Commercial property bubble gets out of control: Commercial real estate is now up 102 percent from the lows reached in 2009.
We live in a system were bubbles grow and pop at an increasingly faster pace. This is largely due to massive market intervention by central banks and their masters with investment and commercial banks. The goal is to always create more liquidity if you are a bank. However there is no clean mechanism to filter liquidity into the appropriate areas of the economy so enormous waste occurs typically in the form of asset inflation. The bailouts were largely a “trust the banks” operation and here we are almost one decade since the Great Recession hit and we’ve basically made the middle class a minority in the United States. In the mean time banks are doing fantastic. One area where a bubble appears to be ongoing is in commercial real estate. Commercial real estate is going gangbusters even though the typical family is barely scraping by. So what gives?
9 charts showing Americans never recovered from the Great Recession: If you are wondering why people are so angry look no further.
The press is somewhat baffled as to why Americans are so angry this year. The stock market seems to be doing fine (too bad most Americans don’t own stock). Jobs are being added (too bad most jobs are in the low wage service sector). Housing values are up (too bad the homeownership rate is down because Americans can’t afford home prices at current levels). This is the state of our current economy. One that is mired in stagnation for the majority of people and the mainstream press is largely seen as a megaphone for the wealthy and connected. You don’t have to look too far to see that things are not all that great in the real economy contrary to the headlines. Let us look at a few charts to see how things really are.
Get used to an America where owning a home is not part of the dream: You cannot afford a home on that income!
Well congratulations America. Signs of another housing bubble are as clear as day. Loans with nothing down are back in the market. Incomes are stagnant so creative financing is necessary to buy more expensive homes. And homes are more expensive. The current home price data shows that across the country we have now surpassed the last bubble peak. Yet incomes are not keeping up with wild movements in prices. The end result is that the homeownership rate has collapsed yet somehow home prices went up. How can prices go up with fewer families buying homes? Easy, since the bailout funds allowed banks, hedge funds, and investors to pickup foreclosed homes from families and then turned them into rentals. Now we have many more people living in rental homes accumulating no equity and barely scraping by. Yet somehow with housing prices soaring, college tuition at crazy levels, and stagnant incomes we are led to believe that somehow we have no inflation. The current model of the American Dream involves no homeownership for the already shrinking middle class.
Student debt apocalypse: Median wages up 1.6% over last 25 years while median student debt is up 163.8%.
Student debt is out of control. Over $1.3 trillion in student debt is floating out in the current economic system. Most of this debt is saddled firmly on the backs of younger Americans who coincidentally are also entering into a job market with incredibly low wages. This idea of high tuition with low wages isn’t some made up propaganda to distract you. This is reality. The math behind this is all clear cut because inflation has eroded the standard of living of Americans to the point that the middle class is now a minority. Student debt carries larger implications than merely paying for a college education. Many younger Americans are unable to buy homes because of the amount of student debt they carry. Many are also delaying bigger purchases because of the large debt they already carry. This path is clearly unsustainable. Just take a look at wage growth and total student debt growth over the last 25 years.
Percent of Total Wealth Owned in the United States: Bottom 40% control -0.9% Meaning Close to Half the Country has a Negative Net Worth.
Wealth is an important measure of financial stability and success. Being able to have enough set aside for a rainy day can make the difference between weathering a minor storm to being in full upheaval because of an unexpected expense. Most Americans however live paycheck to paycheck. There is no emergency fund. It is troubling to see new data looking at the distribution of wealth in the United States because many Americans actually have a negative net worth. New data looking at wealth distribution highlights a growing gulf between Americans. Wealth inequality like that seen during the Gilded Age and the Roaring 20s led to massive disequilibrium that ended up in deep financial corrections. We are very much in a situation that rivals that period only this time the public is able to go into negative net worth territory through items like college loans, auto debt, and credit cards. The percent of total wealth owned in the United States might surprise you.
Importing lower wages as 75% of Silicon Valley’s tech workers are foreign-born: How tech manipulates the H-1B visa program for cheap labor.
We tend to believe that the tech industry operates in a very progressive atmosphere as far as how they vote. This might be the case for workers but for owners, they are ultra-bottom line and this is seen in the way they hire lower wage workers. We tend to get things mixed up in regards to foreign workers “stealing jobs” when the rhetoric is thrown out in the media. In reality, most of the H-1B visas, a visa to allow employers to recruit and employ foreign professionals in specialty occupations, is largely dominated by the tech industry. In fact there are industries in China and India that cater to this market entirely like Tata Consultancy Services. Yet this pushes wages lower at a high level since these are skilled workers. For other Americans, the low wage employment train continues to chug along. Which companies sponsor the highest numbers of H-1B workers?
Low wage recovery highlighted by 7 out of 10 jobs added in January coming from minimum wage waiters and temporary retail workers.
The unemployment rate fell below the 5 percent mark for the first time since the Great Recession wrecked havoc on the economy. This is good news right? Well the stock market didn’t think so for a couple of reasons. First, this adds more fuel to pushing interest rates higher (a big expense on the $19 trillion we already owe). Second and probably more importantly, it highlights the growing trend of low wage employment. 7 out of 10 jobs added in January came in the form of low wage jobs. We added 58,000 in retail and trade (i.e., Wal-Mart and Target work), and 47,000 in the food trades (i.e., waiters and bartenders). With states pushing minimum wages up, this is where the income gains came from but we are talking about a weak jump brought on by the low range of the curve. This is why the casino known as the stock market took a dive despite this seemingly good news. Is this a problem that most of our job growth came in the form of low wage work?