Rich vs Poor: 14 Funny Statistics And 14 Not So Funny Statistics About This “Economic Recovery”

By Economic Collapse

Today there are two very different Americas.  In one America, the stock market is soaring, huge bonuses are taken for granted, the good times are rolling and people are spending money as if they will be able to "live the dream" for the rest of their lives.  In the other America, the one where most of the rest of us live, unemployment is rampant, a million families were kicked out of their homes last year and hordes of American families are drowning in debt.  The gap between the rich and the poor is bigger today than it ever has been before.  In fact, this article is not so much about "rich vs poor" as it is about "the rich vs the rest of us".  Barack Obama and Ben Bernanke keep touting an "economic recovery", but the truth is that the only ones that seem to be benefiting from this recovery are those at the very top of the economic food chain.

Below you will find 14 funny statistics about this economic recovery and 14 not so funny statistics about this economic recovery.  Actually, if you find yourself deeply struggling in this economy you will probably not find any of the statistics funny.  In fact, you will probably find most of them infuriating.  After all, there are very few people that actually enjoy hearing about how well the rich are doing when they are barely able to pay the mortgage and put food on the table.

In any event, the 28 statistics below show the stark contrast between the "two Americas" that share this nation today.  Many liberals will likely try to use these statistics as an example of why we should tax the rich.  But handing more money to the government is not going to magically create more jobs for the poor.  What the American people desperately need are good jobs, and many liberals don't seem to understand that.  Many conservatives will likely try to use these statistics as evidence that "capitalism" is working.  But the truth is that what we have in the United States today is not capitalism.  Rather, it is more aptly described as "corporatism", because money and power is increasingly becoming concentrated in the hands of gigantic corporations that individuals and small businesses simply cannot compete with.  

The truth is that when wealth is concentrated at the very top it does not "trickle down" to the rest of us.  In the old days the wealthy at least were forced to hire the rest of us to run their factories and their businesses, but with the advent of globalism that isn't even true anymore.  Now they can just move their factories and businesses overseas to places where they can legally pay slave labor wages to their employees.

Very large concentrations of money and power are almost always bad for the prosperity of average citizens.  Our founding fathers never intended for our central government to have so much power and they never intended for giant corporations to have so much power.  But we have abandoned the principles of our founding fathers.

When large concentrations of power (whether governmental or corporate) are allowed to flourish, it almost becomes inevitable that the gap between the rich and the poor will grow.  We are seeing this happen all over the world today.

Unfortunately, it does not appear that any of this is going to change any time soon.  In the United States, both the federal government and multinational corporations are constantly attempting to grab even more power.  It has gotten to the point where individual Americans really don't have much power left at all.

In any event, hopefully you will find the following statistics informative or at least entertaining.  The wealthy are most definitely enjoying an "economic recovery" while most of the rest of us are still really struggling....

Funny - Who said that the titans of Wall Street couldn't look hot?  According to the American Society of Plastic Surgeons, facelifts for men jumped 14 percent last year.

Not Funny - According to the U.S. Labor Department, unemployment actually increased in 351 of the 372 largest U.S. cities during the month of January.

Funny - The average bonus for a worker on Wall Street in 2010 was only $128,530.  It appears that more Wall Street bailouts may be needed.

Not Funny - During this most recent economic downturn, employee compensation in the United States has been the lowest that it has been relative to gross domestic product in over 50 years.

Funny - According to DataQuick Information Systems, the sale of million dollars homes rose an average of 18.6 percent in the top 20 major metro areas in the U.S. in 2010.  But is spending a million dollars on one house really worth it?  After all, over the past several years there have been times when you could buy a house in some bad areas of Detroit for just one dollar.

Not Funny - In 2010, for the first time ever more than a million U.S. families lost their homes to foreclosure, and that number is expected to go even higher in 2011.

Funny - According to Moody's Analytics, the wealthiest 5% of households in the United States now account for approximately 37% of all consumer spending.  Most of the rest of us don't have much discretionary income to spend these days, but at least we have Justin Bieber, American Idol and Dancing with the Stars to keep us entertained.

Not Funny - According to Gallup, the U.S. unemployment rate in mid-March was 10.2%, which was virtually unchanged from the 10.3% figure that it was sitting at exactly one year ago.

Funny - According to the Wall Street Journal, sales of private jumbo jets to the ultra-wealthy are absolutely soaring....

