Economic Reality: Bottom 50% of Americans No Longer Matter

by Mike Shedlock

The Fed likes to brag about the “we saved the world” recovery. However, the truth is that a record half of American families live paycheck to paycheck.

Economic Reality: Bottom 50% of Americans No Longer Matter | BullionBuzzConsider: 50% are unprepared for a financial emergency; 19% of Americans have nothing set aside to cover an unexpected emergency; 31% of Americans don’t have at least $500 set aside to cover an unexpected emergency expense; and 49% of employees are “concerned, anxious or fearful about their current financial well-being.”

The Fed recently announced that the US 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.

Half the nation is living paycheque to paycheque. Meanwhile, the stock market and housing are still going strong. We heard the same thing in 2007, but it’s different this time.

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 who are struggling.

That 50% cannot afford a house is irrelevant as long folks keep paying $500,000 for 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.

Here’s the real deal: the Fed expects a second-quarter rebound, and higher equity prices. The Fed needs to keep asset prices elevated even though it’s clear that concerns are mounting over bubbles.

Previously, the bottom third did not matter, then the bottom 40% did not matter. Now the bottom 50% do not matter. The trend is clear. 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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