Americans are the richest they have ever been (loans, expenses, credit card)

[EDS_]

Originally Posted by skeddy

Our economy works best when we have 20% of the population is poor. Just find some way of climbing out of that hole. There will always be someone else to climb into your hole.

As a point of logic and arithmetic in The US there will always be a bottom 20% and that group will be poor in the relative sense nearly none in an absolute sense.

[Serious Conversation]

Originally Posted by Igor Blevin

Welcome to the new housing bubble. Don't cry to me when it pops.


The Fed has exacerbated America’s new housing bubble

Rana Foroohar MARCH 17 2019


The latest Consumer Price Index figures show that almost all core inflation, which was weaker than expected, was in rent or the owner’s equivalent of rent (up 0.3 per cent). Core goods inflation, meanwhile, was down 0.2 per cent.

Very simply, this means that the housing market is once again completely out of sync with the rest of the economy. A decade on from the subprime bubble, housing, which is not only shelter but also the biggest financial asset for most Americans, is the only major component of the CPI with a national inflation rate that is consistently above the overall number.

Over the past decade, the cost of shelter has risen sharply compared with everything else, the report notes. It hit a historic high of 81 per cent of core inflation in the summer of 2017 and remains “the lion’s share”.

There have not been commensurate salary increases. Median household income adjusted for inflation remains hardly higher than it was at the turn of the century. (my emphasis)

The dysfunctional divide between incomes and asset prices is not just an American problem. It is observable in many international markets as well: including Hong Kong, London, Paris and Singapore. In the US, unsustainable real estate prices have recently begun to falter in bubble cities such as New York, something which historically foreshadows a national downturn.

The economic consequences are obvious. So are the political ones. The US looks more and more like an emerging market economy in the sense that the basics of the American dream — housing, education and upward mobility — have all been compromised.



https://www.ft.com/content/219aaa52-...8-96a37d002cd3

At least in my area, housing prices are rocketing up well beyond what should be sustainable. We are a poor area in Appalachia without much of an economy, little tourist draw, and are around two hours from the nearest larger metros, yet prices keep rocketing up.

It really makes no sense at some point.

[Phil P]

The portion of the country with little to no wealth should have had one of the best opportunities in a long time this year to get a good footing, bulk some savings, and move out of debt into security. For those who lost their jobs, unemployment and stimulus should have more than made up for that and they should have been able to make some cash on the side with no day job. For everyone else, expenses, both discretionary and non-discretionary should have went down while income held constant. Rent and other evictions were suspended for those at risk. A few people got screwed this year, but a lot more got a big stimulus with the small business 'loans' and other payments. The news will highlight the few that missed out, but a lot of people cashed in and are quietly smiling, not telling many about it.

If these people can't put a few paychecks away this year, I don't believe there is any sort of event that WILL make the low wealth cohort do so. We may have inequality, but what else are you supposed to do? Give away the entirety of what's collected in income tax as handout payments every year??? To me, it seems increasingly clear that it's not systematic inequality of opportunity that is the main driver of the GINI coefficient. There may be systematic issues causing the top to pull away from the middle, but those issues are not causing the bottom to fail to catch up to the midde.

[beachmouse]

Originally Posted by CorporateCowboy

TSLA's best-selling Model 3 keeps it (extremely) simple; it's priced in the vicinity of $40k - hardly what anyone would call a 'very expensive luxury product' (nor a reasonable measure/example by which to gauge your thread title specific to the US economy or wealth).

Though new car purchases are a rarity in America- the median age of vehicles on the road now is something like 12 years. (Despite what some gear heads claim, they are making them a lot better than they used to in the days of the five digit odometer)

We’ve got a paid off house and enough invested to buy a good amount of freedom if needed and went well around with the car thing before deciding that $40k was just a mental barrier too far and that even the $36k with 0% financing we ended up going with still seems like a lot to tie up in a depreciating item. But it’s fast and comfy and YOLO?

I do think Tesla is going to have issues trying to sell the $25k option unless it’s a comprable size and comfort level as a Corolla.

[1ondoner]

So how should we measure economic disparity, since "the GINI is terrible"?

Originally Posted by EDS_

1. I understand The GINI Coefficient just fine.

2. My point was only that using GINI out of context - really as anything other than a data point - is really dumb and forces on the left use it as a stand alone battering ram every day. Much as you did in post the I responded to.

3. My analogies were only to point out The GINI is a weak, actually terrible, stand alone metric subject to abuse.

[1ondoner]

I would take data of people self reporting themselves as middle class with a heap of salt.

What people refer to as middle class is a lifestyle funded with mounting levels of debt. If it were not for the ever increasing debt bubble the country would be in a 1930's depression.

Originally Posted by ddeemo

Your stats are way off - you are being fed misinformation - probably from the left. According to Northwest Mutual survey, 68% consider themselves as middle class. According to the data from pew research, the middle class by measure is about 52% of the country where as the poor comprise about 29% - so over half the country is middle class and 80% more are middle class than lower class. The middle class has shrunk some but more have moved to the upper class than to being poor.

