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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Select your preferred way to display the comments and click "Save settings" to activate your changes.'s picture

Life for most of us is a difficult journey. The traveler of the journey sees what he sees.  The tourist sees what he has come to see. I feel like I'm at that part in the acid trip where you think nothing is happening.... but it is! My advice to you, if applicable, is to start drinking heavily.



quasi_verbatim's picture

The bottom 90% has never mattered, anywhere, except as voting fodder and cannon fodder. The welfare state, without which there would be real deprivation, was invented to make Revolution a thing of the past.

Peterman333's picture

There's nothing new under the sun, bread and circuses were always there, eventually the bread runs out and you have an uprising os some sort.

UmbilicalMosqueSweeper's picture

"Vote"? ROTFLMFAO!!!



directaction's picture

One question:
Will the dispossessed vote for the Wall Street and War Party,
... or will they vote for the War and Wall Street Party?

It's a tough choice.  

rrrr's picture

Only I matter.

Donate Moar's picture

Good to know there is a Club that willingly accepts my application.

Deep Snorkeler's picture

This is the kind of article that could get us in real trouble in the coming recession.

As the population grows and the economy stagnates,

we will face worsening ecological, humanitarian and refugee crises.

Focus on N. Korea, ISIS and Iran. Keep everyone distracted.

We must believe the system is working and will continue to work.

Keep it going! It's all we have got.


CHX13's picture

Ultimately, the consequences of reality will prove to be a real ß¡†©#. GLTA - we will ALL need it - even the 0.01% !!!

sheikurbootie's picture

Blame Obama.  He did NOTHING for 8 years. 

swampmanlives's picture

Even if McCain or Romney had won, this situation was inevitable. The times are changing, and people are going to get left behind because they can't keep up.

sheikurbootie's picture

First term, I agree.  Second term, not at all.  Obama did nothing to help.  He didn't try anything new. 

Obama is a dumbass community organizer.

crossroaddemon's picture

You're delusional. POTUS has zero power to change anything. The last one to go off-script got his head blown off.

swampmanlives's picture

Republican congress made that difficult for him. Even if Obama wanted to give everyone free guns, they still would have said no.

Setarcos's picture

Sure he is/was the temporary figurehead of the "ship of state" aka The Titanic, but the questions are who has the helm, the Fed, who are the officers, well top banksters and, above all, who owns the ship ... well Rothschild & Co, e.g. about 60 major corporation heads, the IMF, World Bank AND the BIS at the top, with about six direactors I think.  So Obomber did as he was told to do and was is well-rewarded, ditto most previous Presidents, so none minded being the scape-goat for the masses to blame.

Whilst the masses focus on sundry scape-goats, both domestic and foreign, the really deep state is unscathed and so has continued in often dynastic ways for centuries, getting ever more assets and money, especially via wars and revolutions, which simply install the next figurehead, who either does as he is told, or gets assassinated.

It's a you beaut, essentially Ponzi scheme, or a casino in which the "house" never loses and never gets blamed for the ruined punters, who fight amongst each other about the window dressing of political parties, for instance, or some distant "cause" of their loss and endangerment, like Osama bin Laden and Vladimir Putin, or closer to home with such as Dubya, Obomber and Trumpeter (was he once dinkum? did he get reminded of JFK?  who knows? Rothschild minions I guess).

Rinse and repeat.  It is guaranteed that scape-goating, false flags and appropriate propaganda always work.  Even the exact same pretexts like WMD ... by the time that, say, 60% of the population realize they've been had, it's too late.  30% will never wake up, 60% have short term memories and fall for whatever all over again.  No more than 10% ever really learn and they can do nothing to alert the masses who, in any case, dutifully blame a figurehead/scapegoat, never getting to the bottom/top of things.

crossroaddemon's picture

This. Anyone who expects an elected official to change anything is, flat out, an idiot. The Zerohedge community used to know that. WTF happened?

Centerist's picture

The bottom 50% don't matter because they would rather enjoy a poor version of Socialism that ratchets up debt and chokes of job creation.  They vote for incumbents who keep the very system in place that they lament.

It's their own damn fault.  They created their own problems.  As much as they blame the "haves", they certainly aren't doing much.  The only time that they ever come together is when a Soros-funded group rallies them to support more candidates who will guarantee them more of the same crap but with even less individual liberty in time.

It's hard to be sympathetic about deliberately self-inflicted injuries.

MedicalQuack's picture

It's the US digital caste system, to where the culling effect at the bottom is extremely scary and evil.  I call it Excess Scoring of US consumers, as everybody must be scored it seems.

Have you heard of the Chinese Citizen Score program?  Look it up, we have the same thing happening here except corporations are running it and not the government forcing it, but with everyone following the bouncing app, US folks are willingly jumping in.

