The CoronaVirus Bailout Is Working — for the Rich

As I mentioned back in March 2020, the economy is in free fall but the billionaires are thriving, and stocks of big private equity firms are soaring dramatically higher. As usual, the billionaires have been the real beneficiaries of the federal government’s massive rescue efforts. 

Ten weeks into the worst crisis in 90 years, the government’s effort to save the economy has been both a spectacular success and a tremendous failure.

Two events showed this better than anything. On Friday, May 8th, 2020, the government reported that 20.5 million people had lost their jobs in April. That is massive damage to the middle class. The rich receive 2/3rds to 100 percent of their income from holding corporate stock. The stock market rallied with the news of the 20.5 million lost jobs. They are likely expecting trillions more from the Federal government and the Federal Reserve. 

The second event happened on Thursday, May 14th. The government reported the middle class lost another 3.8 million jobs, and the stock market rallied again both that day and the following day. 

If you’re looking for the billionaire’s decision on who has won the four government and Federal Reserve bailouts, consider these returns: Shares of Apollo Group, the giant private equity firm, have soared 80 percent from their lows. The stock of Blackstone, another private equity behemoth, has risen 50 percent. The Nasdaq Composite Index has gotten back nearly all of its losses. 

 

ProPublica reports that billionaire clubs such as “Apollo and Blackstone, disproportionately the wealthiest and most influential, have been insured by the world’s most powerful central bank. This largess is boundless and without conditions. “Even if a second wave of outbreaks were to occur,” JPMorgan economists wrote in a celebratory note on May 9th, “the Fed has explicitly indicated that there is no dollar limit and no danger of running out of ammunition.”

“Many aspects of the coronavirus bailout that assist individuals or small businesses, meanwhile, are short-term or contingent. Aid to small businesses comes with conditions on what they can do with the money. The sums allocated by the CARES Act for stimulus and expanded unemployment insurance are vast by historical standards. But the relief they provide didn’t prevent tens of millions from losing their jobs. The assistance runs out in weeks, and the jobless live at the mercy of a divided Congress, which will decide whether that help gets extended and, if so, for how long.”

Meanwhile, the billionaire’s investment clubs can expect additional trillions of dollars from the Federal Reserve and U.S. government. Picture the CEOs of these firms manipulating puppets by a string, then picture Nancy Pelosi and Mitch McConnell and you’ll understand how politics work. 

ProPublica went on, “The Fed’s efforts, universally praised for their boldness and speed, have come in two stages. First, in February and March, the central bank shored up the capital market “liquidity,” which marks how willing investors are to buy and sell. The central bank’s role is to be a “lender of last resort,” working through banks so they can get money to companies and people.

The second stage of the Fed’s extraordinary rescue goes beyond liquidity. It has said it will buy assets it has never bought before. For almost 100 years, the Fed purchased only government bonds. Now it has announced a wide variety of programs to buy various forms of corporate and other debt, either by direct lending, by buying bonds, or buying loans.”

The mere announcement that the Fed would do this had an immediate effect, spurring the boom in corporate borrowing. For example, if Amazon issued a bond costing $1 trillion at face value and it comes due in five years. The Fed simply buys the bond and Amazon gets $1 trillion from the Fed. When the bond comes due in five years,  the Fed will simply print up the money and pay itself. Meanwhile, Amazon and its mostly billionaire and multi-millionaire shareholders divvy up the trillion dollars among themselves. 

ProPublica reported, “The Fed didn’t stop with the most solid, safest corporate stalwarts. In early April, it also announced something unprecedented. The central bank said it would buy junk bonds, debt issued by fragile companies, many of which already have crushing debt loads. Sure enough, junk bonds roared back and their cousins, leveraged loans, revived.

In doing so, the Fed backstopped the riskiest markets in the world. The most dangerous investments in the world, it should go without saying, are not owned by middle- and working-class Americans, to whom every politician pledges fealty. No, they are owned by the most risk-seeking investors in the world, the ones that need the highest returns: private equity firms and hedge funds.

