Sunday, March 29, 2015

No income growth in two decades

Despite two stock market booms, there has been no real income growth since 1994:

Real Median Household Income Has Been Flat for 20 YearsDespite ultra-loose monetary policies over the past several years, incomes adjusted for inflation have fallen for the median U.S. family. With the benefits of monetary expansion going to a small share of the population and wage growth stagnating, incomes have been essentially flat over the past 20 years. In the long run, however, classical economics would tell us that the pricing distortions created by the current global regimes of QE will lead to a suboptimal allocation of capital and investment, which will result in lower output and lower standards of living over time. In fact, although U.S. equity prices are setting record highs, real median household incomes are 9 percent lower than 1999 highs. The report from Bank of America Merrill Lynch plainly supports the conclusion that QE and the associated currency depreciation is not leading to higher global output. The cost of QE is greater than the income lost to savers and investors. The long-term consequence of the new monetary orthodoxy is likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity.
Karl Denninger was among the first to point out that even if it worked, Quantitative Easing could not possibly do what was claimed of it. Thus demonstrating what I pointed out, which is that it was merely about buying more time for the bankers to make hay before the eventual crash of the global economy. We're already seeing signs of the wars that conventionally accompany depressions, and depending upon your definition of depression, we're only six years into this thing.



Blogger James Dixon March 29, 2015 12:03 PM  

> We're already seeing signs of the wars that conventionally accomplish depressions,

Accomplish or accompany?

Blogger Bob Wallace March 29, 2015 12:30 PM  

Wages peaked in January, 1974.

Anonymous Donn March 29, 2015 12:44 PM  

Nobody needs to tell me about loss of opportunity and wage depression. I've lived it. Society makes Sodom and Gomorrah look like Disneyland and War is coming. I think years rather than decades.

Anonymous Titus Didius Tacitus March 29, 2015 1:10 PM  

The theory that moral corruption reigns because the masses have been so prosperous for so long isn't looking good. The masses are not prospering, and have not been doing so for a long time. "With the benefits of monetary expansion going to a small share of the population and wage growth stagnating, incomes have been essentially flat over the past 20 years."

Unlimited free money for a segment of the population interested in using it for W-word G-word thing-that-shall-not-be-mentioned, constant and pervasive mass media promotion of corruption, anti-white preferences and an unprecedentedly corrupt legal system (promoting abortion whole gutting marriage) doesn't seem to be the magic formula for a morally sound society.

Blogger James Dixon March 29, 2015 1:31 PM  

> The theory that moral corruption reigns because the masses have been so prosperous for so long isn't looking good.

It seems to be that assumes that it's the masses who are morally corrupt.

Anonymous Incurvatus March 29, 2015 1:39 PM  

Worse, the chart shows *household* income declining, instead of median *per capita* income or median *wages.* Parents required to take second jobs would show a boost in household income, despite it being a decline in standard of living.

Blogger IM2L844 March 29, 2015 1:39 PM  

I think years rather than decades.

I'm doubling down that it begins to become obvious to everyone by sometime this summer...fall, at the latest that the wheels are coming off and panic ensues.

Anonymous Will Best March 29, 2015 1:46 PM  

I think its important to note that if you want to claim real household median income has been flat for 20 years, then it has been flat at around 54k and not 52k. You could also make the statement that things were flat from 1970 to 1985 or from 1974 to 1993.

The other issue to consider is that Household sizes in 2013 were 2.54, 2.67 in 1994, and 2.97 in 1964. So even if real median household income is flat, resources per person have increased. Well assuming an accurate measurement of inflation, which there isn't one.

Blogger Cecil Henry March 29, 2015 1:55 PM  

I agree, things are not great despite the headlines.

But the bread and circuses continue in the form of big government, big taxation, EBT, and endless Jerry Springer and reality TV.

ITs sickening.

