12/01/09 London, England – US personal income rose in October. But it was boosted by government benefits, says David Rosenberg. Take away the free money from the feds and income actually went down.
Income has been going down for a long time in the US. English colleague Brian Durrant wonders why there is no revolution:
“Consider a country. For the top 20% of the population real incomes have increased by 60% since 1970. But for the other four-fifths real income has fallen by more than 10%. Am I talking about Guatemala or Bolivia? These sorts of inequalities have in the past provoked resentment sometimes articulated through revolutionary movements and social unrest. But I am not talking about a tiny Latin American state; these figures apply to the US. How can this be? Middle class America is surely better off compared to 1970; if you look at higher car ownership, better housing, more white goods and gadgets. The answer is debt. No wonder the politicians are frightened of it contracting!”
We have been saying that the last 10 years was a ‘lost decade’ in terms of income, employment and stock market growth. For most people, their whole adult lives have been spent slipping backward. Since the Carter Administration, the typical American has lost income. A whole generation made no financial progress.
But they didn’t revolt. Instead, they borrowed. It gave them more gadgets, gizmos and floor space. It also gave them the impression that things were getting better. Now we’ve reached the end of that period of debt expansion. Now debt is contracting. So are lifestyles…And so is the foundational American faith in free enterprise.
America flourished because its people believed in free enterprise and controlled public spending. Now, they seem to believe the exact opposition. That business must be carefully controlled…and the feds can spend however much they want.
But check this out. Now, people in communist China have more faith in free enterprise than Americans do.
Bill Bonner
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And that would be because the Chinese have something a lot closer to a “free market” than the US.
“…people in communist China have more faith in free enterprise than Americans do.”
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well, how do you do!
shades of Abe Lincoln!
Chinese will loose all confidence in the free market when they get hit with a real recession. The government can only keep up what they are currently doing for so long. They became dependent on a trade surplus just as Japan has and look at where Japan is today.
The funny thing is that the free market has nothing to do with any of this. It is the governments that are screwing with the system. That is why it was possible for the people in the top 20% to make so much money. If this was a free economy then that 20% right now would be in a soup line since all the banks, insurance companies and so on would have been wiped out late last year.
What’s the personal tax rate in China? Include fed, state, local, gas, etc.
Canada’s stats would have been interesting. Highly taxed and desentivised there also.
“Managed Capitalism” gave us the greatest boost in real incomes and profits in the post WW2 era up until, surprise, surprise!
The 1970′s ending with the advent by the Carter Admin starting the trend for de-regulation (of that managed capitalism).
Reagan continued the process, but, “on steroids.”
And today we have the results.
The average American is bewildered, brain dead or ideologically too bent to believe anything other than being a narcissistic consumer…
Debt is all this generation knows.
The sheep will continue to be lead to slaughter as long as we don’t see anyone going to jail, from the pols to the moguls of Wall Street. (Or Main Street)
Without historical memory or social consciousness we will not progress (or revolt).
Happy HOlidays!!
All people in the world is tainted with American ideas, but that is going to change. The world is awakening and people don´t need fake ideas like free enterprise, or democracy.
China don´t have the size to relieve US, maybe any country, then there isn´t other way than get rid all American institutions and build new ones.
It is funny how people see the image they want to see when they look in the mirror. “Free market” folks think the problem, is the government, “big government” folks think the problem is the free market – the reality is the two are intertwined, with large corporations controlling the government so that big government is the product and tool of big corporations.
While small businesses employ more people, and the economy is controlled(supported) by the consumer, the actual policies of the government are set by large corporations through lobbyists and a revolving door in Washington D.C. – Goldman Sachs is perhaps the highest profile manipulator, but Big Pharma, Big Oil and all the other usual suspects are just as guilty.
We cannot have a government of the people, by the people and for the people, when the government is merely an extension of large corporations. America has no “free market” we have a planned economy, that is planned by the corporations through graft, bribes and lobbying. Is Dick Cheney a (former) vice president of the USA or CEO(former) of Haliburton – the largest single benefactor of the war in Iraq ?
We have more in common with China than most think, an aging population of mostly serfs, and a government controlled by a small oligarchy that controls the finances of the nation – this describes both nations.
Until too big to fail, means too big to exist, and meaningful trade reforms and regulations are put into place, the downward spiral will continue. The government will help its friends in big business and the oligarchy and continue to loot the riches and labor of the rest of the nation, selling our intellectual properties overseas to the highest bidder ensuring we have no competitive advantages anywhere in the world and thus no stable job base.
The swindle continues and it is futile to try to blame it on a political theory, when it is actually all about the oldest game in the world, greed and collusion.
Don’t forget that corporations exist by edict of the government and have special privileges because of it. Corporations were forged out of mercantilism and should not exist in the free market. Businesses would not be as huge and influential if there weren’t so many government created benefits to being large. Large is not nimble or quick to innovate.
John said:
China is moving into a world of its own. It will deal with economic internals and then externals. For now the externals (what’s out there that’s good for China) are being gone over like items at a rummage sale. The bottom line is this: the de-industrializtion of the “developed” world proceeds more quickly than ever, and the industrialization of primrily China, India and Brazil rips right on.
Business is business. Period.
Well put………Jane Quatam and as usual Bill Bonner.