According to research by UC Berkeley, in 2012, the top one percent of income earners in the U.S. earned 22.5% of all the income. The bottom 90%, on the other hand, earned less than 50% of all the income. (Source: Pew Research Center, January 7, 2014.) Income inequality in the U.S. economy is the highest it has been since 1928. The rich are getting richer, and the poor are seeing their share of income decline.
And according to the United States Department of Agriculture, in 2013, 17.5 million households in the U.S. economy were “food insecure.” This means that at some point during the year, they had difficulty putting food on the table for all their family members due to a lack of resources. This number, 17.5 million food insecure households, was unchanged from 2012. (Source: U.S. Department of Agriculture, September 2014.)
As I have said many times in these pages, economic growth will occur in the U.S. economy only once the average American Joe sees his standard of living improve. This isn’t happening. In fact, the standard of living is deteriorating despite the Federal Reserve having printed and pumped trillions of new dollars into the financial system.
The problem with income inequality in the U.S. escalated after the Great Recession of 2008. According to the Russell Sage Foundation, at the end of 2013, median family wealth in the U.S. economy was $56,335—a decline of more than 43% from $98,872 in 2007. (Source: “Wealth Levels, Wealth Inequality and the Great Recession,” Russell Sage Foundation, June 2014.)
Dear reader, the fact is the U.S. economy isn’t going through a period of economic growth. It’s witnessing a period of stagnation. The economic statistics I just told you about are only some of the troubles facing America.
If you listen to the mainstream, it will have you convinced the U.S. economy is just fine…that it’s growing and that it’s fine to buy stocks. But the reality is quite the opposite.
Major American companies have reported disappointing third-quarter results, including International Business Machines Corporation, Amazon.com, Inc., Wal-Mart Stores Inc., McDonalds Corporation, American Express Company, The Coca-Cola Company, and more. And instead of using their money to grow their businesses, public companies have chosen to buy back their stock (at a pace we’ve never seen before), thus manipulating earnings growth.
The stock market is supposed to move higher when there’s economic growth, and lower when there’s economic uncertainty. Easy money has driven the stock market higher, not economic growth.
At this point, we all know the catalyst for the stock market’s advance since 2009 has been easy money courtesy of the Fed, about $4.0 trillion in newly printed paper money and artificially low interest rates. Each time the Fed has ended one of its quantitative easing programs, stocks have slumped. Why would this time be any different?