Saturday, April 25, 2015 03:46pm
North Adams, MA now: 52 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: The Incredibly Shrinking Middle Class
By Bill Schmick On: 02:04PM / Thursday October 11, 2012
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

Income inequality in the United States should worry you. Chances are, if you are reading this column, you still consider yourself one of America's Middle Class. Just how long you remain one may be entirely out of your hands.

If you think I'm exaggerating, just take a moment to review this most recent data. You may already be aware that income inequality in America has been on the rise over the last 30 years. Last month, the Census Bureau found that the highest-earning 20 percent of households earned 51.1 percent of all income last year. That is the biggest share on record since 1967. The share earned by middle-income households fell to 14.3 percent, a record low. From 1979 to 2007, incomes of the richest one percent of Americans soared 275 percent. That same 1 percent earned 23.5 percent of all income, the largest share since 1928. At that rate, the rich are 288 times richer than you, the middle class.

At the same time poverty has deepened. Fifteen percent of Americans live below the poverty line, which comes to 46.2 million people — 46 percent more than in 2000. If it were not for unemployment benefits and Social Security payments, millions more would fall below that poverty line. And guess what, the politicians are bound and determined to reduce those benefits within the next year. Bottom line: income inequality is worse today than at any time in American history.

That's right, back in 1774 the gap between American's incomes were smaller than it is today, according to the National Bureau of Economic Research. Hold on to your seats — two historians argue that our present condition is even worse than it was during the Roman Empire! The top 1 percent of ancient Roman earners controlled 16 percent of the Empire's wealth compared to America's 1 percent, who controls 40 percent of America's riches.


The Independent Investor: The Next Third World Nation

The Independent Investor: Income Inequality: The Trend is Not Your Friend

And yet, when American voters are asked how important income inequality is to them only about 17 percent thought it was extremely important for the government to try to reduce income and wealth inequality. There could be several explanations for that willingness to witness more and more of the nation's wealth falling into fewer and fewer hands.

One reason is the belief that each of us has a chance to become one of those favored few. Back in the Fifties, for example, 87 percent of Americans thought there was plenty of opportunity to progress. After all, that's the American Dream, right? Americans may be worried that if the government attempts some kind of Robin Hood redistribution grab it could hurt their chances or their children's prospect of becoming the next Donald Trump.

Equally important is the belief that capitalism cannot work without income inequality. We have been spoon fed this myth ever since Trotsky first offered his alternative to capitalism. What incentive would the entrepreneur have to invest, to take chances, to innovate if the government's heavy hand of taxation simply appropriated his hard-won gains? It is the same argument that Ayn Rand used in her book "Atlas Shrugged." The logic is simple and erroneously simplistic: since inequality is good for capitalism, the more inequality, the better capitalism works.

Some economists contend that the phenomenon of income inequality is not confined to the United States. The rich are getting richer all over the world. One economic theory that could account for this trend stems from a study by Simon Kuznets called "Kuznets' Curve" that income inequality rises in an industrial revolution, falls as the country grows and develops and then rises again.

For some of the wealthiest nations, especially industrial exporters like America in the 1950s and 1960s, income equality was on the rise. The U.S. was one of the dominant capital goods exporters in global trade and average incomes kept pace with productivity. But as the rest of the world caught up, America began shipping much of our industrial capacity off-shore. In its place the technology and service sectors came to the forefront. Unfortunately, technology actually reduced the number of middle-income jobs in America and the service sector paid far less than factory jobs. This all happened as economic growth began to moderate.

In my next column we will see exactly where the United States now stands in relation to the rest of the world in income inequality. We will also address what this continuing trend will mean for you and your children in the years to come and what can be done to reverse this trend.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
 



0 Comments
     
News Headlines
Cheshire Gets Gas Pipeline Answers From Kinder Morgan
Pittsfield Celebrates Arbor Day, Honors Berkshire Conservation District
Retired North Adams Police Officer Turns 100
Bashevkin Receives Commissioners Leadership Award
Taconic Golf Club Building Membership, Opportunities to Play
Cultural Pittsfield This Week: April 24-30
Lanesborough Election: Nomination Papers Available
Maple Grove Civic Club Holds Candidate Forum
Williamstown Housing Trust Reviews Proposals for Land Purchase
Clarksburg Mulling Reconstruction of Horrigan Road

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (167)
Independent Investor (223)
Archives:
April 2015 (5)
April 2014 (1)
March 2015 (6)
February 2015 (7)
January 2015 (9)
December 2014 (7)
November 2014 (4)
October 2014 (9)
September 2014 (5)
August 2014 (7)
July 2014 (2)
June 2014 (6)
May 2014 (9)
Tags:
Europe Japan Markets Euro Debt Ceiling Recession Fed Stock Market Crisis Banks Taxes Greece Congress Stimulus Debt Housing Deficit Commodities Selloff Federal Reserve Fiscal Cliff Economy Rally Pullback Stocks Jobs Oil Election Bailout Energy Currency Retirement Europe Metals Interest Rates
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
@theMarket: Right Back Into the Range
The Independent Investor: Brazil Not For the Faint of Heart
@theMarket: Earnings on Deck
@theMarket: Will the Second Quarter Be Like the First?
The Independent Investor: How to Teach Your Kid to Become the Next Warren Buffet
@theMarket: The Fed Does It Again
The Independent Investor: Financial Challenges Facing Single Parents
@theMarket: Pay Attention to Diverging Markets
The Independent Investor: Kids & Money
@theMarket: Home on the Range


View All
Baseball: Westfield Voc @...
The McCann Tech baseball team hit their way to a 8-0 win...
SB: Mt Everett @ Lenox
The final score was Mount Everett 15 and Lenox 3
Berkshire County Invitational...
The boys 4-by-800 meter relay, a 3200-meter battle that...
SB: Mt Greylock @ Drury
The Drury softball team earned its first win of the season...
Touch A Truck 2015
Little kids got to play with big trucks - and school buses,...
Baseball: PHS @ Taconic
Fick finished with two strikeouts while allowing six hits...
Lacrosse: Monument @...
Sean Baruch scored four goals to lead the Pittsfield boys...
SB: Pittsfield @ Hoosac
The Pittsfield High softball team made the most of all its...
STEM, Industry Forum
U.S. Rep. Richard Neal and the Berkshire Chamber of...
BFAIR Annual Meeting 2015
BFAIR holds its annual breakfast meeting at the Williams...
3rd Thursday Events 2015
Director of Cultural Development Jen Glockner and Mayor...
Berkshire Chamber Nite @...
The Berkshire Chamber of Commerce held a networking event...
Tennis: MM Girls @ PHS
Monument Mountain girls tennis team won 5-0 over Pittsfield...
Tennis: MM Boys @ PHS
Monument Mountain boys tennis team won 4-1 over Pittsfield...
IS183 Versace Tchotchke Gala
IS183 Art School of the Berkshires' annual over-the-top...
Tennis: MG @ Lenox
Cami Sachetti and Emily Czelusnick battled to a 7-5, 6-4...
Baseball: Westfield Voc @...
The McCann Tech baseball team hit their way to a 8-0 win...
SB: Mt Everett @ Lenox
The final score was Mount Everett 15 and Lenox 3
Berkshire County Invitational...
The boys 4-by-800 meter relay, a 3200-meter battle that...
SB: Mt Greylock @ Drury
The Drury softball team earned its first win of the season...
Touch A Truck 2015
Little kids got to play with big trucks - and school buses,...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved