Middle class acquiesces through the looking glass of financial mediocrity: The financial system continues to pillage the wealth of working and middle class Americans.
2013 can be remembered as a year where the markets fully disconnected from Main Street. The trickle down promises are all empty and hollow words. For example, we had one of the best stock market rallies ever yet most Americans are not seeing any wage growth. The housing market boomed but more than 30 percent of sales are going to big banks and investors using the Fed’s QE system to crowd out regular people. Why are higher home prices positive if incomes are not going up? The market no longer reflects the pains of the working and middle class. In fact, the stock market must appear like a looking glass for many Americans who look at their paychecks and net worth and must wonder how they can get a piece of the action. The con is strong since most of non-housing debt taken on this year came via auto and student loan debt. In other words, spending what you don’t have. The financial system continues to pillage what little wealth working and middle class Americans have.
Quantitative Easing has become heroin to the financial markets: Federal Reserve balance sheet hits $4 trillion this week.
Addiction is never an easy battle to overcome. This also applies to easy money addiction that is now part of the Quantitative Easing economy. The Fed’s extraordinary measures are now appearing to be more permanent measures. Every time the whispers of tapering are made the markets respond accordingly signifying that the stock market is fully addicted on easy money. There is really no backing out of QE without some sort of pain. Any addict pulling themselves away from a drug suffers some brief or long period of withdrawal. Yet the long-term benefits are obvious. In this case, the Fed is not only avoiding tapering but getting more aggressive in their QE heroin. This week, the Fed’s balance sheet crossed the $4 trillion barrier. Of course few people pay attention to the Fed’s balance sheet but the fact that the Fed has created a second housing mania fueled by investor money is startling.
A Gilded Age built on debt for modern day financial aristocrats: Fed reports record for household net worth only problem is that most people do not own financial assets.
The Fed recently reported that US households reached an all-time record high when it comes to their net worth. A record $77.3 trillion net worth figure was reported with $7.65 trillion of this growth occurring over the last 12 months. The only issue here is that most Americans do not own any financial assets. The bulk of the gain has come from the juiced up stock market courtesy of mega Quantitative Easing. Yet at the same time, we have a peak in food stamp usage and the real estate market is largely being driven by Wall Street speculators. The Fed is creating a modern day Gilded Age that is favoring a very small portion of the population. The vast majority of the population is leveraged into debt with high rates while those with premiere access continue to increase their balance sheets. It is no coincidence that the top 10 percent of households control 75 percent of all wealth in the nation. This is why sentiment for most households is negative. For the majority to participate in this party they need to go into massive debt yet again to pretend they are still part of the middle class.
Sheltered banks do not trust broke American public: Too big to fail securely in place while business inventories surge to record levels.
Tracking consumer spending we find that industries subsidized by easy debt are growing at dramatic levels. These include student debt and auto loans since most Americans simply do not have enough saved up. Many have nothing to their name. The student debt market has grown dramatically this year again largely due to the reality that this debt is fully backed by the government and ability to pay the debt back is fully ignored. How else can someone get $30,000 or more a year to go to a for-profit paper mill? Beyond this, we now hear that household net worth has risen to record levels. However, since most Americans have no wealth in the stock market and are quickly losing home ownership in real estate, these gains are largely going to the top 10 percent in the nation that control roughly 75 percent of all wealth. This is not based on speculation but on multiple points of data. Banks do not trust the public because many are broke and do not have the funds to support massive debt growth. Ironically, these banks would not be around without the big bailout check that was required from the public.