Tuesday, February 3, 2009

Disposable Income Breakdown

A breakdown of those areas contributing to disposable income going back to 1948 is below. Compensation for employees and proprietors income (i.e. salaries) have decreased from well north of 80% to 70%, while personal income receipts on assets increased from less than 10% in 1948 to almost 20% in 2008 (i.e. owners of capital had been king).



And the area with the largest growth over the past 60 years? Personal current transfer receipts, which according to the BEA are:

Payments to persons for which no current services are performed. It consists of payments to individuals and to nonprofit institutions by Federal, state, and local governments and by businesses.
Expect this to grow dramatically in coming years... we're all socialist now!

Source: BEA

Update- an anonymous comment adds:
I think you're ignoring the possibility that much of this is demographic (Social Security and Medicaid). As you say, it will get worse (with the pickup in Boomer retirement).
Good point.
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5 comments:

  1. AnonymousFebruary 3, 2009 at 7:05 AM

    I think you're ignoring the possibility that much of this is demographic (Social Security and Medicaid). As you say, it will get worse (with the pickup in Boomer retirement).

    ReplyDelete
  2. AnonymousFebruary 3, 2009 at 9:18 AM

    Hello,
    I recently started following your blog from samurai trader. Im developing a trading/investing system based on macroeconomic fundamentals, and I was wondering if you could recommend any books that explain macroeconomics, global macroeconomics, and monetary policy for investors and traitors. I want to have a working understanding of these areas so I can better understand your blog, and then later use all of this in a trading system
    Thanks
    Eddie B

    ReplyDelete
  3. JakeFebruary 3, 2009 at 10:00 AM

    Hey Eddie-

    First and foremost I'd recommend first going online and buying an "Econ 101" type book to get an understanding of basic concepts.

    The problem with the current environment is that we are in truly untested waters. Monetary policy is practically irrelevant when interest rates are 0%. There are many theories of how to get out of this (Paul Krugmans' Depression Economics is one), but it details theories or those policies used in non-systemic crisises.

    Let me think about this some more and get back to you. Also if any readers have input... please share for Eddie and for me.

    -Jake

    ReplyDelete
  4. AnonymousFebruary 3, 2009 at 11:11 AM

    Personal current transfer receipts seem to have peaked in 1988, under Reagan? What was going on back then?

    ReplyDelete
  5. AnonymousFebruary 3, 2009 at 11:14 AM

    I really do appreciate the input. I am newly married it puts stress on my marriage to contemplate the idea that I would go back to college and learn all this stuff. But Im holding out hopes that I dont have to do that , and I can get and learn all I need from amazon, these blogs, and some seminars here and there to become a successful investor/ trader. So any resources/ advice/ pep talk I can get is always welcomed.
    I would like to upload and show every one a model of the investing education framework Im working on. I would like to get some feedback.
    thanks
    Eddie

    ReplyDelete