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Abraham Thomas

Abraham Thomas

Cofounder of Quandl, and leads in the discovery, acquisition, and organization of data.

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Justifiably Mad: The Plight of the 99%, in 15 Charts

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Image by  NoisyKnight

One of the mandates of the Federal Reserve is to maintain stable prices. Let’s look at inflation since the start of the decade:

Graph of Annual Change in CPI

Most economists take “stable prices” to mean “inflation between 0% and 2% every year”, and the Fed seems to have hit this target with admirable accuracy.

But wait. Let’s dig a little deeper into the numbers. What are the things people spend money on? Consider the essentials first.

Food prices are rising faster than inflation:

Graph of CPI versus Food

So are energy prices:

Graph of CPI versus Energy

Healthcare as well:

Graph of CPI versus Healthcare Costs

And education is simply off the charts:

Graph of CPI versus Education

Services in general are getting dearer:

Graph of CPI versus Services

Despite the crash of 2008, house prices remain elevated above CPI:

Graph of CPI versus Housing

Food, energy, shelter, healthcare, education, professional services — all rising faster than CPI. In some cases, significantly so.

Meanwhile, what has been growing slower than CPI? You guessed it: wages.

Graph of CPI versus Wages

And this is just for those people lucky enough to be employed. Many Americans are not so lucky:

Graph of Unemployment in the USA

How do people plug the gap? They have had to borrow:

Graph of Total Consumer Credit, Billions

You would think that low interest rates night ease the burden. But no. LIBOR (the rate at which banks borrow money) may be close to zero, but the average credit card interest rate is unchanged from 10 years ago at 12%

Graph of Average Interest Rate on Credit Card Plans, All Accounts

Naturally, this means record bank profits:

Graph of Finance Sector Profits

It’s not just the banks that are doing well. The combination of stagnant wages, reduced payrolls and high prices benefits all companies:

Graph of Corporate Profits After Tax

as reflected in stock prices, which are at an all-time high:

Graph of S&P 500 Index

Who owns these stocks? It turns out that 80% of all stocks are owned by the richest 10% of Americans:

Graph of Shares of household stock wealth

(This number is up from 75% at the turn of the millennium; stock ownership is becoming more, not less concentrated).

So, to summarize:

  • the prices of many essential goods are rising far faster than CPI
  • wages, on the other hand, are rising slower than CPI, and many Americans remain unemployed
  • to plug the gap, families have to resort to credit card debt at ruinous interest rates
  • which contributes to the record profits accruing to banks and large corporations
  • whose stock prices are at all-time highs, helping the rich who own most of these stocks

No wonder the 99% are angry!

My challenge for those who might argue my analysis is specious and/or cherry-picked: All the data and much more is right here. I am keen to hear data-driven counter arguments!

 

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  • RC

    Want to get back at the 1%? Pare down your lifestyle, save as much money as you can, invest the difference and take your profits where you can. Since the 1% have most of the profit in their hands, this is your way to use your purchasing power to claw it back. Stop being a victim and take control of your destiny.

    • utna

      >Stop being a victim and take control of your destiny.
      The American dream. “… you have to be asleep to believe it.” – George Carlin

      • RC

        What I said has nothing to do with the myth of the American Dream. It’s about knowing how to take rational action and to stop externalizing your problems. If everything is always someone else’s fault and is out of your control, when you encounter problems you really can’t solve, you won’t have any way to tell the difference. Self-paralyzation.

      • Evan Rogers (@ervington)

        @RC criticizing the way in which an argument is made instead of responding to its content is equally rude, and the last bastion of those who can’t defend their ideas. Pointing out fallacies is fine, but ignoring the substance and trying to only argue about HOW someone says something is worse than ad hominem.

    • Ed

      The utter absurdity of your comment is impressive. How can I save when I can’t eat? I’m getting back at the 1% by investing in their fixed game?

      You’re actually advocating using “spending power” against the wealthiest in the world. You’re either blindingly ignorant or powerfully stupid.

      This is a systemic problem at the highest levels that can’t be solved by people working at Walmart buying a different brand of macaroni.

      • RC

        I’m not sure how you were raised, but that is an extremely rude manner in which to disagree with someone. Calling people “ignorant” or “stupid” is no way to make a convincing argument. You sound like one of those foaming at the mouth right wing types with that kind of attitude.

      • mzungu

        More ignorance than stupidity, from where i’m standing. But there is probably a bit of stupidity involved as well, as those who allow themselves to be completely indoctrinated and give up critical thinking always are.

