The year is off to a tumultuous start. Markets around the globe are quickly realizing that hot money is going to hit a wall at some point. Many Americans are coming to the stark realization that the recession that ended in 2009 never really ended for the middle class. In fact, it might have been the nail in the coffin for the middle class. Much of the fragile gains really went to a small fraction of Americans and the financial system is predicated on siphoning off wealth from the working class. Many Americans are still living on the financial edge. A recent survey found that 63 percent of Americans have no emergency savings. Forget about having a robust nest egg. The retirement plan for many Americans is to work until they fall over dead. While the last few years brought in spending with debt this of course was set to reverse once the market had its first tiny correction since 2009. Americans are about to feel and become poorer in 2016.
The old and young will feel the pain
Having an emergency fund is basic financial planning. But most Americans simply do not have a fund because they are too broke after paying basic bills. After all, we have nearly 46 million Americans on food stamps and this is happening during a time that we are supposedly in recovery. What will be the case when another recession hits? And for most Americans, the old recession never left. We have a record number of people not in the labor force making the unemployment rate seem artificially low.
The wealth effect will reverse and the stock market already had a dismal 2015. 2016 is off to a horrible start. Markets in China had to be halted twice because of steep drops already and we have yet to even hit the middle of the month. The US market is also feeling the pain.
This post was published at MyBudget360 on January 7, 2015.
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