The Fed has to work through the credit markets. The House and Senate have much greater powers, the power of the purse and of legislation. Congress could have passed laws that directed help in different ways. Europe has essentially nationalized payrolls, a much more direct form of aid to people who have lost the ability to work. However, the rotted corruption of the U.S. Federal government has seen it reluctant to use sufficient fiscal measures going back to the 2008 rescue.

What happens if the economy doesn’t come back soon? If the health crisis does not pass quickly, or if the economy does not roar back, the Fed’s actions might prove inadequate. But investors shouldn’t be too worried. They have been taught they can count on the government to rescue them from their bad investment decisions, and so they can make plenty of bad investment decisions. 

The Bailout is Working for the Rich-ProPublica

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The CoronaVirus Stimulus Bill: The Rich Get 5 Trillion, We Get Crumbs

The rich receive most of their income, from 2/3rds to 100 percent, via corporations, either through capital gains by the selling of shares or with dividends distributed to shareholders. So it should come as no surprise that the billionaires who control the Republican Party got what they wanted in the Federal stimulus bill while the billionaires who control the Democratic Party got theirs, as well. They got more than the bill itself.

The rich will receive $4.95 trillion from the $2.2 trillion stimulus bill. You read that right. The $2.2 trillion includes more than $450 billion for large corporations, allegedly in loans. The bill includes a proviso that the Federal Reserve can print up to ten times that amount and lend that $4.5 trillion with a nod and a wink to large corporations.

The combined profits of all US corporations in 2018 and 2019 were slightly over $4 trillion before taxes. The rich and their corporations, in other words, are getting more than two years’ worth of profits from the stimulus bill. This money will mainly go to the largest corporations, which means the money will go to a small number of corporations, pretty much the 100 to 150 largest. This means a massive stock market bubble is on the horizon fueled by the Fed, lies, political corruption, smoke and mirrors.

In effect, both the Democratic and the Republican members of the US congress decided to save their rich owners by giving them trillions of dollars, most of which will go to the top 1 percent. Then they throw crumbs to the rest of us and their corporate media dutifully failed to report this. Huffington Post and The American Prospect and a few others did report it.

Now, yes, some of you will say, but these are loans. The corporations need to pay the loans back. Wrong! In the future, Fed officials will tell you the loans have been repaid, or the loans were never made, but those will be lies, just like when Fed officials told us the $26 trillions it loaned out to twelve banks during the Great Recession was all paid back by 2011.

That $26 trillion bailout was top secret. Nobody was going to be told about it except the recipients, banks such as Goldman Sachs and JP Morgan/Chase. Then United States House members Ron Paul and Alan Grayson pushed through a bill authorizing the first and only audit of the Fed. The non-partisan General Accounting Office uncovered the $26 trillion bailout. Otherwise, we were never going to be told of it.

The entire U.S. banking industry in the four years from 2008 through 2011 earned $158 billion pre-tax dollars. The $158 billion represents less than 7/10ths of 1 percent of $26 trillion. Obviously, the banks could not have returned the money. It was mathematically impossible. Then Fed Chairman Ben Bernanke after the audit proceeded to lie when he claimed the money had been paid back, and this was mostly ignored by the corporate media.

So you know what’s going to happen. Major corporations will receive close to $5 trillion that they will never need to return, and will never pay taxes on since Fed officials will lie and either say, “They paid it back,” or “They never borrowed the money.” Don’t expect another audit for 100 years. (There has only been one audit of the Fed in its 100+ years of existence, and that is how the $26 trillion bailout was discovered. Click this link for that story.)

0.01 percent of the U.S. population will receive nearly $5 trillion. That money will be used for dividends, CEO compensation, share buybacks in the future (since they are limited with this bill),  and just about anything the billionaires want. That’s why they pay the big bucks in the form of campaign contributions to politicians and spend billions of dollars on lobbyists.

