Bougie Broke or Really Broke? The Façade of Consumer Spending

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Social media users claiming to be “bougie broke” share pictures of their fancy cars, high-fashion clothing, and selfies in exotic locations and expensive restaurants. Yet they complain about living paycheck to paycheck and lacking the means to support their lifestyle.

Bougie broke is like "keeping up with the Joneses," spending beyond one's means to impress others.

Bougie broke gives us a glimpse into the financial condition of a growing number of consumers. Since personal consumption represents about two-thirds of economic activity, it's worth diving into the bougie broke fad to appreciate if a large subset of the population can continue to consume at current rates.

The wealth-divide disclaimer

Forecasting personal consumption is always tricky, but it has become even more challenging in the post-pandemic era. To appreciate why, I share a joke told by Mike Green.

Bill Gates and I walk into the bar...

Bartender: "Wow... a couple of billionaires on average!"

Bill Gates, Jeff Bezos, Elon Musk, Mark Zuckerberg, and other billionaires make us all much richer, on average. Unfortunately, we can't use the average to pay our bills.

According to Wikipedia, Bill Gates is one of 756 billionaires in the United States. Many of these billionaires became much wealthier due to the pandemic as their investment fortunes grew.

To appreciate the wealth divide, consider the graph below courtesy of Statista. Approximately 1% of the U.S. population holds 30% of the wealth. The wealthiest 10% of households have two-thirds of the wealth. The bottom half of the population accounts for less than 3% of the wealth.