The "Net Worthless" Recovery Hits Peak Marxism

Tyler Durden's picture

Back in June 2011, Zero Hedge first pointed out something very troubling: the labor share of national income had dropped to an all time low, just shy of 58%. This is quite an important number as none other than the Fed noted few years previously that "The allocation of national income between workers and the owners of capital is considered one of the more remarkably stable relationships in the  U.S. economy. As a general rule of thumb, economists often cite labor’s share of income to be about two-thirds of national income—although the exact figure is sensitive to the specific data used to calculate the ratio. Over time, this ratio has shown no clear tendency to rise or fall." Yet like pretty much every other relationship in the new normal, this rule of thumb got yanked out of the socket, and the 66% rapidly became 58%. This troubling shift away from the mean prompted David Rosenberg to say that "extremes like this, unfortunately, never seem to lead us to a very stable place." Which is why we are happy to note that as of last quarter, the labor share of income has finally seen an uptick, and while certainly not back at its old normal, has finally started to tick up, which leads us to ask: have we passed the moment of peak Marxism of this particular period in US history?

And while we wish we could say the answer is yes, which would be predicated by more income, and thus, wealth finally shifting back in favor of laborers instead of owners of capital, or those who solely benefit from Fed policy over the past 4 years, the answer is that on an absolute basis there has been no improvement in terms of actual disposable income. The following chart from Bank of America showing the Net Worthless-ness of us consumers says it all.

And from BofA:

The recovery in the stock market has been partly offset by the continuing drop in home prices. In the standard life cycle model of the consumer, households attempt to build their net worth to cover there future spending needs, particularly for retirement. During the asset price boom, the ratio of net worth to income surged, setting up the baby boom generation for its looming retirement. The crisis pushed the clock back to the mid 1990s. The recovery in net worth in the last three years has barely outstripped income growth, leaving the ratio deeply depressed.

In other words, while those of a relativistic bent may assume that in order to preserve the game theory equilibrium so stretched out of place by recent policies  benefiting solely the capital gatherers more wealth is finally being ceded to laborers, the truth is that on an absolute basis the Fed's policies to benefit just one class of people is starting to fade. In other words: 99%ers rejoice - your lot in life is not any better, but at least the 1%ers are starting to sweat a little more. If even purely metaphorically.

Comment viewing options

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

Hey.... we turned the corner!!

Party like it's 1981!

slewie the pi-rat's picture

adjust it for inflation and party like its fuking over, BiCheZ!

V in PA's picture

Man! Just look at that dead cat bounce. It almost looks like he's gonna make it.

Vampyroteuthis infernalis's picture

The 1% might be realizing that they will have to keep some people employed to have their darling (dead) society function.

icanhasbailout's picture

Ahem.  "it looks like someone just shot its dog" would be a better turn of phrase, don't you think? Or how about "that bitch is just reloading, ready to poop all over the carpet again while you're out disposing of the previous turds"? 

Silver Bully's picture

more like 1995, according to the chart.

Flakmeister's picture

In response to the Peak Marxism quip....I was obliquely refering to 1981 when St. Ronnie took up the call and defended us from Marxism....

JPM Hater001's picture

Free economy was more fun

Obamaconomy is more fun

El Oregonian's picture

With that logic playing Russian Roulette is fun.

lenitivelea's picture

It is if you loaded the gun. 

slewie the pi-rat's picture


tyler might consider a "name this economy" contest

a word or short phrase to describe conditions in yer hood or elzewhere

maybe after we're all loaded from "fair share's" someday...

WhyDoesItHurtWhen iPee's picture



green shoots are now "dandelion lawns" economy.

NotApplicable's picture

Instead of gas for my mower, I'm buying fencing today and letting the goats have at it.

El Oregonian's picture
You can live well if you're rich and you can live well if you're poor, but if you're poor, it's much cheaper. -Andrew Tobias
MunX's picture

I get a much different story from that chart. That chart shows me the "trickles". Basically it proves to me that huge stimuli in a Keynesian model doesn't "trickle down" like they should. It also proves to me why this system fails just like pure communism fails. It's not the system, it's the people living in the system.

GeneMarchbanks's picture

Luckily you don't have to worry about that MunX seeing that you reside in a fascist state not a Marxist one.

lizzy36's picture

No its that trickle-down economics is a complete failure.

The upper 20% win. 

Bottom 80% is basically living a soft landing for their living standards.

Funny that the Yank narrative of you to can be steve jobs is what policy is based on, so that the 20% can continue to win.

Crony capitalism = trickle-down economics. That should be the narrative.

SheepDog-One's picture

Trickle-up poverty.

2009's millionaire and employer is todays unemployment and food stamp check recipient.

Flakmeister's picture

Beyond a failure.... it was legalized looting in the name of "Greed is Good"...

My fuck, there are still shills from the Cato Institute saying that cutting taxes for the "job creators" is the way to go...How much more data do they need to that lie to rest??

TMT's picture

So raising taxes on the job creators is the way to go?  Sure it would make the OWS losers happy, but it wouldn't do shit for the economy.

Try again.

MunX's picture

Sorry TMT but what we are talking about has nothing to do with taxes.

TMT's picture

I was responding to Flak who was discussing taxes.  I think you are confused.

Flakmeister's picture

And I think you are misguided.....

Do you really think that lowering tax rates created jobs?

When has it been demonstrated to work?

TMT's picture

Lower marginal tax rates alone doesn't create jobs.  Lower tax rates coupled with smaller government and less regulation creates jobs.  Coupled with doing away with the Fed and smartly regulating the banking industry would result in real economic growth.

Who do you think creates jobs?  Welfare receipients?  Bums?

