Blog Archives

No Wonder We’re Poorer: Wages’ Share of GDP Has Fallen for 46 Years

The majority of American households feel poorer because they are poorer. Real (i.e. adjusted for inflation) median household income has declined for decades, and income gains are concentrated in the top 5%:

Even more devastating, wages’ share of GDP has been declining (with brief interruptions during asset bubbles) for 46 years. That means that as gross domestic product (GDP) has expanded, the gains have flowed to corporate and owners’ profits and to the state, which is delighted to collect higher taxes at every level of government, from property taxes to income taxes.

Here’s a look at GDP per capita (per person) and median household income.Typically, if GDP per capita is rising, some of that flows to household incomes. In the 1990s boom, both GDP per capita and household income rose together.

Since then, GDP per capita has marched higher while household income has declined. Household income saw a slight rise in the housing bubble, but has since collapsed in the “recovery” since 2009.

These are non-trivial trends. What these charts show is the share of the GDP going to wages/salaries is in a long-term decline: gains in GDP are flowing not to wage-earners but to shareholders and owners, and through their higher taxes, to the government.

The top 5% of wage earners has garnered virtually all the gains in income.

The sums are non-trivial as well. America’s GDP in 2015 was about $18 trillion. Wages’ share–about 42.5%–is $7.65 trillion.

If wage’s share was 50%, as it was in the early 1970s, its share would be $9 trillion.That’s $1.35 trillion more that would be flowing to wage earners.

That works out to $13,500 per household for 100 million households.

While it’s easy to spout political promises to “fix” this secular trend, it isn’t that easy. Technology and global competition has raised the premium on technology and managerial workers and reduced the premium on most conventional jobs.

Financialization has increased the share of profits and GDP that flow to financiers and the financial sector.

Crony-state capitalism has imposed rentier monopolies and cartels on wage earners, effectively transferring more of the nation’s income and wealth to politically powerful entrenched interests and cartels.

The problem is that limiting financialization will implode the system, as I explain in my new book Why Our Status Quo Failed and Is Beyond Reform. The status quo now depends on financialization for its profits and taxes, and so ripping the heart out of financial skims and scams will also rip the heart out of the entire status quo.

And so 95% of us will continue to get poorer, no matter who’s in office.

My new book is #3 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book’s website.

Tagged with: , , , ,

German Study Proves It – 95% of Greek “Bailout” Money Went to the Banks

Screen Shot 2016-05-05 at 10.20.07 AM

A recent German study just confirmed what tens of millions of Greeks already knew. That they are a people fully conquered by criminal mega banks and the corrupt politicians and technocrats in their employ.

Get ready for another epic screw job this summer.

Read the rest here.

Tagged with: , , , , ,

[KR910] Keiser Report: Shiny New Collective Living

We discuss the shiny new collective living which is sold to the declining income residents by recycling the same old propaganda slogans and images from the past. In the second half Max interviews Dr. Michael Hudson, author of Killing the Host, about the earnings laundering purpose of Panama and how that relates to the long-forgotten revelations of the #PanamaPapers.

One Chart Says It All

Sometimes one chart captures the fundamental reality of the economy: for example, this chart of money velocity and the civilian-population ratio. (thank you, Joseph Y. for posting it on my Facebook feed.)

When the blue line is up, more of the population has a job. (the blue line is the Employment-Population ratio.)

The red line is money velocity, the rate at which money changes hands. (Money buried in the coffee can in the back yard has a money velocity of zero.)

As Joseph noted, the correlation between the percentage of people working and money velocity was strong until 2010. In the post-2009 recession “recovery,” the percentage of the populace with jobs rose modestly, but money velocity absolutely cratered to unprecedented lows.

(The one other disconnect was triggered by the 1987 stock market crash, which caused money velocity to dip even as more people entered the workforce. This absence of correlation was relatively brief.)

The correlation between more people working and money velocity is commonsensical. More people working = more household income = more spending = higher money velocity.

But something changed in 2010. Did the quality and compensation of work change? Joseph observed: People started going back to work after the official recession ended in Q4 2009 but they were working for lower pay. With lower pay comes less disposable income, hence the cliff-like drop off in velocity.

Another potential factor is higher inflation. Some recent estimates (Where’s The Beef? ‘Lies, Damned Lies, And Statistics’) suggest the gap between official inflation and actual inflation in rent, food, energy and medical care in the past 20 years has subtracted 20% from paychecks.

