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How Will The Economy Improve In 2014 If Almost Everyone Has Less Money To Spend?

Piggybank - Photo by Damian O'SullivanIs the U.S. consumer tapped out?  If so, how in the world will the U.S. economy possibly improve in 2014?  Most Americans know that the U.S. economy is heavily dependent on consumer spending.  If average Americans are not out there spending money, the economy tends not to do very well.  Unfortunately, retail sales during the holiday season appear to be quite disappointing and the middle class continues to deeply struggle.  And for a whole bunch of reasons things are likely going to be even tougher in 2014.  Families are going to have less money in their pockets to spend thanks to much higher health insurance premiums under Obamacare, a wide variety of tax increases, higher interest rates on debt, and cuts in government welfare programs.  The short-lived bubble of false prosperity that we have been enjoying for the last couple of years is rapidly coming to an end, and 2014 certainly promises to be a very "interesting year".

Obamacare Rate Shock

Most middle class families are just scraping by from month to month these days.

Unfortunately for them, millions of those families are now being hit with massive health insurance rate increases.

In a previous article, I discussed how one study found that health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.

Most middle class families simply cannot afford that.

Earlier today, I got an email from a reader that was paying $478 a month for health insurance for his family but has now received a letter informing him that his rate is going up to $1,150 a month.

Millions of families are receiving letters just like that.  And to say that these rate increases are a "surprise" to most people would be a massive understatement.  Even people that work in the financial industry are shocked at how high these premiums are turning out to be...

"The real big surprise was how much out-of-pocket would be required for our family," said David Winebrenner, 46, a financial adviser in Lebanon, Ky., whose deductible topped $12,000 for a family of six for a silver plan he was considering. The monthly premium: $1,400.

Since Americans are going to have to pay much more for health insurance, that is going to remove a huge amount of discretionary spending from the economy, and that will not be good news for retailers.

Get Ready For Higher Taxes

When you raise taxes, you reduce the amount of money that people have in their pockets to spend.

Sadly, that is exactly what is happening.

Congress is allowing a whopping 55 tax breaks to expire at the end of this year, and when you add that to the 13 major tax increases that hit American families in 2013, it isn't a pretty picture.

This tax season, millions of families are going to find out that they have much higher tax bills than they had anticipated.

And all of this comes at a time when incomes in America have been steadily declining.  In fact, real median household income has declined by a total of 8 percent since 2008.

If you are a worker, you might want to check out the chart that I have posted below to see where you stack up.  In America today, most workers are low income workers.  These numbers come from a recent Huffington Post article...

-If you make more than $10,000, you earn more than 24.2% of Americans, or 37 million people.

-If you make more than $15,000 (roughly the annual salary of a minimum-wage employee working 40 hours per week), you earn more than 32.2% of Americans.

-If you make more than $30,000, you earn more than 53.2% of Americans.

-If you make more than $50,000, you earn more than 73.4% of Americans.

-If you make more than $100,000, you earn more than 92.6% of Americans.

-You are officially in the top 1% of American wage earners if you earn more than $250,000.

-The 894 people that earn more than $20 million make more than 99.99989% of Americans, and are compensated a cumulative $37,009,979,568 per year.

It is important to keep in mind that those numbers are for the employment income of individuals not households.  Most households have more than one member working, so overall household incomes are significantly higher than these numbers.

Higher Interest Rates Mean Larger Debt Payments

On Tuesday, the yield on 10 year U.S. Treasuries rose to 3.03 percent.  I warned that this would happen once the taper started, and this is just the beginning.  Interest rates are likely to steadily rise throughout 2014.

The reason why the yield on 10 year U.S. Treasuries is such a critical number is because mortgage rates and thousands of other interest rates throughout our economy are heavily influenced by that number.

So big changes are on the way.  As a recent CNBC article declared, the era of low mortgage rates is officially over...

The days of the 3.5% 30-year fixed are over. Rates are already up well over a full percentage point from a year ago, and as the Federal Reserve begins its much anticipated exit from the bond-buying business, I believe rates will inevitably go higher.

