Saturday, February 15, 2014

The Middle Class Cull = Greater Economic Cyclicality

Interesting stats in this New York Times piece showing that 60% of consumption is made by the highest 20% in income.  So the top 20% generate more consumer spending than everyone else combined – by a wide margin.  The top 5% in income generate almost 40% of consumption!

Obviously, spending for the top 5% is basically all discretionary whereas spending for the bottom 80% is majority non-discretionary.  So the wealth effect has become magnified and economic growth should experience greater variability.

Also, of course, as the article lays out, any businesses targeting the middle class are getting crushed.


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