Economic Reality: Bottom 50% Of Americans No Longer Matter

Tyler Durden's picture

Authored by Mike Shedlock via MishTalk.com,

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 CreditCards.com. “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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Anopheles's picture

Not intended to be condescending at all.  It's a an observation and a lesson.

I see it all the time.  Good, smart people keep working harder and harder and they lose sight of what important, and how to actually make, and KEEP  money.   A big part of that is not just what you do, but what you DON'T do.  Such as spending on useless crap. 

 

HumanMan's picture

Fear not, those assets broken up and sent away by the kangaroo courts also found their way to the short sellers and bankers.

mary mary's picture

If 50% of Americans are financial slaves, then there are twice as many Americans as the natural resources will provide for.

The natural resources aren't going to increase, so that 50% is going to increase to 60%, and then 70%, and then 80%....

TPTB love having that extra population, that 160-million extra people whose function is to be extra customers for TPTB's businesses and extra soldiers for TPTB to attack little countries with.

And if those extra people can be tricked into thinking they "deserve" something from the 49% middle-class who are neither financial slaves nor TPTB, then TPTB can use the extra people to vote for TPTB's minions to hold the Congress, Administration, and Court jobs, to make the system look all democratic-like, "righteous", and "moral".

Fake Trump's picture

Don't worry. The president will make America great again. How and when? I don't have an answer and neither I believe the president has the answer. Keep printing I believe is the only solution until  when the dollar is not worth the paper it is printed on. Hyperinflation will hit America. By then the president is gone. The next president will blame him, Clinton, Bush and Obama for that. The vicious cycle starts again. Bad (quoting Trump).

UndertheDRADIS's picture

Hopefully the banking carteleros will be replaced with gold and silver or instruments for gold and silver.

Django123's picture

I thought it's already sixty percent of people who can't cover an emergency expense, at least according to bankrate: http://www.bankrate.com/finance/consumer-index/money-pulse-0117.aspx

On another note: When the so-called bottom is already the majority of the population or at least close to it, it can't be called bottom anymore. This is the middle-class, sad as that is.

cherry picker's picture

Not to worry, one or two more wars will guarantee all the unemployed or underemployed jobs in the military as boots on the ground will be needed eventually.

After countries are sufficiently demolished, money will be lent to countries to rebuild, as long as they contract with American firms and do not allow competition.

Anyway, this formula kind of worked in the past

Expat's picture

Er, lots of these bottom 50% voted for Trump.  LOL.  Assholes.  They deserve to be bottom 50%.  Maybe Trump will issue a Presidential order that anyone earning less than 75k gets turned into soylent green.

Anopheles's picture

Typical crybaby, liberal butthurt. 

mooncat's picture

Mommy's basement. Right?

UndertheDRADIS's picture

Maybe those people don't like being the bottom 50% and have identified certain establishment policies that keep them there:

  • Deliberate wage suppression;
  • Lower tax base caused by exporting production capital which results in higher taxes for the employed and fewer services in exchange;
  • Foreign colonization of the US through bringing in people who tend to not want to be Americans.

The people who voted for Trump didn't get any indication that Hillary Clinton was going to do anything other than:

  • Import more foreign labor to suppress wages even further
  • Export more production capital
  • Increase foreign colonization of the US.

These are real issues concerning the "working class" that commies claim to agonize over, but never deliver. Creating policies that take away a job someone has been doing and offering a welfare check is not the bribe or buyoff it was intended to be. It was taken as another insult to go with being called "racistsexisthomophobictransphobicislamophobic."

UndertheDRADIS's picture

So the Trump voters would be wonderful people if they had just done what they were told?

Creepy Lurker's picture

You're on to something there. My observation is that most people, but particularly those on the left, seem to think the definition of being an adult is to basically shut up and comply with government dictates, and no complaining permitted.

thisguyoverhere's picture

'A$$holes' in so much as any true believer in the idea that you had a choice to begin with.

Clinton was disgusting and vile, Trump is simply another form of betrayal to those that voted him in. We are ruled by psychopaths.0

A rope leash's picture

People go into debt because that is the American Way. That's how you get the house, the car, the education. That's how you get out of your parent's house and out on your own.

 

Can it be done without debt? Yes, but it takes a lot of time, and people need it now. Most folks, when they get jobs are only going to make enough to make payments, not to buy stuff outright.