    • Jessica

      Interested in hearing you counter any of Eds arguments, instead of just insulting him and getting upset.
      Your argument sounds like a rehash of “pull up your bootstraps”

    • CB

      The idea of those without financial means using spending power to fight back against those with control over the money is ridiculous. I agree with Ed’s response 100%.

    • codiemaps

      This “everyone can be an investor” idea is getting old. I wonder how many people shared RC’s idealism during the Great Depression. Obviously, it’s not as bad now as it was back then, but the general pattern is the same. It makes me wonder, how bad can it get before people stop believing this? 30% of American are making less than $15,000/year. Since the cops don’t let you “pare down your lifestyle” enough to sleep on the streets, you still need to pay rent – on top of food, transportation, and everything else. A person would be lucky to save up $200 a month. Now, what can a person do with $200/month? Honestly?

      I’m lucky enough to be in a situation where I can put away $1,000/month, though I’ve had to sacrifice a lot (i.e. seeing family) to do it. Even still, I can hardly save any of it because of my student loans. If I’m lucky, my partner and I can save up to buy a god-awful cheap house in 5 years back in our hometown and rent that out as an attempt to “invest the difference.” But that’s still going to be an incredibly slow process and anything, like an illness, could throw it off.

      My point is, it’s only people who are financially sound who preach this “stop being a victim” story. And even if you can save a little money, “investing” it in something that would provide financially security would take multiple lifetimes for many Americans to fulfill.

    • Elbereth

      >Pare down your lifestyle, save as much money as you can, invest the difference and take your profits where you can.

      This is impossible for people who are literally making a subsistence wage.

      I’m one of the lucky ones…childless, two incomes, both of us in somewhat techie fields, so we do OK. I could totally do more than I do to “claw my way” up the chain, even in my fairly-high-cost-of-living state, if I followed your advice to the letter. But for a single mom, or parents who are not making so much as we can, and that’s a large number of Americans…there IS no way to save like that. Not if you want to, say, hold a job and keep a car, feed your kids something other than the cheapest of junky food, etc etc. You are perpetually in debt due to the last emergency and the one before etc, always under water, and with no way to claw up. There’s a huge proportion of Americans who fall below the scales for subsidies or help, but can’t get ahead because of this trap (read Elizabeth Warren’s books), and with wages stagnant and prices of essentials (as these charts show) going up exponentially, the middle class, as a matter of a lack of good policy, is falling behind. And more and more of that middle class – and those below it – are falling back further every decade.

      This can be solved nicely with good policy – note that “socialist” (yeah right) Canada didn’t even barely have a downturn, and their banks were solvent, thanks to good, old fashioned regulation) – but not with the current crop of sorry individuals in Congress…particularly orthodox Republicans, who never believe there is enough gutting of spending and services (aka tax cuts), nor enough gutting of regulations (aka giving away the store to corporations and rich people).

  • PJC

    Stop choosing the worst possible choices of Democratic AND Republican candidates. This happened on THEIR watch.

  • John Stillwagen (@StillShaggin)

    Are wages, profits and stock prices inflation adjusted in your graphs? Off the top of my head, I don’t believe stocks are at an all time high if you adjust for inflation.

    • hodedofome

      They are if you count dividends. Without dividends, stocks are still 20%+ below their all time highs in 2000, adjusted for inflation.

  • Alus

    How are the prices of all the basic essentials growing that much faster than the CPI?? HOW is that CPI calculated? it doesnt make sense to me.

  • Random Graphs to Make a Bad Argument

    Lets cherry pick random stuff and put random words together with pictures. Total credit actually decreases with the financial crisis and is below the previous trend. Why would credit card interest rates track LIBOR rates? How all these things that we supposedly spend most of are money on outpacing CPI all at once if the numbers are correct? How many people complained about crashing house values and now we complain that housing is becoming more expensive again? And oh look, top 1% share of household stock wealth is decreasing.

    • Confused

      “Why would credit card interest rates track LIBOR rates?”

      THANK YOU. I’m still trying to figure out any plausible relationship between those two interest rates. Two completely different credit markets. And, different point, the credit card interest line (is this APR? What’s the scale here?) is trending downward with a nearly 3.5% decrease from 2000 to 2013…but it’s called “unchanged”?