Needless to say, this is going to deeply affect the real estate market.  As Mac Slavo recently noted, numbers are already starting to drop precipitously...

The National Association of Realtors reported that the month of September saw its single largest drop in signed home sales in 40 months. And that wasn’t just a one-off event. This month mortgage applications collapsed a shocking 66%, hitting a 13-year low.

And U.S. consumers can expect interest rates on all kinds of loans to start rising.  That is going to mean higher debt payments, and therefore less money for consumers to spend into the economy.

Government Benefit Cuts

Well, if the middle class is going to have less money to spend, perhaps other Americans can pick up the slack.

Or maybe not.

You certainly can't expect the poor to stimulate the economy.  As I mentioned yesterday, it is being projected that up to 5 million unemployed Americans could lose their unemployment benefits by the end of 2014, and 47 million Americans recently had their food stamp benefits reduced.

So the poor will also have less money to spend in 2014.

The Wealthy Save The Day?

Perhaps the stock market will continue to soar in 2014 and the wealthy will spend so much that it will make up for all the rest of us.

You can believe that if you want, but the truth is that there are a whole host of signs that the days of this irrational stock market bubble are numbered.  The following is an excerpt from one of my recent articles entitled "The Stock Market Has Officially Entered Crazytown Territory"...

The median price-to-earnings ratio on the S&P 500 has reached an all-time record high, and margin debt at the New York Stock Exchange has reached a level that we have never seen before.  In other words, stocks are massively overpriced and people have been borrowing huge amounts of money to buy stocks.  These are behaviors that we also saw just before the last two stock market bubbles burst.

If the stock market bubble does burst, the wealthy will also have less money to spend into the economy in 2014.

For the moment, the stock market has been rallying.  This is typical for the month of December.  You see, the truth is that investors generally don't want to sell stocks in December because they want to put off paying taxes on the profits.

If stocks are sold before the end of the year, the profits go on the 2013 tax return.

If stocks are sold a few days from now, the profits go on the 2014 tax return.

It is only human nature to want to delay pain for as long as possible.

Expect to see some selling in January.  Many investors are very eager to start taking profits, but they wanted to wait until the holidays were over to do so.

So what do you think is coming up in 2014?  Please feel free to share what you think by posting a comment below...

Piggybank - Photo by Damian O'Sullivan

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  • Rene Girrard

    America’s peak year was 1969. We’ve just been going downhill very slowly until about 2000. Now we are going downhill at an alarming rate, and the news media won’t even discuss it.

  • Sandbagger

    Pastor Lindsey Williams says to expect a global currency reset in the next few months. When that happens, he said prices will rise around 30% eventually.

    Can you afford a 30% increase on everything you buy? On top of those other increases Michael mentions? I think the majority would say no way.

    I predict 2014 on into 2015 to be when the real pain and riots in the U.S. begin.

    • jn

      maybe

  • Mondobeyondo

    The Dow fell today. We may be headed for a bear market. If we do, things could get… grizzly.

    (Yes, that pun is mine.)

  • Mondobeyondo

    How can you afford Obamacare when you can’t even afford groceries?

    • jn

      you could steal food

  • TR

    Every president that has served during my lifetime has been the worst & the next president will be the worst.

    • Boo-urns

      Yep. Congress too. We allow these buffoons and evildoers (from BOTH parties) to exists because we continue to vote them into office over and over and over again.

      A vote for a Democrat or a Republican is a vote for our imminent demise.

  • BlackDog

    Let’s try to put this into perspective — you take an unknown community organizer with a real vision (regardless of whether or not it’s feasible) for change in this country. You introduce him, prior to the election, to Loyd Blankfein and Jamie Dimon, who offer him and his family, both now and 100 years into the future, the wealth of Kings if he’ll just sway his favor their way, when they need it. Who among you would say, ‘No.’ ??? THAT is the problem we face now, and forever into our future unless we change things. And voting in that change is laughable — our current reps have minions 25 deep, just waiting for their chance to cash in on the American Taxpayers. So, how do you suppose we’ll have to change things? And we’re just about there, too.