In the meantime, a large portion of us 314,685,000 citizens will share $1.75 trillion (about $5500 each on average) to help keep the economy afloat while the roughly 300,000 richest of parasites share $5 trillion, which comes out to a little over $16.6 million each.

That should tell you how corrupt our democracy and both major political parties have become. You should also be aware that with the $26 trillion bank bailout the Fed went from being a central bank to a money-laundering machine for the banks and their rich shareholders. With the new bailout, the Fed has been given permission by the Federal government via both major political parties to be a money launderer for the rich and the rest of their money-making corporations. In other words, the Fed has been a criminal enterprise for the rich by violating U.S. money-laundering laws since 2008.

For more on this from the American Prospect, click the following link.

For more on this from the Huffington Post, click Democrats Are Handing Donald Trump The Keys To The Country: The Senate coronavirus bill is shocking.

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Why It’s Time to Raise the Minimum Wage to $15 or More an Hour: What the Corporate News Media Doesn’t Want You to Know

Source: Economic Policy Institute, http://www.epi.org/publication/charting-wage-stagnation/

More than 40 million US workers would get a raise if the US minimum wage was raised to $15 an hour. Doing so would do five important things to help the US economy.

1. It would increase the demand for goods and services and create jobs in the process. Currently, we are in the worst post World War II economic expansion in US history, except for the last one, you know, that negative job growth under the economic policies of the worst president in US history, George W. Bush! Outside of that expansion, the current expansion is the worst, with the lowest job growth, the least GNP growth, and lots more historically weak statistics.

2. Every US economic expansion since 1981 has been caused by artificial bubbles which have created artificial stock market bubbles, which have almost completely benefited only the rich, and mostly the super rich, at the expense of everyone else. The Bill Clinton presidency saw the creation of 22 million jobs, which came about because of simultaneous housing, tech, stock and telecommunications bubbles. The tech and telecommunication bubbles were created by Clinton’s signature on legislation. The current economic bubble has been created by an illegal housing bubble created by the big banks. See The fix is In! The Banksters are Manipulating the rise in housing prices: Mortgage applications are down for home sales–Johnhively.wordpress.com Raising the minimum wage would create more demand, possibly creating the first demand inspired economic expansion since the Great President Jimmy Carter.

3. Raising the minimum wage to $15 an hour would steer money away from the stock market bubble because it would decrease corporate profits, and perhaps gently deflate the current bubble that is due to burst in a few months anyway. The other option is to allow the bubble to run its course and essentially ruin the US economy like what occurred from 2007 to 2012 and from 1929-1933. The next recession will be worst than the last one, and it’s just around the bend.

4. Income inequality is at an all-time US high with the 1 percent stealing about 37 percent of all income produced in the USA every year compared with only 8 percent in 1980. That means the 99 means we have less money to buy things, while the rich primarily purchase things like stock options, stock, bonds and politicians. This inequality is stifling the demand sector and weakening the economy which is why the US economic expansions since 2000 are the weakest in history. This is, of course, unless, the creation and functioning of the US and worldwide economies are solely for the benefit of the 1 percent, and always at the expense of the 99 percent. You can see from the graph above the rich are stealing $17,867 from every working American, and they do this year after year after year. I think it’s time we get a little of our money back.

5. Wealth inequality is also near an all time high in the USA, and this means (along with income inequality) the rich can afford to buy the services of more politicians, which has already effectively turned our democracy into both an illusion and a myth, and this occurred perhaps as early as 1981. Raising the minimum wage would cut away a bit of the economic cancers known as wealth and income inequality.

The corporate talking heads will also insist raising the minimum wage will result in lost jobs, but there are plenty of studies showing not a whole lot on this issue. Most studies on this subject during the last twenty years show a rise in the minimum wage has a negligible impact on job loss, or jobs experience slight growth. On the other hand, most minimum wage increases that have been studied have been minimal and very local.

