Jun 22 2015

How much do Americans earn in 2015? A comprehensive look at household income and individual earnings. GDP disconnects from household income.

How much do Americans earn?  This is an important question to ask given our consumption based economy.  Each household has a propensity to spend and the ability to consume is largely derived by income.  Debt has made it easier for households to spend future wages but we need to find out two important reference points to measure the health of household income: total wages for households and that of individual workers.  What we are seeing is a growth in lower wage jobs and the cost of living eating into wages leaving a smaller amount of disposable income each month.  I’m still surprised as to how many Americans overestimate wages for US households.  The US is still the top economic country in the world but we are quickly seeing our middle class disappear.  Middle class is an ambiguous catch-all category but at the core, it means a family is earning enough for buying a home, putting your kids through college, and having enough in retirement that you are not begging on the streets in old age.  So how much do Americans earn?

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Jun 18 2015

Record number of too big to fail banks: 59 banks in the United States now have over $20 billion in assets. Top 3 US banks hold $6.3 trillion in assets.

Remember when too big to fail was being uttered like “good morning” or some other daily phrase?  Apparently people have forgotten about the dangers of too big to fail and have allowed the banking system to grow like weeds in an unattended garden.  The previous peak of massive big banks was in 2004 when we had 54 banks with more than $20 billion in assets.  Today we are at a new peak of 59 banks.  These assets are being inflated thanks to the new property bubble that is catering to the investor class.  The majority of families are being pushed to the sidelines being crowded out in the housing market and then being offered 0 percent on savings accounts while banks speculate like wild banshees.  Too big to fail is back and not much attention is being placed on this.  People might be too busy struggling in the low wage economy to care about banks getting dangerously large.  We are now at a peak in regards to too big to fail banks.

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Jun 15 2015

The looming retirement crisis: 10,000 baby boomers a day turn 65 and most are inadequately prepared for retirement. Half of elderly Americans in poverty without Social Security.

There is a very common number that is thrown out regarding baby boomers and retirement.  We consistently hear that every day 10,000 baby boomers hit the typical retirement age of 65.  This trend is expected to go out until 2030.  What is troubling with this narrative is the assumption that most have enough funds to actually retire.  The reality is that most will depend on Social Security as their primary source of retirement income.  When we examine net worth figures we find that the single largest asset for Americans is their primary residence.  It is good to have a paid off home in retirement but no income is generated from this.  You have taxes, insurance, and the costs associated with maintaining a home plus the costs of daily living: food, healthcare, and other expenses.  For many, the new retirement plan is a form of working until you pass away.

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Jun 11 2015

Is college worth the 172 percent price increase over the last 9 years? The cognitive dissonance between rising tuition and falling wages.

$1.36 trillion.  That should sound like a lot of money because it is.  How much is $1.36 trillion?  Texas has an annual Gross Domestic Product of $1.4 trillion.  $1.36 trillion is the amount of student debt that is attached to millions of Americans like a financial albatross.  There is an ugly thing about this unrelenting trend given that many students are now unable to payback their loans.  It is no coincidence that young Americans are putting off marriage, buying homes, and starting families because of the incredible weight of debt they already carry from their college years.  It would be difficult to argue that education is a “bad” thing.  To the contrary, getting an education is vital and important.  Yet with many colleges charging $25,000 to even $50,000 per year merely to study general education courses, you have to question the value of what people are paying for.  The most expensive college seems to be Sarah Lawrence coming in at $65,480 per year for tuition, room and board, and fees.  Just as a measuring guide, the median household income in the US is $50,000.  There is a growing problem and student debt is growing into a financial avalanche.

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Jun 6 2015

The crisis in housing: Not enough homes are being built and rents are outstripping wage gains.

There is an economic crisis happening in the housing market.  The working class is finding more of their wages sucked into the housing financial puzzle. Stagnant wages combined with rising home prices and rents are putting a lid on household formation.  It probably doesn’t help that many young families are caught in the low wage economy.  Before purchasing a home, you probably want to ensure a secure paying job.  Many are also reluctant to purchase given that they are already carrying a heavy burden of student loans.  The housing crisis is being heavily reflected on home prices, rents, and the lack of household formation.  When all of this is combined we find that construction spending is a small part of GDP when in most recoveries, it is a sizable portion of gains.

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