  • Dallas29

    I am 29 years old and college educated. I was laid off in September 2013. Been actively looking for a job since then. Part of the problem is too many people in my industry are out of work. Realized half of the contacts in my phone are out of work. I had an interview for a position that actually pays fairly decently the week before Christmas. If I don’t get an offer for that job. I am giving notice at my apartment and booking a ticket to Australia or somewhere in Asia. Luckily I have some savings to lean on. But, I think sticking around here is scarier than getting a job in another country.

    • Alasha

      Godspeed! You are in my prayers, Dallas29

    • k

      what did you graduate in?

      • libsarescum

        “what did you graduate in”? you must have a 3rd grade education

        • k

          You must be really dense.Let me rephrase it. ‘What degree did he graduate with’/ ‘in what field did he graduate’?

          • libsarescum

            you must be have a 3rd grade education, similar to hussein obama. his GPA in college was 2.01, just barely above passing. who can dispute either. you are an idiot just like obamao

  • 2Gary2

    Tax the rich and spread the wealth–problem solved. Everyone will have money to spend and stimulate the economy. The rich save and have way too much money already. Tax them HARD and spread the wealth.

    • Colin

      No. Increase the minimum wage. This creates increased purchasing power. then everyone benefits.

      • Jimbo

        Return to free market enterprise and not the over regulated, centrally planned system that we have now. The biggest down force on wages is unemployment. In a true free market, there is no unemployment.

        • k

          No mimimum wage, means a sweatshop like workplace. Where goods will be very cheap, but the local population wont be able to buy them because of less than minimum wages. And if no one will be able to buy them, then the company will stop manufacturing them, which again will lead to job-losses.

          And colin, raising the minimum wage leads to higher demand for goods that will lead to two things. Fall in prices of them if their supply is well stocked which it has and if companies are desperate to sell which give the current economic scenario…they are. And the second thing is more jobs created to keep up with that increase in demand to sell and manufacture. If goods are not bought jobs wont be produced through selling and making them.

          It should not be raised too high, but it should raised in a way that both the companies and the people profit…not just one of them.

          • jn

            wrong socialist dumbfuck

          • k

            You must be off your meds. Or get your head checked.

            Or maybe its your upbringing.

          • Jimbo

            On the face of it, an enforced minimum wage sounds good, but in a true free market, there is no need to centrally enforce a minimum. In a true free market, the workers set their own wages by changing to better paying employers forcing the cheapskate employers to pay more. Unemployment benefits encourage unemployment and unemployment itself forces down wages.

          • k

            In a true free market….yes…but the thing is a market will never be truly free in reality. Top companies in a market once the yreach a certain size, can easily form a syndicate or monopolise the market by merging or partnerships with other big companies, or by buying off politcians or lobbying to write laws in their favour, to make harder to others to start a business or employees to leave.

            Its human nature!

            Thats why we need minimum wage laws (laws that guarantee a living wage not super high wages) to keep them in check.

            i am not saying people should get paid more than their work demands, i am saying people should get paid as much as their work demands….thats what minimum wage does.

            Thats why its called ‘minimum’.

            Also with regards to unnemployment benefits, they only encourage unemployment if the wages are far less than the benefits. Not if they are more.

      • Boo-urns

        No it doesn’t. Increasing the minimum wage only promotes inflation; as wages are forced upwards the cost of goods and services rise commensurately. That load of bread that the minimum wage worker struggles to afford will simply cost more after the wage increase, and the worker will still struggle to afford it.

        The bigger issue is that minimum wage jobs are not meant for adults to support a family on, they are meant for high school kids. When I hear Yolanda complaining that she works 40 hours a week at McDonalds and can’t afford to feed her four kids, I can only wonder how she thought that was an appropriate job to support a family on. The truth of the matter is that these low-skill jobs have a certain maximum value, and unskilled workers are easily replaceable so there is no pressure to raise wages.

