The Illusion Of Prosperity

Authored by 720Global's Michael Lebowitz via,

For the last 50 years, the consumer, that means you and me, have been the most powerful force driving the U.S. economy. Household spending now accounts for almost 70% of economic growth, about 10% more than it did in 1971. Household spending in the U.S. is also approximately 10-15% higher than most other developed nations.

Currently, U.S. economic growth is anemic and still suffering from the after-shocks of the financial crisis. Importantly, much of that weakness is the result of growing stress on consumers.

Using the compelling graph below and the data behind it, we can illustrate why the U.S. economy and consumers are struggling.

Data Courtesy: St. Louis Federal Reserve (FRED) and Lance Roberts

The blue line on the graph above marks the difference between median disposable income (income less taxes) and the median cost of living.  A positive number indicates people at the median made more than their costs of living. In other words, their income exceeds the costs of things like food, housing, and insurance and they have money left over to spend or save. This is often referred to as “having disposable income.”  If the number in the above calculation is negative, income is not enough to cover essential expenses.

From at least 1959 to 1971, the blue line above was positive and trending higher. The consumer was in great shape. In 1971 the trend reversed in part due to President Nixon’s actions to remove the U.S. dollar from the gold standard. Unbeknownst to many at the time, that decision allowed the U.S. government to run consistent trade and fiscal deficits while its citizens were able to take on more debt. Other than rampant inflation, there were no immediate consequences. In 1971, following this historic action, the blue line began to trend lower.

By 1990, the median U.S. citizen had less disposable income than the median cost of living; i.e., the blue line turned negative. This trend lower has continued ever since. The 2008 financial crisis proved to be a tipping point where the burden of debt was too much for many consumers to handle. Since 2008 the negative trend in the blue line has further steepened.

You might be thinking, if incomes were less than our standard of living, why did it feel like our standard of living remained stable?

One Word – DEBT.

To help answer that question, we added the green line to the chart. This line adds consumer credit and transfer payments to the blue line. Consumer credit encompasses credit cards, lines of credit, auto loans, student loans, and other non-mortgage forms of consumer debt. Transfer payments are benefits the government bestows upon its citizens in which no goods or services are received in return. Examples include: welfare, food stamps, insurance, and medical benefits. It is important to note that, given the continual deficits run by the U.S. government, these benefits are predominately paid for with borrowed funds.

Note that the green line, unlike the blue line, remains positive and relatively stable from 1959 to 2008, 20 years longer than the blue line. The take away is that consumer and government debt filled the diverging gap between incomes and the cost of living.

The divergence between the lines halted in 2008. The financial crisis was in part the result of a consumer that had exhausted their ability to use more debt to maintain their lifestyle. Despite the lowest interest rates on record and increases in government transfer payments, the green line has not been able to recover.

The red line in the graph isolates the hockey-stick-like growth of consumer credit since the early 1990’s that was used to maintain our standard of living. Of importance, in 1990 when the blue line went negative, the pace of consumer credit growth accelerated. Since then the pace of credit growth has risen at a much faster rate than the economy and our incomes.

To impress upon you the importance of understanding the role debt has played in supporting our lifestyles, the graph below highlights the magnitude and composition of consumer credit and government transfer payments as a percentage of consumer spending. Combined they now account for 43% of all consumer spending, which in turn accounts for nearly 70% of economic growth. In other words, almost a third of economic growth is reliant on increasing debt.

Data Courtesy: St. Louis Federal Reserve (FRED)


These charts clearly illustrate that the U.S. consumer has steadily relied on increasing amounts of debt to maintain an artificial standard of living. Through the use of credit, personal and government, U.S. households have pulled forward future consumption. The weight of those outstanding obligations serves as a wet blanket on current and future economic growth.

