Skewed: Income Inequality in America

Income Inequality
Source: FinanceDegreeCenter.com

Background here, here and here.

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  • Tonto

    Look. The majority of the people in this country have no clue about how wealth is accumulated. The wealth-accumulation equation looks like this. The amount of money you make is far less important than the amount of money you spend. Most American earners making a decent living typically will ignorantly spend more than they make during their peak earning years. Of course they will end up destitute, because their peak earning years do not last forever. And their appetite for consumption remains the same, regardless whether or not they can afford to continue to consume.

    Add to this, that the world is in an economic depression. As a result, fewer people, a much smaller percentage of Americans, actually have disposable income left at the end of the month. Taxes are higher and incomes have gone much lower. So, the opportunities to make a shrewd financial move, have vastly diminished. People who thought they could buy a house and appreciate equity by paying off the house, have found out later that their house isn’t worth what they paid for it, not even close. Owning a house has turned out to be an expensive lifestyle choice most should have foregone.

    There is so much housing on the market right now, the only housing that is selling are steeply discounted cash-sale units and units that have guaranteed bank financing, e.g., housing owned by the banks. The bank won’t finance the sale of your house, not unless some unlikely sucker with scads of down-payment money comes knocking, or, you are willing to give your house away! Bank appraisals are the lowest appraisal amounts in housing. And the typical finance of a non-bank-owned unit requires a 20%-25% deposit down-payment plus closing costs, to get a bank to finance deal off the ground. See what I am saying about the real value of housing? In Maine a realtor gets 6%. The closing lawyers usually get another 5%. A survey and a title search will be required. A mortgage application fee can run another $500 to $1000 That’s 35-40% in cash required to buy/sell a non-bank owned housing unit. It is any wonder housing is a bad investment due to the government being involved financing the housing market?

    The following link is a house that has been on the market near me for three years. It has almost 1000 feet of road frontage and four acres. It’s problem is it is too big and there are no buyers roaming around looking for something like this. The owner is desperate to get out. But to sell it, they will have to go lower still. I chose this house because across the country people dreaming of owning a home will not be able to understand this house, and the predicament of the seller of it, who paid $65k cash for it five years ago.

    http://www.maine.craigslist.org/reo/4109144043.html

    As long as the government is in the business of financing housing, everyone had best stay clear of the temptation. Why? Because the moment the government starts to ease the plug loose on housing financing, everyone is going to find out what their housing is really worth. Due almost entirely to demographics there are more than ten-million vacant and foreclosed housing units in this country -right now- with more coming every day. The FED, FHA, Fannie Mae and Freddie Mac are holding the worthless paper on most of it.

    You will not build wealth buying a house, not today.

    Add to this scenario also, the FED’s ZIRP, which is depriving everyone who actually is trying to save money the interest income that is so important to having their deposits grow in the bank. The banks get money at near-zero interest from the FED, so savers (and small businesses with capital float) are losing out the market rate of interest income on their bank deposits. (A small business “float” can be a half million dollars a month. It’s not their money. It’s money from their customers. But, the small business earns interest income on the float. Right now small businesses are earning next to nothing on the bank deposits of their business float!)

    This is why I say. If you want financial mobility in an economy like this one, the only viable answer to your honorable pursuit is to drastically limit your spending. The more one limits their spending, while they have money in the bank, the more money they will have in the bank the next time they check. The more money you have in the bank, the more capable you will be to make a financial investment that is –>>>guaranteed<<– to pay off when the opportunity comes.

    The time to cut your spending is always now, -yesterday, today and tomorrow-, though, most people only think to cut their spending when their debt has ballooned, and their income has disappeared. That is the dummies' approach to accumulating wealth. Roll the debt-dice and then cry like a baby when the money is all gone and they lose everything, right?

    That's also when they read an article like this one, and think to themselves, that they are being cheated by "the system".

    Bullshit. This article is nothing short of the talking points of socialist rabble-rousers who support taking all your money and sending you out to work in the cabbage fields with a hoe. There's no social mobility to be found in a cabbage patch, comrade.

    • MM59

      Although I agree with your points that most Americans spend too much – buy things they don’t really need but Madison Ave told them they have to have. Way too much debt out there today. I disagree with your being naive about the “system”. The system has been rigged and manipulated by some (the elite) for many decades now. It is not a “free” market.

      The banks are no longer “safe”. They have already worked out the details for our “bail in”. The savers will pay for the bad speculations made by the bankers and politicians. Its is all in writing, google it. It is just a matter of time. When you put money in the bank you are an unsecured creditor. FDIC insurance? Well I think there is something like $54 Billion in the fund to cover $14 Trillion of deposits. Does that make you feel comfortable?

      When the time is right, the elite will crash the system – it is a house of cards.

      But remember that there are many people that only make an average of $35K per year. They put in a hard’s day work. You add up rent, food, utilities, car and health insurance, gas – basic needs and there really is nothing to save. Price inflation on basic necessities has gone through the roof – just look at milk and bread or gasoline. But somehow the “geniuses” don’t count that inflation when they issue their official reports – do they? The system is rigged – wake up!

  • gozounlimited

    Breaking Inequality – Full documentary ….. http://www.youtube.com/watch?v=5y_e6i9wR1o

    • gozounlimited

      FRONTLINE …… The Untouchables… FRONTLINE investigates why Wall Street’s leaders have escaped prosecution for any fraud related to the sale of bad mortgages….. http://video.pbs.org/video/2327953844/

  • Robert

    Income inequality has been an major issue between the rich and poor. http://bit.ly/IncomaAnalysts

 

 

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