Title : No, Not Every American Is Crowing About The Great Bull Market
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No, Not Every American Is Crowing About The Great Bull Market
The endless paeans to the grandiose Bull - market that is- are all awash in the financial press see e.g.
https://www.wsj.com/articles/what-can-stop-this-bull-market-1534881350
but also usurping huge spaces in the regular press (Denver Post, p. 1A yesterday) - are enough to make anyone with sense bring up his or her breakfast. Yes, the DOW (as well as NASDAQ and S&P 500) have reached new heights, but do none of its worshippers in the media grasp how it's been jiggered to perform better? See e.g. http://brane-space.blogspot.com/2018/07/trumps-asset-bubble-economy-based-on.html
And yes, some reports have also rubbed it in about those in the "ordinary middle class" who have been left out while the "rich get richer". But no one who pens such balderdash goes on to explain why. For example, that many in the ordinary middle class- squeezed by parental care and youngsters' college costs - are in no position to partake, given they have little or no disposable income, i.e. like the rich. Hence, the lesson many learned from the 2008- 009 financial crisis and stock crash is don't buy into the Wall Street casino if you can't afford to lose.
That was brought home even more poignantly on the local evening news two nights ago when the economic crunch affecting many in our (EL Paso) county was discussed by a financial expert. The issue was sky high rents which have been rising into the stratosphere even as home prices have also soared (we're getting the excess demand from the overly pressured Denver market) and the accompanying wage stagnation.
According to the finance specialist appearing on KOAA-TV, the average renter in our county is in a retail service job and earning barely $10.22 an hour when that wage needs to be at least $20.65 an hour to make most rents and not pay more than 35 percent of income for them. This bad news also comports with the enormous pressures on household mortgage debt and auto loans - which have now pushed U.S. consumer debt to $13.3 trillion (WSJ, 'Household Borrowing Hits High', Aug. 15, p. A3)
We find (ibid.):
"Debts rose by $82 billion in the second quarter driven by rising mortgage, credit card and auto loan balances, according to the Federal Reserve Bank of New York's quarterly report on household debt and credit."
Adding, ominously:
"Total debt is now higher than before the financial crisis when widespread defaults, especially on mortgages, contributed to the longest and deepest recession since the Great Depression. After paying down debt through 2013, in aggregate, consumers gradually began to borrow again and household debt is now nearly 20 percent higher than five years ago."
And nattering finance scolds and nabobs wonder why more middle class blokes are not in the stock market? Especially when "aggregate household debt grew for the 16th quarter."
Another worrisome aspect: "The total stock of outstanding mortgages climbed to $9 trillion, the highest level since 2009."
What gives? Well it's clear that people - too many in the middle class and lower, are treading water and going under with wage stagnation, so are trying to keep their standard of living by taking on more debt. Epitomizing this pathetic situation is the news that one actually finds too many employees offered: The Promotion That Comes Without the Pay Raise, e.g.
https://www.wsj.com/articles/the-promotion-that-comes-without-the-pay-raise-1534944636
What appears to be counter intuitive now is so many Millennials who've never experienced a bear market in the stock market now and absolutely blase about the possibility. (41 percent of households age 35 and younger own stocks now compared to 23 percent in 1989) In the words of one young Turk quoted in a piece in yesterday's Denver Post:
"It's going to sound terrible but I'm actually looking forward to the next downturn."
Well, you might regret it if the stocks (or mutual funds) you own turn out to be duds, leaving you waiting two decades (after 40 percent losses) to reach the breakeven point.
Given all the above it's logical to point out that even the labor participation rate remains low because of the pathetic wage increases. Sadly, it makes more sense for many people just to grab disability or other benefits where and when they can than to plod away in a job that won't pay even a basic rent. So why not instead opt for Medicaid and a Section 8 housing voucher? As WSJ columnist William Galston has pointed out ('Wage Stagnation Is Everyone's Problem', Aug. 15, p. A15), the "labor share has in fact declined".(The 'labor share' is defined as the share of national income going to working and middle class Americans).
Galston in his column considers several reasons, including the decline of union membership, but mainly points his finger at globalizaton, observing:
"In a 2013 paper for the San Francisco Federal Reserve Bank economists found as much as 85 percent of the declining labor share may be attributable to increased import competition as U.S. producers responded by shifting production to countires with cheaper labor."
And oh by the way, that shift included tech specialists, and call agents as well whose jobs were shifted to Indians in Bangalore or Delhi.
Another less cited source of the declining labor share arises from automation. As I pointed out, citing a WSJ piece, in November of last year:
Two thirds of large global companies expect to automate some or all of their finance department tasks over the next two or three years, according to new research by Hackett Group Inc. Hacket's report is based on benchmark and performance studies at hundreds of large global companies.
Adding:
The new technologies are designed to cut costs, liberate workers from time consuming repetitive tasks and - in many cases - reduce finance and treasury department employee numbers."
