed?  People now go to school and get Master's degrees in how to take as much money from you as they can, and give you as little in return as possible.  The vampire class goes around, looking for piles of other people's money and uses every means, legal and illegal to seize it.  The noose is tightening and you're blaming us for having a neck that's too thick.

ElTerco's picture

People were making decisions based on the real world back then, and living within their means. If people now are trying to duplicate people's lifestyles back then, then they are not adapting to economic reality.

That said, I could not agree more with your second paragraph. If you would have separated that into a separate comment, it would have had more than a dozen up-votes.

brushhog's picture

People "back then" were the exact same, genetically as people are now. We need exactly the same things to live and be, water, shelter, and purpose. This has not changed in 2 thousand years or more. The difference is your expectations of what you believe you should have, and your loss of understanding of what life and happiness is all about.

brushhog's picture

I'm saying that although America maybe passed its peak, economically, you still have more than enough. Many of us CAN"T HAVE ( a phrase that Americans hate to hear ) EXACTLY what other people had in a different time. Truth be told you still have 20x more than what most people have, and have had, all over the world INCLUDING people from America's past. You are crying with a loaf of bread under each arm. The fact is the things required for a human being to live a happy, healthy life, have not changed in 2 thousand years....and you have an abundance of it.

The problem is not that you dont have enough, the problem is you dont know what to do with what you have.

darteaus's picture

They'd matter more if they paid taxes.

buttmint's picture

....ten years ago, how much of what we take for granted in today's world existed on our DASHBOARD?

Nascent smartphones, very expensive. Email was King. Everyone flush from the House-As-ATM economy raged on.....

I was in good health, mid 50s, had a sweet gf, a great worker and tons of construction jobs besides my own gigs on my onw Ponderosa.

Projects aplenty.

My helper died at age 36, thymoma---rare cancer of the thymus.

I could not walk any longer, knees wore out.

GF dried up. Actually, people wanted big ticket jobs completed gratis.

I bailed.


I took a flight to SE Asia and learned to read, write and speak an Asiatic language. Learning to live in any foreign country is a HUGE learning curve.

Now I have lotsa gfs, great food, I live on my motorbikes and I do whay I want everyday. My SSA checks are a pittance, who cares?

It was far from easy---but it is DOABLE. I suggest you check the date on your passport. If less than 6-9 months remaining---reup and check the box that says you want the BIG US Passport. It is free....lotsa extra pages for visas. Believe me---the Art of Living abroad is managing your passport pages.

Not a joke.

The US Embassies in foreign countries are amazing places. They represent what America used to be like and still can be! Polite, informed staff that will

go to the nth degree of their abilities. I get chills thinking of fine US Embassy staff the world over---professional problem solvers. Put THEM in charge of running the US Govvie and things WILL GET STREAMLINED!'s picture

The human body is 90% water.  We're basically cucumbers with anxiety. SHOW ME THE BEEF!

Global Douche's picture

It also means we're damned close to drowning, so keep jumping high enough to breathe.

I am Jobe's picture

Romance and Love will save Americans . I thought Americans were EXCEPTIONAL?  


“Sometimes people don't want to hear the truth because they don't want their illusions destroyed.” ? Friedrich Nietzsche

Centerist's picture

Not Americans. AmericA.  There is a difference.  The latter is an idea, while the former is a mixture of those who deserve to live the idea and those who are just ingrates letting it die around them.

aliens is here's picture

Not true, they'll remember the bottom 50% when it's time for their re-election then they'll say I am with you and I care about you etc etc then we'll re-elect them in as usual. People are dumb that's why we have the gov't we have today. Happy Monday.

johand inmywallet's picture

Not true, they'll remember the bottom 50% when it's time for their re-election then they'll say I am with you and I care about you etc etc then we'll re-elect them in as usual. People are dumb that's why we have the gov't we have had for the past 100 years. Happy Monday.



Argenta's picture

The wisdom of the Second Amendment is being obviated before our very eyes.  If you believe this country would have hung around even this long without it you're naive.


Catullus's picture

Greenspan said as much in Bloomberg last week. He talks about entitlement reform but then says of course monetary policy will respond if not. It means this is going to continue. They're just waiting on political cover to print some more. They know this is ridiculous.

Nurse Ratchet's picture

Greenspan started this mess.  

Obama and Bernanke just increased it.  The walls will come crumbling down soon because the FED does not care about Trump. 

Nurse Ratchet's picture

excellent article. In a sense there is already socialism in the US. people are dependent upon the governement in the same way.


The real test is when the middle class is squeezed out of the stock market.


I am ready. These guys have been doing a good job of calling the dips and rallies. 

Marilee's picture

Good group there.  Former Goldman guys. 

Patriotico's picture

Shep Wave has been the only analyst to actually call market moves. Thanks. 

Deep Snorkeler's picture

The Bottom 40%, a Growing Dead Zone

1. The American system started 

to take things out of the human mind

instead of putting things in, about 1982.

2. Their lives reduced to an absurd fantasy.

3. There are no expectations for improvement.

just the tip's picture

instead of putting things in, about 1958.


reader2010's picture

Since when the rest of any society matters in the course of human history?

TheSilentMajority's picture

The bottom 50% are the pawns of globalists.

The bottom half must always contend with illegal immigrants undercutting their wages, and they must always be fearful that their job could be off-shored at a moments notice by the globalists if they deem it to be necessary.

Yen Cross's picture

  The bottom 50% matters when it comes to student and subprime car loans.

Berspankme's picture

Wonder what % of that credit card debt is serviced at monthly minimum?