Not Your Father's America

Although every generation has probably asked the same question, I still have to wonder: what happened to our country? How did we allow greed, corruption, and incompetence to destroy the American Dream for so many people? When did we reach the point where being an Average Joe (or Jane) is increasingly seen as a dead end rather than a good thing? I have to admit, the following excerpts, from My Budget 360 and Wall St. Cheat Sheet, made me feel pretty depressed:

"What Does it Mean to be Middle Class in 2010? – No College Degree, Massive Amounts of Debt, One Health Crisis from Bankruptcy, and Beholden to the Banking Elite." (My Budget 360)

Being middle class today does not carry the financial security that it once carried in the 1950s and 1960s. Interestingly enough, many Americans at that time did not own stocks yet somehow they managed well because they had access to affordable housing without toxic mortgages and many had the ability to work with one company and have some kind of security from their company. It was a mutual relationship as even Henry Ford shook the auto manufacturing world by upping wages for his workers. Yet today, we are being fed distorted information from Wall Street that we need to have this system where workers are disposable entities only to increase the profits of the corporate class. If people are hurting so much why are we paying billions in bonuses to a small group of people that really haven’t helped the country? In fact, many of these are directly responsible for our current economic problems. At the root, this has been the cancer that has eaten away at what it means to be middle class. Social government welfare for Wall Street and Darwinian capitalism for the rest of us.

The middle class has it extremely tough today not because of random events but purposeful and directed robbery from Wall Street. This was a methodical and planned dismantling of the system. First, let us walk through some details of the middle class to create a profile:

Source: Census

The most common household formation in the U.S. is a married couple. Certainly this has changed over time but this is the most common arrangement in the U.S. But this has also led to the two-income trap that we have heard about so often:

Even though nominal wages are much higher today, inflation has eroded the buying power of Americans so much that even two incomes today cannot compete with one income forty years ago. After all, if you could buy a car with $200 then $1,000 would seem like a lot. But what is a $50,000 household income when home prices cost $250,000? This is really the essence of what has broken the middle class apart. Prices rose to astronomical levels because Wall Street created speculative casino products and injected the virus into the system. The middle class today is fearful of even having enough to retire. But beyond even retiring, many people have very little saved:

Now Wall Street would lead you to believe that people should just pucker up and save more. Bailouts are only for Wall Street folks yet average Americans need to resurrect the ghost of Horatio Alger and pull themselves up from their bootstraps or hope that a rich uncle leaves them a nice inheritance package. Yet what they forget is that we have a large part of our population that don’t even qualify as middle class:

38,000,000 Americans are receiving some form of food assistance. These people are living day to day so saving isn’t even in their equation. They are just trying to get by. These are the folks waiting at midnight at Wal-Mart waiting for their debit cards to reload just so they can buy food for their family. Do you think they are interested in investing in the next hot stock? Even as hard as it is to be middle class, poverty has been amplified in this recession:

10% of all U.S. families are in poverty. Yet the rate is a bit higher if we actually go by food stamp data. The average household size is 2.61 in the U.S. so many families are struggling with children as the above data reflects. Yet you would expect the middle class to have a better chance at going forward but more and more middle class families are entering what is now being called the working poor.

Wall Street and the banking system is at the core of this mess. They didn’t create poverty but they have amplified it by setting up a system that has now pushed millions of Americans into foreclosure. Why all of a sudden did Americans start gambling with their homes only when Wall Street got involved? They have created a new financial fiefdom where they can siphon off resources from the productive sector of the economy all from the comforts of their NY,NY offices. Even the idea that all Americans own stocks is not exactly accurate:

The top 1 percent control 42 percent of all financial wealth in this country. And wealth is the key here. So what if you have a $500,000 home if you have a $600,000 mortgage. You are not wealthy. So what if you have a leased BMW but have $30,000 in credit card debt. You are not wealthy. This is what Wall Street sold to America in the disguise of wealth. And people bought it up at the expense of the prudent. But that veil is now gone. And who has the wealth? This is what happens when you make a pact with the financial devil. (Click here to read the rest.)