However, all of this is irrelevant because there is one gigantic study that shows that when the real wages of the 99 percent go up, so too does the US economy, and not just for the benefit of the few. This study is called the history of the US economy. Notice in the graph below real wages grew in the US economy from 1948 to 1978. In reality, you can go back to 1938 and see the same stuff. Inflation was low and job growth was high during the years 1938 to 1980. The middle class was strongest then, and demand for US goods was incredibly strong, especially the demand from US citizens. Even the rich got richer, although the percentage of income and wealth they could steal from the rest of us was small compared to today.

Source: Economic Policy Institute, http://www.epi.org/publication/charting-wage-stagnation/

Corporate talking heads will always lie and say raising the minimum wage will increase inflation. In reality, allowing the financial markets to rise in bubbles creates inflation, as I pointed out in my book, The Rigged Game.

Now some people will say inflation was fairly high during the 1970s, and yes that is kind of true, and then kind of not. That’s because the US government has changed the way it measures inflation twenty times since 1981, and every change has the intended effect of lowering the rate of inflation. In other words, if inflation is 1.5 percent nowadays, using the methodology of 1975, today’s inflation would be about 6 percent. Average yearly inflation during the 1970s was 7 percent, and so using today’s inflation methodology, inflation during the 1970s would have averaged about 2.5 percent, which isn’t all that much.

You can also see from the graph above how real hourly wages have stagnated since 1978, but of course, that’s a lie since real wage increases are measured against inflation, and we know inflation is no longer measured like it used to be. If inflation over the last 35 years was measured with the methodology used by the US government in 1975, US inflation would be significantly higher each of those years, and real US wage growth during this period would be negative, year after year after year for the last thirty or more years. This means real wages are significantly lower nowadays than the available statistics will allow us to measure, and this, of course, is one of the reasons why the government changed the way it measured inflation: it stops us from seeing how much we of the 99 percent are getting screwed by our corrupt government in redistributing our income and wealth to the 1 percent.

I don’t know about you, but I want my money back! Raise the minimum wage!

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Good News the Corporate Media Has Failed to Report: Rising US Wages Finally Happen in 2016

The Economic Policy Institute (EPI) reports that US wages grew in real terms (wage growth minus inflation) during 2016. While good news for the people who actually do the work of producing the goods and services necessary to keep the economy humming, this is also bad news.

EPI reports that income inequality continues to rise. “Rising inequality,” the report states, “means that although we are finally seeing broad-based wage growth, ordinary workers are just making up lost ground, rather than getting ahead. The way rising inequality has directly affected most Americans is through sluggish hourly wage growth in recent decades, despite an expanding and increasingly productive economy. For example, had all workers’ wages risen in line with productivity, as they did in the three decades following World War II, an American earning around $40,000 today would instead be making close to $61,000 (EPI 2017c).” That income difference has been redistributed to the very rich since 1981.

The report went on, “A hugely disproportionate share of economic gains from rising productivity is going to the top 1 percent and to corporate profits, instead of to ordinary workers—who are more productive and more educated than ever. This rising inequality is happening largely because big corporations and the wealthy have been rewriting the rules of the economy, particularly the job market, to stack the deck in their favor. This has prevented the benefits of productivity growth from “trickling down” to reach most households.” In other words, trickle down economics was a complete farce.

Now for the bad news. The economy is heading on a crash course with the worst and most prolonged recession since the Great Depression sometime around June of this year, give or take a month or two. The severity of this recession is due to the income and wealth inequality the US and the world has experienced since 1981, the year it pretty much began. I have been watching this current business expansion unravel since before November 2015. See The Coming Recession is Going to Be a Big One-JohnHively.wordpress.com There are always certain variables that precede a recession. Many of those began a year and a half ago.

Typically, the last variables to happen before an economy tanks is that wages rise and the Federal Reserve raises interest rates. Now those variables have officially happened. The Fed will likely raise interest rates again this month.

Somebody might point out that the economy is humming along with wage growth, low unemployment, etc…. How can we go into recession?

