The divide between rich and poor grows

Poverty is the parent of revolution and crime.
Aristotle, BC 384-322, Greek Philosopher

The rich are getting richer, the poor are getting poorer and the middle class is getting screwed. Daniel Hoffman states that the underclass (undeserving poor) now makes up 10% of the US population Full Story This is shocking considering that the US is supposed to be a first world country. If so many people are hurting why are we fighting wars we cannot afford, policing the world and donating money to nations who do not deserve it.

The following data suggests that the situation is only going to get worse. This is by no means a comprehensive list.

Unemployment:

The unemployment rate is officially 9.9%, but everyone knows this figure is just huge fat lie. The true rate is probably in the 18%-20% ranges. Some parts of the country have rates in excess of 25%

The foreclosure factor:

Home sales might be improving, but most of the improvements are a direct result of the 8,000 credit the government offered first time home buyers. In 2009 roughly 3 million homes were foreclosed and www.Realtytrac.com states that the number could increase by as much as 3.5 million in 2010. If we add in strategic foreclosures, the picture will probably look a lot worse.

According to Reuters roughly 40 million Americans are on food stamps

Nearly 40 million Americans received food stamps — the latest in an ever-higher string of record enrolment that dates from December 2008 and the U.S. recession, according to a government update. Full Story

The dept of Agriculture states that 1 in 8 Americans may not be able to eat without government assistance. Let this figure sink in, we are not talking about some third world country, we are talking about the US. This is a clear sign that things are a lot worse than they are being made to look. The undeserving poor could grow in leaps and bounds if the economy suddenly hits a road bump. Europe is already in the midst of a second recession.

According to the most recent census, about 35 million Americans live in poverty

Let’s also consider the fact that some jobs are never coming back. We covered this recently in the following article High unemployment levels here to stay.

Dollar tree, Wal-Mart, Sam’s club and other large warehouse clubs are all booming; a sign that individuals are looking for bargains. Bargain hunting is usually a sign that all is not well.

Catherine Rampell provides additional information on this topic

In December 2008, 22.9 percent of the unemployed had been out of work for at least 27 weeks. A year later, that portion rose to 39.8 percent. That translates to having about 4 percent of the total civilian work force categorized as long-term unemployed.

Here’s a look at how many weeks the average jobless person has been jobless for:

Source: Bureau of Labor Statistics

The average person who was unemployed in December had been out of work for 29.1 weeks. By contrast, when the recession began two years earlier, the average unemployed person had been out of work for 16.5 weeks. Full Story

Conclusion

The underclass or the undeserving poor are growing as a group and many of those that are being pushed into this group are individuals who formerly belonged to the middle class. Given that unemployment is going to remain high for years to come, it appears that this trend will continue for sometime. In many cases this could have been avoided if these individuals had chosen to live 1-2 standards below their means and put the money they saved into good investments. For example, high dividend yielding stocks or invested some of this money in bullion, high quality technology, commodities based stocks, etc. Instead many of these individuals lived a lifestyle that was several levels above what they could afford and now sadly they are paying the price for their lack of foresight. However, it would be wrong to lump everyone into this category. If we are hit with another recession, then the outlook could deteriorate significantly.

We are not concerned with the very poor. They are unthinkable, and only to be approached by the statistician or the poet.
Edward M. Forster, 1879-1970, British Novelist, Essayist

Read the original story at The Tactical Investor