      • Drud

        @all – not laws, no regulations, no ideas, no fixes can work until we fix the currency. An analogy would be a very sick patient with multiple organ failures related to blood poisoning. Fixing the organs does nothing, they will simply be poisoned again in short order.

    • carljr

      Unfortunately Gary this is not a viable solution as the tax money will not trickle down to normal people who do not want to be on government assistance and welfare, etc….

    • Malcolm Reynolds

      Teacher says, when Gary says ‘tax the rich and spread the wealth’ a one trick pony gets it’s wings.

    • libsarescum

      you are beneath scum

      • 2Gary2

        ok hoss you really put me in my place.

    • Mark Caldwell

      Karl Marx is dead, I wish the disease of cultural Marxism = collectivism had died with him. Alas, there is never a shortage of naive and ignorant peasants available who think we are living in actual free market capitalism, when we actually have kleptocratic corporatocracy. That has to change, your drum beating about pitchforks in front of the mansions is nothing but parasitic flailing and mob mentality most likely fomented during early childhood where anger grew out of resentment of those around you.

      Collectivism and authoritarian progressive socialism is always attractive to those with broken spirits and jaded souls.

  • 2Gary2

    michael-happy new year. Have you heard how Christmas sales were? Better than or worse then expectations and or prior years?

    • jn

      worse you liberal dumbfuck

    • libsarescum

      libs lose the senate in 2014. YEAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

      • 2Gary2

        that would be a no hoss. 2014 will be the year of the progressive.

  • GSOB

    Reactor 3 is steaming and we can only guess why. Fresh plumes of steam arising….89 TONS of radioactive fuel is threat

    Everyone, it seems, feels that 2014 is going to be bad for our economy.

    Go figure…

    • sr82

      Don’t you mean that God will only help those who have repented. After all the rest of us are going to burn in hell so who cares about the unsaved. Right?

  • Colin

    Remittance workers are individuals who are employed in one country and sent their money to the home country for supporting their families. Many of these workers are from developing countries, and they work in developed countries. If our country continues to devolve into a third world nation, will we soon see American remittance workers working in other countries and sending their money back to the motherland?

  • Mondobeyondo

    How to Survive in a Depression, #4:

    Don’t be stuck in your bedroom, crying your eyeballs out and listening to “Cry Baby” * on your MP3 player. Don’t let it get that bad. Because if you do, you won’t be able to get out of it alone without help.

    * Janis Joplin.

  • Mondobeyondo

    How to Survive during a Depression, #5:

    It will break your back. It will break your heart.
    Don’t you DARE let it break your spirit.
    You MUST press on.

  • Karen

    I live in Northern Florida and 90% of everybody I see drives nice vehicles, the stores are packed nice homes where does it all come from!!! DEBIT I know of no one whom lives within their means except my daughter and she is 23. In the 80 s when I left active duty you could only have unemployment for six months no ands ifs or buts you had to find a job. Now folks live on it for over a year jobs are there you just have to really look, my daughter gets up early takes her children to day care and works cleaning hotel rooms at eight dollars an hr 23 years old and works her butt off. SO STOP your whining. Guess what the new trends are for in 2014 per the old farmers almanac robots that will pick fruit and do other manual labor because humans are to lazy.

    • Rene Girrard

      Your daughter is Mexican?

    • DiscouragedOne

      My son has been looking for a job since May, and even though he has a degree he is willing to take anything. He has not even had one interview yet.

  • Cassandra

    It is so hard to watch everyone sit here and blame each other. We did not pay attention and now we only have ourselves to blame. These problems started long before Obama. If he had not intervened the way he did, America would be third world. I’m Canadian. I have been watching from afar. Your people cannot see the forest for the trees. Employers do not pay a live able wage. That is the problem. Personal responsibility can only go so far. Someone will always have to pump gas. Theses lives and their children’s lives should not be devoid of health and happiness because their employers choose to funnel all the money to the top. There is more than enough for everyone. All the money is in corporate pockets and the bank accounts of the 1%.