 

It's okay for the frugal to scold the frivolous, but as for the American Dream, debt is how it's done.

brushhog's picture

I never did it with debt. But if you choose to put yourself in debt I have no problem with it until you start crying foul and blaming the people who loaned you the money, and blaming society, and blaming capitalism for your circumstances. The economy did not force you to take on debt, the "elites" did not force you, the banks did not force you, the evil rish did not force you.

You take on debt, own the responsibility and the consequences.

A rope leash's picture

Getting into debt is made very easy and is actually very much expected. If you bought a decent house, a good car, and got an education without getting a loan then good on you. Did you start with no money and an ordinary job? Then you could not be considered an average American. The average American is up to his eyeballs, and no amount of moral dictating by the financially disiplined will ever change it.

 

Because this is what is expected and what the banks want...debt is the American way of life. 

ToSoft4Truth's picture

Date fat chicks on the cheap.

Anopheles's picture

Reality is throughout the history of mankind, the bottom 50% (or more) have NEVER MATTERED.   

They've always been the second class citizens, the cannon fodder, the disposables. 

Cordeezy's picture

This is an unfortunate situation in our country.  The pensions are being cut, social security cut, by the time the children of today are finally retiring, what will they have left?  Will they finally have to pay the debts of their predecessors?

 

www.escapeamazon.com

 

 

Blanco Diablo's picture


“There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution.”

Aldous Huxley, Tavistock Group, California Medical School, 1961
Anopheles's picture

That drug already exists.  It's called Liberalism 

sTls7's picture

And,  they haven't mattered for a while!!! 

ToSoft4Truth's picture

"Boy the way Glenn Miller Played
Songs that made the Hit Parade
Guys like us we had it made
Those were the days...."

 

All In The Family Intro

https://www.youtube.com/watch?v=7K50UstKfJM

hooligan2009's picture

ponders whether paying the labor force an additional annual bonus equal to half anual corporate earnings is the answer.

i guess not, that would mean productivity would be treated as having dropped about 20% - bleh, just no winning in a game run/rigged by people that create no value

FreedomWriter's picture

Waiting for the day when the 0.01% don't matter. If history is any reference, that day is coming soon.

headless blogger's picture

I doubt the 'lower 65%" will ever take things into their own hands. They will turn on each other but never will anyone take out the psychopaths and parasitical "upper 10%", and in particular, those that made all these rules.

CRM114's picture

Off their own bat, maybe not, but all it takes is a bunch of local leaders and pretty soon the tumbrels are rolling again. 

ToSoft4Truth's picture

The local leaders are just as addicted to Fed-Bux.

 

Bush sent most cities and townships new fire engines after 9-11.  Along with tanks. 

 

Flint, MI is being saved with Fed-Bux all the while new stadium after new stadium are being built to 'save' Detroit. 

Silver Savior's picture
I am pretty sure they would start to matter if they just stopped spending their gov subsidies and started pissing on the street and stuff. Maybe take a dump on the lawns of the elite. All that good stuff.
Mimir's picture

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

Sounds convincing to draw the conclusions, that when 60% don't matter anymore, something will indeed happen.

Whether the 60% find a way to "take over" is worth considering, but, at that time, even the 60% have understood, that the Trump option and the Brexit options were proven deadends. Trump ended up making his billionaire friends and himself even richer and he had no solutions for living conditions for 40-50% who don't count anymore. He didn't bring back the "stolen" jobs and the coal mines stayed closed. Concerning Brexit it will have proven to hurt first of all those who voted for it with falling real incomes, falling pensions treathened National health system and less and less public services for especially the poor as result.

 

New ways forward will have to be found.

Maybe one should look towards the extreme left instead of the exstreme right. 

hooligan2009's picture

you need to get a job in a central bank.

libtard socialism is what has caused this problem, communism would make even the failed dogma of libtard socialism many times worse.

"Insanity: doing the same thing over and over again and expecting different results." - Albert Einstein

Mimir's picture

Your demagogic view of the world make you miss the point. Let's wait until Trump and Brexit have shown even to you that they are indeed both dead ends. Then we will see. 

I believe my point is valid. By the way, I don't need a job in a central bank, already too much on my table, paying better, and it is nit in the central banks theses futures will play. 
hooligan2009's picture

you do realize that communism is a failure right? as is central bankism and libtard socialism.

if brexit and trump are dead ends, the available (available for now that is) alternatives are far worse. that does not mean you should try murder because rape doesn't do it for you any more.

