When Luxury Booms and Debt Explodes

In Chicago, the line outside the Pilsen food pantry wraps around the block. A few miles away, the city's luxury boutiques and cocktail bars are packed. According to the Times, that contrast captures today's US Economy, one that looks strong on paper but feels fragile. For millions, the top 10% of Americans now account for nearly half of all consumer spending, the highest share in decades. Their wealth, boosted by record stock market, keeps the economy humming. But for lower and middle income families, inflation, layoffs and slower wage growth are eroding security. Wages for the lowest paid workers are now rising, the slowest, reversing pandemic era gains. Families are relying more on credit cards just to stay afloat. And late payments on car loans are climbing. Even McDonald's CEO warns that visits by low income customers are down sharply. Trump era policies, from deep workforce cuts to new tariffs and immigration crackdowns, are amplifying the divide. The data show a resilient economy, but as one Chicago physician told the Times, how's the economy? Depends on who you're looking at. So what's the real message here? We have a very split economy. It's basically the really wealthy who are doing well and spending lots and lots of money, propping up the overall economy. But the bottom 90% are not doing very well and it only looks worse for them in the near future. Let's dig a little bit deeper here. It's. I mentioned the top 10%, but so much of our economy really propped up by the top 1% because they're doing very well. Extremely, extremely well. And the other part that's propping up this economy is all the spending on artificial intelligence. If you look at the massive, massive amounts of capital being expended on artificial intelligence and took that away from our economy, we'd be in a recession right now. Trump would not be able to get away with the things he's doing because people would be screaming bloody murder that he had destroyed the economy. And in fairness, right now the economy is not destroyed if you look at things overall. So I'm not saying he did, but most economists agree. Without this massive expenditure of dollars, capex spending on artificial intelligence poured into publicly traded companies and private companies like ChatGPT, our economy would have no growth whatsoever. We really would be profoundly stagnant. Unemployment would be much higher. And the top 10%, the top 1% would be surly and unhappy because they would not see the gains they've seen in the market. And I can tell you my own stock portfolio has done extremely well. And it's not because I'm a genius. I invest in index funds. And if you invest in any index funds that's broadly market based, you've made a fortune this year. You have. The problem is some 60% of Americans don't own any stock. So they don't benefit from that at all. It's increasingly a two tiered economy. It's not an economy that's being driven by a middle class. You really have that top sliver and everyone else, and everyone else is just hanging by. Here's the real problem. It's an increasingly fragile economy. It can't take a punch to anyone's sector because so much is riding on really just 10 companies. I mean, there are 10 big tech companies that are responsible for something like 40% of our entire stock market and certainly the growth of our stock market. So if there is any kind of a shakedown with AI that things sort of change, just pause for a minute. You could see this massive deflation of a bubble. If all of a sudden rich people say, oh, I didn't see my net worth go up 10% last month. Let me tighten my belt. That is going to filter its way all the way through the economy because the people in the top 10%, certainly the top 1%, they're going to be fine. Believe me, we're going to be fine. They can tighten their belt and life is still going to be great. But that belt tightening is really going to have profound implications for the bottom 90% because there's no cushion there, there's no margin. We're seeing millions of Americans who can't even pay their automobile loans. And if all of a sudden they get one fewer shift at any store, any business they're in, that could make the difference of them becoming homeless or not. Let's look at some more facts here. Top 10% of US households now drive 50% of consumer spending. Inflation and slower wage growth squeezing low and middle income families. Credit card and auto. I mentioned the auto loans. Credit card delinquencies are rising and increasingly economists are warning that the US economy is stable, seemingly on the surface, but very brittle. I think that's the key word. It's brittle. What we haven't seen, and many economists predicted this, that we would go right into a recession with Trump's big tariffs. They haven't done that yet. The question is, is it because all those economists were wrong or is it because of the hundreds and hundreds and hundreds of billions of dollars being invested in artificial intelligence infrastructure? Did that sort of paper over all the other problems the tariffs have created. I'm not going to tell you I have all the answers for that. I can tell you that we may know sooner rather than later, because if there is a dip in AI spending and then we do go into a massive recession, then I think a lot more people are going to buy into the idea that these tariffs were really nothing more but a tax on Americans, a tax on especially working Americans, who by and large have to spend every penny they have every month just to keep a roof over their head. That could start to change the political equation we talked about in the previous segment. Right now, the people who liked Trump's economic policies and voted for him for that reason in the election last year, they're still with him. Very few of them are convinced. Even the soybean farmers who've lost their farms are about to because tariffs have ended all of their markets in China. I haven't even seen signs of them deciding to change their vote and their political support. But this could change and change quickly if a couple of pieces of our economic puzzle change.