The financial crisis in 2008 fractured the economy in ways that are clearly evident today. Addressing the troubling debt burden has been postponed through extraordinary stimulus, but the problem has only grown in size. This proves that a debt problem cannot be solved by using more debt.


thunderchief Agent44 Wed, 09/27/2017 - 11:15 Permalink

Debt  is what keeps dollar demand going.  Thst is why central banks can print 3 trillion a year and yet none of it reaches the masses.   Debt is the antidote to hyperinflation.   The masses will get their hyperinflation some day, but only when the banks want to squash them with it, and they will ensure their debt is protected from it.

In reply to by Agent44

38BWD22 Wed, 09/27/2017 - 10:55 Permalink

  Debt is a killer.  Avoid.So many here say the Rothschilds want your money.  How do you keep it away from them?  Don't borrow.

Azannoth 38BWD22 Wed, 09/27/2017 - 11:07 Permalink

If we all suddenly stopped spending the government would think of something to take your money away anyway, more taxes, higher fees, more police harrasment etc. they would get the money one way or the other, to keep our money we need to get rid of the government that's the only way.

In reply to by 38BWD22

Dwain Dibley Azannoth Wed, 09/27/2017 - 12:08 Permalink

Unless you're holding legal tender notes and U.S. coin, you don't have any money.Your bank deposit account is merely a bank managed record of how much legal tender money the bank owes you. In other words, your deposit account is bank debt.You utilize your deposit account as a line of bank credit, which merely transfers the obligation to pay from bank to bank.  Payment is never made unless or until you go to your bank or ATM and take possession of payment in the form of legal tender notes and U.S. coin.MONEY .

