The Economy is Great, If You're in the Top 10%

The K-Shaped recovery never left, but wealth inequality doesn't matter to our leaders.

Before we get into the research and technical aspects of this piece, let me lay out my thesis about where I think the economy is headed. There is no obvious course ahead for the world, economically speaking, in the year 2024. Plenty of economic indicators are showing a booming economy, especially in the United States, but plenty of other statistics are also showing dark clouds on the horizon.

If you engage in online discourse, you can find plenty of experts touting that things have never been better, and plenty that say the sky is falling (or more likely, about to fall any day now). The truth is much more murky.

I believe that we will see a recession, but the only question left is whether that will hit before or after the election in November. And will the impeding recession start in 2024, as it already has for the U.K., Germany, Japan, and China.

Never underestimate the ability for the Federal Reserve (FED) and the U.S. Treasury to kick the can down the road. This means that the recession might not hit until 2025, but that is a best case scenario, in my humble opinion.

I subscribe to the philosophy that we have been in a silent depression since the 2008 financial crisis, but not many people share that sentiment. I stole that phrase from Emil Kalinowski.

Seriously, I have no economic degree, so feel free to ignore me (at your own peril). I believe that the economics profession, especially neo-classical economics, is about as scientific as witchcraft. No, let me take that back. Witchcraft actually is more scientific than economics.

If you are looking for accurate predictions on world events, consult an astrologer, not an economist.

Bloviating aside, lets get down to the numerical statistics. We shall start in the U.S. to make the good versus bad argument, and then we shall move to international markets, specifically China and the European Union (EU).

Booming Economy Data is a Lie (US)

If you read any news article about the economy not from a Rupert Murdoch owned enterprise, it will tell you how great things are in the U.S. (CNBC, Forbes, Fortune, Bloomberg, Business Insider, Financial Times, etc). They are not lying. Reading the economic tea leaves is akin to reading Tarot cards to predict the future: everything is up to the seer’s interpretation.

The most common refrain in the business media is that the economy is experiencing a soft landing. There is no such thing as a soft landing, and this is the exact same thing they were saying in 2007 right before the GFC. Whenever the financial media starts saying the words soft landing, you need to be prepared for a recession.

The first figure used by everyone to prove how great things are doing is GDP (Gross Domestic Product).

As you see in the graph listed above, the GDP since 2006 has been on an upward trajectory. Since the 2020 lockdowns, the line is going up at an even more accelerating rate than since the 2008 Great Financial Crisis (GFC). This figure is the most quoted by financial talking heads, economists, and anyone touting the resilient economy.

The problem is that GDP is a really bad figure to prove a good or bad economy. Governments can just spend a ton of money on useless stuff, such as building a bunch of tanks or bridges to nowhere, and pump up the final numbers to make the economy look better than it is.

This is exactly how the United States posted a 5.5% GDP figure for Q3 of 2023, and how it was able to post a 3.3% GDP print for Q4 of 2023 - government spending, baby. Print those dollar, dollar bills! If you break down the GDP figures, you find out that the government in the US, which posted a 2.1 trillion dollar deficit last year, has been keeping their economy out of recession.

This is also why China always has such a great GDP figure, it’s because their government builds a bunch of stuff just to juice the GDP figure. Plus, they make up whatever figures they want. It helps to be a totalitarian government.

Contrarily, this is why the U.K., Germany, and Japan just went into recessions. By these witchcraft doctors knows as economists, if your economy prints negative GDP two quarters in a row, you are officially in a recession.

The next figure used by all the financial pumpers in the media is the stock market. This is another lagging indicator, but it is an easy thing to lean on to prove the sentiment that abounds. The theory is that since everyone is invested in the stock market via their retirement accounts (401k) that it shows a broad range of opinion about the future of the economy.

Bullshit. 93% of all investment in the stock market is by the top 10%.

The stock market is just a graph of rich people’s feelings. - Krystal Ball

Above is a graph of the S&P 500 for the last six months. It looks pretty good, and it did really well in 2023 after a terrible performance in 2022. I will not bog this blog down with too many graphs, but you can look it up to fact check me if you like.

If you are plugged into the financial world, you know that the vast majority of the good performance in the stock market in 2023 was due to what has been dubbed the Magnificent Seven by Michael Hartnett from Bank of America. These seven stocks are as follows: Microsoft, Amazon, Tesla, NVIDIA, Alphabet (Google), Meta (Facebook), and Apple.

