Last Tuesday evening, amidst the buzz surrounding Apple’s quarterly earnings, an intriguing headline captured attention…
“Lance Armstrong sued by U.S. for post office sponsorship funds.” CNN.com detailed the story.
“The Justice Department officially filed a lawsuit against Lance Armstrong and his company, Tailwind Sports, for millions of dollars that the United States Postal Service had spent sponsoring the cycling team.
‘The USPS invested roughly $40 million to sponsor the USPS cycling team from 1998 to 2004,’ the court documents reveal.
The government aims to recover triple the sponsorship amount under the False Claims Act, potentially resulting in over $100 million in damages. The complaint presented in the U.S. District Court for the District of Columbia alleges that the use of prohibited substances constitutes a breach of contract with the Postal Service.”
Clearly, Armstrong’s choice to cheat with performance-enhancing drugs was a mistake. Furthermore, misrepresenting this for years only compounds the issue. Yet, the pressing question remains: what on earth was the U.S. Post Office—a financially struggling federal entity—doing sponsoring cycling teams, and why did it squander $40 million of taxpayer money?
The Curious Eye
Have you ever wondered why the U.S. Postal Service backed Lance Armstrong’s cycling team? We certainly do. Did they at least secure a logo on a jersey?
Such delightful puzzles make navigating a declining democracy all the more entertaining. For instance, earlier this month, the unemployment rate dipped, thanks to 496,000 Americans exiting the labor force… It’s almost comical.
At Economic Prism, we look around with keen and attentive eyes. What are we searching for? While we often encounter extraordinary absurdities, our primary focus is to uncover insights that hint at the future direction of the economy. We also seek strategies to profit from these signals before they become obvious.
Is the economy on an upward trajectory or slowing down? Should you consider selling in May to take a break? Are people becoming wealthier or poorer?
A quick glance at the headlines may suggest that the economy is generally improving. A one-year chart of the S&P 500 paints a picture of a robust bull market. But what’s truly happening beneath the surface?
A closer examination reveals that the reality is starkly at odds with reported events and stock market behaviors. Perhaps this so-called economic recovery is not much of a recovery after all. Has it genuinely improved the lives of the average individual? We’re eager to find out…
Seeing Beyond the Surface
On Wednesday, we received some clarity. The Pew Research Center released new data that shed light on the apparent disconnect…
“During the first two years of the nation’s economic recovery, the mean net worth of households in the top 7 percent of wealth distribution increased by approximately 28 percent, while the mean net worth of households in the bottom 93 percent declined by 4 percent, as per a Pew analysis of newly released Census Bureau data.
“From 2009 to 2011, the mean wealth of the 8 million households within the affluent group rose from an estimated $2,476,244 to $3,173,895. Meanwhile, the mean wealth of the 111 million households in the less affluent group fell from about $139,896 to $133,817.
“These significant disparities were largely driven by the stock and bond market rally of 2009 to 2011, while the housing market remained stagnant.
“Affluent households generally have their assets concentrated in stocks and other financial investments, while less affluent households typically find their wealth tied up in their homes.”
Since 2011, the stock market has continued its steady ascent, and housing appears to have finally stabilized and is starting to improve. This might suggest that the lower 93 percent could see their paper wealth rise in the coming years… at least until the next economic downturn. Nevertheless, it reveals one uncomfortable truth…
The economy heavily relies on inflated asset prices.
In other words, the facade of growing prosperity is truly just a mirage. Indeed, if we look past the headlines, the reality becomes clear.
Sincerely,
MN Gordon
for Economic Prism