The attention and accolades being given to a female 'writer' who decides to leave her husband of 10+ years to do a year of wanton sexual promiscuity is truly disgusting and surreal.

The cowardice and amorality of the MSM is truly staggering. There is nothing to defend in that.

Anonymous Too-Soon-ami March 29, 2015 2:01 PM  

"Flat" is the wrong word to describe that chart. Income went up, down, up, and then down to where it was 20 years ago. They could also extend the $52k line back further, and claim it's been 'flat' since 1987, except for that down + upswing from 1987 to 1994.

Blogger LP 999/Eliza March 29, 2015 2:12 PM  

No, there was only theft, outsourcing, offshoring, more theft, lies, more lies...

Game over.

Blogger Mark Citadel March 29, 2015 2:30 PM  

The wealth of America was squandered on the ever-expansive and illegitimate bureaucracy which has strangled the workers. Monarchs of yore would have balked.

Anonymous Titus Didius Tacitus March 29, 2015 3:13 PM  

What would happen to China if China's rulers looked Chinese but had no loyalty to China, and imported Somalis and other third-worlders to make the Chinese a minority in their own country? As official Chinese newspapers gloated about "the blackening of China" would the growth of the Chinese economy be unaffected?

There's no reason why America, or many countries like it, should be unaffected by the replacement of the populations that built these countries and made them prosperous and good.

Blogger IM2L844 March 29, 2015 4:07 PM  

The cowardice and amorality of the MSM is truly staggering. There is nothing to defend in that.

Yes. There is nothing quite so annoying and disturbing as a society that truly believes it is more "enlightened" than all previous generations when it's perfectly obvious to me that human nature is precisely the same as it's always been and no amount of discovery or knowledge will ever change that.

Blogger Retrenched March 29, 2015 4:24 PM  

Dont worry, Im sure importing millions of immigrants and giving them welfare and low paying jobs will fix this.

Blogger Retrenched March 29, 2015 4:24 PM  

Dont worry, Im sure importing millions of immigrants and giving them welfare and low paying jobs will fix this.

Blogger Black Poison Soul March 29, 2015 4:31 PM  

Try closer to 40 years it's been flat.

Blogger RobertT March 29, 2015 4:44 PM  

And wages have been flat since 1964.

Anonymous grey enlightenment March 29, 2015 4:46 PM  

Where does it say in any economics theory that real wages must rise? The left is trying to paint this as a crisis when there is no evidence it is.

Anonymous grey enlightenment March 29, 2015 4:57 PM  

Real entitlement spending has surged in the past 40 years, which the leftists fail to account for.

US effective corporate tax rate is among the highest in the world

The most recent estimate comes from the World Bank and International Finance Commision, which put the United States’ effective rate for 2014 at 27.9 percent. That’s second-highest behind New Zealand among OECD countries and 15th-highest among the 189 countries measured.

Instead of attacking QE, the target should be America's excessively high tax rate

Anonymous Mike M. March 29, 2015 5:01 PM  

"Wars that follow depressions"

Vox, I've never heard of it put that way. It's usually thought of the other way around. Not that you're wrong, but it's an interesting way to put the cycle.

Blogger grendel March 29, 2015 5:09 PM  

The scary thing is that broken window economists truly believe that war ends depressions. After all, WWII ended the Great depression. They ignore the evidence that WWI debt is what started the Great depression. So from their perspective, WWIII is looking bullish as hell right now. Kill some excess population, create some jobs in the weapons industry, redraw some inconvenient national borders, war fatigue and bolshevik revolutions. Duh, Winning!

Anonymous Mike M. March 29, 2015 5:25 PM  

Yup. Normally, a war is followed by a depression. World War 2 wasn't because of the mobilization of women as temporary workers, and forced war bond purchases to control inflation.

Blogger LP 999/Eliza March 29, 2015 6:02 PM  

I have another theory or its not so different.