The growth of any business expansion has much in common with hiking up a mountain. Once you step on the highest point of any mountain, the next step is down. And so it is with any economic expansion; once it hits a peak, the very next step is down into recession. This month, March 2017, is the 93rd month of this economic expansion, making it the third longest in history. Compared to every economic expansion lasting six or more years, the current is the weakest by almost every measurement. So don’t expect it to go on much longer.

Click here for the entire EPI report on wage growth in 2016.

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What the Corporate News Media Won’t Tell You about the Federal Reserve Raising Interest Rates

The Federal Reserve raised its key interest rate by 0.25% on Wednesday. The corporate news media, both liberal and conservative, claimed this signified the Fed’s confidence in the improving U.S. economy. There may be some truth to this, but maybe not.

Anybody with any knowledge of US business cycles can see our current business expansion is nearly over, which makes this a poor time to raise borrowing rates. See The Coming Recession Is Going to be a Big One–Johnhively.Wordpress.com. The current expansion is 91 months old this month, which makes it the fourth longest on record. In February 2017 it will become the third longest in US history. All the variables indicate we’ll be hitting a recession sometime before or by June 2017.

Maybe Fed officials decided to deflate the stock market and housing bubbles the US economy is in the thrall of. The US economy has been powered by a series of federally created or federally condoned bubbles since the 1980s, which is radically different from the US economy of 1933-1981. The US economy will be suffering from a massive hangover when this next recession hits, which is why it will in many ways be far worse than the last recession.

Rising rates will affect millions of Americans, including home buyers, savers and investors by increasing the cost of which they borrow. In other words, trillions of dollars are going to be redistributed from the 99 percent to rich bank shareholders and bondholders. It’ll cost you more to borrow, and the difference between the old rate and the new rate goes straight into the pockets of the rich.

Income and wealth have been massively redistributed from the 99 to the 1 percent by a series of deliberate federal government actions over the last thirty-five years. This is why interest rates have been historically low over the last eight years, and had been getting progressively lower since 1981. The demand for goods and services by the 99 percent is largely dependent on the ability to borrow to a much greater extent than earlier decades.

This is also means the Fed will have to enact negative interest rates to help bolster the economy during the next recession, which is currently the case in Europe.

Change in the form of a shift of political power from the billionaires to the middle class will finally come because of this next recession as millions more people vote via their wallets and take to the streets.

Fed officials raised its target for short-term interest rates by 0.25 percentage points to a range of 0.50% and 0.75%.

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Interest Rate Hike and the Federal Reserve Bank

The Federal Reserve Bank is expected to raise interest rates tomorrow. It will most likely be a mild increase of 1/4 to 1/2 percent.

The US and world economies are heading for a recession worse than the last one, and it should begin by June 2017, give or take a few months. Then President Donald Trump will get the blame, as well as the Republican US senate and the Republican US House of Representatives.

The Republicans will blame the Federal Reserve. Blame the recession and its dire impacts on the effects of Reaganomics, which has been a long-term policy of redistributing income from the 99 to the 1 percent (I doubt Reagan intended it that way). That decreased the demand for goods and services on the part of the 99 percent, and has led to a series of bubble economies for the United States since the 1980s.

The result has been the weakest economic growth in US history under President George W. Bush. The job gains under Bush numbered less than 1.4 million jobs total, with declining real wage growth. Things have been quite a bit better under President Obama. However, the job growth numbers under Obama are far worse than any other president since and including Jimmy Carter, with the exception, of course, of Bush.

Carter had the best monthly job growth numbers of any president since 1976. See Why Did President Jimmy Carter Create More Jobs Per Year Than Any President Since Him? JohnHively.wordpress.com

The Fed and everybody else expect the current economic expansion to continue. That’s insane. All the indications and variables suggest we are on a crash course with a massive recession by June 2017. See The New Recession is Knocking at the Door, and It’s Going to Be Worse than the Last One–JohnHively.Wordpress.com

Only two US business expansions have lasted longer than 100 months. The third longest expansion began under President Ronald Reagan and lasted 92 months. Including this month, the current expansion is 91 months. That means by next June it will have lasted 98 months. Given the weaknesses of the current US economy, we most likely won’t make it much longer than June.