In reply to by Azannoth

Nostradumbass Wed, 09/27/2017 - 10:58 Permalink

OT I know, but too good to not post:  Bobby Fischer Speaks Out Against the Jews  Renegade Editor’s Note: Bobby Fischer is considered by many to be the greatest chess player of all time. He and his sister Joan were raised by their single mother Regina, who although biologically jewish, did not have any of the jewish privilege. Most of Bobby’s formative years were spent impoverished, living in Brooklyn, where he first learned chess by reading the instructions from a set purchased from a candy store. After his sister gave up on the game, Bobby was forced to play against himself. He was self-taught, without any expensive tutors like many of the other chess champions, but his natural intelligence and dedication to the game enabled him to explode onto the scene.At age 15 he became the youngest grandmaster and the youngest candidate for the World Championship. He won the US Championship at age 20 (1963-’64) with a perfect score, which is still the only time this has happened in the history of the tournament. In 1972 Bobby became an American hero as he beat the USSR’s Boris Spassky, becoming the World Chess Champion in chess’s most legendary matchup. He held onto the title for 3 years, but he refused to defend it in 1975 as he could not come to an agreement over the conditions for the match, so the title was automatically given to his challenger. Bobby would become reclusive after that, but did emerge in 1992 to beat Spassky once again in a rematch. His genius would continue to influence chess, but Bobby had become very disillusioned with the game, and he became convinced that matches were being fixed.Bobby came to hate the American government, which he accurately saw as being controlled by nefarious jews, and was persecuted for his outspoken opposition. His assets were seized, his name was used without ever giving him any royalties, he was imprisoned in Japan, and the once-great American genius was made out to be a crazy kook. Bobby lived out his last few years as an asylum seeker in Iceland before his death in 2008. Many people think he was likely killed for his strong stance against international jewry.This is a collection of quotes from Bobby on the subject, though it is certainly not comprehensive.  “There is no United States as people think of it. It’s just a puppet in the Jews’ hands. It’s a plaything for the Jews… The US government and American Jewry are virtually interchangeable… They’re lying bastards. Jews were always lying bastards throughout their history. They’re a filthy, dirty, disgusting, vile, criminal people… They’re just unbelievably wicked… ” (Bombo Radyo, Philippines, September 11, 2001)“America is totally under control of the Jews, you know. I mean, look what they’re doing in Yugoslavia… The Secretary of State [then Madeleine Albright] and the Secretary of Defense [then William S. Cohen] are dirty Jews. ” (Philippines radio, May 24, 1999)“First of all, we have to understand what communism is. I mean, to me, real communism, the Soviet communism, is basically a mask for Bolshevism, which is a mask for Judaism.” (Press Conference, September 1 1992)“My main interest right now is to expose the Jews. This is a lot bigger than me. They’re not just persecuting me. This is not just my struggle, I’m not just doing this for myself… This is life and death for the world. These God-damn Jews have to be stopped. They’re a menace to the whole world.”“What is going on is I am being persecuted night and day by the Jews for telling it like it is… They want to put me in jail, they’re robbing me of everything I have; they’re continuously lying about me. I’ve had enough… ” (Radio Interview, March 10 1999)“I have a crazy quirk, Eugene. I like to say what I think. And if you’re gonna work for the Jews, you can no longer say what you think. You can’t say the holocaust never happened, for example. That is an absolute no-no. You can’t say that circumcision is a crime. There are so many things you cannot say once you get on the Jewish bandwagon. … There used to be a lot of people like me, but little by little the Jewish spirit seems to be conquering all.” (Speaking to Eugene Torre on Bombo Radyo Philippines, May 24 1999)“I would rather be free in my mind, and be locked up in a prison cell, than to be a coward and not be able to say what I want.” (Radio Interview, May 24 1999)“The latest thing they’ve done is I had some stuff in storage back in Pasadena for 12 years, spent a fortune on storage fees, a fortune on safes… and the Jews in America have just gone and grabbed it all… You know, up until now they [the Jews] have more or less been satisfied to kind of attack my name, to exploit my name, to violate my rights, to violate my intellectual property rights, to violate my contracts. Now, this is a new level. They’re just stealing my belongings. Stuff worth millions, they just went and stole it. ” (Calypso Radio, Hungary)“The Jews don ’t want me to succeed in any of my projects. They want me to be a failure. They want to utterly destroy my reputation for all time. Jews are vicious rats. America is just a Jew country. They’re a bunch of crooks there. The Jews control everything and everybody. ” (Bombo Radyo, Philippines)“(They persecute me) because I beat the Jews in chess. I beat them badly too, I beat them very badly… Plus, on top of that I exposed them as cheating in chess. As outright crooks. Plus, I exposed the Holocaust as never having happened. Totally made up. The Jews are… liars. There is not a shred of truth to this Holocaust. ”“Jews are antisocial, destructive, intolerant, mean-spirited, deceitful, et cetera. They wish to destroy, rule and kill, rob whoever gets in their way. To facilitate them getting what they want, they have developed a perverted, unnatural, destructive, evil lifestyle. Even though they live off the non-Jews as parasites, they still hate them and wish to destroy them. Jews hate nature and the natural order, because it’s pure and beautiful, and also because it’s bigger and stronger than they are, and they feel that they cannot fully control it. Nature’s beauty and harmony stands in stark contrast to their squalidness and ugliness, and that makes them hate it all the more. ’“Jews are destroyers. They are anti-humans. The anti-human Jew hates and wants to destroy all non-Jews. He will also destroy even other Jews who are less destructive and evil than he is, if they get in his way. Apparently, the wickedness of the Jew is genetically based. Jews are destroyers. They are anti-humans. By the act of circumcision, the Jew shows his hatred towards nature and the natural order. By this bloody, cruel, senseless act, he shows his cruelty and sadism, and that he will stop at nothing to obtain his ends. Surely the Jews are also behind the Islamic circumcision, which serves as an ideal cover and distraction from their own wickedness in this regard. Jews are truly anti-human and anti-nature. ”“Jews are intensely selfish, intolerant and antisocial. They are full of hate, greed, malice. Naturally, other people, i.e. the non- Jews, don’t like being bulldozed aside, robbed and murdered by the Jews, and will sooner or later resist. That is where the lies and deceit of the Jews come into place. ”“No lie is too big for a Jew, no lie is too small… Jews live by lying, and die with coming in contact with the truth.”“They’re lying bastards. Jews were always lying bastards throughout their history. They’re a filthy, dirty, disgusting, vile, criminal people. ”“I think that the Jews would like to eat me… I think they’ve got eating Fischer on their minds. They hate my guts. Or maybe they love my guts. ”“Circumcision is a crime. The Jews say they know better than millions of years of evolution… The only road to sanity for the Jews is to admit that circumcision is a crime. ”“The Jews are not fighters. They have miserable bodies. They’re cunning like rats. ”“I don’t think there’ll be any (world) peace until these Jews are dealt with. These people are animals, they’re just bastards, y’know. Absolute animals. ”“The US government and American Jewry are virtually interchangeable. ”“Morphy was really the world champion. That’s also a Jewish conspiracy, because he was a Catholic and they tried to say he wasn’t the world champion so they could promote Steinitz, who was a Jew, as the first world champion… There was a huge conspiracy against Paul Morphy… And nobody compared to Paul Morphy. Obviously the Jews have an insane hatred toward him.” (On the great 19th century American chess player, Paul Morphy).“Almost everyone who has been around me turned out to be a secret agent working for the Jews, working for the CIA… The Jews have planted so many of their Jew agents and CIA rats all around me. So many people… girlfriends, lawyers, everybody almost, turned out to be working for the CIA and the Jews. Unbelievable but true.”“My basic thesis is that the Jews are a criminal people, and the Jews completely control the United States, and the Jews are using the United States as a vehicle to take over the world. ”“I’d like to see all Jews be lesbians and homos. That would solve the problem with the Jews. There’d be no more Jews, no? ”“They are jealous of me in every way. They’re jealous of my talent, they’re jealous of my looks, they’re jealous of my potency, they’re jealous of my chess. They’re just jealous bastards. They are ugly, they are jealous…’’

