The financial feeding of the massively indebted American: Consumer credit owed hits record, permanently high gas prices, and feeding empty promises with food stamp outlays up 600% from 2000.
Americans are now fully engaged, once again, in their consumption ways financed by debt. To continue pretending that the middle class is not shrinking, massive amounts of debt are being pumped into the system once again. Total consumer debt has reached another peak but the reason this has peaked is very troubling. Over the last decade the fastest growing sector of debt has come from student loans. The Fed has injected easy money into member banks and from our 2009 financial lows, debt is now trickling throughout the economy. Yet, old habits seem to be a stubborn thing. A few items now seem to be permanent fixtures of our economy. Gas prices are stubbornly high, food stamp outlays are at record levels, and consumer debt rages on the fires of student loan growth. In other words, the expansion is being driven by debt yet again.
The uneasiness of Quantitative Easing: How QE is ineffective with helping the broader economy in favor of boosting support for too big to fail banks.
Quantitative Easing outside of economic and financial circles is a mystery to most of the public. In fact, start talking about the Federal Reserve and eyes will glaze over as if you were speaking in tongues. The financial sector counts on the public being ignorant of such things. That is why the failure of QE is such an important topic to discuss. The consequences brought on by QE have resulted in massive distortions in the market. First, we have incredibly high speculation once again from the financial sector (it never really went away and was the fodder for our last financial implosion). QE simply provided an easy mechanism for cheaper funds via interest rate distortions. The second key point is that banks have increased their leverage via easy debt and are crowding out smaller players in the market. A perfect example is the flood of big money investors crowding into residential real estate. QE has ultimately turned out to be a very selective bailout of the too big to fail banking sector.
Arrested development courtesy of student debt: How student debt is putting the lives of many young Americans on hold.
Many young Americans view student debt as a necessary evil in pursuing higher education. The level of student debt now reaches Himalayan levels as many are falling behind on keeping up with payments. A double-edged sword has befallen young Americans. First, the path to middle class jobs no longer runs through a blue collar industry (as I’m sure Detroit would testify to this fact). Second, the required skills for middle class jobs (i.e., healthcare, engineering, sciences, etc) run through formal education for better or worse. The ability to pull oneself out of one class and have mobility to another is at the core of the American Dream. Yet this dream is now becoming a debt filled labyrinth. Recent college graduates are finding it difficult to buy a home or other typical life journeys when many already come out with mortgage like debt thanks to the student loans they carry. Are we seeing a sort of economic arrested development for younger Americans courtesy of the maze of student debt?
Detroit files for bankruptcy while S&P 500 hits record high: The bifurcation of the American economy and the long decline of the American manufacturing base.
The US is full of economic dichotomies. The DOW hit a peak when food stamp usage peaked. Incomes for the wealthiest are reaching record levels while the median household income has fallen back to levels last seen in the mid-1990s. And today, the once manufacturing powerhouse of Detroit is filing for bankruptcy at the exact same time that the S&P 500 reaches a record. The symbolism cannot go unnoticed especially as a reflection of our so-called recovery. We have offshored our blue collar workforce and this has helped a small group at the top at the expense of the working and middle class. The low wage capitalism race is full speed ahead and Detroit is merely another bystander in the way. How is it that we can offer lifeline after lifeline to banking giants while Detroit is left to contract and suffer a painful demise? This isn’t to say that something should be done but it offers a bifurcated method of how we are operating today. The financial giants are bailed out with corporate food stamps while the working class is left to fight the global forces of low wages on their own. What else does the bankruptcy of Detroit tell us?