One Chart Says It All

Sometimes one chart captures the fundamental reality of the economy: for example, this chart of money velocity and the civilian-population ratio. (thank you, Joseph Y. for posting it on my Facebook feed.)

When the blue line is up, more of the population has a job. (the blue line is the Employment-Population ratio.)

The red line is money velocity, the rate at which money changes hands. (Money buried in the coffee can in the back yard has a money velocity of zero.)

As Joseph noted, the correlation between the percentage of people working and money velocity was strong until 2010. In the post-2009 recession “recovery,” the percentage of the populace with jobs rose modestly, but money velocity absolutely cratered to unprecedented lows.

(The one other disconnect was triggered by the 1987 stock market crash, which caused money velocity to dip even as more people entered the workforce. This absence of correlation was relatively brief.)

The correlation between more people working and money velocity is commonsensical. More people working = more household income = more spending = higher money velocity.

But something changed in 2010. Did the quality and compensation of work change? Joseph observed: People started going back to work after the official recession ended in Q4 2009 but they were working for lower pay. With lower pay comes less disposable income, hence the cliff-like drop off in velocity.

Another potential factor is higher inflation. Some recent estimates (Where’s The Beef? ‘Lies, Damned Lies, And Statistics’) suggest the gap between official inflation and actual inflation in rent, food, energy and medical care in the past 20 years has subtracted 20% from paychecks.

The four “biggies” for the average American are rent, food, energy, and medical care, in approximately that order. These “four horsemen” have been galloping along at a faster rate than headline CPI. According to the BLS definition, they compose about 60% of the aggregate population’s consumption basket, but for struggling middle-class Americans, it’s closer to 80%. For the working poor, spending on these four categories can stretch to as much as 90% of total spending.

(If we add exposure to higher education’s soaring costs, the rate goes even higher.)

So even if wages held steady, once we factor in “real” inflation, real take-home pay has declined by 5% to 20%, depending on the household’s exposure to rent, food, energy, medical care (love those co-pays and out-of-pocket expenses) and higher education.

Another potential factor is the figurative coffee can in the back yard: people sense the ‘recovery” is bogus, and their rational response is to save more money rather than squander it. Even though central banks have reduced the yield on savings to less than zero, people are still saving whatever they can.

Data suggests it’s all three: lower incomes, higher inflation and a recognition that savings are more important in a ‘Lies, Damned Lies, And Statistics’ economy than more spending.

This chart says it all: real income is declining and the bottom 95% are poorer.No wonder people are socking away what they can and tightening their spending: they have no other choice, even as the Federal Reserve strip-mines their savings.

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  • U3O8

    Yes indeed. For those not suffering from abnegation, ignorance, cognitive dissonance or anosognosia

    Time is neigh & the fuse is short…

    • FYI: No, the Police Don’t Work For You

      They are the Revenuers!

      Police Have No Duty To Protect Individuals

      Before the mid-1800s, American and British citizens – even in large cities – were expected to protect themselves and each other. Indeed, they were legally required to pursue and attempt to apprehend criminals. The notion of a police force in those days was abhorrent in England and America, where liberals viewed it as a form of the dreaded “standing army.”


      • U3O8

        FYI: I don’t think that all Police as you say above or lump them into w/ a broad brush stroke fit into your classification. At least the ones I know don;t & aren’t preparing for a greeting party w/ NWO in fact the opposite. Terms / concepts that are absolute such as “all” or “never” I generally try to avoid using.

        • Did you read and listen to everything posted? Please never reply without a through reading or viewing!

          • U3O8

            This is what you wrote: “FYI: No, the Police Don’t Work For You” my response remains.

          • Remains unfounded and untrue as well ‘STILL’!

          • U3O8

            Yes of course. And the video makes a lot of good points. But, not all Police are the same just as humans are not all the same. We can generalize or predict w/ some degree of certitude certain attributes or similarities that are predictable but not absolute. We will apparently find out what that metric & crucible will be in due time it does appear.
            The system is flawed & always had it’s shortfalls but it served pretty good for many years until this divide & conquer PsyOp was put into full swing. The chasm & schism we are experiencing in our society were created for the tension & social unrest on purpose of course. Certainly the UN will not be a bonus for humanity either lol…

          • You can lead a horse to water, but you can’t make it drink

            Meaning: People, like horses, will only do what they have a mind to do.

            Origin: Proverbs give richness to language and, to some extent, define a culture. ‘You can lead a horse to water, but you can’t make it drink’ might be thought to encapsulate the English-speaking people’s mindset better than any other saying, as it appears to be the oldest English proverb that is still in regular use today. It was recorded as early as 1175 in Old English Homilies

          • U3O8

            Indeed. The PTB already know this & that is precisely why it looks like it will come down to an “Adolph Eichmann Defense” part Deux 2.0 / Nuremburg Trials. History repeating itself from the same people who brought you WW l & WWll !

            “We were just following orders” / “We were just doing our jobs” end game.

            This is a prime example of 4GW/5GW asymmetrical nonlinear dispersed warfare.

          • The gun-grabbers insist we should turn in our guns and rely on the police to protect us from crime. Yet the court continue to rule that the police are under no obligation to protect the public.