Flakmeister's picture

Sounds nice.... Can you provide evidence that regulations have hurt job creation?I mean real evidence, not hand waving ideology or anectodal evidence.

So why is it that Germany with essentially no natural resources, high taxes, powerful labor unions is a manufacturing powerhouse that has run current account surpluses for years, has a modest budget deficit? Moreover, why do studies now show that Germany has *higher* upward mobility than the US?

One last question, given the strong correlation between oil use and economic growth, do you think that *growth* relies on more than what you listed?

WTFx10's picture

Come on give tmt a break he knows how to fix it. He saw it on FOX news.

TMT's picture

Who ever mentioned Fox news?  Let me guess - you're still in your PJs, popping pimples in your mommy's basement waiting for the next OWS rally?

I don't claim to have all the answers but surely the failed parasites at OWS are clueless.

I'm simply a RP fan who believes in limited government.

Try harder next time.  Call me Dick Cheney or something else intelligent.

TMT's picture

Have you ever run a small business?  If yes, you wouldn't ask such a dumb question.  Who the hell do you think pays for all the bullshit regulations?  Or are you a Krugman broken-windown theorist?  Sure, the regulations cost businesses money but they also "create jobs" ... bullshit.  Wise up.

As for Germany, come back in about a year once the EU experiment totally unwinds and tell me they're a powerhouse.

Yes, growth relies on energy as well.

Flakmeister's picture

As I suspected, nothing of substance...

Umm... I never implied that bad regs were not a pain in ass, but a job killer... C'mon you will have to do better than that... 

Hey, if you had mentioned the screwed up Health Insurance system you might have gotten a bit of traction...

TMT's picture

Substance is working in the real world and running a business.  From your reply, I safely assume you've never done so.  My company recently had to obtain a dust permit in order to clear some land of weeds (about a day of work).  The dust permit cost $13,000.  What did we get for it?  Nothing.  It was merely a tax or a fee.

At the same time we need to hire an analyst.  Do you think after paying for 5 dust permits this year we could have filled that position?

That's the real world Flak.  Get out of your tent and enter the fucking real world and you'll see with your own eyes how government regulation kills businesses.

Health care ... it's fucked up.  Let me guess, you want single payer.

Flakmeister's picture

All you have to offer is hearsay...

Wow, sounds like business is good $65,000 in fees and it is only April....


TMT's picture

Try to keep up.  I said 5 permits this year.

Call it hearsay.  Why don't you tell me from your own experience how wonderful regulation is and how it creates jobs.

You're a troll.  Go back to your tent.

Flakmeister's picture

Where did I say that it created jobs? Really, quit with the bullshit.

Now as far as I can tell, the EPA has put a lot of Respitory Therapists out of work.  You may be on to something...


TMT's picture

BTW I'm a flat tax guy with no deductions.

donsluck's picture

Which jobs are they creating?

TMT's picture

Two examples.  I have a good friend who is a GC who just hired four people last month.  Decent wages with benefits.  One of my associates owns a landscaping company who hired two people last week.  Both make a lot of money and are most likely part of the 1%.  Does that make them evil?

Who the fuck do you think creates jobs in this country?

Flakmeister's picture

You really only want to believe what you want to believe...

The 1% is a red herring,.... 

Try focusing on the 0.1% for a start.... You know the kleptocrats that export the jobs and the Hedgies that add no value....

PS He must have a helluva Landscaping company if his *net* profits at ~1/4 million bucks...Good for him...

TMT's picture

Not too hard to pull in $250k when you're doing commercial install jobs that run over $600k.

I think that's part of the problem - the OWS crowd thinks someone who makes $250k is flying around on private jets and going to Paris for lunch.

Flakmeister's picture

A function of the soundbite universe we live in... 1% is easy to say, 0.1% is not...

TMT's picture

Or it's a function of you hating those who have more than you.

blunderdog's picture

You don't have a clue what the OWS crowd thinks.  You'd have to talk to them if you wanted to learn something about that.

TMT's picture

Blow me.  I have zero desire to talk to a bunch of incoherint parasites who can't formulate a sentence.  I've watched countless interviews with these folk and read their web postings.  Their "end the fed" talk is right on.  But by and large they're a collection of useless idiots who want handouts.

Sorry to offend you but I call them like I see them.  Hitch your wagon to a more credible group.

Flakmeister's picture

I sense a lot of misdirected anger.... you might want to try some therapy lest that anger turn into cancer....

TMT's picture

My anger is directed with precision.  I despise those who want to take the fruits of my labor - like many of the OWS gimme gimme fuckers who won't get off their ass and work for an honest days pay.

Free2Speak's picture

I have gone down and talked to them and TMT is right.  Many of them (not all) are Marxists. And they don't understand who the 1% are.

blunderdog's picture

   I have gone down and talked to them and TMT is right.  Many of them (not all) are Marxists.

How can he be right?  That's not what he said. 

Do you want us all to pretend that "Marxist" means "hates people who are successful"?

MunX's picture

I couldn't agree more. However, for me it's not as important knowing that "trickle down" economics is a complete failure, but why it is a failure. I believe the answer is an imbalance in the nature of humanity, which manifests itself during every paradigm shift. Unfortunentally, during these shifts, humanity usually tries to change the system instead of changing himself/herself. At this point what system is left to try?

Flakmeister's picture

We had ideologues like Milton Freidman telling us that excessive greed was acceptable and markets self-regulated... Enough people took advantage of the situation that we completely lost our values and moral compass....

The final nail in the coffin was the use of financialization to induce an unsustainable consumer binge that effectively bought off the lower classes long enough so that if/when they woke up to the pillaging, it would not matter...

MunX's picture

The only question is where will humanity go from here?

ffart's picture

Eating from a garbage can and living under a bridge, most likely