Sales of private jumbo jets are so strong that Airbus and Boeing now have special sales forces devoted to potentates and the hyper-rich.

Not Funny - There are now over 6.4 million Americans that have given up looking for work completely.  That number has increased by about 30 percent since the economic downturn began.

Funny - Porsche recently reported that sales increased by 29 percent during 2010.  Even Porsche jokes are coming back into style....

Question: Why did the blonde try and steal a police car?

Answer: She saw “911” on the back and thought it was a Porsche.

Not Funny - Approximately half of all American workers make $25,000 a year or less.

Funny - Cadillac recently reported that sales increased by 36 percent during 2010.

Not Funny - According to the U.S. Energy Department, the average U.S. household will spend approximately $700 more on gasoline in 2011 than it did during 2010.

Funny - Rolls-Royce recently reported that sales increased by 171 percent during 2010.

Not Funny - According to a new study by America's Research Group, approximately 75 percent of all Americans are doing less shopping because of rising gasoline prices.

Funny - According to the New York Post, Barack Obama enjoyed a total of 10 separate vacations that stretched over a total of 90 vacation days during the years of 2009 and 2010.  Apparently Barack Obama was not talking about himself when he told the American people the following....

"If you’re a family trying to cut back, you might skip going out to dinner, or you might put off a vacation."

Not Funny - When 2007 began, 26 million Americans were on food stamps.  Today, an all-time record 44 million Americans are on food stamps.

Funny - Ralph Lauren reported a 24 percent increase in revenue in the fourth quarter of 2010.  It is good to know that preppies are thriving in this economy.

Not Funny - The Ivex Packaging Paper plant in Joliet, Illinois is shutting down for good after 97 years in business.  79 good jobs will be lost.  Meanwhile, China has become the number one producer of paper products in the entire world.

Funny - Luxury jewelry retailer Tiffany & Co. recently announced that their profits increased by 29 percent in the 4th quarter of 2010.  All of the men that did not buy their women jewelry during the holidays are trying to keep this particular news item from getting passed around.

Not Funny - Average household debt in the United States has now reached a level of 136% of average household income.

Funny - In 2009, only 18,288 vehicles with a price tag of $100,000 or more were sold in the United States.  In 2010, 32,144 such vehicles were sold.  It appears that "showing off for chicks" is now very much back in style.

Not Funny - The U.S. economy now has 10 percent fewer "middle class jobs" than it did just ten years ago.

Funny - Porsche has announced that they will soon be taking orders for their first hybrid sports car, the 918 Spyder.  The price tag on one of these puppies will only be $845,000.

Not Funny - The average CEO now makes approximately 185 times more money than the average American worker.

Funny - Barack Obama recently played only his 61st round of golf since moving into the White House.  Many are now concerned that Obama is simply not getting enough free time.

Not Funny - According to one recent study, 21 percent of all children in the United States were living below the poverty line during 2010.

Manufacturing in U.S. Makes More Sense Than In a Generation; China Not Such A Great Deal Any More

Posted by Carpe Diem

Here's an interesting article titled "Made in America: Small Businesses Buck the Offshoring Trend," about how some manufacturing is being brought back to the U.S. from China, especially for smaller American firms, because of: a) rising labor costs in China, b) inconsistent quality, c) shipping costs that have doubled in the last year (see chart above), and d) the lack of safeguards on intellectual property.  Here are some key paragraphs from an article that suggests that America's manufacturing sector can look forward to a bright, dynamic and thriving future:

"For U.S. firms, the decision to manufacture overseas has long seemed a no-brainer. Labor costs in China and other developing nations have been so cheap that as recently as two or three years ago, anyone who refused to offshore was viewed as a dinosaur, certain to go extinct as bolder companies built the future in Asia. But stamping out products in Guangdong Province is no longer the bargain it once was, and U.S. manufacturing is no longer as expensive. As the labor equation has balanced out, companies—particularly the small to medium-size businesses that make up the innovative guts of America’s technology industry—are taking a long, hard look at the downsides of extending their supply chains to the other side of the planet.

When accounting giant KPMG International recently asked 196 senior executives to list their top concerns for 2011 and 2012, labor costs ranked below product quality and fluctuations in shipping rates and currency values. And 19 percent of the companies that responded to an October survey by MFG.com, an online sourcing marketplace, said they had recently brought all or part of their manufacturing back to North America from overseas, up from 12 percent in the first quarter of 2010. This is one reason U.S. factories managed to add 136,000 jobs last year—the first increase in manufacturing employment since 1997 (see related CD post here).

