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Home / Expert Opinion / Money Management: Who is better off than they were 4 years ago?

Money Management: Who is better off than they were 4 years ago?

George W. Karpus

“Who is better off in the last four years?” This is a question that is being asked by politicians on both sides.

There is no doubt that those with the most in invested assets (the wealthy) have done the best.

Since President Obama took office, the stock and bond markets have done extremely well.





January 1, 2009 through September 7, 2012


              Stocks                                                             Bonds

S&P 500                                                            Barclay’s Govt./Credit Fund

Total Return      +72.51%                                              +25.74%

Annualized        +15.94%                                                +6.45%

The top 20 percent of wage earners, with an average annual income of $223,500 and who pay 67.9 percent of all federal taxes, have the most investable assets. They are the clear winners as to “who is better off.”

The bottom 20 percent, with an average annual income of $23,500 and who pay almost no taxes, are the losers.

Printing money makes the poor poorer and the rich richer.

Deficit spending by governments stimulates economic activity which causes stock prices to rise. Printing money (QE1; QE2: Operation Twist) also causes financial assets to rise. Those with the most invested in financial assets (stocks and bonds) benefit the most.

On the other hand, those living on food stamps, welfare, unemployment and Social Security alone, as well as those who are working and living from check to check, lose ground when the government prints money.

Printing money is essentially a regressive tax, meaning that it hurts the poor and the lower middle class the most.

In the last four years, gasoline prices have doubled and most food items have risen 40 percent. Imported goods from Asia have also risen due to the relative devaluation of our currency. The Consumer Price Index (CPI) no longer takes into account food and energy. People on social programs (food stamps, welfare, unemployment, Social Security) usually find their increases linked to changes in the CPI, while most employers increase employee wages by CPI plus 1 percent.

Thus, those in the bottom 50 percent find that they have been receiving increases of 2 to 3 percent annually but the things that they buy have increased 5 to 6 percent annually. After four years, they have fallen behind by 12 to 16 percent.

The top 20 percent of income earners use a smaller portion of their incomes for food and energy and a larger portion toward investments.

It is clear that the top 20 percent have been the winners over the last four years while the bottom 50 percent have been the losers.

George W. Karpus is chief investment strategist and chairman of the board for Karpus Investment Management, an independent, registered investment advisor that manages assets for individuals, corporations and trustees. Offices are located at 183 Sully’s Trail, Pittsford, N.Y. 14534; phone (585) 586-4680.