Tags: recovery | economy | income | housing

The Fake Recovery Isn't Very Good

By    |   Thursday, 12 June 2014 08:03 AM

A recent article from CBS News summed up one of the major problems with the economic recovery: For most people, it doesn't exist.

While we may hear reports of rising home prices, decreasing unemployment and rising wages, a closer examination reveals that most of the benefits of the recovery goes to the highest income earners, leaving most Americans no better off.

In housing, for example, the article stated that "sales of the most expensive homes were up 21.1 percent through April of this year, while they've fallen 7.6 percent for the rest of the market. That follows a gain of 35.7 percent in 2013 for the top 1 percent and just 10.1 percent for less-expensive homes."

No wonder a CBS News/New York Times poll showed that 69 percent of Americans believe the economy is in bad shape, and 66 percent believe it isn't getting any better.

We often say that the recovery is fake, and it is. But more importantly, even the fake recovery doesn't extend to most of the economy, because it is only focused on pumping up the asset bubbles, particularly in the stock market.

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And since 10 percent of Americans own 80 percent of the stock, pumping up that asset bubble isn't helping the majority of Americans. Even in the real estate and consumer-spending bubbles, most of the improvement we've seen since 2009 has come from the wealthiest Americans, not the average consumer.

The same is true of wages. The Bureau of Labor Statistics reported wages rising 1.9 percent in April, but the increases are going disproportionately to higher earners, with average earners more likely to have lower wages than higher wages. What's worse, the education required to earn those wages in the first place is becoming more expensive: The CBS News article reported that between 2005 and 2012 student loans more than doubled in real terms.

This is just another example of how unsustainable the recovery is. Even with all the firepower the federal government is putting into it, it's doing very little to jumpstart the real economy.

Instead, it's pumping up the asset bubbles. Yes, that helps somewhat — we'd certainly be in worse shape right now without massive borrowing and money printing. But inevitably, we will hit the wall. And for most Americans, the ride won't even have been much fun in the first place.

About the Author: Robert Wiedemer
Robert Wiedemer is a managing director of Absolute Investment Management, an investment-advisory firm for individuals with more than $300 million under management. He is a regular contributor to the Financial Intelligence Report, the flagship investment newsletter of Newsmax Media.
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RobertWiedemer
A recent article from CBS News summed up one of the major problems with the economic recovery: For most people, it doesn't exist.
recovery, economy, income, housing
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2014-03-12
Thursday, 12 June 2014 08:03 AM
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