The U.S. certainly isn’t on the verge of recapturing its past industrial glory, nor can every business benefit by fleeing China. But those that actually build tangible goods should no longer assume that “Made in the USA” is an unaffordable luxury. Unless a company is hell-bent on selling the cheapest goods possible, manufacturing at home makes more sense than it has in a generation.

China’s big manufacturing advantage has been cheap labor, but wages—while still low compared with those in the U.S.—have risen sharply in recent years (see chart below).

Manufacturing wages more than doubled in China between 2002 and 2008, and the value of the nation’s currency has risen steadily. It’s now under tremendous international pressure to let the yuan appreciate even more, and the country must cope with worrisome inflation at home (food prices rose by nearly 12 percent last year). And though Chinese workers still earn a fraction of what their American counterparts do, the rising costs of labor there are prompting companies to reevaluate their production strategies. Once they do, these businesses often realize something profound: China isn’t the great deal they expected."
 

Conclusion: "In dynamic systems such as supply chains, the tighter the connection between nodes, the lower the risk of something going haywire. That risk can be tolerated when the benefits of stretching the connections are too great to ignore. But when those benefits diminish, it’s time to consider building a system that is stable by design. And once America’s formidable innovation muscle is focused on keeping manufacturing nearby, new and inventive systems for reducing labor costs (see chart above)—without going overseas—will be developed quickly."

Why the Dollar's Reign Is Near an End

By BARRY EICHENGREEN

The single most astonishing fact about foreign exchange is not the high volume of transactions, as incredible as that growth has been. Nor is it the volatility of currency rates, as wild as the markets are these days.  Instead, it's the extent to which the market remains dollar-centric.

Consider this: When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter. Indeed, the dollar is virtually the exclusive vehicle for foreign-exchange transactions between Chile and Korea, despite the fact that less than 20% of the merchandise trade of both countries is with the U.S.

Chile and Korea are hardly an anomaly: Fully 85% of foreign-exchange transactions world-wide are trades of other currencies for dollars. What's more, what is true of foreign-exchange transactions is true of other international business. The Organization of Petroleum Exporting Countries sets the price of oil in dollars. The dollar is the currency of denomination of half of all international debt securities. More than 60% of the foreign reserves of central banks and governments are in dollars.

The greenback, in other words, is not just America's currency. It's the world's.

But as astonishing as that is, what may be even more astonishing is this: The dollar's reign is coming to an end.

I believe that over the next 10 years, we're going to see a profound shift toward a world in which several currencies compete for dominance.

The impact of such a shift will be equally profound, with implications for, among other things, the stability of exchange rates, the stability of financial markets, the ease with which the U.S. will be able to finance budget and current-account deficits, and whether the Fed can follow a policy of benign neglect toward the dollar.

The Three Pillars

How could this be? How could the dollar's longtime most-favored-currency status be in jeopardy?

To understand the dollar's future, it's important to understand the dollar's past—why the dollar became so dominant in the first place. Let me offer three reasons.

First, its allure reflects the singular depth of markets in dollar-denominated debt securities. The sheer scale of those markets allows dealers to offer low bid-ask spreads. The availability of derivative instruments with which to hedge dollar exchange-rate risk is unsurpassed. This makes the dollar the most convenient currency in which to do business for corporations, central banks and governments alike.

Second, there is the fact that the dollar is the world's safe haven. In crises, investors instinctively flock to it, as they did following the 2008 failure of Lehman Brothers. This tendency reflects the exceptional liquidity of markets in dollar instruments, liquidity being the most precious of all commodities in a crisis. It is a product of the fact that U.S. Treasury securities, the single most important asset bought and sold by international investors, have long had a reputation for stability.

Finally, the dollar benefits from a dearth of alternatives. Other countries that have long enjoyed a reputation for stability, such as Switzerland, or that have recently acquired one, like Australia, are too small for their currencies to account for more than a tiny fraction of international financial transactions.

What's Changing

But just because this has been true in the past doesn't guarantee that it will be true in the future. In fact, all three pillars supporting the dollar's international dominance are eroding.

First, changes in technology are undermining the dollar's monopoly. Not so long ago, there may have been room in the world for only one true international currency. Given the difficulty of comparing prices in different currencies, it made sense for exporters, importers and bond issuers all to quote their prices and invoice their transactions in dollars, if only to avoid confusing their customers.