The welfare, disabled, those who can work but dont wish to, those who tried n' failed and those who are sincerely too dysfunctional to bring into the labor force are here in epic numbers. I see the over the counter meds, food, general survival stuff a bottle of nasal rinse, depends or miralax, edu-college-debt-fraud, dental/eye care, insurance, car buying throwing the middle class out of the middle class into poverty.

I say the purge of dependents could be on its way. After the wealthy and those who made better decisions, were smarter, etc., are looted, loot the middle classer, proles and kill off the dead beats.

Everything has gone unaffordable.

Also on the uncomfortable side are a few gym pals who were appalled at being asked to prove their health care ins (HC) when doing their taxes. They are forced out of the market of HC.

The frankenmedia is so utterly co-opted with non-stories and lies like how great things are that tv media/online SJW'ers are next to be purged followed by the SSI rolls.

Don't know could be wrong, after all, I am writing more towards the micro than the marco econ, more of the cultural than the numerical/statistical.

Blogger pyrrhus March 29, 2015 6:16 PM  

A more realistic inflation number, which takes into account the soaring costs of college, energy, and taxes, leads to the conclusion that incomes for the middle class have declined since 1970.

Blogger JaimeInTexas March 29, 2015 6:27 PM  

Nothing advances the decay of morals and increases government like war.

Anonymous Titus Didius Tacitus March 29, 2015 6:31 PM  

LP 999/Eliza, I think that you've got a point in that the corruption of the mass media means there is no feedback loop. Those at the top can harm whom they like in an increasingly subsidized population, and it's not relevant unless it's in the news, which it won't be.

Anonymous Titus Didius Tacitus March 29, 2015 6:33 PM  

JaimeInTexas: 'Nothing advances the decay of morals and increases government like war."

The war on terror has removed the taboo on torture. If that's not moral decline I don't know what would be.

Anonymous Will Best March 29, 2015 7:22 PM  

Where does it say in any economics theory that real wages must rise? The left is trying to paint this as a crisis when there is no evidence it is.

If you aren't growing you are dying. Harvard school.

soaring costs of college, energy, and taxes

College is not a required purchase. It was the notion that it was required that resulted in government policies dedicated to malinvestment.

The war on terror has removed the taboo on torture. If that's not moral decline I don't know what would be.

Has there ever really been a taboo on torture?

Blogger Thucydides March 29, 2015 7:36 PM  

Some of the asymmetric wealth distribution is explained by power law distribution (AKA the The Pareto principle ), but I will say that by far the greatest killer of income growth has been the ever increasing size of the State.

Consider in Canada, the average family of four is estimated to have 40-44% of their income devoted to taxes and government fees from all levels of government. A bit difficult to grow your income if the State is taking almost half of it. The massive growth of the regulatory regime is also a major factor; once again using a Canadian example, in Ontario it is estimated that a small business owner will spend over 30hr/month on mandated government paperwork, record keeping etc. Think about that; if you work 40 hr a week, then at that rate you spend almost one work week every month simply to satisfy the regulatory requirements of the State. And if you can only spend 3/4 of your time working to grow and expand your own business, then the people who can do it full time are going to clean your clock.

This toxic stew only gets better as the government uses the power of the State to transfer even more of your wealth to their crony capitalist friends; once again in Ontario, we now pay "Green" energy barons among the highest utility rates in North America, with energy prices only set to continue their upward spiral.

Since the cause is pretty clear, the solution is also equally clear. The real issue is will the solution be carried out by a controlled drawdown of State power, or will there have to be people swinging from lamp posts in the end?

Anonymous Titus Didius Tacitus March 29, 2015 7:38 PM  

Will Best: "Has there ever really been a taboo on torture?"

I see no sign of a taboo against torture in the way that Germans were treated after World War II, particularly in the way that confessions regarding the Holocaust were obtained. Considering the testicle-crushing brutality of the interrogators, it's only by a fortunate coincidence that all the testimony is objectively true.