The Federal Reserve will likely raise interest rates tomorrow and hasten the coming of the next recession by a month or two.

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Real Family Median Family Income Still Down From 2007

As you can see from the graph via the Federal Reserve Bank, real family income is still down below the level of 2007 eighty-eight months into the newest economic expansion. The median is the number of families in the middle of any series of numbers.

The top 1 percent received 99 percent of all income growth from 2010 to 2014, which was an historic record. Although incomes rose in 2015, the typical household is still worse off today than it was in 2000, adjusted for inflation. The assets of the typical family today are worth 14 percent less than the assets of the typical family in 1984. And the typical job is less secure than at any time since the Great Depression.

That’s all because the 1 percent has used its financial control over both major political parties to wage war against the 99 percent. Waging war in this case means redistributing income and wealth from the 99 to the 1 percent via the actions of the federal government.

We are now fast approaching the newest recession, which should hit by June 2017. It’ll be worse than the Great Recession in any number of ways. This will be because trillions of dollars have been redistributed to the wealthy over the last thirty-five years. This epoch is about to end.

Enough people will finally be aroused for working folks to take back control over both major political parties as the reality of the severity of the next financial crisis takes hold. Then real middle class incomes can grow again.

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The New Recession is Knocking at the Door, and It’s Going to Be Worse than the Last One

 

Originally published in September 2016.

The next recession will hit sometime during the next twelve months, most likely by June of 2017, give or take a month or two. It will be worse than the last one, and the impacts of it will last longer than the Great Recession of 2007-2009. The effects of that recession are still being felt. Median household income, for example, is still below what it was in 2007. That is one of the reasons why the next recession will be worse than the last.

99 percent of all US income growth from 2009 to 2014 went to the top 1 percent. They invest their money in the bond, stock and political markets. This does not create demand for goods and services. It destroys that demand by using financial and political leverage to export US jobs to low wage countries.

So all of this means that roughly 23 to 36 percent of all income produced in the United States has been stolen by the 1 percent, depending on whose figures you’re using. This inequality is destroying the demand for goods and services. Back in 1980, the 1 percent were able to steal only 8 percent of all US income. That’s why job and wage growth was much greater then than now.

Nowadays, the 99 percent earn roughly 62 to 77 percent of all income, down from 92 percent in 1980. This means demand for goods and services will be weak, much weaker, in fact, during the next recession than might be imagined.

The current economic expansion is the weakest in modern US history because of that lack of demand. It’s also been illegally contrived.

The big banks withheld 3.4 million homes from the market by 2011. This is a violation of a variety of US laws, and is called a conspiracy in restraint of trade. As you can tell from the graph above, demand for home mortgages have been historically low compared to the last housing bubble, yet prices continue to bounce up because that 3.4 million homes represented more than 50 percent of the entire available housing stock, according to Bloomberg news. Click the following link for the Bloomberg report $382B Shadow Inventory Weighs on U.S. Housing-Bloomberg News.

This has driven home builders to construct more homes in the USA, and panicked people into purchasing overpriced homes that the banks illegally benefit from. This illegal housing bubble is what has powered this economy forward, and also to its doom.

The above suggests a few ominous things.

1. The big banks can’t take many more houses off the market during and after the next recession, leaving them unable to create another housing bubble sufficient to power the next economic expansion forward.
2. Earning 63 to 78 percent of total US income will not allow the 99 percent sufficient financial strength to power the US out of the recession.
3. Instead, people who have borrowed against the rising value of their homes and used credit cards to sustain their standard of living will be trying to dig out of their debt.
4. The value of housing will drop, as it always has done during recessions. This time the drop could be 30 to 50 percent in many areas. Maybe 60 percent.
5. Deflation, caused by a lack of demand, will likely happen.
6. Expect negative interest rates.
7. The stock markets will fall more than they did last time. Expect major stock indices like the S&P 500 and the Dow to plummet 50 to 90 percent.
8. The Federal Reserve will bail out the big banks and rich investors to the tune of tens of trillions of dollars, like during the last recession. But the Fed won’t bail out the 99 percent.
9. The government must bail out the rich, or the 99 percent, but it can’t bail out both. The politicians will chose to bail out the rich, just like last time.
10. Unemployment will be in double figures at some point, and perhaps for a long time.
11. A political revolution will likely be forced into place at some point to replace the current corrupt government, and the corrupt politicians of the Republican and Democratic Parties.

