NYC’s haves & have nots

New York City’s richest made out quite well over the Great Recession gathering up a larger percentage of  wealth, while the poorest saw less income.

The facts should not surprise anyone who has read this blog for the last seven years as I have called this period The Great Fleecing for it was the greatest transfer of wealth in history.

The Independent Budget Office, a nonpartisan public fiscal monitor, said it examined annual samples of 770,700 personal tax returns to determine income distribution among New Yorkers from 2006 to 2014, adjusting the data for inflation.

During that nine-year span, median income among the top 50 percent of New York earners remained about $65,000, while that of the bottom half dropped 13 percent to $12,360.

The top 1 percent, however took home 41 percent of the city’s income distribution in 2014, a slight increase from 2006. Income from the bottom half totaled 5.6 percent, a decline of 1.8 percentage points.

“We can see evidence of growing income inequality in the city,” said IBO spokesman Doug Turetsky. “The share of income going to New York City’s highest earners, the top 1 percent — and even more specifically the top 0.1 percent — has grown.”


$16+ trillion lost in global equities in 6 months

As I’ve written about the Great Fleecing of the US middle class by the Federal Reserve during its many phases of Quantitative Easing — where trillions of dollars were handed over to the richest Americans in the form of asset bubbles in stocks and bonds — now a new market report comes out saying global stocks have lost nearly $17 trillion in value over the last 6 months.

Most of European and Asian stock indices are in bear market having lost more than 20% of its value from their August 2015 highs, the US has lost 16% since the summer.

Now who do you think experienced those losses? The 1%ers, who move in and out of stock, bonds and other markets as they have their wealth managed by pros, or the dwindling ranks of middle class Americans trying desperately to hold on to the last vestiges of a nest egg or to fund college for their children, using the tired old thought of buy-and-hold being proffered by a broker at Merrill Lynch, who more than likely is divorced with an alcohol or drug problem and losing money in the market himself.

This market bubble popping is a very easy way to pare the gains of the Americans who for some reason were not completely wiped out in the 2008 crash. These boom and bust cycles happen on a 7.5 year run up, with roughly an 18 month sell off in between.

So let’s figure how this will play out.

  • First, the Fed is done with interest rate hikes. One and done will be the mantra for 2016.
  • Secondly, this market sell off will continue through the summer. The Fed can’t cut rates in second half of 2016, for fear of embarrassing the Democrats over their failed monetary policy. So the overall stock market trend will be lower lows and lower highs through the election.
  • Lastly, this continued economic malaise may be the needed fuel to put a Donald Trump into the White House.

I have stayed clear of politics in my column, but if I am correct on the markets slipping lower through the election cycle, there will be a hunger to move away from socialistic monetary thought and that could usher in a Trump win.

That said, will there be much difference on the monetary side with a Trump White House? Probably not, but that is for another column down the road.

The numbers behind the greatest wealth transfer ever

A new Oxfam International study confirms my Great Fleecing article from Sunday’s New York Post.

The result of the greatest transfer of the wealth the world has ever seen, facilitated by the Federal Reserve and its Quantitative Easing programs under President Obama, shows the richest 1% now have more wealth than the rest of the world combined.

The study released this week to coincide with the World Economic Forum in Davos, Switzerland, where many of the 1% congregate, also states that just 62 individuals held the same amount of wealth as 3.6 billion people, about half the world’s population.

“Power and privilege are being used to rig the system to increase the gap between the richest and the rest to levels we have not seen before. Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate,” said Raymond C. Offenheiser, president of Oxfam America, in a statement.

Here are some dramatic milestones reached since Fed chief Ben Bernanke began his wealth transfer program in December 2008:

  • In 2015, just 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity. This figure is down from 388 individuals as recently as 2010.
  • The wealth of the richest 62 people has risen by 44% in the five years since 2010 – that’s an increase of more than half a trillion dollars, to $1.76 trillion.
  • Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 41%.

So as I said in the article, “these actions — to the greatest extent — are the reasons the American middle class has been decimated and no longer makes up the majority of the US population.”

And all this wealth transfer was made possible by the Obama Administration, not a Republican White House.

The president’s economic advisers working through the Federal Reserve under Bernanke and then Janet Yellen bailed out the banks with more than $4.5 trillion in cash, but left out any wage growth or access to capital that may have lifted the struggling middle class and lower economic classes to reach for the American Dream.

As a matter of fact, the White House actually made matters worse for the middle class, as it gave Wall Street an out on the toxic mortgages it wrote, while swiping from US homeowners almost half the value in their biggest investment — their homes.

When the Wall Street banks did a mortgage modification under Obama’s Home Affordable Refinance Program (HARP) program, the principle was not cut to reflect current value, the rate was simply tweaked down slightly. And the banks collected big fees from the government to get themselves off the hook.

