Having Trouble Coming Up With Four Hundred Bucks

Economic Growth in 2014The burning question that’s facing economists like me today and that will only be answered in the future: did creating $3.0 trillion in new money out of thin air really make things better or worse for America?

My personal view, as expressed in these pages, is that the rich (the big banks and Wall Street) got richer from the “printing press” era, while the average American did not directly benefit from the Fed’s actions.

In fact, in America today, the spread in wealth between the rich and the poor has never been so great. As for the middle class, they are becoming extinct.

The “Report on the Economic Well-Being of U.S. Households in 2013,” recently published by the Federal Reserve, says 34% of Americans feel they are worse off today than they were five years ago, and 42% said they are holding back on the purchase of major or expensive items. (Source: Federal Reserve, August 7, 2014.)

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But the data gets worse…

Of those Americans who had savings prior to the 2008 recession, 57% of them say they have used up some or all of their savings in order to combat the after-effects of the Great Recession.

Only 48% of Americans said that they would be able to cover a “hypothetical emergency expense” that costs $400.00 without selling something or borrowing money. Simply put, about half of Americans have less than $400.00 in emergency funds!

Meanwhile, 31% of Americans say they do not have any retirement savings or pension. Of those who are between the ages of 55 and 64, 24% of them expect to work as long as possible, while 18% expect to work part-time during retirement.

When you look at the stock market, it tells you all is well in the U.S. economy. But in reality, the stock market is telling you all is well with a very small portion of the population…those who have assets (such as stocks) that they can trade to other well-to-doers.

What worries me going forward: will all that money (trillions of dollars) created by the Federal Reserve show up as inflation? History has shown time and time again that when a country prints fiat currency (paper money) with no backing (like gold reserves), inflation occurs in the years ahead. This will only put those people who can’t come up with $400.00 a lot further behind.