As a final note, it should be pointed out that very few news sources have reported the housing conspiracy. No politician of note has mentioned it to my knowledge. This suggests something ominous, and this is only a suggestion.

It is possible the CEOs of the big banks gathered together, either in person or electronically, with Republican Party, Democratic Party and Federal Reserve officials, to conspire to engineer this housing bubble in order to power this historically weak economic expansion, and to make certain they wouldn’t face federal charges in doing so.

Now this is just a suspicion, so don’t get all heated up. But since the government has made it a point not to do enforce US laws against drug money laundering and other criminal activities on the part of the bankers, it might also be reasonable to assume this housing bubble has been created with a nod and a wink from the politically powerful.

When this recession begins, there will be virtually nothing to power us out of it except a political revolution of some kind. We’ll need a new FDR. Are you listening Senator Warren?

 

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The Coming Recession is Going to be an Income Inequality Hangover

A Great Depression Homeless Camp. Looks a lot like a modern day homeless camp doesn’t it?

The US Bureau of Labor announced the United States created 255,000 jobs in July. While good news, and rightly praised by the pundits, there is trouble hiding behind those numbers. The US durable goods sector went into recession early last autumn, while the entire manufacturing sector followed by November. That’s over 12 percent of the economy. Here’s what isn’t well known.

The entire economy has followed the durable goods sector into recession in each of the last recessions since and including the Great Depression. Historically, it takes sixteen to eighteen months for the rest of the economy to follow durable goods. So we’re most likely looking at a recession hitting somewhere between October of this year and June 2017.

Given that 99 percent of all income growth from 2009 to 2014 went to the top 1 percent, an historic record, the next recession will likely be more severe than the last. That’s because the great middle class will historically have fewer dollars to spend during the coming recession, which means the demand for goods and services will be depressed at levels not seen in decades.

This is the fourth longest economic expansion on record, and also among the weakest when it comes to job and wage growth. The US experienced higher monthly job growth in the economic expansions of the 1960s (170,000 per month), 1980s (230,000 per month) and the 1990s (200,000 per month), despite a smaller population, smaller GNP, and less worker productivity. Those expansions also featured real wage growth, especially during the 1960s. The current boom period has seen only 184,000 jobs created per month. Contrast that with the much maligned President Carter. Job growth of 206,000 per month occurred under Carter, with a population 2/3’s the size of today, and a GNP roughly 40 percent of today’s economy. Wage growth was consistent under Carter.

In addition, the most recent housing bubble will burst, as it always has done when recessions hit. Typically, when a recession occurs along with a bursting of a bubble, things are significantly much worse than without a bubble.

So, given the bubble, and historic income and wealth inequality, we should be looking at a whale of recession that is coming down the pike at hurricane speed.

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The Next Recession and the Next Housing Crisis

Last year, PBS reported that hundreds of thousands of financially distressed Florida homeowners have been compelled to modify their home loans. This entailed getting reducing interest rates, but not reduced home loan principals. Those reduced interest rates have one problem.

They eventually go up–and soon.

Just like teaser rates for subprime mortgages a few years ago, these modified loans are about to blow up at a time when the US economy is hurtling toward the most severe recession since the Great Depression. This financial train wreck will strike somewhere between October 1, 2016 and the end of June 2017. See The Coming Recession: It’s Going to Be a Big One–JohnHively.wordpress.com

This goes to prove the old saying; The more things change, the more they stay the same. But in our case, the saying should be, “The more the economy changes, the worse it gets for us, the 99 percent.”

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