All right: there was a War on Terror mass media propaganda campaign to make torture much much less taboo than it had recently been. There was a great change from the Cold War attitude that torture and brainwashing were things that they did, that we did not do.

There were not discussions in National Review Online before the War on Terror on topics like whether "enhanced interrogations" (relatively nice stiff that we do, unlike "torture") should rightly include everything short of destroying major bodily organs, or whether even cutting off fingers and toes might be going too far.

When the new standards of the War on Terror came in, Mark "Chopper" Read might as well have been a moral authority. And that was a change.

Anonymous Repair_Man_Jack March 29, 2015 7:41 PM  

I interpret that chart differently. The Economy flat-lined in 1997/98. Notice d(income)/dt is monotonic increasing up until then. From 1998 to 2007, it was static. Some years up/some years down, but Income 1998 = 2007. From 2007 on, it's in the toilet.

Anonymous Titus Didius Tacitus March 29, 2015 7:52 PM  

I know that I was completely wrong about what was possible. I said at the time (in 2001) that we would not go in for terrorism and torture because the great American public would never stand for it. That was how many people thought at the time: there were accepted standards and a healthy public opinion would maintain them.

How utterly wrong I was! The great American public doesn't decide anything, so it cannot maintain moral standards against elite opposition. (This applies as much to economics as to war-making, as the big bailouts and the lack of economic crooks going to prison show.) The public can, under enough pressure, be made to accept many things that are morally wrong. And the anti-white elites that rules us are not receptive to the moral sentiments of the white working class, or even economic sense; the consequences of mass third world immigration are obvious, but the anti-white elites are anti-white first, last and always. So much for many virtues, including patriotism and concern for our posterity.

Standards of righteousness have been torn down. Probably they were never held up by enough force to begin with, or they could not have been torn down. But the tearing down was still a change.

Blogger grendel March 29, 2015 8:00 PM  

"Considering the testicle-crushing brutality of the interrogators, it's only by a fortunate coincidence that all the testimony is objectively true."

That's hilarious. Fortunately our investigation completely exonerated us.

Regarding what mechanism ended the Great depression, I read an argument that rationing resulted in pent up savings/demand which was unleashed in 1946 and carried us into the sainted 50s on a tidal wave of consumption. It was written by gunwriter Frank W. James, but I think it was lost in the death of his previous blog.

Anonymous Titus Didius Tacitus March 29, 2015 8:21 PM  

What matters now is that we live in an era where:

(a) There are no plausible means by which the sort of misbehavior that can bring down the whole system would be punished on an individual level. We have made a trial of it, and nobody went to prison, and the ruling elite had no real reaction except to freeze out the angry public and resume as if nothing had happened.

(2) Public morality is being rapidly and efficiently eroded from the top, so that even if "we the people" had a say we are increasingly likely to say wrong.

(3) Nationalism, which is inherently partly racial, and concern with ones posterity (ditto) are practically prohibited (for whites), with the result that many people who in a different era would have been public-spirited just have the mentality "I hope the wheels don't come off before I die".

(d) The world LP 999/Eliza March 29, 2015 6:02 PM described exists, and that world is completely passive and vulnerable, there to be squeezed from the top without recourse.

The brakes on this car are shot.

I'm keeping 2034 in the economic dead pool.

Blogger LP 999/Eliza March 29, 2015 8:25 PM  

Math, stats and charts still rule.

Politics are meaningless if ones knows their econ and banking, its all predictable. (OT; I predict Goldman funds failure loser boomers, wins and Post America is stuck with another loser in another loser administration.Paul, Rubio and that other repub guy will have nothing but misery and wasted money running for an office no one wants.

Wasn't the current admin gen xers? Sans voter fraud gen x prevails.)

Anonymous Frank Brady March 29, 2015 8:26 PM  

Perhaps the most damaging factor is that the elite's self-interested manipulation of all economic data has corrupted the market's ability to communicate value and hence the population's ability to act upon it. Every metric to come out of Washington is fraudulent, from inflation and unemployment rates to GDP calculations and the true size of the national debt.

