U.S. consumer confidence for the year is the highest it’s been in more than a decade. Unemployment is as low as it’s been in almost 20 years. The stock market is once again approaching record highs, bouncing back from its correction early in the year.
Listening to talk radio, you hear people talk about how strong the economy is now. And this confidence is being reflected in consumer spending. Americans spent more than $12.8 trillion in July 2018, a new record.
But this consumer confidence is coming with a price. Even though 90 percent of wage earners saw an increase in take-home pay after the recent tax cuts, real wages remain low. The average hourly wage today, though almost 10 times what it was 40 years ago, has the same purchasing power as it did in the 1970s.
As Pew Research’s Drew Desilver notes:
After adjusting for inflation, however, today’s average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.
A similar measure – the “usual weekly earnings” of employed, full-time wage and salary workers – tells much the same story, albeit over a shorter time period. In seasonally adjusted current dollars, median usual weekly earnings rose from $232 in the first quarter of 1979 (when the data series began) to $879 in the second quarter of this year, which might sound like a lot. But in real, inflation-adjusted terms, the median has barely budged over that period: That $232 in 1979 had the same purchasing power as $840 in today’s dollars.
With wages stagnant, how are Americans spending more? The answer is debt.
Credit cards weren’t in wide use until the 1970s, and even then, they were mostly charge cards like American Express or Diners Club cards — meaning you had to pay back what you borrowed each month. Not many people had a card that let them carry a balance. Since then, the banksters have offered credit to everyone, and it’s ensnared the nation. You can borrow thousands of dollars over what your income is, and only pay back a fraction of it each month. It is debt slavery — a servitude more brutal than than its parent, the fiat money system.
U.S. household debt rose 3.5 percent year over year to $13.3 trillion, while mortgage debt also rose by 3.5 percent to $9 trillion. Credit card debt is up, as is auto loan debt and education loan debt. And Americans are increasingly willing to become debt slaves to the bankster trust.
A report by Bankrate.com found that 24 million homeowners believe borrowing against home equity is an acceptable way to cover regular bills. Cash-strapped millennials, low earners and the less educated were most likely to think home equity offered an appropriate solution to ordinary bills.
Almost 1 in 3 homeowners who earn less than $30,000 per year said it’s OK to tap into home equity to cover their everyday bills, more than triple those who make $75,000 or more. Twenty-one percent of those with no more than a high school diploma agreed, nearly doubling those who have a college degree. And 22 percent of millennials also felt home equity was an appropriate resource for paying bills, compared with only 12 percent of older Americans.
“These people are living paycheck to paycheck with little or no emergency savings—and they’re scraping up money any way that they can,” said John Hope Bryant, chief executive officer and founder of Promise Homes Co., a property asset manager that offers affordable housing and financial support services to families.
Almost 1 in 4 Americans have no such savings, according to a June Bankrate.com study. But even cash-strapped homeowners are more fortunate than many, Bryant said, since U.S. homeownership has fallen to the lowest rate in more than 50 years.
U.S. consumer debt has continued to climb since the beginning of the Great Recession. This week we passed the anniversary of the collapse of Lehman Brothers, the event that many consider the primary event of the 2008 financial collapse.
Economist Peter Schiff, who correctly predicted the collapse even as Fed Chairman Ben Bernanke and other mainstream economists were preaching sunshine and flowers, believes a financial hurricane is right around the corner.
Another credit bubble is in the works. Americans didn’t learn their lesson 10 years ago. This is a symptom of a fiat money system.
Every new dollar the money creators create dilutes every dollar already created. Hence the stagnant wages.
When central banks expand the money supply, it gives rise to the consumption of goods of every description, which is not preceded by production (and savings). As long as the pool of funding continues to expand, loose monetary policies give the impression that economic activity is being boosted. It is a great illusion to all but the sober.
Paper money expands consumption way beyond income. This eventually guarantees debt collapse and social breakdown. The foundation of the household collapses and the middle class is destroyed. Paper money is an illusion and illusory because it is non-substance and can be created by the government to infinity. When the people accept numbers on green strips of paper or computer symbols for money, they accept illusion for reality.
Is this déjà vu all over again?