Now, however, nearly everyone carries hand-held devices that can be used to compare prices in different currencies in real time. Just as we have learned that in a world of open networks there is room for more than one operating system for personal computers, there is room in the global economic and financial system for more than one international currency.

Second, the dollar is about to have real rivals in the international sphere for the first time in 50 years. There will soon be two viable alternatives, in the form of the euro and China's yuan.

Americans especially tend to discount the staying power of the euro, but it isn't going anywhere. Contrary to some predictions, European governments have not abandoned it. Nor will they. They will proceed with long-term deficit reduction, something about which they have shown more resolve than the U.S. And they will issue "e-bonds"—bonds backed by the full faith and credit of euro-area governments as a group—as a step in solving their crisis. This will lay the groundwork for the kind of integrated European bond market needed to create an alternative to U.S. Treasurys as a form in which to hold central-bank reserves.

China, meanwhile, is moving rapidly to internationalize the yuan, also known as the renminbi. The last year has seen a quadrupling of the share of bank deposits in Hong Kong denominated in yuan. Seventy thousand Chinese companies are now doing their cross-border settlements in yuan. Dozens of foreign companies have issued yuan-denominated "dim sum" bonds in Hong Kong. In January the Bank of China began offering yuan-deposit accounts in New York insured by the Federal Deposit Insurance Corp.

Allowing Chinese companies to do cross-border settlements in yuan will free them from having to undertake costly foreign-exchange transactions. They will no longer have to bear the exchange-rate risk created by the fact that their revenues are in dollars but many of their costs are in yuan. Allowing Chinese banks, for their part, to do international transactions in yuan will allow them to grab a bigger slice of the global financial pie.

Admittedly, China has a long way to go in building liquid markets and making its financial instruments attractive to international investors. But doing so is central to Beijing's economic strategy. Chinese officials have set 2020 as the deadline for transforming Shanghai into a first-class international financial center. We Westerners have underestimated China before. We should not make the same mistake again.

Finally, there is the danger that the dollar's safe-haven status will be lost. Foreign investors—private and official alike—hold dollars not simply because they are liquid but because they are secure. The U.S. government has a history of honoring its obligations, and it has always had the fiscal capacity to do so.

But now, mainly as a result of the financial crisis, federal debt is approaching 75% of U.S. gross domestic product. Trillion-dollar deficits stretch as far as the eye can see. And as the burden of debt service grows heavier, questions will be asked about whether the U.S. intends to maintain the value of its debts or might resort to inflating them away. Foreign investors will be reluctant to put all their eggs in the dollar basket. At a minimum, the dollar will have to share its safe-haven status with other currencies.

A World More Complicated

How much difference will all this make—to markets, to companies, to households, to governments?

One obvious change will be to the foreign-exchange markets. There will no longer be an automatic jump up in the value of the dollar, and corresponding decline in the value of other major currencies, when financial volatility surges. With the dollar, euro and yuan all trading in liquid markets and all seen as safe havens, there will be movement into all three of them in periods of financial distress. No one currency will rise as strongly as did the dollar following the failure of Lehman Bros. There will be no reason for the rates between them to move sharply, something that would potentially upend investors.

But the impact will extend well beyond the markets. Clearly, the change will make life more complicated for U.S. companies. Until now they have had the convenience of using the same currency—dollars—whether they are paying their workers, importing parts and components, or selling their products to foreign customers. They don't have to incur the cost of changing foreign-currency earnings into dollars. They don't have to purchase forward contracts and options to protect against financial losses due to changes in the exchange rate. This will all change in the brave new world that is coming. American companies will have to cope with some of the same exchange-rate risks and exposures as their foreign competitors.

Journal Community

• discuss

“ I'm waiting for the pitch to buy gold and the suggestion we buy guns etc to get ready for the riots. If the the dollar stops being the reserve currency, it won't happen in my lifetime ”

—Alan Gordon

Conversely, life will become easier for European and Chinese banks and companies, which will be able to do more of their international business in their own currencies. The same will be true of companies in other countries that do most of their business with China or Europe. It will be a considerable convenience—and competitive advantage—for them to be able to do that business in yuan or euros rather than having to go through the dollar.

U.S. Impact

In this new monetary world, moreover, the U.S. government will not be able to finance its budget deficits so cheaply, since there will no longer be as big an appetite for U.S. Treasury securities on the part of foreign central banks.