So the 62 richest people in the world, Warren Buffett for example, made huge profits off of investing in Goldman Sachs and Wells Fargo beginning in 2009.

I could go down the list and a good majority profited handsomely from this Wall Street bailout, but quite frankly it’s too sickening.

So get your children out there working, because they have to pay off this debt. This way by next year only 40 of the richest people in the world have the same amount of cash as you and I.

There shall be pain in 2016

There’s plenty of pain coming down the pike for corporate America. I can see a dirt cloud rising on the horizon of companies charging towards bankruptcy courts.

You can’t have the type of economy we’ve had for the last 6 months and not expect it. Crude oil prices have been nearly cut half, with plenty of drillers and such using oil in the ground as collateral to fund operations, with the price cut loans will be called in as collateral dries up. Retailers cutting jobs, closing stores and slashing sales estimates.

The US outlook, per the Fed, sees a growing economy with perhaps 4 rate hikes this year taking the Fed funds rate up to 1%. The bond market does not see this at all, and they usually win these battles. I believe we will see zero rates before we see 1% rate this year.

The raw data from the Labor Dept. on December jobs showed 11k new jobs created. The remainder of the 292K were statistical noise. The number of jobs created in 2015 was 2.4 million and wages  grew less than 2% for the third year in a row as food service, health care workers and profession services independent contractors were the top job categories for the year.

Most of these jobs carry no medical or any other type of benefits since the positions are either part-time or an outsourced job. In December the number of people holding two or more jobs climbed to the highest level since 2008.

None of those statistics lead me to believe there will be much in the way of discretionary spending by consumers this year to reverse the trend for increased spending. Consumer spending makes up  70% of GDP.

The Atlanta Fed seems to believe the same thing as it says growth in the last quarter of 2015 will be 0.8% GDP. We will get the first estimate of that number at the end of January.

I want to thank all the Gray’s Economy readers for one of the biggest days ever for visits Monday on the topic of the Great Fleecing.

The greatest transfer of wealth where trillions were placed with the banks and the debt was placed with the American people.

The greatest transfer of wealth in history

When people use the term Great Recession they are playing into the charade laid out by Federal Reserve and the Treasury Department.

The years 2008 through 2015 should be known as the Great Fleecing. During that time period the greatest transfer of wealth in the history of the world occurred. Some $4.5 trillion was given to Wall Street banks with the American people picking up the IOU and getting little more than working ATMs for the misery.

See newest post to see the numbers behind this heist.

And if you take the Wall Street banks modus operandi of leveraging all money on hand, then the largess from the Fed is conservatively $45 trillion.

This is the primary reason the US economy has not been able to recovery from the bank implosion of 2008. However the Fed — through Ben Bernanke and Janet Yellen — cannot point to this as the reason for the Great Malaise.

Surely if you inject $45 trillion, even into the US economy, you will get economic growth. You will get an economy that has 4%-5% GDP for a year or two, not one quarter of one year.

Remember, the Obama Administration is the first two-term presidency that has not posted a 3% GDP growth on an annualized basis for 8 years. Even Franklin Delano Roosevelt posted 3% growth year during the Great Depression.

In order to grease the wheels for the wealth transfer, wages and jobs needed to be curtailed, because the Fed could not allow the banks’ largess to be sterilized —  circulated into the public — for fear of rampant inflation. The fear that the Fed had been that it had to keep rates at zero for the banks to make the largest Vig on that money, in order to bolster balance sheets as  quickly as possible so the banks could survive.

If my cost of capital is zero, then whatever return I make in the market from buying Treasury bonds and reselling those notes to the Fed is pure profit. This is how the Fed attempted to heal the damaged balance sheets of the bulge bracket banks after Lehman Bros. demise.

The banks also funded company mergers, company debt offerings and stock buybacks. This activity kept the money sequestered somewhat and allowed a greater return for the banks. The secondary concern of creating an asset bubble in the market was seen as cost of doing business, which would generally benefit the upper classes more than any other segment of the economy.

These actions — to the greatest extent — are the reasons the American middle class has been decimated and no longer makes up the majority of the population.

Their lifeblood has been sucked out by the wholesale export of once good paying jobs, however they are still on the hook for higher taxes on what meager home they still own as well as the growing US debt to fund the banks.

Is it any wonder that in all of the 3,007 US counties, parishes and territories just over 50% of the population in each county is on government assistance of some sort.

This wealth transfer has taken the US down the road of socialism, where hardship grows and quality of life suffers.

Why does this matter now? Well the asset bubbles are growing weak and some say about to pop. The stock market is in correction mode — off over 10% from its highs last year — and if you want to get a little of that wealth for yourself it might not be a bad time to take some money off the table.

Having all your cash in the market now, may prove to be the same as mid-2008. Do you have eight years to try to recoup what you have now?

Think about it.