Aireannpure Nostradumbass Wed, 09/27/2017 - 11:21 Permalink

If it isn't the Jew it would be some one else, so the point is? All my Jewish friends and relatives are smart productive citizens that love America. Love trumps hate always. Hate has a nagative effect on your brain. Remember that America was founded on getting away from the Catholic church running everything. Some one must lead and will always be hated by those who want to really just take thier place. And the music plays on.

In reply to by Nostradumbass

Nostradumbass Aireannpure Wed, 09/27/2017 - 11:52 Permalink

Apparently, j00ze have a negative effect on the brains of Whites: Dr. Hutschnecker said that research by Dr. Jacques S. Gottlieb of Wayne State University indicates that schizophrenia is caused by deformity in the alpha-two-globulin protein, which in schizophrenics is corkscrew-shaped. The deformed protein is apparently caused by a virus which, Dr. Hutschnecker believes, Jews transmit to non-Jews with whom they come in contact. He said that because those descended from Western European peoples have not built up an immunity to the virus they are particularly vulnerable to the disease.'There is no doubt in my mind,' Dr. Hutschnecker said, 'that Jews have infected the American people with schizophrenia. Jews are carriers of the disease and it will reach epidemic proportions unless science develops a vaccine to counteract it.'-------A Jew learns as part of his sacred Bible and Talmud studies that crimes against Gentiles, such as genocide, mass murder, child abuse etc. are considered holy services to God. The Bible and the Talmud, the holy books of hate, mandating innocent Jewish youngsters to hate, to murder, to deceit, to expel, to rob non-Jews in the name of God. This leaves not only a dent on their mental structure, but turns their soul into a festering spiritual deformity.They live and work together with non-Jews in communities throughout the world, liking their Gentile neighbours, enjoying their culture and even at times falling in love with members of the Goyim opposite sex. However, because of the strict law and restrictions (based on racial purity) imposed upon them, they are forced to grow up and develop in a world in which they learn the skills of obeying one command and living a double life. The dilemma the ordinary Jew faces, is that he has to obey the Rabbis' interpretation of God's laws. They educated the young minds of the Jewish nation to despise, to subjugate, to look down upon and even to hate the non-Jewish world. Failing to follow these holy commands results, as they are taught, in severe punishment by God. This must result naturally in mental aberration amongst the Jewish community.

