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If you haven't noticed it yet, perhaps once you read this article you'll pay attention to a growing phenomenon: while driving through suburbia you will start to see a number of Corvettes, shiny boats and campers sitting on front lawns across America, with a FOR SALE sign taped to the window. Also, you may notice an increase in yard and garage sales.
There have been so many yard sales many local municipalities are now requiring permits to have one!? But why you may ask, is this happening?
Well it's simple: Baby Boomers are selling their toys in order to pay their bills...and taxes.
How did we get here? Elizabeth Warren gives us a better picture of the 70s and how much has changed financially, (despite the long winded introduction, may I suggest you watch the entire video. It is eye opening). Here I give you The Coming Collapse of The Middle Class by Elizabeth Warren:
It's ironic that Professor Warren, whom I respect immensely, cites 1971 throughout her speech. That was the year Richard Nixon took us off the gold standard and announced aloud "We are all Keynesians now." (the phrase is actually attributed to Milton Friedman, father of Monetarist Economics). Yes, Professor Warren mentions the increase in fixed cost and new expenses like daycare, but what she does not mention is WHY we are not getting ahead. Here's something worth looking into...how about our "modern" inflation driven economic policies along with creeping scope taxation - which taxes anything that moves - as the cause of all this. Saving and getting ahead are impossible when an economy becomes a moving target - even for those who make decent money.
You see, before 1971, the U.S. economic system swung back and forth between Monetarist economic policies - (favored by the Republican Party) - and Keynesian economic policies (favored by Democrats. Invented by John Maynard Keynes). The pendulum swung back and forth between the two systems depending on which party dominated Congress. This was not revealed to the population of course. It wasn't perfect, but it kept us in balance. But once Nixon took us off the gold standard, we had ONE economic policy no matter who was in charge and runaway inflation began. THAT economic system is Keynesian and is why some people state there is no difference between Democrats and Republicans...it's the same outcome.
If inflation is the engine of Modern Economic theory...then let's take a look at the results.
Doesn't sound like a lot of money does it? Well in 1979, I could put $2 of gas in my car so I could take my date Robin to our local Pizza Hut restaurant. We would order a large Thin 'N Crispy pizza with 2 toppings - pepperoni & mushroom - with a pitcher of Pepsi. Then we would drive to the local theater, 2 tickets, a bucket of popcorn and two sodas (hey I was a teenager, we ate a lot).
So how much did this entire evening cost? Seventy-five dollars? One hundred? Sixty bucks maybe? The entire evening, dinner and a movie cost me a whopping $20!!! Plus $2 in gas to joy ride for the night. That's right, $22!!!
You are probably thinking "come on Brad, you're exaggerating!" Well, ask any Baby Boomer who grew up in a small town in the 70s and chances are, they will confirm my math. Life was cheaper because the dollar was more stable. And the gap between rich and poor was almost non existent. No one was protesting high health care costs because health care was affordable. Taxes were lower both at the Federal and State levels. Sales tax was lower on everything. You didn't need an MBA to get a job. As a matter of fact, if you had a high school diploma and made $35,000 a year, you could own a house, buy a car, have your wife stay at home and raise two children.
Your efforts were connected to the value you received in coin. You did NOT have to work so hard to get ahead. To prove my point, most Americans had enough money left over to actually save 11% of their take home pay!
Today Minimum wage (depending on the state you live in) is around $7.50 an hour. If the cost of living, along with inflation has gone up between 600 and 700% since I was in high school, shouldn't minimum wage be at around $18 to $22 an hour?
Yes it should. The reality is that minimum wage has barely doubled in 30 years!!! What that means is, if you are making $7.25 an hour today, you are making the equivalent of $1.35 an hour in 1979 dollars. And that should make it crystal clear why no one can get ahead on minimum wage these days. After years of hustling and never getting ahead, eventually they come to a realization that it is easier to go on government assistance like Welfare. Why work so hard when a government program is available?
We didn't need so many programs back in the 70s because life was affordable and even if you were poor you could work your way out of it.