The four “biggies” for the average American are rent, food, energy, and medical care, in approximately that order. These “four horsemen” have been galloping along at a faster rate than headline CPI. According to the BLS definition, they compose about 60% of the aggregate population’s consumption basket, but for struggling middle-class Americans, it’s closer to 80%. For the working poor, spending on these four categories can stretch to as much as 90% of total spending.

(If we add exposure to higher education’s soaring costs, the rate goes even higher.)

So even if wages held steady, once we factor in “real” inflation, real take-home pay has declined by 5% to 20%, depending on the household’s exposure to rent, food, energy, medical care (love those co-pays and out-of-pocket expenses) and higher education.

Another potential factor is the figurative coffee can in the back yard: people sense the ‘recovery” is bogus, and their rational response is to save more money rather than squander it. Even though central banks have reduced the yield on savings to less than zero, people are still saving whatever they can.

Data suggests it’s all three: lower incomes, higher inflation and a recognition that savings are more important in a ‘Lies, Damned Lies, And Statistics’ economy than more spending.

This chart says it all: real income is declining and the bottom 95% are poorer.No wonder people are socking away what they can and tightening their spending: they have no other choice, even as the Federal Reserve strip-mines their savings.

My new book is #3 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book’s website.

Tagged with: , , , ,

Shariah Gold Standard – $2 Trillion In Assets “Could Send Price Soaring”

by Mark O’Byrne

The coming ‘sharia gold standard’ or shariah compliant gold could lead to a very significant source of  new demand for physical gold coins and bars in the Islamic world.

Gold Bullion at London DealersFifty gram gold bars sit across a one kilo gold bar at bullion dealers Goldcore, in London, U.K., on Thursday, March 11, 2010.  Photographer: Chris Ratcliffe/Bloomberg

It is believed that this will contribute to much higher prices and gold “soaring” as some of the $2 trillion of assets held in Islamic financial institutions are allocated to the very small physical global gold market.

Full article by can be read here

The first 10,000 people to Retweet will be entered to WIN a 10 gram #GoldCube. There will be 5 Winners #BirthdayGold

Double Down with Max & Stacy: The Real Reason Behind the New Yuan Gold Fix

China has recently introduced a new yuan priced gold fix. Within a week of the new fix being introduced, Russia and China announced a new gold trading platform. Most Western central bankers and commentators claim gold is a barbarous relic, a pet rock, a cabbage patch doll, so why all these moves in the gold market? Double Down asks Austrian economist, Sandeep Jaitly, to explain the purpose of a fix and what the gold moves by Russia and China might tell us about the current fiat money system.

CLICK ON IMAGE BELOW TO LISTEN TO SHOW

Click this image to listen!

Click this image to listen!

Alternatively, here is direct download to mp3

MoneyWeek: ‘Why I’m buying Bitcoin.’

Why Trump Winning the Republican Nomination is Good for American Democracy

Screen Shot 2016-05-04 at 10.20.31 AM

Donald Trump and Bernie Sanders have done America a great deal of good. By running from the political fringes, they have shattered status quo taboos and exposed the two party political system for the monumental sham it is.

Whether you like either one of them is irrelevant. The truth about how undemocratic our elections actually are, and the disturbing overlap when it comes to establishment Republicans and Democrats needed exposing, and that’s exactly what’s happened this election season. Personally, I wanted to see Trump vs. Sanders in the general election. I think the public deserved two non-mainstream choices for President for once in their lives, and such a match up would have provided two distinct non status quo visions for the future. That said, Trump vs. Clinton is the second best option.

Read the rest here.

Tagged with: , , , , ,

Eight “New Normal” Charts That Are Insanely Abnormal–and Dangerous

Anyone questioning the sustainability and rightness of The New Normal is immediately attacked by the mainstream-media defenders of the crumbling status quo. Not only is everything that broke in 2008 fixed, everything’s going great globally, and anyone who dares question this narrative in a tin-foil hat conspiracy nut or simply an annoyingly doom-and-gloomer who recalcitrantly refuses to accept the positive glories of official statistics: low unemployment, rising valuations of stock market Unicorns, etc.

But the New Normal is anything but normal; all the readings of artificial life-support and manipulation are off the charts. If the New Normal were indeed a return to normalcy, we’d see a rapid and sustained decline in official life-support of the economy.

Instead, we see official life-support efforts rising to new and dangerous levels.The only reason stocks are at nose-bleed valuations globally is massive, sustained intervention on multiple levels.

