The ugly truth about America's poor - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 30 July 2014
The ugly truth about America's poor A  A  A

Paris, France

Dear Diary,

Fire down below!

Dow down 70. Gold down too...below $1,300 again. Nothing much to talk about there....

Meanwhile...we see pain and suffering. At the bottom of the financial heap, day by day, people struggle to get by.

The averages hide it. The average figures - for wages, household incomes and household wealth - are lifted skyward by the gas at the top. Thanks to the rise in asset prices, those with substantial assets have become substantially richer...raising the averages up with them.

But what about those at the bottom? This is not the middle class we're talking about, but those down below. How do they live? What do they eat and drink? How do they make ends meet? Not that we have become bleeding hearts. And not that we are concerned about 'fairness' either. Those concerns are much too generous and socially conscious for us.

--- Advertisement ---
Are Your Being A Responsible Investor?

We are sure you're no stranger to the concept of diversifying investments.

The thing is no matter how simple it sounds, it can be a really tedious task.

Sure, you know what Blue Chips are... Maybe you can list out a couple of Mid Cap stocks too.

And you probably even remember hearing about some obscure Small Cap stocks.

But can you truly say that you understand the stocks that you're buying with the little information that you get from business channels or newspapers?

If you're serious about investing, you need to roll up your sleeves and do some ground work.

Analyze the financials of these stocks, assess economic and business conditions, and then pick the best ones for your portfolio.

Sounds like a lot of work? Alternatively, you can leave all that to us.

While you focus only on that which matters to you the most... investing to grow your wealth!

Click here for full details...

No, we're just worried, selfishly, about what happens to the passengers in the upper cabins, when life below decks becomes intolerable.

More and more of the credit-drenched economy depends on these marginal people down in the hold. In 2007, it was marginal sub-prime housing debt that tipped the financial world into crisis. Now, we have sub-prime auto loans...and subprime student lows...and subprime corporate (junk) and subprime government debt (Senegal...Greece!) too.

Charles Hugh Smith:

    The mainstream media is delighted to highlight positive economic data, but nobody ever asks about the quality of the borrowers who are behind the rosy numbers. Behind the rosy numbers, sales and profits are increasingly dependent on marginal buyers and borrowers: those buying on credit who would not qualify to borrow money in a system ruled by prudent risk-management.

    These marginal borrower/buyers are last on, first off: they qualify for loans at the end of a credit expansion, when lenders throw caution to the winds to reap the profits from issuing new mortgages, auto loans, student loans, credit cards, etc. to marginal borrowers.

    These marginal borrowers are the first to default, because they have insufficient income and collateral to support their loans.
How bad is it down there?

We have heard the stories about "midnight shopping," for example. The feds' food aid program credits its debit cards at 12am. Desperate shoppers are already in line at the all-night discount stores...and sales rise in the middle of the night.

The numbers add perspective. The bottom 20% of the population saw its real household income peak out in 1999 at $13,663, in 2012 dollars. Thirteen years later, it had lost 16% of its wealth, with real household income of only $11,490.

And here comes the Associated Press with further grim details.
    WASHINGTON (AP) -- More than 35 percent of Americans have debts and unpaid bills that have been reported to collection agencies, according to a study released Tuesday by the Urban Institute.

    These consumers fall behind on credit cards or hospital bills. Their mortgages, auto loans or student debt pile up, unpaid. Even past-due gym membership fees or cellphone contracts can end up with a collection agency, potentially hurting credit scores and job prospects, said Caroline Ratcliffe, a senior fellow at the Washington-based think tank.

    "Roughly, every third person you pass on the street is going to have debt in collections," Ratcliffe said. "It can tip employers' hiring decisions, or whether or not you get that apartment."

    Almost half of Las Vegas residents- many of whom bore the brunt of the housing bust that sparked the recession- have debt in collections. Other Southern cities have a disproportionate number of their people facing debt collectors, including Orlando and Jacksonville, Florida; Memphis, Tennessee; Columbia, South Carolina; and Jackson, Mississippi.

    Wages have barely kept up with inflation during the five-year recovery, according to Labor Department figures. And a separate measure by Wells Fargo found that after-tax income fell for the bottom 20 percent of earners during the same period.
Down below decks, life is hard...and getting harder. Real jobs are hard to find. Real incomes are falling. Prices are still going up.

What do they do? How do they cope? Do they spit in our soup? Do they sabotage our plumbing? Do they rise up...and come looking for us, like zombies searching for fresh meat?

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Get The Daily Reckoning directly
in your mail box.
Just enter your e-mail address » 

Read our Privacy Policy and Terms Of Use.

Equitymaster requests your view! Post a comment on "The ugly truth about America's poor". Click here!

1 Responses to "The ugly truth about America's poor"

H K Prakash

Jul 30, 2014

It costs so little to run soup kitchens, night shelters, give away old clothes in good condition. It costs so little to use the data collected on the US population by the US Gov to credit bank accounts with welfare money
Instead of a Roosevelt trying everything to throw off the Depression and succeeding, .... we have Obama, Kerry et al looking like sad faced clowns unable to get their act together (but rushing to feed the already rich bankers with more printed money).

Equitymaster requests your view! Post a comment on "The ugly truth about America's poor". Click here!

Recent Articles:
Deep State First
August 23, 2017
Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.
A Darkness Is Spreading Across the US
August 22, 2017
Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.
Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working
August 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
Trump Takes a Beating
August 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.