Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

10 Things That Affect Your Purchasing Power

Economics / Inflation Sep 24, 2014 - 06:32 PM GMT

By: Harry_Dent

Economics

Rodney Johnson writes: This might be considered “wonkish,” but it tells the story of how middle-class purchasing power has suffered since 2007.

Recently, the Federal Reserve released the 2013 Survey of Consumer Finances (SCF). This tri-annual survey is a treasure trove of information that provides a snapshot into the financial life of the median American in inflation-adjusted 2013 dollars. Notice that I said “median” and not “average”… that’s important.


The average can be skewed by a few people at the top or bottom of any measurement. The median gives us the point at which half the people are above and half the people are below and is a much better indicator of what’s going on. Because the SCF has been conducted for decades, we can see how people have progressed, or regressed, over time.

The changes over the last six years are consistently horrible, particularly for those in the middle income brackets.

10 Factors That Affect Your Purchasing Power

  • Age of Head of Household
  • Percentile of Income
  • Family Structure
  • Education of Head of Household
  • Race of Head of Household
  • Current Work Status of Respondent
  • Region
  • Urbanicity
  • Housing Status
  • Percentile of Net Worth

Since 2007, median net worth has tanked, almost any way you cut it. The one group that escaped a decline was the Current Work Status of “other,” whose median net worth in 2007 was $6,000, and in 2013 was $9,000. Yes, I know… fat cats on Wall Street and corporate executives are raking in ridiculous sums of money, so there must be small pockets of people that have seen their fortunes rise over the past six years. These groups are so small that they exist at the edges of society.

For the median person, the one in the exact middle in all of these categories except the one, it’s nothing but losses. Looking at just one classification — net worth by percentile of income — the change in median net worth from 2007 to 2013 is breathtaking.

When we flip over to the change in median income itself, the results are still miserable, though not as dramatic. Almost every group in every category suffered a decline in income over the past six years. The exceptions were households led by those over 65 years old, households of retirees, and those with net worth in the 90% to 100% range. Again, breaking it out by percentile of income, there were losses in every group.

While the median at the bottom and the top of the food chain experienced little change in inflation-adjusted earnings over the past six years, those in the middle income and just below were hit hard.

Now, think of these two statistics together. For those who earn between the 40th and 59.9th percentile of earnings, meaning those smack in the middle of wages in the U.S., purchasing power has fallen by 12% while their net worth has plummeted by 38%… and that’s over SIX YEARS!

This isn’t a one-year aberration, or some fluke in the data. This is six years.

Where is the recovery? Where is the improving economy that is supposed to carry the U.S. through the second half of the 2010s? How are people supposed to not only grow their purchasing power, but also put money away for their future?

Keep in mind that the inflation numbers used to adjust the data are the official Consumer Price Index (CPI) figures. If we used more realistic numbers over those same six years, showing higher spending on medical expenses, education and food, the reports would be even worse.

Whenever you read about the recovery gaining speed, or about consumers gearing up for higher spending, think about these numbers. Think about the millions of Americans who can’t even tread water financially, and have watched their situation deteriorate for more than five years. These are not high school dropouts, or even just high school graduates (only 35% of Americans have a college degree, so by definition 50% of earners must include many college grads).

Think about them when someone at the Fed, in Congress, in the Administration or at the New York Times crows about how they “saved” us.

The line between the “haves” and the “have-nots” is being drawn more boldly with each passing year. At some point, the angry “have-nots” might choose to stand up and start saving themselves. This should make the small group at the top very nervous.

Rodney

http://economyandmarkets.com

Follow me on Twitter @RJHSDent

Rodney Johnson

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in