This Is Not The Time To Be Any Shade of Grey

If you are a regular reader of BeeLine you know that I love charts.  A picture does say a thousand words.  According to brain research, an image will be remembered at least 6X more than words.  Let's if these charts will burn an image and

Here are three charts I came across in an article by Michael Cembalest or J.P.Morgan Asset Management.  They all tell their own story of where our economy and fiscal position is right now and where we have been.

The first chart is the average federal individual income tax and social insurance (FICA) tax rate by income group from 1979-2013.  This chart shows that we now have that horrible top 1% of income earners paying the highest tax rate on income since 1979.  You would think President Obama and the Democrats would be saying "mission accomplished".   However, they are telling us they are not finished yet.

Note the trend of the average tax rate of the lowest quintile.  Due to refundable tax credits these "taxpayers" actually profit from our current tax system.  They receive more in tax refunds than they have taxes withheld from their earnings.

All of the average rates are higher for 2013 due to the expiration of the payroll tax holiday.

The next chart is auto sales as a % of the population.  As you can see, the United States pretty consistently had auto sales of around 6% of the population up until 2008.  Sales went over the cliff with the financial meltdown in the Fall of 2008 and bottomed out at 3%.  That is when the auto union bailouts were required for GM and Chrysler..  Auto sales have recovered but are still below historical averages.  Europe's auto sales as a % of the population have historically been about half of the U.S.  The contraction has not been as severe in Europe but auto sales are not recovering as many of the European countries remain under fiscal stress.

The final chart is one that Cembalest creatively captioned as "Fifty Trades of Grey" shows that for 50 consecutive months the Federal Reserve has been buying treasury and agency securities through its Quantitative Easing (QE) program.  In effect, printing money in order to buy federal government debt.

It is almost beyond belief that in January the Federal Reserve funded 70% of all federal debt purchases. Over the last year there has not been one month that the Fed has not purchased less than 50% of all Treasury and Agency securities.  There is not much room for anyone else to get up to the Treasury window to make a purchase.

All of this is great for the federal government and the big banks who are getting bailed out by the Fed's low interest policy but what about the savers?  You know, those people who worked their whole life, spent less than they earned, did not gamble with their money or with leverage and would now like to earn a safe return on their savings.  I came across one additional chart this week from Grant Williams of "Things That Make You Go Hmmm" that tells that story.  He calls it Financial Repression.

Source: Grant Williams, "Things That Make You Go Hmmm"

If the $10 million is too rich for you, consider someone with $1 million.  All they can earn with that is $2,400.  How about $100,000?  That will get you $240.  Have a Happy Retirement!

It certainly is not the time to be any shade of grey.