In other words, corporations have found human employees to be more like drains on their profits than useful contributors. Benefits alone clip the profit margins especially for providing any health care, or even sick days. Given these monetary limitations - and the fact humans get sick and machines don't - who wouldn't dedicated capitalists manning the corps want to ditch all the bio-based flesh and blood workers for machines and software.?
Jim Hightower provided even more insights that I also cited:
"With corporations socking away massive profits and the labor market still tight why are worker's wages stuck at miserly levels? One big reason is that corporate boards and CEOs have their heads stuck in a dreamy future. Nearly every economic sector is spending vast sums of money on workers p just not on human workers.
While few Americans are aware of it, bosses are investing in hordes of sophisticated autonomous robots powered by a cognitive technology called artificial intelligence. Instead of paying a decent wage to you, corporations are buying millions of these cheap, human-esque thinking machines in order to take a shocking number of jobs away - well, from you!"
Given all the above it's logical to point out that even the labor participation rate remains low because of the pathetic wage increases. Sadly, it makes more sense for many people just to grab disability or other benefits where and when they can than to plod away in a job that won't pay even a basic rent. So why not instead opt for Medicaid and a Section 8 housing voucher? As WSJ columnist William Galston has pointed out ('Wage Stagnation Is Everyone's Problem', Aug. 15, p. A15), the "labor share has in fact declined".(The 'labor share' is defined as the share of national income going to working and middle class Americans).
Galston in his column considers several reasons, including the decline of union membership, but mainly points his finger at globalizaton, observing:
"In a 2013 paper for the San Francisco Federal Reserve Bank economists found as much as 85 percent of the declining labor share may be attributable to increased import competition as U.S. producers responded by shifting production to countires with cheaper labor."
And oh by the way, that shift included tech specialists, and call agents as well whose jobs were shifted to Indians in Bangalore or Delhi.
Another less cited source of the declining labor share arises from automation. As I pointed out, citing a WSJ piece, in November of last year:
Two thirds of large global companies expect to automate some or all of their finance department tasks over the next two or three years, according to new research by Hackett Group Inc. Hacket's report is based on benchmark and performance studies at hundreds of large global companies.
Adding:
The new technologies are designed to cut costs, liberate workers from time consuming repetitive tasks and - in many cases - reduce finance and treasury department employee numbers."
In other words, corporations have found human employees to be more like drains on their profits than useful contributors. Benefits alone clip the profit margins especially for providing any health care, or even sick days. Given these monetary limitations - and the fact humans get sick and machines don't - who wouldn't dedicated capitalists manning the corps want to ditch all the bio-based flesh and blood workers for machines and software.?
Jim Hightower provided even more insights that I also cited:
"With corporations socking away massive profits and the labor market still tight why are worker's wages stuck at miserly levels? One big reason is that corporate boards and CEOs have their heads stuck in a dreamy future. Nearly every economic sector is spending vast sums of money on workers p just not on human workers.
While few Americans are aware of it, bosses are investing in hordes of sophisticated autonomous robots powered by a cognitive technology called artificial intelligence. Instead of paying a decent wage to you, corporations are buying millions of these cheap, human-esque thinking machines in order to take a shocking number of jobs away - well, from you!"
Of course, in the midst of all this one will always find cocklemamey fantasies churned out by the delusionary elements of the media such as FOX News or some of its WSJ op-ed counterparts. One example: Phil Gramm's 'The Myth Of American Inequality" (Aug,. 10, p. A15), writing such bollocks as:
"The bottom 90 percent of German earners pay a share of their nation's taxes on income 77 percent larger than that paid by the bottom 90 percent of Americans".
Failing to note the Germans paying those high taxes get an enormous return including for top notch medical care (no worries over bankruptcy and pre-existing conditions), child care, generous unemployment benefits and generous pensions - oh, not the 401(k) kind Americans are forced to pay for on their own!
William Galston for his part is clear on what the solution needs to be (ibid.):
"There is only one way to go. The high earning Americans who have done so well in recent decades must pay higher taxes to support the portion of the workforce that is falling behind. This isn't charity, nor is it welfare. It's simple common sense, or self interest - rightly understood. Because an economic system that fails to offer broad gains will end up with disruption."
Or worse, with extinction. So basically, Galston is proposing - like FDR with his multiple programs after the 1929 stock market crash- of saving capitalism from itself. But perhaps the solution begins and ends with ditching American 'cowboy' capitalism for the more humanized manifestation of Rhine capitalism (Google!)- say as practiced in Germany and Scandinavian nations.
See also:
http://brane-space.blogspot.com/2016/10/did-you-know-poor-have-gained-most.html
And:
http://www.smirkingchimp.com/thread/paul-street/80803/trump-corporate-media-are-both-enemies-of-the-people
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