Late last week, the US shocked economists with  a report that contained results they were not  

really expecting. The economy had grown at  a shocking 3.8% pace in the second quarter,  

seemingly putting to rest all the concerns that  the nayers had about a softening job market,  

trade wars, the cost of living, skyrocketing  defaults, declining labor force participation,  

sectorwide crises, and slowing productivity.  Sounds great, right? Well, as you might have  

already guessed, there is a lot to unpack from  these numbers. GDP isn't a flawless measure even  

in normal times. And I'm sure you have probably  noticed there is a lot going on at the moment.  

But if you do what nobody else wants to do and  actually read the data behind these figures,  

it tells three very interesting stories that  challenges a lot of assumptions that we have about  

how our economy should work. This goes well beyond  just simply growing inequality. That's not exactly  

shocking news anymore. But if you are looking  for a sign of just how healthy and balanced the  

current market is, a new report has revealed that  there are now more private equity firms in America  

than there are McDonald's. And the reason is very  simple. If all of these numbers needed a headline,  

it would probably be you don't matter anymore.  Economically speaking, of course. GDP report  

showing that the US economy expanded at 3.8%  surpassing the forecast growth of 3.3%. 36%  

of consumers say they've had trouble paying in  just the last week. So that is up 25%. Compared  

to the same time period a year ago. So you have  to go to your landlord and say, "I don't know how  

I'm going to pay you." I've never had to do that.  Trillions of dollars are pouring into the United  

States for investment purposes. The US economy  grew faster than expected between April and June.

So yeah, that wasn't a typo. There are now 19,000  private equity funds in the US and only 14,000  

McDonald's locations. The statistic was originally  highlighted by Alisa Wood, a partner at one of the  

biggest private equity firms in the world. Ironies  aside though, the reason this is happening is  

because there is just more opportunity in serving  investment products to a few thousand ultra- high  

net worth individuals and institutions than there  is in serving burgers to millions of everyday  

Americans. As an economic participant, you really  only have three jobs as far as these numbers are  

concerned. You can work, you can invest, and you  can consume. So do keep this in mind as we jump  

into the numbers because there are really three  big problems with a lot of our assumptions. The  

first problem is what this impressive economic  growth figure is actually based on. GDP is  

normally calculated by summing together household  consumption, investment, government spending,  

and exports and then subtracting total imports.  When the Bureau of Economic Analysis says that  

the economy is growing at 3.8%, 8%. They do this  calculation for a quarter, compare the difference  

to last quarter, and then multiply it by four to  get an annualized figure. If you are so inclined,  

they publish the individual breakdowns of all  of these numbers. And if you did look closely  

at the most recent report, there is one number  buried deep in the data that really puts this  

promising headline into perspective. In Q1 of this  year, imports into America spiked by over 38% from  

the quarter before. This was mostly because big  retailers wanted to stock up on inventory before  

tariffs took effect so they could remain cost  competitive for a few more months. But in Q2,  

after they had already filled all of their  warehouses, they didn't need to bring in more  

inventory from overseas. So imports dropped by  over 29%. Now remember, when the economists do  

their calculations, they subtract imports. So on  paper, a crash in import volume is actually good  

for GDP numbers. In reality though, international  trade swinging this wildly over 6 months in the  

biggest economy in the world is not great. But it  gets worse. Within the same report, it is noted  

that this large drop in imports actually bolstered  GDP by over 5%. What this means in plain English  

is that if we ignored the wild swings in import  volumes, GDP would have actually shrunk by 1.2%  

at an annualized rate. Now, as a small little  side note, two consecutive quarters of negative  

GDP growth. I'm sure the comment section can  tell you what that's an indication of. Now,  

you might think a little glitch in the reporting  process still shouldn't have this much of an  

impact on the performance of the entire economy,  right? And you would be absolutely correct. Over  

2/3 of the American economy depends on just this  part here. Personal consumption now accounts for  