In reply to by Aireannpure

TeethVillage88s Wed, 09/27/2017 - 11:04 Permalink

If USA adopted Buddhism, the US Economy would collapse. Because we would stop being so materialistic, stop consumption at ludicrous speed. Our illusions would be on our minds through out the day and when shopping.

Therefore, the Elites would have to suppress Buddhism.

Movies, Stories, Video, Film, ... all illusions that fill our heads with mush.

Illusions are REAL, powerful, dangerous, seditious, treasonous, anti-American, anti-Nation...

Illusions are What DC, Central Bank, Wall Street give us. (Bankers, Lawyers, Lobbyist, Politicians)

- Vote NO this year on Boskin Commission Reforms to CPI (1996)

hooligan2009 Wed, 09/27/2017 - 11:17 Permalink

excellent point - growth in debt does only translates into sustainable growth if the key component shown (C)onsumption is a) sustainable and b) split more between goods that last (v) goods that are (eventually) the same way that the Fed cannot dictate the level of economic activity by printing money, the funding of credit (or the government) by borrowing does not necessarily spur growth - unless it is spent on growth producing actiivty, not pissing it up agains tht wall and paying corrupt banksters and other words, consumption increases are not valuable (prevent further debt increases) if they are funded by debt that cannot be repaid form growth in wages.the biggest sin in the misallocation of capital is the POLITICAL DECISION to engage in share buy backs, rather than worker bonuses.share buy backs should be illegal, as should ceo salaries above 5 million - there is no correlation between fat cat salaries and profits not gained by extortion, price gouging, government pork, regulatory arbitrage or export of jobs (labor arbitrage). you dont need to pay caviare to the monkeys that game the system, rather than create value.had 600 billion share buy backs been paid as bonuses to workers, credit would be that much lower and americans that much better off (shareholders are increasingly not even american - the are people like the Swiss Nationl Bank that just prints money and buys US companies).

Atomizer Wed, 09/27/2017 - 11:17 Permalink

The house was used as banking ATM to purchase goods and services. Based on your debt to income ratio. Some folks placed three mortgage claims on one house to appear rich as fuck. Imagine the compounded interest they were paying to look wealthy. It's all a illusion. 

Hkan Wed, 09/27/2017 - 11:33 Permalink

Debtaddiction is personal and worldwide desease....kills all. Predictrefusal.Blame urself for deepshit? Go fight someone. Universal!

aztrader Wed, 09/27/2017 - 11:22 Permalink

All this new long term debt via car and home loans has destroyed discretionary spending.  Making payments to a finance company does nothing for the economy.

Savvy Wed, 09/27/2017 - 11:22 Permalink

I recall being in college living in a basement suite in an upscale neighborhood. I drove a '86 corolla. The people next door drove jaguars. Never waved at me, would look the other way to avoid seeing me wave good morning to them. One morning there's repo trucks in their driveway. I rolled down the window, slapped the door of my beater car and yelled "PAID FOR". Debt is slavery.

MrBoompi Wed, 09/27/2017 - 11:46 Permalink

Have we forgotten ALL of our money is loaned into existence?  They loan out (create) the principal but not the interest.  We need to create more debt each year to cover the payments, the principal+interest.  If consumers do not borrow, somebdy else will, on their behalf too.  It's baked into the cake.  Everyone in charge will gladly kick this can down the road until the day they die.  