People can't tell the difference between virtual world values and the real world anymore, they just follow the algos.

hooligan2009's picture

The Federal Reserve has noting to do with quality of life, only quantity of money and supply of credit. The Fed can no more improve the lot of the bottom 50%, than it can directly prevent drug abuse or abortion rates. All that the Fed has ever done is encourage poor marginal investments with low hurdle/interest rates or make sure only the best marginal investments make it past a high hurdle rate – it impacts the economy at the margin, not the core.

I look at it this way. The Fed has been lowering the costs in the economy for everyone by pursuing ZIRP ad QE. A 20 trillion debt burden at 4% rates costs 800 bilion a year – at 1% it os “only” 200 billion. By monetizing US Government debt, the Fed has lowered costs to the US economy by 600 billion A YEAR, for a total of 4.2 trillion dollars over the last 7 years.
That is its only saving grace – enabling successive libtard socialist governments in the US to fund the welfare economy that it cannot afford.

The hard solution is to lower all benefits so that people have a stronger motivation to both work and save. The Fed could encourage saving by setting a rate of, say, 3%, which would be consistent with todays inflation rate.

The goverment has some control over the spending of scarce tax dollars in the economy that it hasn’t already pledged to non-discretionary welfare spending, but it chooses to lower US living standards by spending 750 billion a year on war, whilst allowing predatory pricing in health provision and education. The government sponsors debt creation for health and learning. It also sponsors poor health care and poor education by allowing politically correct antifa campuses that produce, again at the margin, students that cannot create value to society.
The choice made by people to remain unprepared for their financial needs is a function of reward for no effort via benefits combine with no reward for saving via lower interest rates.

Trump was elected to end drug cartels predatory pricing, to motivate american unversities and companies to substitute american know-how and people into all aspects of the value chains that make up the imports of goofs AND to reduce spending on the military on pointless wars in places that most people couldn’t find on a map.

So far, he has either flipped or been stymied and is fast losing any relevance he might have had to solving some deep rooted issues. As such, he has contributed to the lack of faith people have for politicians. Nobody has faith in the gnomes in the Fed to do anything worthwhile that might affect QUALITY of life for the bottom 80% of people. The top 20% are laughing all the way to the (bailed out) banks.

restelle's picture

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

Huh!  As if voting makes any difference...


T-NUTZ's picture

I think he is referring to voting with pitchforks and rope.

Blanco Diablo's picture

I believe these young American white kids in their teens and 20s and early 30s will never fight back.  They will lay down and roll over and pee on themselves like little puppies.  Same in Europe. They will not fight back.

The tribe didn't create the Dept of Education (Indoctrination) for nothing,  it begins at pre-school and is very effective.

Sick Underbelly's picture

How many are necessary to "WIN"?

What is a "WIN" in your book/definition...since they would be "fighting back"?

Why isn't there a place, forum, technology, etc where we can openly discuss this, not as planning for implementation, but to openly discuss logistics and feasability as an exercise in preparedness?

A quick search on the term "encrypted chat room" yields some promising results.

crossroaddemon's picture

Trust me: nothing is encryted enough to protect you if they are seriously looking. Nobody is going to organize, because the risk is too great. You're all going to sit behind your computers and wait for a leader to fall in with. That leader is not coming... and would only be made a bloody example of if he did.

Blanco Diablo's picture

No win situation, only desperation when there is nothing else to lose.

crossroaddemon's picture

The older generation won't either. They have too much to lose. Try it: tell your wife you're gonna quit your job so you can march on DC with a hunting rifle.

Creepy Lurker's picture

I used to try to get people to watch the Charlotte Iserbyt videos about the "education" system in the US. I couldn't get more than a shrug. I have begun to think we are not a viable species.

crossroaddemon's picture

Ernst Mayer was probably right.

George Parr's picture

Ah! In America the bottom 99.99% do not matter.

The Davos crowd is calling the shots. They own the political apparatuses of all western countries. It used to be that the Davos crowd wanted smaller governments. They used their influence to fight against the encroachment on society by the political establishment. No longer. They have finally figured out that it is easier (much easier) and cheaper (much, much cheaper) to buy the government rather than to fight it.

The truly pathetic thing is the top 1% (minus the top 0.01%, of course). Those fools actually believe that they themselves matter. 

ihatediscus's picture

“The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.”
  Frank Zappa

Sick Underbelly's picture

...and, my mind filled some extra at the end " will see the brick wall at the back of the theater, and the firing squad aimed at your chest."

I'm just too cynical!  

LawsofPhysics's picture

LOL!!  Please, the bottom 50% have never mattered. They have been entertained and sedated since their sacrifice in the second world war, but that's it. All the smart and savy folks in large and small business have in fact switched to a very different investing strategy.  Specifically, 2008/2009 made it crystal clear that the "elite" will continue to enrich themselves through financial, political, and econopmic repression at the expense of everyone else.

In other words, all the smart folks are now interested in the protection or RETURN OF (not return "on") CAPITAL...