"8 Reasons the US has Become a Nation of Slaves" (Wall St. Cheat Sheet)

These days, the idea of retirement seems like either a bad joke or a utopian fantasy. I’ve already covered some main reasons the US economy is screwed, but here are 8 reasons why the US has become a nation of indentured servants:

1) Stagnant wages

Are you partying like it’s 1999? That’s because you’re earning money like it’s 1999. Over the past 11 years, the median household income has been flat as a corpse’s pulse.

If everything gets more expensive over time but no one gets a raise, workers will afford less goods and services. This means people will either work the same amount for less stuff, or work harder for the same stuff. Either way, it’s a shitty deal.

2) Dual-income Nation

We’re a country of family values, right? Wrong. We’ve built an economy that requires two incomes to attain middle class status. It has even become a luxury for one spouse to stay home to raise children! (But that’s more of an existential issue …)

The graph above illustrates one of the most basic tenets of economics: if there is twice as much cash floating around the economy, the cost of things simply rises in direct proportion. In this case, adding an extra worker per household has increased household income. As a result, sellers of houses, child care, health insurance, cars, etc. have upped their prices to take more of our dollars.

3) Energy and Food Inflation

Remember $4 gas? Well, we’re back to $3 (double last year’s low). Every time a car ride costs more, that’s less money left over for things other than getting from point A to point B. As oil prices continue to rise with global demand (and diminishing supply), we will spend more hours working just to get to and fro.

Food is the ultimate necessity. So, when prices rise, there’s not much to do if you don’t care for the taste of cat food. It’s harder to notice 20-30% food inflation when a $2 item jumps to $2.40. But when your average bill moves from $100 to $120, those $20 bills are no longer available for things beyond basic sustenance.

4) Skyrocketing costs for Health Care and Education

One of the biggest thieves of retirement has been the unconscionable rise of health care and education costs. With health insurance costs jumping 10-25% per year, a worker with stagnant paychecks is on the long road to bankruptcy. (See Health Insurance Companies Price Gouging the US Economy)

Got a child or two? Do you want them to go to college? Well you better get rich, fast. The College Board’s study of college pricing trends shows costs have exploded 300% since 1980. That’s especially interesting since median household wages are up only 10-15% over the same time period. Maybe home schooling is better than the poor house. (Click here to read the rest.)

Comments

[Rocky]

Perhaps the the generation after WWII was an aberration. Europe and Japan were recovering from WWII and China was a closed communist society. US workers could command excessively high wages because there was so little foreign competition. That's not true any more. In some respect, dysfunctional movie characters like Precious Jones have become the new symbol of a failing America: children having children, incest, obesity etc. Then there are the costly military adventures abroad. The economic future does not look good for today's American youngsters. Their parents should have been more concerned about our failing political class (symbolized by the former corrupt governor of Illinois and the war monger George W. Bush) and less about gays wanting to marry.

[roger]

from 1950 to 1980 the outstanding private debt
increased 1,624% source ,federal reserve board.maybe
just maybe this idea of a middle class was just an illusion.

[NowWhat]

You can argue that the Lower class will all have college degrees...Thousands of kids have no jobs...but yet they continue to feed the line that college will lead you to a job.

Yah a job at Walmart

[Gene Montavo]

Teachers in some cities in Calif. can make over $100,000. a year at top of the pay scale, for less than 10 months work.
And retire at 55, with 80% of your salary, and free medical.

