The Banks

It should be obvious that an economy dependent on Consumer Spending can't be sustained for long if too many people are unable to spend the money needed to keep that economy going.

And when enough people are left with nothing more to lose, there will be a reckoning.

Despite tenuous times for the banking industry, some of the largest U.S. lenders reported banner first-quarter earnings on Friday that easily exceeded investor expectations.

JPMorgan Chase, the nation’s largest bank, reported revenue that rose virtually across the board, helping it pull in $12.6 billion in profit, a 52 percent jump from the same quarter a year earlier. That’s a reflection both that higher interest rates, which are generally considered good news for the industry, and the fallout from the collapse of Silicon Valley Bank and Signature Bank last month appear to have strengthened the biggest banks.

JPMorgan’s customer deposits rose slightly in the first quarter from the previous quarter, compared with some smaller competitors who have seen depositors pull cash en masse.

“The banking situation is distinct from 2008 as it has involved far fewer financial players and fewer issues that need to be resolved, but financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending,” Jamie Dimon, the JPMorgan chief executive who has taken a leading role in bailing out smaller lenders, said in a statement.

Wells Fargo also surpassed analysts’ expectations, reporting a profit of nearly $5 billion in the first quarter, a 32 percent increase from a year ago. Rising interest rates lifted the bank’s earnings as its loan portfolio grew, led by gains in personal lending and higher credit-card balances.

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Meanwhile, almost 12% of us - 38 million Americans - are living in poverty.

And it might be even worse than that.

• There are 37.9 million Americans living in poverty, accounting for 11.6% of the total population, according to the U.S. Census Bureau.The number reported by the Census Bureau is based on the official poverty measure, which has remained virtually unchanged since the mid-1960s
• As a response, the Census Bureau developed the Supplemental Poverty Measure in 2011 as an improvement over the existing measure.
• But some experts say that even the SPM falls short of accurately measuring poverty in the U.S.

As of January 2021, 37.9 million Americans lived in poverty, accounting for 11.6% of the total population, according to the latest report from the United States Census Bureau. That’s despite the fact that America ranks first as the richest nation in the world in terms of GDP.

“Poverty and economic insecurity are widely common, very commonly experienced,” said Shailly Gupta Barnes, policy director at the Kairos Center for Religions, Rights, and Social Justice. “They are as much a part of the American story as successes to the American dream.”

But the number reported by the Census Bureau is based on the official poverty measure, which has remained virtually unchanged since the mid-1960s. It’s calculated by comparing pretax income against a threshold set at three times the cost of a minimum food diet in 1963.

“The researcher whose work became the basis of that measure never intended it to be used in the way that it currently is,” said Barnes.

Grace Bonilla, president of United Way of New York City, said the official poverty measure doesn’t take very obvious indicators into consideration. To start, it looks at pretax income instead of actual take-home pay. It also doesn’t consider factors such as family composition or the cost of child care.

“It has not kept up with the way life has changed for most Americans,” said Bonilla.

As a response, the Census Bureau developed the Supplemental Poverty Measure in 2011 as an improvement over the existing measure. It incorporates into the measurement both the cost of basic needs like food, clothing and utilities, but also government transfers and programs. It also takes into account geographical differences and household size. The SPM rate for 2021 sat at 7.8%, compared with the official poverty measure rate of 11.6%, mainly due to government relief during the Covid-19 pandemic.

But some experts say that even the SPM falls short.

“It’s a step in the right direction but it falls so short of actually giving us an accurate count of poverty in the United States,” said Bonilla. “If you have a universal brush for the whole country, you’re going to miss a number of people that are either at risk of falling into poverty or are already technically living in poverty but are not counted by the measure.”

The Census Bureau told CNBC that both the official poverty measure and the supplemental poverty measure provide a consistent data of poverty measurement and that the Bureau continually strives to innovate and improve the design and measurement of their well-being statistics.