How America's Middle Class Lost The War In One Simple Animation

Over six years ago this website made a simple prediction: as a result of the Fed's disastrous policies designed to make the rich richer beyond their wildest dreams, the US middle class - the growth dynamo behind America's economic power for over a century - is on its way to extinction.

Overnight, we reported that according to a new Pew study, this is precisely what is taking place because while in 1971 two out of three Americans live in middle-income households, now for the first time in at least four decades (and likely ever) just under half of all households (about 49.9 percent) belong to the "middle class." Slightly more than half of Americans (about 50.1 percent) either live in a lower-class household (roughly 29 percent) or an upper-class household (about 21 percent).

As a result of factory closings and other economic factors, the country now has 120.8 million adults living in middle-income households, the study found. That compares with the 121.3 million who are living in either upper- or lower-income households.

"The hollowing of the middle has proceeded steadily for the past four decades," Pew concluded.

And middle-income Americans not only have shrunk as a share of the population but have fallen further behind financially, with their median income down 4 percent compared with the year 2000, Pew said.

 

Initially, many mocked us for our dire prediction. Now, it is conventional wisdom and the implications are reverberating everywhere from monetary policy (even the Fed has admitted the QE does not work) to politics, where general discontent has fueled the stunning surge of such anti-establishment candidates as Donald Trump. Here is the FT:

The prevailing view that the middle class is being crushed is helping to feed some of the popular anger that has boosted the populist politics personified by Donald Trump’s candidacy for the Republican presidential nomination. “The middle class is disappearing,” says Alison Fuller, a 25-year-old university graduate working for a medical start-up in Smyrna, Georgia, who sees herself voting for Mr Trump.

But while the US middle class officially has lost the war, one group of Americans has never had it better. For the answer, we refer you to the FT animation below.

 

Finally, for those curious how the distribution of income growth has changed over the same period for 90% of the population, vs just the top 1%, here it is again with the one event that precipitated the surge in wealth for the top percentile duly highlighted:

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