            Bowers v. DeVito, 686 F.2d 616 (7th Cir. 1982) (no federal constitutional requirement that police provide protection)

            Calogrides v. Mobile, 475 So. 2d 560 (Ala. 1985); Cal Govt. Code 845 (no liability for failure to provide police protection)

            Calogrides v. Mobile, 846 (no liability for failure to arrest or to retain arrested person in custody)

            Davidson v. Westminster, 32 Cal.3d 197, 185, Cal. Rep. 252; 649 P.2d 894 (1982) (no liability for failure to provide police protection)

            Stone v. State 106 Cal.App.3d 924, 165 Cal Rep. 339 (1980) (no liability for failure to provide police protection)

            Morgan v. District of Columbia, 468 A.2d 1306 (D.C.App. 1983) (no liability for failure to provide police protection)

            Warren v. District of Columbia, 444 A.2d 1 (D.C.App 1981) (no liability for failure to provide police protection)

            Sapp v. Tallahassee, 348 So.2d 363 (Fla. App. 1st Dist.), cert. denied 354 So.2d 985 (Fla. 1977); Ill. Rec. Stat. 4-102 (no liability for failure to provide police protection)

            Keane v. Chicago, 98 Ill. App.2d 460, 240 N.E.2d 321 (1st Dist. 1968) (no liability for failure to provide police protection)

            Jamison v. Chicago, 48 Ill. App. 3d 567 (1st Dist. 1977) (no liability for failure to provide police protection)

            Simpson’s Food Fair v. Evansville, 272 N.E.2d 871 (Ind. App.) (no liability for failure to provide police protection)

            Silver v. Minneapolis, 170 N.W.2d 206 (Minn. 1969) (no liability for failure to provide police protection)

            Wuetrich V. Delia, 155 N.J. Super. 324, 326, 382, A.2d 929, 930 cert. denied 77 N.J. 486, 391 A.2d 500 (1978) (no liability for failure to provide police protection)

            Chapman v. Philadelphia, 290 Pa. Super. 281, 434 A.2d 753 (Penn. 1981) (no liability for failure to provide police protection)

            Morris v. Musser, 84 Pa. Cmwth. 170, 478 A.2d 937 (1984) (no liability for failure to provide police protection)



            In the United States, you can get a pizza delivered faster than you can get the police to come to your home! To serve but not protect!

          • U3O8

            Yes indeed no doubt about it.
            The stupid continues to burn.

          • geoh777

            But, not all Criminals are the same just as humans are not all the same. So we should not hesitate to put our confidence in some criminals.

          • U3O8

            That has to be the stupidest Straw Man / Aunt Sally troll comment of the day. Not even worth one nano second more.

            GGGgggeeezzzuuusss H C on toast…

        • geoh777

          The situation with the police in regard to their relationship to the American citizens who employ them has degenerated to the point it is today by degrees.

          So, what guarantee do you offer that the “good” cops that you imply exist won’t be purged as disloyal to the cause of whatever the excuse will be, e.g. “national security”? making the divide complete? as it has happened in so many documented cases in history?

          Today, “good cops” agree that no one should respond with violence against the police, no matter what the police are doing to them. Obviously, they think that they have free rein to do as they please by virtue of them being cops, and that you should wait until you are dead before launching a lawsuit against them for damages. They also wish death for anyone who would advocate the protection of constitutional rights through a return of violence against a police attack:

          Also, “good cops” simply do not like constitutionalists:

          BTW “stockpiling weapons” is not against the law. Bring your charges of violations of the law, not your MRAPs loaded with deputies to some guy’s house so as to confiscate his two double-barreled shotguns and .22 rimfire rifle with XXX amount of ammunition, always reported by the msm as some huge, disastrous cache of terrorist weapons. Then, after all charges are dropped due to utter lack of evidence of a crime having been committed, the police won’t return his stuff (including all of his freeze dried food that they took) to him because that makes them look weak.

          If he ever gets it back, it comes back damaged from mishandling, a further sign of no respect for people, property, or rights.

          • U3O8

            There are no guarantees now & there won’t be w/ a NWO either.

            GGGgggeeezzzuuusss H C on a Pogo Stick.

          • Just keep a wide angle view. Mar 9, 2016 New Mexico: Truck Driver Spots Train Hauling Military Tanks and Equipment Headed East

            Trains Hauling Everything from Tanks to Bulldozers! This event he caught on tape shows that the train was heading east passing through the Gallup, New Mexico Area Yesterday. All of this coming in the few months leading up to Jade Helm 16. You can find more at the links below.


          • Aug 28, 2014 Pentagon Has ‘Everything Must Go’ Sale

            After protestors in Ferguson, Missouri, were met with a militarized police force, new attention was brought to the Pentagon’s 1033 program, a program that supplies military-grade equipment to local police departments, often for free.


      • geoh777

        If they were merely Revenuers, the present day situation in regard to police/general public relations would not be as grim.

        • You should go back and view the film footage from the twenties and thirties gunning down folks everywhere at a drop of the hat for any reason. One in the same!

  • May 3, 2016 Central Bankers Are Now Preparing To Unleash The Economic Crash

    EU slashes growth. More layoffs coming in the tech sector, hundreds of thousands of jobs will be lost. Banks want to put millennials deeper into debt. China manufacturing declines and the Baltic Dry Index declines rapidly. The smart money is now getting out of the market. The central banks are preparing for a digital currency which will lead into a cashless society. US is headed into a recession / depression. The crash is accelerating and the central bank is almost ready to pull the plug.

  • y3shuA immAnu3l

    “And I’m calling all angels
    I’m calling all you angels
    And I’m calling all angels
    I’m calling all you angels”

  • May 4, 2016 The War On Cash Has Begun, ECB Fires The First Shot

    Aeropostale file for Chapter 11. 90% of the households have lower net worth now than in the 70’s.Durable goods decline signalling a collapse of the economy. Trade deficit tumbles. Manufacturing continue declines. ECB fires the first shots and eliminates the 500 euro, the $100 is next.

    • cettel

      Thanks! That was a terrific report.

  • cettel

    another brilliant, classic, article from Charles Hugh Smith, one of the really great economists (which is assisted by the fact he’s not in the economics profession).