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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brushhog's picture

Too much focus on money ( how much we feel we should have but dont ), and not enough focus on how we should use the money we have to increase our happiness and satisfaction. When you look at it that way, most of us would find that we have more than enough money to accomplish this, and probably too much useless material bullshit that we dont need.

Money is a vehicle to bring us to our ultimate goal of happiness. Like a car that brings you to your destination. Too many people focus on the car and not enough on the destination. A car with no where to go, and no idea how to get there is a useless thing. We all know miserable rich people , and many people who live to make money...they think the car IS the destination. Poor misguided souls. All that effort, and happiness is a destination you can easily walk to.

ToSoft4Truth's picture

LOL - where did I hear that??  Hmm....



“I was curious if I could care about (money) on some fundamental level, and I couldn’t,”


- Chelsea Clinton



az_patriot's picture

Precisely.  The foundational issues are the average American's utter unwillingness to a) manage what they have properly and effectively, and b) stop trying to keep up with the Jones'.  Couple this with a refusal to accept responsibility when shit hits the fan by blaming the "system" instead of their poor money management skills, we have an army of financial morons.  I said it in another posting and I'll say it again:  IT'S NOT HOW MUCH MONEY YOU HAVE, IT'S HOW YOU MANAGE WHAT YOU'VE GOT!

samsara's picture

"If Your Income doesn't Meet Your Out Go,

Your UpKeep Will Be Your Down Fall"

Centerist's picture

Not to be repetitive, but as I said above many entitlement programs provide excessive disposable income to recipients, and they prevent them from cultivating financial discipline, further encouraging reckless behavior.

Kyddyl's picture

Apparently you have not had someone you "love" diagnosed with cancer or other painful illness. It will fianancially break you. You are too smug.

brushhog's picture

Yes, actually I have..TWICE. And all the money in the world didnt buy them one more day on this earth. You are too hostile.

Master Electrician's picture

Be careful of the can of worms you open; it might be full of snakes. I've had a number of relatives die of cancer, and there are several long-term survivors who had very expensive treatments, some ongoing. None of them are broke, because they protected their substantial (but still middle-class) assets by having a good health plan. If you had money to pay bills, why didn't you have coverage? If you didn't have money for insurance, then were you already broke? If you were, then the cancer didn't break you, because you had nothing to begin with. 

Besides, a short 100+ years ago, there were no treatments at all, and people died of all manner of diseases and disorders all the time. I'm sorry for your loss, but you need perspective. We do need to ask if, now that we have made such life extending treatments possible, has health coverage become a right? And if we answer yes, can we do better than any other country that has implemented a national health plan? Because (seeing how you couldn't afford it then) everyday people like us will still not be first in line for treatment. Your loved one likely would have died waiting for lower-tier treatment that likely would not have worked anyway. It would have been no different a fate than if you had lived 100+ years ago. So now we're full circle. 

So don't be too hard on yourself, or on people who try to find happiness where they can. What has happened to us is not our fault. We were born at the end of a cycle, 'interesting times' if you will, and the Powers That Be have apparently decided to turn over the chessboard and cull the herd. The snowball rolling down the mountain is about a thousand times bigger than it needs to be to wipe out the village, and is apparently picking up speed. The next weeks and months should prove to be very interesting. Enjoy some quality time with those you love, while you can.

Centerist's picture

Well stated.  More people need some perspective laid out when they start talking about medical costs.  Even before the mandated over-priced policies that exist, nowadays, there were catastrophic coverage plans that were plenty affordable enough.

Too much, anymore, people squander their resources on frivolous activities and toys without allocating money for what they really need.  Not to get too far down another rabbit hole, but I would say that many entitlements encourage that reckless behavior by providing excess disposable income so that the recipients don't learn the basics of financial discipline.

803Mastiff's picture

"Whats for dinner?" During the industrial revolution buildup it was horse meat. You are either useful or a protein source. We are experiencing The Pareto Principle. You can ignore reality but not the effects of it.

swampmanlives's picture

You know what is funny is how people forget so easily what they voted for in the past. If you voted Republican 30 years ago, you would have been voting for free trade. Of course, during the 80s the Dems were protectionist, just like Trump is pushing today. Of course, Bill and Obama were pro-free trade, but you see, you can't blame them, since the Republicans are the ones who got the ball rolling on it.

ToSoft4Truth's picture

"McCain to allies: Watch what Trump does, not what he says  (source"


McCain should say this to the folks who voted for Trump.


"Trump, like Ryan and Bohner before him, said he'd repeal Obamacare...  "Watch what Trump does, not what he says..."

Tim_in_Tucson's picture

Screw voting!  The election system is rigged!  We need nothing short of a good old fashioned revolution in this country, complete with punishing those responsible for destroying our economy and destroying our country!

Tzanchan's picture

Tim these are the people we just eelcted.......This sounds a LOT like the 47% that Romney complained about. Make up your minds, they're like embryos and Syrians; we care a LOT about them when they're in their womb/country.....When they come out no assistance, extreme vetting. Meet the New Boss, same as the old boss....

Gallumhrasha's picture

poor people are poor for a reason, they are stupid

SilvaDolla's picture

Go fuck your Fucking self. People like you that can only see in black and white are the blight/cancer of this world.


vjmali's picture

you must be really poor.

vjmali's picture

you must be really poor.

Creepy Lurker's picture

Rich people plan for thier grandchildren.

Poor people plan for Saturday night.

Kyddyl's picture

To hell with what the repairman wants. Have someone close to you diagnosed with cancer or some other painful and deadly disease. It will eviscerate your savings and put you in debt past all hope of paying off. But then why should some of you worry? It's the American Dream baby!

vjmali's picture

but we have freedom and liberty and no govt intervention.

consider me gone's picture

Of course they matter. They get government hand-outs of our money and our childrens money. And in order to keep getting those hand-outs they vote for socialist politicians that keep sending them our money and racking up trillions of debt for "entitlements." Tell me they don't matter again. I think I'm going give a $100 bill to whomever can deliver the 1 millionth lie I've heard in my life. Shouldn't be too much longer now.

Tzanchan's picture

Fun Factoid: Minimum wage under LBJ would be equal to almost $11 an hour today. 40% of all wage earners make less than that. Our distribution of wealth has gone so far off to the barbell that when Joe and Susie 6 Pack (or maybe its' Joe and Susie Oxy now) wake up from their stupor if ever, they'll realize that 40%++ of people make less than that. Wonder why they can't get $400 together? Instead of the Joads who lived in a company town, they live in a company country.....

SilvaDolla's picture

Fuck this author. I'm proud to be In the lower 50%. The upper 50% is missing out by remaining blind to the existence of guys like me.

Fuck 'em.

Racer's picture

The UK is the first country in the world to be found guilty of grave and systemic violations of disabled people's human rights by the UN