  • karryokie

    To fix the economy:GET RID OF CASH.Tax evasion and crime are much harder without the use of cash.

  • jn

    gary the commie pos effeminate lib has returned!

    • carljr

      I think people hate Gary’s theory about taxing the rich because they believe that should they become rich one day that they would hate to get taxed. The irony is that most of us will only aspire to be wealthy and never actually achieve it. The 1% has the deck stacked in their favor not ours. See the movie Assault on Wall St. It depicts this quite accurately regarding how we are just small wheels in a gigantic cog and have no control over what happens.

      Also the rich only pay social security taxes up to 100,000 dollars of their income. How is that fair?

      • Drud

        The flaw in the whole theory is that the 1% not only pay tax-lawyers obscene amounts of money to avoid paying taxes, they also, through their lobbyist, WRITE the tax laws. So, do you think that any law written by a bought-and-paid-for Congress will EVER touch the 1%? No, any law will simply redistribute the 7% of the wealth that is controlled by the 99%. This is what has been happening for the past 3 decades (at least) regardless of who is in the White House or which letter has the majority in Congress.

        • jn

          +1

        • DiscouragedOne

          Well said.

      • DiscouragedOne

        I think you are wrong…people hate it because they know it is a slippery slope, and they know their taxes are going up too…and they are. Obamacare is going to kill the middle class figuratively and literally.

  • Ralfine

    lol

    eat your .45 then.

    • Jim Davis

      Excuse me, while I go and vomit.

      • Ralfine

        feel free to enjoy yourself

  • Mondobeyondo

    Sorry, Alice. All is not well in Wonderland. Every single source I’ve checked – economist blogs, alternative media, mainstream media, the Bible – etc – say the same thing: America is going down like the Lusitania (which went down faster than the Titanic). Not one of them offers a prosperous future for this country.

    These 2 links may, might, possibly convince the remaining doubters…

    http://abcnews.go.com/US/wireStory/gloomy-americans-foresee-downhill-slide-2050-21407800

    http://www.paulcraigroberts.org/2012/07/08/the-collapsing-us-economy-end-world/

  • Mondobeyondo

    “Despite the recent shift toward negativity about the state of the nation, the portion of U.S. residents rating themselves very or pretty happy stayed around 9 out of 10.” – ABC News

    Yikes! There’s a disconnect here. Are they saying depressed people are happy?

  • Gay Veteran

    gee, better talk to your heterosexual neighbors about their sodomy habits

  • Ralfine

    ok, my numbers are dated. still quite impressive if you think about the population of germany – 82 million.

  • GSOB

    Good post… Did not see that.

    Reminds me of the news story,… the NSA and the Japanese government knew about the radiation levels, yet sent the troops anyways….

    • Washington76

      Thanks’ patriot!

  • Mondobeyondo

    The Baltic Dry Index (true indicator of the economy, as opposed to the Dow Wow Wow) is looking a bit better, but it’s far from where it was in the mid-2000′s.

    You can check it out here…
    http://investmenttools.com/futures/bdi_baltic_dry_index.htm

    Hope you like charts and stuff such as!

    • Mondobeyondo

      Only topped by country star Kellie Pickler’s answer on “Are You Smarter than a Fifth Grader”.

      “Hungary? You mean that’s a country?”

      My goodness…. we are doomed.

  • Sandbagger

    Did anyone else click on the Mac Slavo link?

    Crazy-scary graph shows the stock market in the months leading to the ’29 crash mirroring what we see today. W-o-w. No denying we are going over the cliff.

  • libsarescum

    did you know that gary is human filth?

  • John

    The premium increases are in reality a middle class tax increase which is being used in part to pay for all the millions who will sign up with medicaid.

  • Orange Jean

    Raising the minimum wage will simply result in inflation until the same people who now cannot afford to live on what they earn will again also not be able to afford to live on what they earn …

    Don’t believe me? In 1970 or thereabouts the minimum wage was something like $2/hour. But then you also could buy enough food to feed a family of 2 for $10 a week. How do I know that? I had a minimum wage job then and my grocery budget then was $10 a week, and we had enough to eat reasonably. Around the same time, one of my brother’s bought his first house (in Concord, NH) for $20,000. Seen any homes in that price range lately?

