Summer Charts: A New Capitalism NeededSummer Charts: A New Capitalism Needed

“Summer Charts” is a series of current financial topics explained in dots, lines, and only a few words –just the right “mix” to concisely convey ideas for critical thinking about economic topics and investing. 

Americans are becoming far more comfortable with (or reliant upon) higher levels of debt. Data released by the Fed shows that consumer credit has not only grown to unprecedented levels, but also that the annual rate of change has become increasingly more significant since 2011. Considering that the U.S. consumer “anchors" the faith of the domestic economy with a 70% contribution to GDP, historical trends of (increasing) consumer credit combined with the below-illustrated reduction in wages relative to GDP may be even more alarming than current levels of total consumer debt owed.

Since 1970, employed Americans’ share in the economic success of the economy, as measured by GDP, has generally been in decline. Even though this development has recently been in reverse since reaching a low point in 2011/2012, current levels are still below those seen prior to the 2008/2009 recession. Whereas other factors contribute to the health of the consumer – e.g., disposable income – the overall picture is “off,” especially given the position of the consumer relative to the drivers of the U.S. economy (i.e., investment and business spending “drive” the economy, but it is up to the consumer to buy final goods and services that are reflected in GDP). A new, more sustainable, paradigm is needed.