WE'RE NOT #1 ... WHEN IT COMES TO THE RICHEST MIDDLE-CLASS WE'RE ACTUALLY #27

Over the past 10 years the richest Americans have become even richer. As well, in terms of standard GDP measures, the United States is still considered the richest country on the planet. Accordingly, if one were to buy into the GOP's tax cuts for the rich strategy, those on the lower economic rungs of America's economic ladder should be enjoying the financial benefits of this wealth as America's riches naturally "trickle down" to the rest of us, right?

Think again. 

Via the Huffington Post we learn that when we stack the U.S. middle-class up against other nation-states that the U.S. is ranked 27th. Countries like Iceland, Spain, and Qatar have a better standard of living for its middle-class than the U.S. 

So, why is it that the U.S. no longer has the richest middle-class and standard of living in the world? The reasons are many, and are tied to issues our Congress seem to have no clue about - like events in Baltimore and Ferguson - nor any inclination to fix.  Here are several of those reasons:

• We don't have real universal health care. 

• Weak labor laws undermine unions.

• Our minimum wage is pathetic.

• Wall Street is out of control.

• Higher education puts our kids into debt.

• It's hard to improve your station in life if you're in prison, often due to drug-related charges that don't even exist in other developed nations. In fact, we have the largest prison population in the entire world, and we have the highest percentage of minorities imprisoned. "In major cities across the country, 80 percent of young African Americans now have criminal records." (See Alexander, Michelle (2010), The New Jim Crow: Mass Incarceration in the Age of Colorblindness. New York, The New Press. p. 7. as cited in Wikipedia.)

• Our tax structures favor the rich.

• The wealthy dominate politics.

• Big Money dominates the media.

• America encourages globalization.

The top reason for our declining middle-class status is complex, but pretty straightforward. 

Simply put, we have gone from being a nation that builds and provides real goods and services in the real economy to one that thinks we should focus on making money from money in the symbolic economy.

In fact, we have been disproportionately rewarding market players in the area of finance over those who work in the non-financial sector.

The financialization of our market system has turned our economy from one that strongly rewards those who produce real wealth through hard work and sacrifice to one that lavishly rewards those who extract wealth by securing favorable legislation, deregulation, and regular bailouts from Congress and state houses across the country.

It's the difference between playing monopoly and building them.

- Mark 

Kudos to Marion for the link.

THE KOCH TAKEOVER

In many respects, this isn't far from the truth ...

- Mark

DEBT FUELED GROWTH? YES, INDEED ... AND WHY WE'RE HEADED FOR OUR NEXT "MINSKY MOMENT"

Hyman Minsky (1919-1996), professor of economics at Washington University.

More and more investments in the biggest stock markets in the world are being purchased with borrowed money, or with what's called margin debt. Put another way, increasingly more (on margin) market activity in the New York Stock Exchange (NYSE) and in the Shanghai Stock Exchange (SSE) is happening with managed debt.

This story is important to you and me for two reasons.

First, the last two stock market bubbles in the U.S. peaked and popped with margin-debt-ratios that equaled between 2.6% and 2.65% of total market capitalization. 

Not only are we currently within this range, but the Shanghai stock market - which is now trading more dollar volume than the NYSE - has already surged past the NYSE's margin-debt range, coming in at 3.44% of China's total market capitalization this year.

Below is another way of looking at the margin-debt figures (note how the NYSE margin-debt-to-GDP ratio in the U.S. hit a record 2.73% in 2014) ...

Second, as I pointed out in my book, economist Hyman Minsky told us many years ago about the danger posed to national economies when their growth is based on debt. The key is understanding that it's not debt as much as the economic instability we create for ourselves (his financial-instability hypothesis) by not keeping tabs of who's using borrowed money to make purchases in the market.

We're all in trouble, according to Minsky, when our economy becomes dominated by speculative market players (who can find the money only by selling stuff) and Ponzi or Pyramid market players (who are just one step ahead of the next market collapse) rather than by hedged investors (who can back their bets with their own cash).

It’s not difficult to see which group of market players we were dealing with in the lead up to 2008 (and, make no mistake, they‘re still out there). Recent history tells us that we're probably not in a good place now. Hyman Minsky would definitely agree. 

But I'll let you be the judge of this. Sigh ... 

- Mark 

CHINA, THE NEW FINANCIAL CENTER OF THE WORLD?

As you go out and have a good time on Cinco de Mayo tonight you might want to start your discussion with this little nugget. When it comes to dollar trading volume in stocks, China just passed the United States as the world's top trading center.

