David McAlvany : As you say, things are not evenly distributed. The misery index has, over the 5-year period from here going back to about 2007, gone from 7½ to 9½ . We have had, as you said, median household income decline from just shy of $55,000 to $50,000. People’s primary asset, the median existing home, has declined. When we look at consumer confidence, this is where we see something of a divergence. Where do you see this divergence between the S&P and consumer confidence taking us?
Marc Faber : In principle, it is possible that as a result of rising
stock prices and recovering real estate prices, confidence will increase
somewhat, but I have to go back to what life is for the typical
household, and what life is for the holders of capital, in other words,
the 1%, or ½% of the population. For the typical middle class, the
standard of living is not going up because the insurance costs are going
up, healthcare costs are going up, taxes are going up. Everything is
going up in price, but employment has improved.
But then, if we decompose the improvement in employment, and we
analyze what kind of jobs people get, then the jobs that are being
created are mostly low-paying jobs, and the jobs that were lost were
high-paying jobs, so I don’t think we should just look at the number of
In the meantime, I also need to mention that the government debt
since 2007 has increased by more than 6 trillion dollars, and we have
deficits of around 1 trillion dollars. Having these deficits will
become, one day, a problem. They may not seem a problem now because the
Fed basically finances the deficit through the purchases of assets, but
will they be able to do it forever? That is the big question mark.
- in a recent interview with McAlvany
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