businessinsider/mark-cuban-student-loan-bubble-2014-6 The shrinking middle class. Even Walmart has taken to warn in its projections of financial statements that the shrinking middle class and increasing poverty of its customers is impacting its bottom line. As the American economy becomes a high-cost (for basics like housing, transport and higher education) and low-wage one, it is on its way to becoming a htm economy (hand-to-mouth) whereby almost every penny of salary is spent on basis, and very little savings can occur. We know that in macro-economics, that total income = consumption + savings/investment, i.e., business borrow money from private savings to invest in increasing the business. If all income goes to coinsumption, then there will be no more savings and investment. Wall Street thus depends on a healthy Main Street, or so goes the classic paradigm. But increasingly, it seems, that is no onger the case. Businesses still have access to capital despite low private savings. How? My hypothesis is that Wall Street is so disconnected from Main Street that it gets its savings from the 1%. It seems that stock prices go up (known as stock appreciation) due more to larger markets, being bigger, mergers and acquisitions, and less on profitability especially if that profitability is from making goods for low-income customers. Think QE. When the Fedeal Reserve bought Federal bonds on the open market, it was like having investors cash in their bonds, and then these investors place this money onto the stock market. Nowhere is there a way for the 99% to benefit directly from QE. And very few of the low-income 99% own enough stocks to strike it rich with QE.
Posted on: Sun, 22 Jun 2014 00:26:59 +0000
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