Wall street has a lot to do with how many retirees live though since that is their income source.

[ddeemo]

Originally Posted by Zephyr2

It isn't my agenda, it's a fact! The article is misleading because it would be like looking at your neighborhood and declaring that the average value of housing has doubled because Jeff Bezos built a new $50 million mansion next door. While technically correct, the average value is very misleading, just like the "collective net wealth" number is very misleading. All the gains in net wealth have gone to very few people. "By contrast, from 1979 to 2018, worker productivity rose by 69.6 percent, but the wealth created by these productivity gains went predominately to executives and stockholders. Worker pay rose by only 11.6 percent during this period, while compensation for chief executives grew by an enormous 940 percent and the stock market grew by 2,200 percent." https://www.nytimes.com/2020/09/10/b...nequality.html

The article is not misleading, they reported nothing incorrect - using an average is NOT misleading if that is what is being reported. You keep trying to change it from wealth to income which is not what was being reported. Adding a data point (i,e, Bezos house or wealth) in an average of a large group is relevant, should we take out his wealth in a discussion of average wealth in the US also? Saying that average doesn't matter in a discussion of averages - that is pushing an agenda.

Saying a report is misleading when it doesn't go off on the tangent you want and that was not really relevant to the subject being reported is wrong - and you just did it again. You try to take it another direction by talking about productivity and executive compensation which is really irrelevant to discussion of wealth increase in the US. Most of productivity gains in that 40 years are due to automation not workers doing more. About half the US households are stockholders either directly or through ESOP, 401k, pension, union investments or other means - that is not just the "wealthy". You also ignored the relevant parts of my post - again that is pushing an agenda.

You provided nothing but unsupported statements that are not relevant to the articles subject - that is a fact. Trying to modify the reports focus just because you don't like the results or the subject, that is pushing an agenda whether you think so or not.

[EDS_]

Originally Posted by 1ondoner

So how should we measure economic disparity, since "the GINI is terrible"?

We should mostly forget internal disparity numbers and focus on relative after tax buying power (after tax nominal incomes vs. COL) across maybe the 50/75 most important first world cities and the same for countries.

Similar to per capita purchasing power parity analysis........take a like marketbasket of goods per area, smooth the numbers for FX differences and local incomes at the poverty line and the median. Doing all this by differences in income per race is a serious eye-popper.

[beachmouse]

Originally Posted by EDS_

We should mostly forget internal disparity numbers and focus on relative after tax buying power (after tax nominal incomes vs. COL) across maybe the 50/75 most important first world cities and the same for countries.

Similar to per capita purchasing power parity analysis........take a like marketbasket of goods per area, smooth the numbers for FX differences and local incomes at the poverty line and the median. Doing all this by differences in income per race is a serious eye-popper.

The Economist's 'Big Mac Index' is actually surprisingly good despite being a single variable brute force way of estimating that on a country level.

[ddeemo]

Originally Posted by 1ondoner

I would take data of people self reporting themselves as middle class with a heap of salt.

What people refer to as middle class is a lifestyle funded with mounting levels of debt. If it were not for the ever increasing debt bubble the country would be in a 1930's depression.

I put it the figure for those reporting themselves as middle class because that controls much of their thought process and I think it is interesting that many more think they are middle class than reality - I put in the actual figures also.

Mounting debt is a personal choice, wanting to create the impression of wealth before they earned it. Debt related to things like housing is "good debt", debt related to a credit card is "bad debt" - both because of the interest charged and the wealth created or lost. Buying a house can increase wealth, buying a coffee at Starbucks does not.

"Good" debt is normally defined as money owed for things that can help build wealth or increase income over time, such as student loans, mortgages or a business loan. "Bad" debt refers to things like credit cards or other consumer debt that do little to improve your financial outcome. "Good" debt has increased faster than "bad" debt.

The age group with the highest credit card debt is the 25-34 year group. Much of the debt of those in their 20s is student loans but that results in higher wages if the degree is relevant to their job. But debt is not mounting, household debt peaked in 2007-8 in both actual value and debt-to-income ratio - now 11% less in total and about 25% lower debt ratio according to Fed Reserve data https://www.marketwatch.com/story/su...ebt-2018-01-09

In 2006, at the height of the housing bubble, household debt totaled 116% of annual disposable income; now it’s 90%. The debt-to-income ratio — one gauge of the ability to pay — has been remarkably stable since 2012.

Household debt has been growing at the slowest pace of the post-World War II era. From 1980 to 2007, debt in real (or inflation-adjusted) terms grew at an average annual rate of 5.3%. But since the financial crisis began 10 years ago, real household debt has fallen by 11%. Over the past five years of expansion, real debt has grown at a 1.4% annual rate.

There is no debt bubble but if there was that would be a big drag on the market - more income going to debt maintenance than purchasing is a drag and debt that is written off because of inability to pay is a bigger drag. BTW - Much of the 1929 crash was because of personal debt proliferation and bank loans that could not be liquidated.