Monday, May 16, 2011

The Economy: Good for Some, Meh for Most


The stock market is on the rise, and has been throughout the "recovery." Wealthy shareholders are living in a golden age, while the rest of the country is just holding on.

Let's say that 81.2% of all stock is owned by the top 10% of wealth gatherers. (table 9). Let's say there was 100 shares at $1 each for a total value in stock on 8/31/10 of $100. That $100 became $129.80 by 5/2/11.(S&P closing numbers) But, I'm going to round off all of this to keep it really simple. 100 shares. 80 shares owned by 10 people. 20 shares owned by 90 people. Fast forward 9 months and now the $100 is $120. Still 100 shares. (We're excluding splits, initial offerings and anything else that would increase the number of shares, simple.)

So, 10 people now have a total worth of $96. The 90 people are splitting up $24. Both saw a 20% rise. Hooray! But here's the issue, an additional $1.60 will do a lot more than an additional $0.04. The issue is coin in the pocket. For the middle-class, it's just not happening.

Combine the rise in stock prices with the sharp drops in home prices and high unemployment, and the middle class is struggling to stay afloat. The wealthy continue to benefit from "money printing" from the Fed via their stock portfolios, but the "trickle down" part just isn't happening. The "economic recovery" is but a thin veneer atop a rotting foundation.

In other words, the rich get richer. So much for fresh news.

1 comment:

Kevin said...

You mean trickle down economics doesn't work???