Their overperformance was solely based on Artificial Intelligence (AI) hype. The entirety of gains in the stock market for 2023 were based on hopes and dreams, not reality. 75% of all stock market gains in 2024 are from four of those Magnificent Seven (Amazon, Microsoft, Meta, and Nvidia)!

It is not a coincidence that they are the four leading companies in AI development. Nvidia produces all the chips for AI computing, and the other three are the leaders in AI technology, especially after Microsoft pulled a coup with OpenAI (who developed ChatGPT).

So are seven companies doing great by maximizing a PR buzz cycle about a product that may or may not ever be developed a sign of a good economy?

AI has been around for a long time, the hype that it’s going to change the world is the new part. Cruise control in your car is AI. Recommended ads on every website you visit is AI. Sure, the technology has come a long way to where the chatbots almost sound like humans, but it’s not intelligence.

Another figure trotted out to prove the economy is booming, Jack, is the decline in inflation, or CPI (Consumer Price Index). Notice that the conveniently don’t mention the cumulative effects of price increases.

That big bump in the graph from 2020-2023 is why your groceries are so expensive now. Prices had been rather stagnant for decades, growing at about a 2% annual inflation rate. The pandemic set off a chain of inflation that the U.S. hadn’t seen since the 1970’s.

While pundits are talking about how much lower the inflation rate is now at 3.1%, that is on top of all of the prior increases. The cost of groceries are up over 20% since 2020, the cost of rent is up 20%, car insurance is up 18% in the last year, and then there is the worst of all categories: health insurance. Rates from 2020-2021 increased by 9.1%, then another cool 28.2% from 2021-2022, and then another 7% from 2022-2023.

The government redid their formulas for health insurance to counteract these crazy increases, so the FRED data is not an accurate representation of reality, FYI.

So, if you are wondering why you can’t seem to afford to live anymore, it is because everything you need to live is way more expensive now. Wages clearly have not kept up with this rampant inflation, much of which is not captured in the governments CPI data, as it is a highly manipulated figure.

The final figure used to say the economy has never been better is the unemployment rate. This is a truly low number at 3.7%, because they exclude anyone from the stats who has dropped out of the labor force. If you work two jobs, congratulations, you count as two people working! Work 1.5 hours last week? Congrats, you are also considered employed by the FED.

(Chart is the unemployment rate since 2019 through January 2024).

I haven’t technically held a job in the U.S. since 2015, but I have never been considered unemployed by the government. While I’m unemployed, the government doesn’t want me to mess up their manipulated statistics. Why am I not counted? Because I never filed for unemployment and am not actively seeking a job. Poof, I am Schrodinger’s worker: neither employed nor unemployed.

So that is what they say is the sign of a booming economy: the government manipulated statistics of GDP, CPI, and unemployment combined with a highly manipulated stock market. Modern day witchcraft.

It’s all smoke and mirrors.

People are well aware of how difficult it’s to survive in the modern world. We are squeezed from all angles with necessities costing more and wages not keeping up with inflation.

Scary Economic Indicators

There are plenty of indicators that caution that things might not be as rosy as the priests of economics would have you believe. Don’t believe your lying eyes, they say. Look at these lovely graphs and statistics that say your life has never been better, peon, is what they tell you. It’s pure gaslighting.

More children from the ages of 18-29 are living at home with their parents since the Great Depression, 45%, and it all because of finances. Can you blame them with the cost of housing, insurance, groceries, and the rest needed to live a comfortable life?

Before you go all boomer and say who cares about the dumb kids, please understand that over 50% of all Americans are having difficulty paying rent. Add onto that, the protections against evictions that were initiated during the pandemic are now all gone. Evictions are up dramatically in the U.S.

What happens when you get evicted and you can’t afford to rent a new place? Whelp, you become homeless. Shockingly, homelessness rates are skyrocketing as well. These rates are up in all environments (urban, suburban, and rural). Sadly, this is probably only the beginning of the homelessness crisis, as we haven’t had massive layoffs, yet, in this economic cycle.

Currently, over 62% of Americans are living paycheck to paycheck. Which means that everyone is only one paycheck away from being the next in line for either moving back in with their parents or homeless.

When everything gets more expensive, your paycheck barely covers expenses, and your dollars buys you less and less, what do you do? Well, charge it. Credit card debt is at an all time level, $1.129 trillion dollars, which broke the record from the prior quarter, and the quarter before that. Delinquencies are still low, but they are ticking up slightly.