[CrisisMaven]

"financial security that it once carried in the 1950s and 1960" - rember, guys, what changed irrevocably in 1971? Nixon finally took the dollar completely off gold. Becase of imperial overstretch, i.e. war the country couldn't, all told, really afford (and, as I just read yesterday, has now cost over 60,000 losses in veterans due to suicides and thus more than died in action). The US went with a two wheel drive where only four-wheelers dare to venture, now, since Greenspan at the latest, she is revving up every so often only to find herself even deeper mired in the mud. From creditor to debtor nation after winning a World War is a feat that speaks for the prowess with which US politicians and the Fed have tried to wreck the country. It would have been worthier of a better cause! And now, when the middle class would be called upon to once again spawn the likes of the Founding Fathers it lies defeated. Rome comes to mind only they didn't live in world of atomic armaments.

[Low level retiree with no stocks]

I don’t care who’s in charge of this pig pen rate game, just get the damned rates back up.

This “deflation” stuff is a bogus deal like all the misinformation these days.

I see NO damned “deflation” everything I buy, or pay for is UP, I don’t buy 10 tons of iron ore to dump in my back yard, I buy things I need to live. which the CPI seems to thing don’t need to be counted.

With no COLA and higher co-pays, higher deductibles, and higher fees on licenses its only the rates on savings that help when the rates are at least 4%, this 1% or less is ridicules.

Funny thing is on one hand its all about “health care” and than they cry about the retirees and the “entitlements”. Hell why not just do a Dr Kevorkian or pull a Jim Jones cool aid party and be done with it!

WE PAID into those so called “entitlements” to have them in OUR old age dammit, I paid SS and medicare, and tax on my lousy 78 dollar a month pay as a pvt. when I joined the Army in 64, and even than that was a big chunk out of that income, I ended up with 55 bucks a month. I NEVER used any other type of “entitlements” in my life but for my retired pay after 27 years and now my SS. I lived way under my annual income which was under 20K a year for a long time, I bought a house that cost me less than most paid for their damned SUV’s and paid for the damned thing almost 30 years, and BTW not even being able to deduct the interest cause I had NO DEDUCTIONS at my income. I drove a car I paid 13K for for 18 years, and was still running when i sold it to the junk yard for 125 bucks. I own no pets of any kind to feed or maintain, or kids, I don’t have a degree from any college, but I’m doing OK cause I “saved” and was labeled a “tight wad” by family, I own NO cell phone, no MP3 player, no Ipod, no Ipad, and still use dialup ISP. I don’t need some sorry azz “give it to me now” generation crying about MY damned “entitlements” I sacrificed my life style for.

[Small Town Gal]

Low level, what you seem to fail to comprehend is that I will have paid into SS and medicare for my entire life and I will see NOT ONE PENNY of that. I really don't care about your lifestyle - that is your choice. But when you go labeling an entire generation "gimme" people, it doesn't sound like you have a lot of experience with them. In fact, I think you failed to read the two excerpts above.

It used to be you could get a stable, living-wage job with a high school diploma: not any more. It used to be you could buy a house for a reasonable amount (nevermind that you don't have kids, and therefore don't have to worry about school district - the single biggest factor in getting your butt handed to you on buying a house): not any more. Used to be that cars LASTED 18 years, and you could work on one yourself: not any more. Used to be that you weren't tethered to a cell phone or blackberry when you got off work - you were just off work: not any more. Used to be you could pay cash for what they charged for a doctor bill or even an emergency room visit: not any more.

So don't give me your self-important crap. Making ends meet as a family is next to impossible now. If you go to college, which we're told you must to be employed these days (remember, there are no manufacturing jobs any more), you come out with $100,000 worth of debt at age 22 and start your life with that hanging over your head. It's stupid, and I'm seriously thinking about emigrating out of this hell hole. What do you know - maybe if enough of my generation do that, SS and medicare won't go broke after all. NO, wait -- it's your generation that is going to bankrupt them. My bad.

[Nicole Bourbaki]

Jim Rogers prefers investing in gas rather than oil :
http://jimrogers1.blogspot.com

[non investor retiree]

@ rogers the "gas investor"

"I really don't care about your lifestyle"

"either", my bad, smirks