Mimir's picture

Who the heck is talking about "communism" (whatever you refer to with that term). What is important is that the extreme right (and in Europe often the neo-fascist right) does not have answers to the problems of the 40 , 50 or 60%. They are dead-ends and what is worse, they know it.

The extreme left in Europe (France, Italy, Spain, Portugal and partly Germany) actually have some answers which deserve your attention, if you can abolish for a moment your dogmatism. No ! they are not communist in the old-fashion Stalinist, Leninist tradition.

swampmanlives's picture

If you worked at a bank making millions, you wouldn't be here bitching.

hooligan2009's picture

did that, gave it away after seeing too many analyses compiled by idiots - now i "contribute" here for shit and giggles, in between living a life of leisure.

not everybody needs to be in a bank to be smart ad wealthy, quite the opposite, playing pinball with money gets dull if you get too many replays and cant possibly play them all

Librarian's picture

I think the polite term is "no longer economically viable".

D-Fens.

homebody's picture

If Trump signs the temporary spending bill, the working class base that got him elected will show anger like nothing in history (I hope).  I can understand the free shit army not objecting but the people that pay for that swamp and free shit must show their strength.  I think most knew that this election was a turning point, get the country back or go down the drain.

crossroaddemon's picture

Yes they will show their anger. They will rage on the internet like never before. You know damn well nobody is actually going to do anything.

Anopheles's picture

It's liberals that make up the twitterverse.  The "working class" is too busy working. 

az_patriot's picture

Trump was never my first choice, but I'm starting to get pissed off at how the man is being treated.  Let's be reasonable here -- anyone who honestly thought that the swamp was going to be drained within the first 100 days is out of their mind.  If Trump moved too fast, he'd be eviscerated by the lying press, the liberal loonies, and the corrupt system he was sent in to dismantle and reshape.  Let's give this some more time.

homebody's picture

The corrections needed to be done on the promised "day one".  He had the political support and could have weathered the storm.  The GOP could be in a position to be putting forth solutions now to replace the repealed disasters of Obama but it is too late now - the opposition has united and putting pressure on the GOP members.  They are too chicken shit now to do the heavy lifting needed to save the country. 

 

edit   To fund Planned Parenthood goes against all the election platforms of the GOP.  To not fund the "WALL"  is the greatest failure.  To not repeal Obamacare and let the population buy insurance anywhere is the greatest flip flop.

swampmanlives's picture

Except Trump ran a campaign predicated on being "different". People voted for him expecting the swamp to be drained. So now, since he has failed to do so, that just makes him just another lyin' politican and even worse than a lyin' liberal because when you vote liberal, you know very well that they are going to lie.

Wahooo's picture

Everyone with a job is living paycheck to paycheck. That's why we work.

deplorable nation's picture

Next will be the financial collapse and THEN the race wars...The Hollywood lefties will all retreat to their bunkers in their Malibu mansions.

Jolt's picture

If only the author of this opinion piece had bothered to mention the solid foundation of the US econony: Unending, unnecessary military actions around the world.

Why diagnose the cause of the cancer when you can just blame everything on the symptoms? Nice...but lazy.

hutnela's picture

Those unending wars are keeping a lot of people employed right now, who otherwise would be flooding the workforce with competition for what few jobs exist that don't provide the military industrial complex with goods and services. Wars create jobs, ramp up production, and allow us to max out the FED credit card. If we ever stop going to war our money bubble will pop like a pimple on a teens face.

The IRS collects just over 3 trillion in taxes every year, which is immediately absorbed into the national debt. So when DC wants money they have to take out new loans, and raise the debt ceiling. The US's largest budget is the military, so when DC wants to pump money into a deflating economy, they use the military.

The military spends money, on metal, oil, food, etc... which all trickles back to Mr. and Mrs. john q public making them believe that everything is fine. If DC did not do this the deflation would become obvious to Mr and Mrs john q public who would quickly burn down the corner 7/11 in a frenzied panic for the last nutty buddy as the financial system came crashing down (theoretically). 

P.S. our national debt is not really $19 trillion, that's only the principle. Our National debt is 68.7 Trillion and climbing. If we only pay $3 trillion a year how long would it take us to pay off the money bosses? That's a trick question BTW, you cant pay off a debt using something that already belongs to the Federal bank.