2008/2009 redux with much larger government DEBT!  The bank runs (call it what it is people) have already begun, again...

carbon's picture

You but it mildly , everwehre na, 

 HyPnotized the bottom 50%

homebody's picture

Who is John Galt?


Time for all to leave that can.

brushhog's picture

The most happiness I ever experienced was when, at the age of about 30, I was working in the school system and I would get the summers off. I was broke ( I never consider myself to ever have been "poor" but I was flat broke for about a decade ), and I would spend much of the summer with a backpack, bedroll, tarp, just enough food to keep me going but not weigh me down and a good set of outdoor clothes. I hiked so many trails, Id be out for weeks at a time with just what I had on my back. Hike all day, stop at a spot and set up my camp. Make a camp fire, cook my meager meal ( which always tasted like heaven ), sleep under the stars and get up the next day to do it all again. True freedom. This is what made me the happiest. If im honest, I come to the conclusion that, barring the absolute necessities of shelter, clothing, and food... material things have very little to do with happiness. In fact, I believe a reverse correlation between 'things' and happiness could be observed once you get past a certain threshold.

So alot of people are caught up in the treadmill of buying this, and that, in search of a feeling of satisfaction which wears off after a short time and leaves you right back at your default level of satisfaction ( or lower ). Most people living week to week, paycheck to paycheck are those of us who are caught up in this cycle, paying off debt for shit that just becomes a burden and brings no lasting advancement in our level of satisfaction.

We can talk all day long about the economy, and the sad state of affairs for people living this way but the reality is that for 95% of them it is a the choice to blow lines of coke everyday. They are caught up in a destructive, soul crushing cycle. Yes they need help, yes they are suffering, but the solution is not more money to buy more's an internal problem that goes deep into a person's values, expectations, and sense of self and purpose. It requires deep introspection to rewire the entire outlook...for most this is impossible. But for those who reach these conclusions, they will find that there is more than enough money and material things available to them to facilitate happiness. The problem isnt REALLY the jobs, the economy, or the LACK of too is likely quite the opposite.

Sick Underbelly's picture

Oh the good times of hiking parts of some well-known trails...the silliness of getting lost in the count of raindrops on the tent...the great delight of finding another marshmallow deep in your pack and being oh-so-careful to toast it "just right".

So much more could be said.

Life really can be simple...and full of happiness.

...Thanks for this post, brushhog

NaturalOnly's picture

I did not go hiking, but in my thirties I left for London and Berlin with just a suitcase. That is the happiest I have ever been.

It is a simple life. You really don't need anything else. The crap just weighs you down. It is easily to accumulate though..

I put everything I owned in a storage unit.

short screwed's picture

Phew! I was glad to see I'm comfortably in the 49th percentile.

Dixie Vixen's picture

Our society is so accustomed to sliding a card and paying the minimum, doing the minimum and achieving the minimum.

Here's a novel idea cut up your cards, pay cash, if you don't have the cash in your pocket to cover it... Quite honestly you don't need it.

I know sounds crazy right?
But how does zero debt sound right about now?

I have no bank account, no credit cards save one prepay for online purchases and car rentals and such. I have no mortgage, no car note and have not owed a single cent in taxes since 2012....

Living within your means....hmmmm

Jethro's picture

You are living the dream!

I just have a mortgage now. And, that will be done in a few more years. Can't wait.

az_patriot's picture

Good credit is important.  It's often best to keep a bank account, eliminate all but the credit cards you use (preferably, the older ones with the longest credit history), and then use the cards like cash and pay them off frequently.  I use a spreadsheet to budget and manage spending and pay my credit cards off about every other day.  The result is zero debt, decent savings, a FICO score of 855, and financial peace.  ANYONE can get there.  It's not HOW MUCH you have, it's how you manage WHAT YOU'VE GOT.

Blanco Diablo's picture

Inquiring minds want to know, "Will Jihad John MexiCain's Arizonia Caliphate send the Muslim who worked for terror-linked CAIR & MAS Deedra Abboud to the US Senate??"

WillyGroper's picture


it keeps you locked in the system tho.

Jethro's picture

Ha. Nobody mentioned the RE bubbles exacerbated not by just our own 1%, but also the Chinese 1%.

az_patriot's picture

This article (ass)umes that the bottom 50 percent know how to manage money.  Often, a large portion of them don't.  There are scores of people out there who -- despite working hard for a living and actually bringing in a reasonable income -- recklessly live WAY beyond their means and rack up so much credit card debt that the monthly interest alone is staggering.  They go from default to bankruptcy at their own hands.  NOW -- whose fault is THAT? 

Peon14's picture

Kind of like the criminal politicians running our country with the 20 trillion dollars of debt with the US citizens name on it.  What's strange is while their finance idiots with the taxpayers money but finance geniuses with their own money almost like the criminal knuckleheads are playing some shenanigans on the America sheople.