The incredibly uneven recovery: Net worth of bottom 93 percent declines by $0.6 trillion while top 7 percent net worth increases by $5.6 trillion. Why? Most Americans don’t own a sizable amount of stocks and bonds.
One unique signature of this economic recovery is how narrow it is. When we look at actual wealth, the net worth figures of Americans, we see some dismal numbers. In fact, what we find really isn’t a recovery at all if we look at 93 percent of the country. Then again, with most of Congress being millionaires they are so far removed from the real lives of the public that reality has become encapsulated in a very tiny bubble. One piece of data that recently came out highlights this uneven recovery. From 2009 to 2011, the heart of the so-called recovery, the net worth of Americans went up by $5 trillion. Sounds great right? Well, when the data is actually carefully examined we find out that the net worth of the bottom 93 percent of Americans actually fell by $0.6 trillion and the top 7 percent saw all the gains of $5.6 trillion. In other words, for most Americans, this isn’t a recovery at all.
Reinventing GDP: US GDP to be revised in July by adding “intangibles†to the tune of $500 billion. The make believe economy.
The US debt-to-GDP ratio is now quickly reaching insurmountable levels. It is interesting that a paper citing this issue is now being openly discredited as if this is reason enough to put on the rocket boosters of quantitative easing. Japan has gone so far off the deep end that they are now intervening in their stock markets. Why not just give everyone $1 million and push the DOW up to 30,000? The debt-to-GDP ratio in the US is now quickly approaching 107 percent. Of course, in the make believe economy, we now find out that the official GDP figure is going to be miraculously boosted up by $500 billion in July. Why? Because all of a sudden they want to add intangibles. How convenient that now that our ratios are out of whack that they want to add a whopping $500 billion out of thin air.
US households are tapped out on debt: While US households are forced to eat austerity measures financial institutions load up on debt and purchase assets at rock bottom prices.
US households are tapped out with debt. Debt matters. Contrary to what is being spouted out over the airwaves having too much debt does cause problems. American households tipped over this point when total household debt reached annual GDP. This is a critical juncture and results in massive deleveraging. There doesn’t seem to be answer or really a major priority in trying to figure out ways of maintaining a strong middle class in the US. It is almost assumed that this is now a lost cause. Fewer in the middle and more in the low wage system that is being developed. Half of Americans are living paycheck to paycheck with 1 out of 3 having no savings at all. Another 47 million Americans are struggling on food stamps. Yet we are supposed to believe that this is a recovery. We recently found out that a large jump in the economy has come from housing. Yet curiously, the large purchasing power has come from financial institutions crowding out regular Americans. There is such a thing as too much debt. US households have reached that point.
The coming deleveraging for Canada – Unit labor costs in manufacturing above US labor costs and household debt-to-income at 160 percent.
Our neighbors to the north in Canada are going to face a serious deleveraging shortly. This isn’t hyperbole or some off the wall call but based on evidence of what happens when economies get into too much back breaking debt. If the largest trading blocs, the US and Europe had to have their day of reckoning how is it that Canada will be immune from the same economic forces of debt? Bubbles do not pop in perfect harmony. They pop in a disorderly and loud fashion and momentum picks up once the unraveling begins. Canada has one of the biggest ongoing housing bubbles and contrary to the rhetoric we see, they have households deeply in debt. In other words, they are leveraging to the hilt just to keep this charade going. Yet this can only go on for so far.  Obviously bubbles can last for a very long-time (i.e., US housing from 1997 to 2007) and can surprise many people. Let us take a look at a couple of reasons why Canada is going to face a heavy deleveraging.