68% of all of our economic activity, well above  most other advanced economies, which is clearly  

not ideal. But it has given us two pieces of false  confidence. The first is that since so much of the  

economy relies on consumer spending, we can't let  those consumers fall too far or else there will be  

nobody left to sell stuff to. Right? Wrong. I have  mentioned this statistic before. But for those who  

haven't heard it, 50% of all consumer spending is  now done by just the top 10% of households. Now,  

that's a scary statistic by itself. But what  it doesn't mention is that the bottom 60% of  

households now collectively account for less than  20% of the spending. And a growing share of that  

is being supported by risky consumer debt. The  companies that have been performing best over  

the last 5 years have been in industries catering  to wealthy consumers or to investor hype. Ferrari  

is now worth twice as much as Honda. And even  Walmart is changing its business model to cater  

to more upmarket shoppers. More than 200 million  people could drastically cut their spending  

tomorrow. And the total drop in economic activity  could be covered over by increased spending on  

things like AI. In fact, it's kind of already  happening. Personal consumption contributed  

less to economic growth than data center  construction in the last reported quarter,  

and a majority of that consumption was  done by just 10% of households. Anyway,  

Steve Iceman of Big Short Fame did an extended  interview on this a few days ago, and it goes  

into depth on a lot of the specifics, so I will  leave a link to that down below. But in brief,  

this is more than just regular old inequality.  Today, we have something arguably worse.  

Indifference. The lords of old at least needed  their surfs to keep their empire operating. Today,  

not so much. As far as the economy is concerned,  your ability to be a good little consumer is  

just a rounding error. And that leaves only your  ability to work and your ability to invest. So,  

it's time to learn how money works to find out  why you don't matter anymore to the economy.  

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workflow using the link in the description.  One important detail about your relationship  

with the economy is that yeah, sure, your success  might not mean that much to the economy anymore.  

But the success of the economy also doesn't mean  that much to you anymore. Over the last 40 years,  

personal productivity has doubled, even accounting  for inflation. That means the average American is  

now producing twice as much as they were 40 years  ago. And this has given even average people access  

to comforts, conveniences, and experiences that  they just wouldn't have had back then. And yet,  

when asked, slightly more than half of you  that responded still said you would prefer  

to live back then. So, we are all remembering  history through rose tinted glasses. Or, has this  

doubling of economic output actually been totally  irrelevant to average people? Well, as you might  

have guessed, our per capita production doubled,  but incomes did not. Adjusted for inflation,  

median wages have increased by just 20% over  the last 40 years, which is not great. But it's  

still not nothing. The median isn't skewed by  the uber rich like the average is. And that's  

20% after inflation. So, we should theoretically  be 20% better off. And we are, but only in areas  

that don't really matter. Travel, technology, on  demand services, clothing, furnishes, and even  

food are all much more accessible today than they  were back then by a pretty wide margin. However,  

more essential items like housing, education, and  healthcare have become far more expensive. So,  

while you can in theory buy more stuff today  with a perfectly middle-of the road income,  

it's not exactly the stuff that you need to build  a comfortable life. The things that we wanted  

became cheaper, but the things that we needed fell  out of reach. Which means for a lot of people,  

their strongest tangible connection to economic  prosperity is the car they are paying off over  

the next 84 months. But there is one much bigger  factor which is a lot harder to capture with these  

numbers. And it's how people have earned that  money. Your consumption may not matter to the  

overall economy, but the overall economy hasn't  made it easy to consume the things you want. But  

something that has lost its relevance even faster  is the work we are doing. 40 years ago, most jobs  

garnered far more respect from both employers and  employees. Most workers in skilled or semi-skilled  

professions stayed with their employers for a long  time, and laying off staff or getting fired was  

a massive deal. Today, losing your job at some  point is the expectation. A lot of young workers  

treat it almost like a joke to make content out  of. Although, this could be some kind of brain  

coping mechanism that I don't fully understand.  Anyway, modern technologies have made a lot of  

jobs far more productive, but they have also  made them far more userfriendly. As an example,  

a few decades ago, most large offices would  have a small army of semi-skilled secretaries  

to put together presentations and information  for reports. Something like making a graph in  

the prescribed corporate style would take a lot  of time, but also take some level of training to  

learn. Today, the company can just have an Excel  template, and as long as someone can copy and  

paste two rows of data, they can do what used to  be hours of work. Bank managers used to be highly  

respected professionals with a deep understanding  of business finances, their local economy,  

and their extensive list of clients. Replacing  one of these guys could take a full year of direct  

mentoring. Today, bank managers are glorified  loan salesmen because credit reports in extensive  

electronic databases have taken the skill out of  their jobs. Travel agents, junior analysts, stock  

brokers, and an array of other jobs all mostly  followed the same trend. These people became far  

more productive, but also far easier to replace.  User-friendly and standardized technologies meant  

most people could get up to speed with a job  within a week or two as long as they knew how to  

use a suite of software. The promise or threat  of AI, depending on who is asking, is that it  

could render your ability to work completely  obsolete. But even if it simply continues this  

trend of standardizing roles, it will ultimately  make workers more of a commodity that could be  