We also see increasing dependence on debt to sustain increasingly weak growth. The New Normal is all about diminishing returns on additional debt.

The New Normal is also about the loss of institutional credibility. The Federal Reserve denies it makes policy decisions based on the stock market, but as soon as stocks start tumbling, the Fed’s leadership hits the airwaves with a media blitzkrieg, frantically assuring the world that the Fed will do “whatever it takes” to keep stocks at absurdly overvalued levels forever.

It once cost the equivalent of a new auto to attend a highly regarded public university. Now they cost the equivalent of a new house–and a mansion at that. In the pre-New Normal world of academia, the highest paid employees were senior professors (other than the university president).

Now under-assistant deans are paid $250,000 each while new tenured professors scrape by on $75,000, and most of the teaching (the actual purpose of the university, ahem) is done by academic serfs paid $35,000 to $45,000 a year, with few benefits and no pensions. (A fancy title masks the serfdom: adjunct professors.)

Meanwhile, the quality and value of the education has reached such low levels, a large percentage of student debt-serfs gain no real knowledge and many don’t even graduate.

Here’s how all those billions of dollars in administrative salaries get paid: with debt enabled by the federal government. If this looks remotely sustainable or healthy to you, please get your eyes checked immediately:

Diminishing returns on soaring debt is the hallmark of The New Normal. Bank credit has shot up like a rocket, but GDP has been subpar:

The recent surge of hope in global stock markets is largely the result of soaring credit expansion in China. The New Normal boils down to this: paper over non-performing loans (NPL) and debt that will never be paid back with new loans.

Debt and (not much) deleveraging (McKinsey & Company)

China’s New Credit Surges to Record on Seasonal Lending Binge

China’s debt to GDP is another New Normal manifestation of diminishing returns on new debt: every government and central bank is dumping more credit into their economies in the vain hope that more credit will spark “organic growth.” Unfortunately for the New Normal cheerleaders, more credit chokes “organic growth.”

The New Normal can only be propped up by massive central bank purchases of stocks and bonds. Look at the assets that have been purchased by the Bank of Japan in the past four years: up from 1.2 trillion yen to 4 trillion yen.

The New Normal means central bank balance sheets only go up, they never come down. Everyone knows that if central banks tried to sell even a sliver of their trillions in assets, global markets would promptly crash.

The New Normal is stagnant income for the bottom 95% and fewer people working. In The New Normal “recovery,” the percentage of the population with a job has advanced all the way back up to where it was 40 years ago, in the late 1970s.

Is there anyone on the planet who’s actually stupid enough to believe these New Normal charts are healthy and sustainable? I doubt it. Rather, the apologists, toadies, apparatchiks and flacks are being well-paid to cheerlead, and the “leadership” (using the term lightly) of the discredited institutions are terrified of what will happen when people finally catch on.

The New Normal is not sustainable. Ramping up intervention and new debt to ever-more unprecedented levels will only serve to destabilize the economy and society– a foolishly dangerous path indeed.

My new book is #3 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book’s website.

Tagged with: , , ,

Bob Moriarty: new best-selling Amazon book, “Nobody Knows Anything” getting rave reviews.

If A = B and B = C, does A = C?

Bob Moriarty
Archives
May 4, 2016

A century ago when I was in high school, one of my teachers wanted to teach us the basics of logic. The teacher began with the simple equation of if A = B and B = C, does A = C? Of course the majority of the class picked the most obvious answer.

But what happens when the apparent answer is not the correct answer? What if the obvious is dead wrong?

Here is the proof. If an airplane is transportation and a train is transportation, is an airplane the same as a train? Now the correct answer is both apparent and obvious. No. A train and an airplane are both transportation but they are not the same.

As investors, why is this important for us to know? I answer that in my new best-selling Amazon book, Nobody Knows Anything. Any ordinary person using nothing more than common sense and what they already know or can easily obtain, can learn to make profitable decisions if only they learn to ignore the experts, the gurus and other fools.

Click image to enlarge

For example, if you knew that silver had climbed from $4.01 an ounce in November of 2001 to $49 and change in April of 2011 using nothing but your own common sense you could reasonably conclude that silver was cheap in 2001 relative to silver in 2011. And that it was expensive in 2011 relative to what it had been in 2001. (more…)

“Either: Wright is not Satoshi, pretending to be Satoshi. Or: Wright is Satoshi, pretending not to be Satoshi.”