Nor will the U.S. be able to run such large trade and current-account deficits, since financing them will become more expensive. Narrowing the current-account deficit will require exporting more, which will mean making U.S. goods more competitive on foreign markets. That in turn means that the dollar will have to fall on foreign-exchange markets—helping U.S. exporters and hurting those companies that export to the U.S.

My calculations suggest that the dollar will have to fall by roughly 20%. Because the prices of imported goods will rise in the U.S., living standards will be reduced by about 1.5% of GDP—$225 billion in today's dollars. That is the equivalent to a half-year of normal economic growth. While this is not an economic disaster, Americans will definitely feel it in the wallet.

On the other hand, the next time the U.S. has a real-estate bubble, we won't have the Chinese helping us blow it.

 

Dr. Eichengreen is the George C. Pardee and Helen N. Pardee professor of economics and political science at the University of California, Berkeley. His new book is "Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System." He can be reached at reports@wsj.com.

The Natural Gas Comeback of 2011

Posted by Wealth Wire - Wednesday, March 2nd, 2011

Guest post by Keith Kohl of Energy and Capital.

You've probably been told — warned, even — that natural gas may be one of the last places you should put your hard-earned money...

I've been told the same thing.

They say the natural gas markets are dead, that there's no hope in sight for decades to come. They liken natural gas profits to seeing pink elephants — something only witnessed after you've had your head in a pail of Natty Boh.

Sure enough, one quick glance at stagnant price charts, and there's a chance you might take those warnings to heart.

Who's to argue?

Flat prices have been commonplace during the last few years:

But where most of the herd tends to panic, others see potential...

The natural gas price problem

For starters, the problem lies in the surge in shale gas plays across the United States.

For the sake of our newer readers, here's a good look at where the U.S. shale plays are located:

Furthermore, we have a lot of gas. According to the EIA, the United States has 2,552 trillion cubic feet (Tcf) of potential natural gas resources. Approximately one-third of that resource (nearly 827 Tcf) is from shale formations.

Shale gas now makes up 14% of our domestic natural gas supply, but I'll get further into that detail in just a second.

Today, natural gas futures fell more than they have in three weeks. Not only is the winter heating season almost over, but production is also on the rise.

2011: The year of the natural gas comeback

There's no doubt that demand is back on the up and up.

According to EIA data, U.S. natural gas demand in 2010 was higher than ever. Our total consumption for that year reached 24.1 trillion cubic feet, a 5.6% year-over-year increase.

Consider the fact that we only produce about 27% of the oil we use. And we're all painfully aware of our country's addiction to foreign oil...

Natural gas is much different. Last year, we produced 87% of our demand domestically.

Although demand for natural gas goes primarily towards electric power and the industrial sector, there's also a wild card: the U.S. transportation sector.

Doesn't it make sense that our transition away from oil would come from natural gas?

Perhaps UPS adding 48 LNG-fueled heavy-duty trucks to their fleet is a sign of things to come. To date, the company has just under two thousand alternative technology vehicles — more than half of which use LNG for fuel.

Is it time to buy natural gas?

You might find it all too easy to dismiss natural gas plays. The price chart above might suggest there's not much to get excited about...

Natural gas has been shadowed by oil throughout the last few years.

Only two years after oil bottomed at $33/bbl, and we're once again staring down the barrel of $100 oil. Brent crude even hit $120 per barrel recently — just $27 shy of the WTI record set during the summer of 2008.

In fact, crude prices have jumped considerably higher, up more than 170% since 2009. I showed you earlier that oil drilling activity is ready to overtake natural gas.

Does that mean your natural gas investments have suffered a similar fate?

Far from it, actually.

Take a look at how some of those companies have been performing for investors:

The truth is these companies don't need $15/Mcf to thrive. And some companies are eying even bigger returns...

Range Resources (NYSE: RRC), for example, announced this week the company is selling off their Barnett Shale properties for $900 million. (That's roughly 20% of their total production.)

The sale will allow Range to focus on other plays with more potential, like the Marcellus Shale in the Appalachian region. Almost 90% of their 2011 budget is being spent on the Marcellus.

Those shale plays are going to play a major role in meeting future demand. As you can see below, the EIA expects shale gas to make up 45% of production by 2035:

Just imagine what will happen when natural gas prices start to rebound...

Later this week, I'm going to show you another hotbed of natural gas activity. And the best part is these natural gas investments are still flying under everyone's radar.