Blogger LP 999/Eliza March 29, 2015 8:40 PM  

Time to stop at 8 ounces and go to sleep.

Just as throughout history, 30 to 50 years from now wont be anything that once resembled reality as we know it or nothing changes. With the national financial problems and dependence on foreign banking cartels, next up is the Bank of China, I dont see a bright future for post america in 2030, 2034 or whatever.

Anonymous old coyote March 29, 2015 9:25 PM  

It must burn down, for something new to rise from the ashes. There may be places where white Christian civilization will rise again, or not. Some are preparing to help that happen.

Blogger Cecil Henry March 29, 2015 9:44 PM  


Government regulation and coercion in Ontario and Canada is just insane. Why work???

WE have communism. The government control wages and incomes AFTER the fact with taxation. The government takes 50% of everything. If you work hard then it is simply given to someone else by force.

Bureaucrats love regulation as it justifies and entrenches their power and income. If you have a business well by God do your best to hire NOBODY or you will find yourself working for your employees instead of the other way.

There are 1000;s of regulations that could never be implemented without destroying profitability but it gives the government 100% leeway to control and coerce every business in the province.

Every time you work you feed the parasite.

Its disgusting. Just be a parasite and GTHO.

Anonymous Titus Didius Tacitus March 29, 2015 9:53 PM  

Don't worry about "nothing changes". That's not an option.

Anonymous Jack Amok March 29, 2015 10:12 PM  

I don't see how anyone could expect real income growth when there are fewer people doing real work. Lawyers, lobbyists, political fixers, banksters, brokers, accountants, advocates, organizers, bureaucrats and billing code specialists are support personnel. They may work real hard, but in the end they're not making anything. Possibly they're getting in the way of people making things.

Any army that makes being in charge of a supply depot the ticket to promotion isn't going to win very many wars, and an economy that makes paperwork the ticket to a paycheck isn't going to be much of an economy for long.

Anonymous Samuel Scott March 30, 2015 3:40 AM  

I'm not sure how accurate such claims are. Sure, real salaries have not risen since, I think, the late 1970s. However, what happens when you add benefits -- what has been the change in the level of total compensation?

I don't have the data handy, but I think I once saw that real salaries have not risen because companies have been paying more and more for their part of health insurance plans over the years as those costs keep rising.

Blogger ScuzzaMan March 30, 2015 7:48 AM  

The depression was ended by the massive reduction in government spending after the war ended.

The logic of this proposition is simple and unassailable, particularly in light of the subsequent decades of increased government spending which have correspondingly reduced the common weal, and especially degraded the living standards of the middle and lower classes to the benefit of the already wealthy.

The wealthy and powerful do not control our "democratic" elections so that their house-trained pets will bite the hand holding the leash. No, they do so because doing so benefits them at the expense of the rest of us.

Blogger David March 30, 2015 8:48 AM  

This graph is interesting, but David Stockman's publishing of the wages vs GDP is more revelatory. In sum, wages constitute the smallest share of GDP on record, meaning that financial income (gaming the herd's perception of value) has crowded out work income.

Prechter has noted that gains from the FIRE economy are a late-stage (5th wave) development, and given their rise to dominance since 1980 +/- 2 years indicates that the entire 35 year period is the last "surge" in a much larger rally. This fits with the notion that the "correction" to the money-debased, debt-fueled binge of the past 3 decades will be a punishing denouement, something commensurately larger than that of the Great Depression.

Blogger justaguy March 31, 2015 2:35 PM  

Aren't we forgetting that what we are able to buy is much greater now and in 1974? Technological progress and higher production lead naturally to deflation. Yes monetary policy changes this to slight inflation, but all we have done is buy larger houses, more TVs, and much more more entertainment. Look at purchasing power and a stable set of gets cheaper.

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