FacebookTwitterGoogle+RedditEmail

Recovery for the 7 Percent

by PAUL CRAIG ROBERTS

“From the end of the recession in 2009 through 2011 (the last year for which Census Bureau wealth data are available), the 8 million households in the U.S. with a net worth above $836,033 saw their aggregate wealth rise by an estimated $5.6 trillion, while the 111 million households with a net worth at or below that level saw their aggregate wealth decline by an estimated $600 billion.”

–“An Uneven Recovery,” by Richard Fry and Paul Taylor, Pew Research Center.

Since the recession was officially declared to be over in June 2009, I have assured readers that there has been no recovery. Gerald Celente, John Williams (shadowstats.com), and no doubt others have also made it clear that the alleged recovery is an artifact of an understated inflation rate that produces an image of real economic growth.

Now comes the Pew Research Center with its conclusion that the recession ended only for the top 7 percent of households that have substantial holdings of stocks and bonds.  The other 93% of the American population is still in recession.

The Pew report attributes the recovery for the affluent to the rise in the stock and bond markets, but does not say what caused these markets to rise.

The stock market’s recovery does not reflect rising consumer purchasing power and retail sales. The labor force is shrinking, not growing. Job growth lags population growth, and  the few jobs that are
howeconcreated are primarily dead-end jobs in lowly paid domestic services. Retail sales adjusted for inflation and real median household income have been bottom bouncing since 2009.

To the extent that there is profit growth in US corporations, it comes from labor cost savings from offshoring US jobs and from bringing in foreign workers on work visas.  By lowering labor costs, corporations boost profits and thereby capital gains for those 7 percent who have large holdings of  financial assets.  Those in the 93 percent who are displaced by foreign workers experience income reductions.  This transfer of the incomes of the 93 percent to the 7 percent via jobs offshoring and work visas is the reason for the stark rise in US income inequality.

Another source of the stock market’s rise is the Federal Reserve’s policy of quantitative easing, that is, the printing of $1,000 billion dollars annually with which to support the too-big-to-fail banks’ balance sheets and to finance the federal budget deficit. The cash that the Fed is pouring into the banks is not finding its way into business and consumer loans, but the money is available for the banks to speculate in derivatives and stock market futures.  Thus, the Fed’s policy, which is directed at keeping afloat a few oversized banks, also benefits the 7 percent by driving up the value of their stock portfolios.

The reason bond prices are so high that real interest rates are negative is that the Fed is purchasing $1,000 billion of mortgage-backed “securities” and US Treasury debt annually. The lower the Fed forces interest rates, the higher go bond prices.  If you are among the 7 percent, the Fed has produced capital gains for your bond portfolio.  But  if you are a saver among the 93 percent, you are losing purchasing power because the interest you receive is less than the rate of inflation.

The Pew report puts it this way: Since the “recovery” that began in June 2009, wealthy households experienced a 28 percent rise in their net worth, while everyone else lost 4 percent of their assets.

Is this the profile of a democracy in which government serves the public interest, or is it the profile of a financial aristocracy that uses government to grind the population under foot?

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. His latest book The Failure of Laissez-Faire Capitalism. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format.

 

 

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is The Neoconservative Threat to World Order.

More articles by:
May 26, 2016
Paul Craig Roberts
The Looting Stage of Capitalism: Germany’s Assault on the IMF
Pepe Escobar
Hillary Clinton: A Major Gold-Digging Liability
Sam Pizzigati
America’s Cosmic Tax Gap
Ramzy Baroud
Time to End the ‘Hasbara’: Palestinian Media and the Search for a Common Story
José L. Flores
Wall Street’s New Man in Brazil: The Forces Behind Dilma Rousseff’s Impeachment
Patrick Cockburn
The Battle of Fallujah: ISIS Unleashes Its Death Squads
John Feffer
The Coming Drone Blowback
Alex Ray
The Death Toll in Syria: What Do the Numbers Really Say?
Richard Pithouse
We Shall be the Prey and the Vulture
Binoy Kampmark
Trump and the Polls of Loathing
Manuel E. Yepe
A Cruise Ship Without Tourists Arrives in Havana
Jack Rasmus
Greek Debt Negotiations: Will the IMF Exit the Troika?
Ajamu Nangwaya
Pan-Africanism, Feminism and Finding Missing Pan-Africanist Women
Howard Lisnoff
Israel, a Palestinian State and Anti-Semitism
May 25, 2016
Eric Draitser
Obama in Hiroshima: A Case Study in Hypocrisy
Ryan Mallett-Outtrim
Does Venezuela’s Crisis Prove Socialism Doesn’t Work?
Dan Arel
The Socialist Revolution Beyond Sanders and the Democratic Party
Marc Estrin
Cocky-Doody Politics and World Affairs
Sam Husseini
Layers of Islamophobia: Do Liberals Care That Hillary Returned “Muslim Money”?
Susan Babbitt
Invisible in Life, Invisible in Death: How Information Becomes Useless
Mel Gurtov
Hillary’s Cowgirl Diplomacy?
Kathy Kelly
Hammering for Peace
Dick Reavis
The Impeachment of Donald Trump
Wahid Azal
Behind the Politics of a Current Brouhaha in Iran: an Ex-President Ayatollah’s Daughter and the Baha’is
Jesse Jackson
Obama Must Recommit to Eliminating Nuclear Arms
Colin Todhunter
From the Green Revolution to GMOs: Living in the Shadow of Global Agribusiness
Binoy Kampmark
Turkey as Terror: the Role of Ankara in the Brexit Referendum
Dave Lindorff
72-Year-Old Fringe Left Candidate Wins Presidency in Austrian Run-Off Election
May 24, 2016
Sharmini Peries - Michael Hudson
The Financial Invasion of Greece
Jonathan Cook
Religious Zealots Ready for Takeover of Israeli Army
Ted Rall
Why I Am #NeverHillary
Mari Jo Buhle – Paul Buhle
Television Meets History
Robert Hunziker
Troika Heat-Seeking Missile Destroys Greece
Judy Gumbo
May Day Road Trip: 1968 – 2016
Colin Todhunter
Cheerleader for US Aggression, Pushing the World to the Nuclear Brink
Jeremy Brecher
This is What Insurgency Looks Like
Jonathan Latham
Unsafe at Any Dose: Chemical Safety Failures from DDT to Glyphosate to BPA
Binoy Kampmark
Suing Russia: Litigating over MH17
Dave Lindorff
Europe, the US and the Politics of Pissing and Being Pissed
Matt Peppe
Cashing In at the Race Track While Facing Charges of “Abusive” Lending Practices
Gilbert Mercier
If Bernie Sanders Is Real, He Will Run as an Independent
Peter Bohmer
A Year Later! The Struggle for Justice Continues!
Dave Welsh
Police Chief Fired in Victory for the Frisco 500
May 23, 2016
Conn Hallinan
European Union: a House Divided
Paul Buhle
Labor’s Sell-Out and the Sanders Campaign
FacebookTwitterGoogle+RedditEmail