The Financial State of the US economy 2016

Many people are concerned about the U.S. economy. Facts about the financial situation of the United States indicate that our economy is “chronically ill”.

According to the Federal Reserve, the anticipated average economic growth for this year is 1.9%, "much lower than the projected 2.5% in March and 3.1% last year". 

Since the late 1800s, the U.S. has held the title as the world’s largest economy. However, in 2014, China overtook the U.S. to become the largest economy in the world. The projected growth for the Chinese economy is 7.1% for 2015, but only 3.1% for the U.S.

The median household income, adjusted for inflation is $51, 939, this is almost $4000 lower than in 2000. 

The wealth gap is more extreme today than it was during the Great Depression. From 1979 to 2012, the top 5% of American families experienced a 74.9% increase in their incomes while the lowest-income fifth saw a decrease in their incomes of 12.1%. The divide between rich and poor is especially notable when examining the salaries of CEOs: In 2009, the average CEO made 263 times as much money as the average American. 

Average hourly wages have largely levelled off since the 1970s. Since 1972, the average hourly wage increased by only 9%, compared to an increase of 76% between 1947 and 1972. 

Young people today cannot expect to improve their conditions as their parents and grandparents have done. Although many middle class families own homes and have pensions, they also have higher mortgages to repay and higher consumer credit and student loans. Rising indebtedness was offset by the rise in market value of the assets of middle-class families. But this collapsed with the Great Recession of 2007-2009.   

Moving into the future, Americans (the bottom 90%, not the top 10% richest) are projected to borrow more money and put themselves further into debt despite stagnant incomes and wages and little economic growth. Corporations are also expected to borrow more money than they did before the market crash of 2008. From now until at least 2017 it is expected that America will experience a “tsunami of debt”. 

In the spring 2015, investors in America moved away from stocks in the biggest retreat since the 2008 financial crash. Investors pulled out of equity mutual funds and ETFs of $35.8 billion.  

That should keep you up at night. Most of all, that should tell you that traditional means of investing, as in giving your broker your nest egg is no longer the route to take. What is the route? Stay tuned for tomorrow nights post.