Could our economy be turning into a very unstable wealthy driven economy?

[ck4829]

According to new research from Moody's Analytics, the top 5% of Americans by income account for 37% of all consumer outlays. Outlays include consumer spending, interest payments on installment debt and transfer payments.

By contrast, the bottom 80% by income account for 39.5% of all consumer outlays.

The data may be a further sign that the U.S. is becoming a Plutonomy–an economy dependent on the spending and investing of the wealthy. And Plutonomies are far less stable than economies built on more evenly distributed income and mass consumption. "I don't think it's healthy for the economy to be so dependent on the top 2% of the income distribution," Mr. Zandi said. He added that, "In the near term it highlights the fragility of the recovery."

In fact, the recent spending of the wealthy may be unsustainable. Their savings rate has gone from more than 26% in 2008 to a negative 7% in the first quarter of 2010, according to the Moody's Analytics data. They still have lots of savings. But the massive draw on that in the past two years is unlikely to continue at the same pace.

http://finance.yahoo.com/family-home/article/110258/us-economy-is-increasingly-tied-to-the-rich

[hedgehog]

1. If I read the article correctly, the top 5% accounts for 37% of consumer spending,

but

"the top 10% of earners captured about half of all income as of 2007."

In other words, these folks have all the money but they aren't spending it. So much for "trickle down" theory!

[ck4829]

2. It's no longer a matter of left vs right. Trickle down economics WILL destroy this country

End the tax cuts, save the US. It's as simple as that.

[TBF]

9. It's never been a matter of left v. right. Only to the wealthy who use it to divide us.

Check out who owns the media and how wealthy they are...

It has always been about economics.

[dkf]

5. They are spending it. They have negative savings in the beginning half of the year

And are the drivers of the recovery. Without their spending there would have been no recovery.

[ck4829]

8. Don't think that will stay the same though

It already has signs of slowing down.

[dkf]

15. Once we started focusing on the lack of jobs being created and

On increasing their taxes they got scared. Personally I think they are more nervous that the increase in taxes are only the beginning of this. . From what I have seen many rich people hate paying taxes maybe more than they like making money.

[TBF]

10. They can afford to spend a bit after pillaging our 401K's -

but for the most they are hoarding. The numbers don't lie.

[dkf]

13. They took a much bigger hit than the average Joe From the stock market.

The average Joe owns less stocks therefore he/she has less to lose. It is the rich that got hit by the stock market and it is why their spending started recovering when the stock market did.

Average Joe/Jane got hit harder by the housing market which can lead to bigger losses than the stock market because mortgages use leverage especially if you only put 5% down. That is why overextending yourself on a house is more risky than playing the stock market. In stocks you generally only lose what you have. In the housing market you are playing with money you don't have and didn't anticipate having for 30 years.

Of course if you are going to be foreclosed on and anticipate that as your out then maybe it's better to lose only 5% than putting down 20% and getting foreclosed on.

[Bonhomme Richard]

3. Could? It has been for the last 20 to 30 years. n/t

[dkf]

4. This is why increasing taxes on the wealthy will be bad for the economy in the short run.

And we cannot rely on transfer of wealth through taxation to support a whole swath of our population because like it or not that smacks of welfare which is always subject to political tides and cannot be depended on.

Wages are a function of supply of labor which is why illegal immigration which floods a good amount of extra labor and outsourcing to other countries are the main factor in the poor wages of the lower end of the pay scale. Illegal immigration is actually worse because there is at least a transportation cost and delay for goods manufactured far away. But when they are manufactured here at below legal costs the American worker doesn't have a chance.

[ck4829]

7. Continuing down this road is definitely unsustainable though

Either way, this looks like the beginning of the end for the American economy.

[dkf]

25. Yes it is unsustainable. We need to work on bring up wages from the bottom

And that requires an undersupply of labor. When you have an oversupply of labor the pressure to raise wages is non existent.

[TBF]

12. Increasing taxes on the wealthy to the levels in the 1950's-60's

is our only way out of this (and it will be temporary of course due to the cyclical nature of capitalism).

[dkf]

28. The rates were high but there were a ton of loopholes.

They didn't really pay 90%.

The 50s and 60s were prosperous for the US because the wars destroyed the manufacturing in Germany and Japan. We won't have those advantages of those days again.

[TBF]

33. Agree with you on jobs -

I don't know that tax cuts are the way to spur it (a government works program paid for by tax dollars would be more my thought) - but I certainly agree with you on the key being jobs. The public will too & Obama needs to realize that going into elections. It's foremost on everyone's minds...

[lonestarnot]

20. What bullshit!

[dkf]

31. In a stratified economy where the rich have most of the extra funds it is obvious they do

much of the discretional spending. How does that not make sense to you? Obviously we must make plans to alleviate the situation but that has to be done in the labor market and is a longer term deal.

[lonestarnot]

35. I see no point in allowing that to continue as is. Richies need to pay their fucking share and stop

stealing from the hungry.

[Ichingcarpenter]

6. How many cars, boats, houses, electronic equipment, etc can they buy

for one or two persons?

After you have everything you need then you invest in tax dogging investments.

Trinkle down is bullshit.

[mnhtnbb]

11. Yes. See my post

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x8906989

[Bonhomme Richard]

14. I am seriously considering downsizing, selling the house, ...

and all the useless stuff I have accumulated over my life and moving on to a sailboat. Think of a cheap (compared to buying and maintaining a house)"condo on the water" you can move at any time. I just came back from a week on the boat and it is amazing just how fast you get acclimated to the change in environment.

[mnhtnbb]

16. Check your messages

[closeupready]

22. I once knew an English couple that did that and cruised the rivers of France.

They enjoyed it.

[Bonhomme Richard]

24. I think the hardest thing would be giving up the "Norm".

Not that the norm is right or wrong. It is what you are used to.

[Barack2theFuture]

17. 'be turning'?

The question is 20 years too late.

[Jakes Progress]

18. Yes. About 15 years ago.

[pampango]

19. US has the worst level of income inequality of any developed nation. Europe and Japan are best.

Our GINI - measure of income inequality - (40.8) is close to Mexico (46.1) and China (46.9), while European countries are typically in the mid-20's (Denmark-24.7, Germany-28.3) and Canada is at 32.6.

Also, the multiple of the average income of the top 10% in the US compared to the bottom 10% (15.9) is the highest among all developed countries. European and Canadian numbers are all below 10 (6-9). Japan has the lowest (4.5) perhaps one of the reasons that their society seems so stable despite decades of economic problems. Surprising that India was at 8.6. Not so surprising that China was at 21.6.

http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

[kenny blankenship]

21. The author's crystal ball is prognosticating through a 25 year, satellite induced delay?

[GreenPartyVoter]

23. Bwahahaha!!! Good one!

[galileoreloaded]

26. Socio-economic destratification......Mexico style.

Just remember that with great change comes great opportunity. Your going to have to choose, predator or prey?

[BOG PERSON]

27. "turning into"

:eyes:

[HEyHEY]

30. Yup...bout sums it up, bog person

Realistically our culture has had about.... 20 out of 200 years where we actually gave a fuck about helping out everyone else.

[HEyHEY]

29. 1985 called, it wants its concept back

[Doctor_J]

32. From the department of Look Who Just Caught Up

:duh:

[Initech]

34. Just look at baseball as a perfect example.

You have the Yankees who are worth a couple billion, then you have 29 other teams who couldn't even dream of matching their funds.