easily traded around an open market. Again, this  raises the argument that if nobody can find a job  

anymore, then there will be nobody left to buy all  of the stuff that companies are making. But once  

more, this is simply not true. Profit motivated  companies aren't going to hand over their  

valuable resources for nothing in return. For  normal people, what they typically exchange for  

those goods and services is the hours in their day  through something like a job, a contract, or maybe  

even working in their own business. But if these  working hours are no longer valued by the market,  

then over time, companies are just going to start  selling their products to people who can get their  

money through their investments. Kind of like what  is happening right now. In some tragic irony, this  

trend has gone so far that even multi-millionaires  are being pushed out of coveted goods and services  

by billionaires with more purchasing power. I  appreciate that cuz people don't think about the  

millionaires, right? Like we get lumped in with  the billionaires, but the millionaires really have  

it rough. Why are you guys saying [ __ ] you?  All right, so your consumption and your labor  

might not matter to the economy, but what about  your ability to invest? It sounds like things  

are pretty sweet for those guys, right? Well,  yes, except for the fact that investments into  

productive capital, like all of the technology  that's making you really easy to replace,  

is even more consolidated than consumption and  income. Increased high-interest consumer debt also  

makes a lot of investing done by everybody else  counterproductive. According to data from the Fed,  

the top 10% of households own more than 93% of  corporate equities in America. But those same  

households only account for 5.4% of non-mortgage  consumer debt. It's great that more people are  

getting into the market, but if you are paying off  a 20% APR car loan and putting $500 a month into  

Robin Hood, you are not an investor. You are just  really bad at allocating capital. Now, what all  

of this means is that most economic participants  don't really participate in their own economy. In  

the past, when average people struggled, the  economy struggled and wealthy people riding  

on that economy struggled, too. Today, we could  very well be in a situation where the majority  

make up such an insignificant share of market  activity that even severe problems for them can  

be effectively drowned out by the party being had  by a very small handful of people. Now, as far as  

social cohesion is concerned, this isn't great.  But for the economy, it gets worse. We could see  

a situation where unemployment rises dramatically,  but the economy continues to grow because all of  

those laid-off people didn't contribute much to  overall consumption or investment. In that case,  

taking action like lowering interest rates or  giving out stimulus to help the unemployed would  

risk further inflating already overinflated asset  markets that didn't feel the pain to begin with,  

which would only make this problem even worse.  Even the Fed essentially admitted that it was  

increasingly hard to enact policy that would  help ordinary workers without helping out wealthy  

asset owners even more. But it gets worse. Average  people might not have that much skin in the stock  

market game, but the 10% that are doing all of the  spending do. The reason they are spending so much  

in keeping entire industries alive is because they  feel wealthy thanks to their booming portfolios.  

If these asset markets falter, there is not going  to be much left to prop everything up. And to use  

a technical term, we are going to be absolutely  [ __ ] Now, this is normally the point where I  

would say to put away the tinfoil hat because  this is all the result of broken incentive  

structures and flaccid regulations rather than  some kind of deeper conspiracy. But the reality  

is this all sounds very familiar. In 2006, a  series of reports were leaked from Cityroup's  

asset management team dealing specifically with  ultra- high netw worth clients. In these reports,  

they described a platonomy, a combination of  plutoaucracy and economy where economic growth is  

powered by and largely consumed by a wealthy few.  In a platonomy, there is no such animal as the US  

consumer or the UK consumer or indeed the Russian  consumer. There are rich consumers, few in number,  

but disproportionate in the gigantic income and  consumption they take. The rest are the non-rich,  

the multitudinist many, but only accounting for  surprisingly small bites of the national pie. Now,  

the actual intention of this report was  to encourage Croup's wealthy clientele to  

invest in companies that catered exclusively  to other wealthy clientele because the analyst  

predicted that they would eventually be the  only ones worth selling stuff to. And remember,  

this report was published way back in 2005. Now,  City has tried really hard to scrape this report  

off the internet, so I am going to go ahead and  leave a link to it below. It's a dense investment.  

thesis, but also genuinely very scary. Now, of  course, there is still one way that you matter in  

the economy, and this report covered that as well.  Whilst the rich are getting a greater share of the  

wealth and the poor a lesser share, political  infranchisement remains as was one person,  

one vote. In plain English, the biggest risk  to their clients was that votes were somewhat  

evenly distributed. Fortunately for them,  we are really bad at spending them wisely.  

Go and watch this video next to see just the  latest example of people clearly voting against  

their own best interests. And don't forget to like  and subscribe to keep on learning how money works.