      If all of the selected items are outpacing CPI, then everything else not selected in CPI must be decreasing or staying the same…unless the author selected CPIs that had the selected item removed for each comparison. Another thing that puzzles me with all the CPI-related graphs is that all values start at 100 in 2000. Are you suggesting that all of these prices parsed out were exactly in line with CPI in 2000? Is 2000 your reference base period? Because when I go to FRED the CPI produced uses 1982-84 as the reference base period. You can make it whatever you want, that’s fine, but needs clarification.

      How are you measuring wages? You’ve got it on a graph with CPI, okay fine, but am I to believe that wages in 2000 were 100? Is it a wage index? Is it nominal? Real? Annual? If annual, is it beginning of year? End of year? Average of the year’s values? I know enough about these things that I think I know what’s going on, but the author should be clear as to what’s being presented. And did you notice that while you suggest wages aren’t keeping pace with CPI that twice in the presented graphs the lines intersect, including the most current observation? Wages are below in some times, but they catch up.

      This may seem nit-picky and mostly stylistic, but this might be the most unclear collection of graphs I’ve ever seen. None of them have details as to the simplest of things (e.g., base year), and some combine two variables that are measured on different scales but don’t have a second axis to cover it (e.g., unemp rate in % and duration of unemp in wks). And did anyone else notice that the very first graph has the following markers on the vertical axis: 0, 0.01, 0.01, 0.01, 0.02, 0.03, 0.03, 0.04? How do you have three 0.01′s and two 0.03′s?

      • BankruptcyLou

        You can’t see ANY connection between LIBOR and credit card lending? None? Your bank just has a large pool of capital they lend each day? Chairman Scrooge McDuck with a big vault of money?

        Presumably the point here is that the LIBOR rate reflects an indicator of the rates banks can borrow to capitalize themselves while the credit card APR chart reflects the rates they charge customers.

        Last I checked, banks exist and profit in the spread between these markets.

        The main critique of those two charts are likely these. First, the LIBOR published rate is known to have been manipulated to lower those published rates during key periods of the market colllapse so the true rate @ which a bank could borrow would be some what higher. And would likely need to be a blend of deposit rates, LIBOR and government discount widow-type lending. Second, the credit card APR may be accurate but it should be adjusted (when estimating the bank spread) to reflect default and non-payment elements. The rate banks pay to borrow is lower because fewer actual losses have ever occurred in those markets compared to credit card lending. (Much of the bank loss is borne b taxpayers, which is a different debate of course.)

  • drez

    The matter of fact is that the gap between the wealthy and the other “99%” is increasing. I think the Abraham makes that argument quite clear and from the comments it seems everyone agrees. You can argue the details about the specific data to get clarity, but his argument is valid.

  • Sébastien

    This blog post is angering the 1%! Do we have a candy coated version for them?

  • Zach

    Some extremely interesting figures and comments, my favorite my RC up at the top with the large discussion. I’m taking student loans to go to school, but guess what? I’m working full time, which means I have money to invest. It’s a lower sum of $250/month, but you know what? It’s something. And following the rules of compounding interest, that will be worth a substantial amount come the day I retire. On top of that, my advice is simple and follows statistics shown by the most recent census and the IRS. If you graduate high school, wait until at least age 18 to have a child, and work full time, you have over a 90% chance of living above the poverty line. It’s not difficult. The common statistics quoted about American income are on those who make less than $15,000/yr are either seniors living on social security alone and the other percent are the unemployed. If you’re working full time at the Federal Minimum Wage, you’ll make nearly $15,000/yr. This is not a difficult concept to me, and if you live below your means and live like you’re only making $15k-$20k/yr and are really making a decent wage, you’ll have debts paid off quickly and build wealth at a steady pace. His comment was great, take his advice.

  • David

    @Zach I think the statement that if you graduate from high school, wait until age 18 to have a child, and work full time “you have over a 90% chance of living above the poverty line” needs a citation because I’ve seen no data that support that assertion.

    So, you have a high-school education, you work full time, you go to college (for which you’re taking out student loans), while presumably paying for housing, taxes, utilities, food and medical expenses, all while investing $3K per year? This strains credulity.

    Finally, your premise gets a little muddy there towards the end. Your comment “… live like you’re only making $15k-$20k/yr and are really making a decent wage…” requires that one make over the Federal Minimum Wage in order to live at a $15-20k/yr level. We’re still talking about high school graduates, right? I’m afraid you’re missing the point: people in that demographic don’t make a decent wage, they make the Federal Minimum Wage if they’re lucky, and no one is “building wealth” at that level of income.

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