  • GSOB

    “Of Special Importance”

  • Mondobeyondo

    “Instructions: Poke holes in plastic covering. Microwave on high for 5 minutes if frozen, 3 minutes if thawed. Remove from microwave oven. Toss
    contents in garbage” .

    Perfect. I get to eat nothing – again.
    ———–
    You need a laugh. So do I. We all do.

    • Orange Jean

      Sounds like you’re having a rough week Mondo… hope it gets better from here.

      Since you live in AZ, might want to consider eating like Mexicans or Native Americans do…

      but your sense of humor is great!

  • Mondobeyondo

    How to Cook Stuff When You’re In a Depression and Can’t Afford Stuff to Cook:

    “Great Depression Cooking with Clara” is a great place to start. She went through it in the Thirties; we’re going through it now. You can find her videos on Google or YouTube. Some of what she says, I knew already, but I learned a lot of new things too. Remember the two “P’s”. Potatoes and pasta. They are your best friends.

    “Mama said there’d be days like these”…*

    * The Shirelles, “Mama Said”

  • libsarescum

    why does liberal dogma dovetail so nicely with that of the Nazi’s?

    1. gun control (aka confiscation) both wanted to disarm the middle class so they could control them

    2. health care – both wanted universal healthcare as a means of controlling the populace.

    3. disposal of the unwanted – nazi’s own the holocaust, libs love abortion

    4. and remember its for the children – both love to be photographed with children and use them as props

  • ian

    Dont worry everyone. As soon as the next republican president wins, this will all magically disappear, the economy will instantly improve, and you will be called a traitor for believing any different. Just like no one can remember the last president and the damage he did to the country

  • libsarescum

    +1

  • libsarescum

    lmao, nice try.
    1. ethnic minorities such as the blacks who were held as slaves by democrats?
    2. wars like vietnam which killed 50000+ young men? oh wait, that was a gift from the democrats.
    3. hating banksters is cool and trendy
    4. LGBT is so cool. I bet you will raise your children as gay so your boys can grow up and lick other mens testicles.

  • libsarescum

    libs are human excrement and even they know this

  • Mondobeyondo

    America’s peak years were in the late 1950′s, during Eisenhower’s second term as president. Big finned cars, a booming industrial economy – what could go wrong? Umm, just about everything.

    And now, returning to the immediate task at hand – “Green Bay has just scored a touchdown! The football is frozen solid! Jim, did you see that? It was literally coagulating in midair as the quarterback threw it! Now for the point after attempt – hope the field goal kicker’s foot doesn’t fall off when he kicks that ice cube”

  • none

    GOOD NEWS MICHEAL.
    I don’t think that Obama wants to change medical insurance.
    This reminds me of an Mafia tactic from the 1960′s.
    It was called the 2% contract.
    Basically, some guy would tell you that you either sign it, or you will have your brains blown out all over the paper.
    The end result was the same. They would end up owning your company.
    Think about all the money that insurance company’s own. Worldwide, all the company’s that insure with us.
    (Side note, the NSA would love to get ahold of all that info).

  • DISGUSTED

    We own our own business and get our money from manufacturers. They are wildly cutting expenses – they see what is coming, or more importantly, what is here. Our business is off by 25%. Add to that the idiot’s healthcare plan. Excessive taxes. Rising prices. YES, we are cutting expenses. Drastically. I’m not happy with the USA right now and I’ve always been an unwavering patriot.

  • DiscouragedOne

    Wish I lived where I could go clamming.

  • Chris Lannon

    A strong country to me would have a smart and healthy people. Healthcare and education are through the roof, makes no sense. In addition, why is it acceptable to lay off hundreds of people and then the top exec’s get more money. I would rather have those people working and the top earners get less. That is what will help everyone. Sadly, greed tends to win out.

  • energizedmortal

    Prepare and survive!!! The reward is anarchy.

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