Shanghai's financial district, Pudon. The Pearl Tower sits in the middle, while the new 125-story Shanghai Tower is to the left. It's China's tallest building and the world's second tallest skyscraper, measuring 632 meters (2,073 ft).

According to the National Inflation Association ....

In July of 2004, the dollar volume of US stocks traded on the NYSE and NASDAQ accounted for 68.96% of the world’s total stock market dollar volume. Last month, the dollar volume of US stocks only accounted for 31.47% of the world’s total stock market dollar volume. 

China surpassed the US last month to become the new center of the financial world. For the month of March 2015, the dollar volume of Chinese stocks traded on the Shanghai and Shenzhen exchanges accounted for 40.6% of the world’s total stock market dollar volume.

With money following trade - the argument goes - China becomes the new financial center of the world. You can check out the rest of the discussion here.

- Mark

P.S. China has also passed the U.S. in terms of GDP, sort of ...

CRASH IN 2015, OR NO CRASH ... YOU BE THE JUDGE

Click on the graph below (or here for a huge version of the graph) and try to figure out what the creators of the graph are saying ...

Click here for the discussion.

- Mark

THE TRUTH ABOUT ENTITLEMENTS

- Mark

HOW STUPID IS THIS MAN?

Speaking at an event hosted by U.S. Hispanic Chamber of Commerce Senator Ted Cruz (R-TX) tried to blame President Obama for the 2008 market collapse, and the subsequent economic failures, which you can read about here.

And for the record, spending, taxes, and deficits are lower today than they were when President Obama took office.

- Mark

EVEN NEGATIVE INTEREST RATES NOT HELPING EUROPE

In case you missed it, back in September of 2014 Germany sold about $4.33 billion (or €3.34 billion) of 2-year government bonds at negative interest rates. This means that instead of Germany paying you interest when you lend them money that you pay them for the honor of letting them use your cash to pay their bills.

Let that sink in for a moment. People are actually lending Germany money, and paying them for the privilege of doing so.

Things worked out so well with their 2-year bond sale that Germany did it again in February of this year. This time they sold 5-year bonds to investors ($3.72 billion, or €3.28 euros), who then pay Germany a small premium for holding their debt.

So, why is this important, you ask? Because according to at least one source over 25% of all bonds sold in Europe now carry negative interest rates. The fact that the European economy, let alone the U.S. economy, has yet to take off with such low interest rates means there are serious distortions throughout the European economy.

Stay tuned. It's usually "small" stuff like this that starts us off on a story-ride that doesn't end very well.

- Mark 

EXPLAINING THE ASSAULT ON SCIENCE AND REASON

From Salon, "Beyond the War on science: Why the right embraces ignorance as a virtue."

Spouting off about stuff you know nothing about is traditionally considered unwise. But as the Republican war on science intensifies, ignorance has started to become not only less of a handicap, but a point of pride. In the face of expertise and facts, being belligerently ignorant—and offended that anyone dare suggest ignorance is less desirable than knowledge—has become the go-to position for many conservative politicians and pundits. Sadly, it’s a strategy that’s working, making it harder every day for liberals to argue the value of evidence and reason over wishful thinking and unblinking prejudice. 

The strategy of holding out ignorance to be the equivalent of expertise and simply daring your opponents to try to do anything about it was epitomized recently in the Ohio legislature. Republican state legislator John Becker introduced a bill that would ban all insurance plans in the state from covering abortion. It was a horribly misogynist and intrusive bill, but Becker didn’t stop at just trying to outlaw abortion coverage. He also insisted that IUDs, the most effective contraception available, be outlawed from insurance coverage. His reasoning was that he believes IUDs cause abortion, because he believes they work by killing fertilized eggs. 

He is, of course, factually wrong in multiple ways. 

An “abortion” is a procedure that stops a pregnancy, and if a fertilized egg fails to implant—and about half fail to implant, regardless of a woman’s choices—then you were never pregnant in the first place and therefore cannot get an abortion. But it’s also factually wrong that IUDs work by killing fertilized eggs. Like nearly all other forms of contraception, IUDs work by preventing sperm from meeting egg. 

When confronted with the facts, Rep. Becker just blew them off. “This is just a personal view,” he said. “I’m not a medical doctor” ...

Ignorance as a badge of honor is only picking up steam. You can read the remainder of this story by clicking here.

- Mark 

TIME FOR A SPECULATIVE-FINANCIAL TRANSACTION TAX

The following is not investing. It's based on speculation and deception. It's one of the reasons why everyone should support a financial transaction tax on speculative and deceptive practices like this ...

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For more on how a speculative or financial transaction tax on Wall Street would help us all click here.

- Mark