One of the saving graces that was a hold over from the pandemic era stimulus was a moratorium on student loan payments. That ended in October of 2023, so expect a lot more hardship coming in the near term. Debts are swirling around Americans like a perfect storm, and the house is in disrepair.

Maybe these issues aren’t affecting you directly, but I am certain that everyone who is not in the top 10% knows someone who is struggling big time right now. The quit rate for jobs is dropping, which is an ominous sign about how precarious the job market is right now.

Notice on this graph how the quit rate dropped during the worst part of the pandemic and then rose through 2021 and early 2022 due to employees having bargaining power for the first time in over 20 years. You probably remember all the articles about quiet quitting that were posted at the time. The news media is owned by the top 10% who want you to be desperate for a job so that they can underpay you, exploit you, and take the excess productivity you provide to put more money into their pockets.

The factor that kept the U.S. from entering a recession, as was predicted for 2023, was a lack of widespread layoffs. If there are massive layoffs, recession is a lock, and a depression becomes the next possibility. So far, there have been some layoffs, but nothing like the GFC or the 2020 COVID-19 panic.

But the layoffs are not far away on the horizon.

Over 38% of companies are planning on laying off workers this year and 50% have implemented a hiring freeze, according to Business Insider. Their reasoning is due to a fear of a recession and because they have bought into the AI hype. They want to fire you and replace you with a computer algorithm. And they will, if they can.

So with all this dour data and ominous signs, why is every news report talking about how great the economy is? Simple: the economy is doing great for the top 10% of income earners. Those are the people who own the news, work for the media, and are friends with the people in power.

Wealth Inequality Has Skyrocketed

The ultra-wealthy have done great. Government has ensured they reap all the gains for the last forty years, but the last twenty have been even more of a giveaway of the riches to those who already own all the riches.

The top 10% own 74% of all of the wealth in America. That booming stock market that the media likes to tout, the top 10% owns 93% of all equities. Out of that, the top 1% have increased their ownership of stocks from 40% in 2002 to 54% in early 2024.

“The running of the bulls in 2023 was more like the waddle of the fat cats.” Irina Ivanova

(Name of the Fortune article.)

That quote was the clickbait title of the article, but it explains what is actually going on in the world of finance. The people with capital are extracting more and more capital from those who have less and less to give.

The wealthy are stockpiling for the next downturn, and then they will buy up all the assets for cheap, once again. Until then, they will extract every last penny they can from the rest of us who are forced to pay them rents in the form of interest, fees, or other financialized methods of wealth extraction.

When you hear about how we can’t redistribute wealth from the rich to the rest of us because that would be a class war, well, they are obfuscating the fact that they are already engaged in class warfare against all of us. The top 10% have bought off government to pocket more of the wealth of our nation, and more specifically, the fruits of your labor.

Sadly, the government is not only allowing it to happen, but it is their prescribed policy. After all, the people in government are there to get rich themselves. Our elected representatives are all engaging in insider trading, making corrupt deals with lobbyists for donations to their campaigns, and doing favors for business leaders to secure themselves and their relatives cushy jobs at top companies.

Four decades of growing inequality are directly related to the new economic paradigm of neoliberalism. Ronald Reagan and Margaret Thatcher were the major proponents of this philosophy, but it is held by every major political party across the entire Western world. Bill Clinton was a neoliberal, so was George Bush (both daddy and his coke snorting son), so was Obama, so was Trump, and so is Biden.

If you don’t know what neoliberalism is, well, it’s what has made the world around you a hellscape. It’s a commodification of everything based on selling off publicly owned assets to private businesses. Better stated, fuck you poor boy, lets give everything to the rich people, no more cool shit for you assholes.

It’s getting late, and I will only digress into an incoherent rant if I continue along talking about neoliberalism and the fact that everything that benefited the public at large was sold off in my lifetime. Water, electricity, and all the other utilities used to be owned by the government, and more importantly, the costs were way lower because there was no profit incentive involved.

What is the hopeful message to end this on? I don’t really have one. Be prepared, because the shoe will drop, eventually. It’s an election year, so I don’t expect there to be a huge market crash or massive recession to hit until the end of the year, at the earliest. But stranger things have happened, and we are balancing a cruise ship on a knife’s edge.