TeethVillage88s Wed, 09/27/2017 - 11:47 Permalink


1) Constitutional USA, enforced, recognized, law of the land
2) Free Markets, Stock Exchanges free of unequal access, free of computer algo trading, free of entities trading with leveraged money on margin, free of naked shorting
3) Capitalism free on Monopolies & Oligopolies, no advantages for large behemoths, no federal subsidies for State Capitalism, no protections or bailouts for State Capitalism... business dynamics do not favor Older & Larger companies and there is no decline of small businesses, small banks, small farms, mom & pop stores
4) There is no preference or advantage for overseas labor in our Capitalism... we protect our Tax Base, our Domestic Jobs, our Economy, our US Dollar, and Jobs for Minorities that could be sent overseas
5) We do not Plan to Create Inflation, we preserve the wealth and means of Elderly, Infirm, Minorities, Youth who chose to work, Domestic Job Skills who will not receive wage increases in dish-washing, cooking, construction, day labor, landscaping, waste removal, skilled home remodeling or repair
6) We keep Inflation down so that people can retain, relocate when displaced from jobs
7) We protect Pensions, 401Ks, prevent people from losing wealth due to high health care prices
8) Social Contract is intact



Batman11 Wed, 09/27/2017 - 11:51 Permalink

They used debt to maintain consumption in the 1920s.They used neoclassical economics that doesn't look at private debt.The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression.That looks like a good idea, let's get that crappy neoclassical economics back again.Use 1920s neoclassical economics, remove 1930s regulations and repeat. and 2008 are basically the same; it’s just a different asset class used to blow the bubble. 1929 - stocks; 2008 - real estate.  

Deep Snorkeler Wed, 09/27/2017 - 12:16 Permalink

There shall be no interruption of our permanent prosperity.There is nothing in the current situation to be disturbed about.A depression is improbable.Dissenting voices are not welcome.Sex, drugs and rocknroll.

mendigo Wed, 09/27/2017 - 12:19 Permalink

There is something dishonest about this article.People are not taking on ever increasing amounts of debt well except that mortgages, student loans and car loans are ever increasing. Mortgages and car loans are self correcting.The government is however taking on ever increasing debt - largely to finace wars of convenience.

dot_bust Wed, 09/27/2017 - 12:31 Permalink

The Equifax hack is the bankers' way of turning off the credit spigot.Suddenly, half the U.S. population is being told by the banks to freeze their credit. In a credit-fueled economy, that's akin to throwing a wrench into the moving parts of an engine. The engine will simply break apart.Now, the Federal Reserve wants to raise interest rates and reduce its balance sheet at the same time. I can't help but think that this is a planned economic implosion.If you get half the country to freeze its own credit and the other half to pay more for credit, economic depression becomes a virtual certainty.

nsurf9 Wed, 09/27/2017 - 13:09 Permalink

As long as we continue to let them control our "fiat" money - they will never stop stealing us blind with the invisible tax called inflation (dollar power stealing dillution) and eventually (maybe) we will wake-up, most assuredly, penniless on the continent that forefathers died to create. END THE FED - you don't even know who owns it or our debt - do you?  And, they're making sure you don't.

Let it Go Wed, 09/27/2017 - 18:24 Permalink

With the markets sporting a glow from all-time record highs that are being made week after week it might be a good time to revisit the concept of irrational exuberance. We must consider the possibility we may be nearing the end of a 37-year run that will completely upend everything most people have come to believe about the economy. Since 2008 all growth has been built on a mountain of debt.Those of us who have doubted and repeatedly predicted the collapse of this so-called recovery remain wrong because we have underestimated both the breadth and size of the global intervention of central banks and governments. Nobody in their right mind would have ever anticipated the sheer magnitude and scope of what has become a worldwide phenomenon. The article below questions when the burden of global debt will cause Atlas to shrug.

mscir Wed, 09/27/2017 - 18:38 Permalink

Using debt to stimulate things is a good idea IF the debt can lead to the development of new businesses that will employ a lot of people and generate a lot of products or services, I'd like to see zero hedge analyze that.

1936ryer Drop-Hammer Thu, 09/28/2017 - 21:49 Permalink

And they wonder why everone hates them.  Jews have done the same thing over and over again and this is why they are slaughtered --only this time they not only own the banks that indebt you, they own they media that misinforms you about debt and they own the government that kills anyone that tells the masses about the scam..   The people will wake up and guess what -- they we get slaughtered again.  The good with the bad will pay the sins of the jew bankers.

In reply to by Drop-Hammer