A Debt-Induced Revolt of Free Enterprise?
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.