Here's how inflation really works. That house your mom and dad bought in 1979 for $56,000 is now worth $550,000. They're rich right? You may thinks so, but in reality the price of the house didn't really go UP. What actually happened is, inflation caused the VALUE of the U.S. Dollar to go DOWN. What you used to be able to buy in 1979 for $56,000 now takes 10 times as much. THAT is what inflation does; creates the illusion of wealth.
This is why Inflation is called an invisible tax and one of the most destructive man-made forces ever invented. It steals your wealth. The dollars you save lose value every decade eventually becoming a liability instead of an asset. The line of what is considered poverty begins to rise, higher and higher until eventually couples making $120,000 a year can't get ahead. This is what happened in the Weimar Republic of Germany shortly after WWI and it is what is happening NOW in the United States.
Despite The New York Times unemployment numbers there are no real jobs out there. Taxes are going up in order to get cash flow from those that are still employed. Real estate taxes are increased to pay for a school system that has a larger percentage of the population attending than those paying.
And if wages and salaries do not keep pace with inflation, the American Dream starts to be just that: a dream.
We are currently in a crisis here in the United States. Everyone is saying politely that Baby Boomers will not have the same level of prosperity as their parents. The word no one is using is Baby Boomers will be living in poverty.
We have to take a look at modern economic theory and realize it does not work. At least not in its current form. We do this by simply observing and looking at the numbers. Now if the value of the dollar is going down (it takes more and more dollars to pay the same amount of goods) now look at the state and local and federal taxes on your telephone bills, your food and your clothing. Add it all up. If you do not own a house, add up the invisible taxes on your rent that your landlord may be paying.
Now add up the taxes removed from your paycheck: federal, state, local, FICA and such...if you add every tax up as a whole, you realize that more than half your salary is gone along with the addition of sales tax, federal usage taxes and state fees on all purchases and commerce. Time to face facts: most Americans are lucky if they are keeping 20% of their pay.
Your taxes have gone up and taxable opportunities have increased - like the taxes on your cell phone. Inflation is forcing you to work harder to make the same amount of money. Taxes are destroying what you have left, and like most Boomers, they can NOT retire anytime soon. This is because the same economic system that is destroying your prosperity now requires all governments to increase their intake...because, value and buying power are going down for the government as well.
Back in 1971 you only needed $300,000 to retire. Today you need $4 million in the bank to retire comfortably. Since only 50% of Baby Boomers saved for retirement...we are about to see the greatest increase in impoverished elderly since 1933.And now I have one last question...
WHY are we not furious at the leadership in this country?
In France and England they raised college tuition and the students rioted. In Greece they raised the retirement age and people rioted. In Spain the government takes austerity measures and people riot. But in the United States...we just sit there, waiting for what I do not know. Boomers were the radical generation and now we play Farmville or Mafia Wars on Facebook instead of getting angry.
Are Boomers being betrayed? You betcha. But are we really victims? Not really. We have to blame ourselves. We signed up for things that took our money and we agreed with it because we figured, hey we're moving up in the world. You are about to hear words like austerity, which is a fancy word for government cutting back while raising your taxes. You will be blamed for getting rich and now you have to pay the piper by living below your means.
This is a meme designed to get you to accept a horrible economy. (And to feel guilty instead of asking questions). Poverty is outpacing our ability to ignore it. Boomers selling their toys is the start of this downward spiral, but shortly we will no longer be able to ignore it. Tent Cities filled with Boomers are cropping up all over, from Florida to California. Boomers are broke.
Keynesian Economics creates Boom and then harsh Bust cycles. At first they aren't so bad. The Boom cycle creates the illusion of prosperity as credit and money are easily had. The economy improves because people start spending when everyone has a job. But when the injection of money stops, a bust cycle destroys everyone's newly found wealth...even stable families, businesses and companies get destroyed in this down cycle. Anyone remember the Dot Com Boom and Bust? It almost drove Cisco out of business...and they were a tangible company! Trillions of investor dollars were lost in 1999.
Eventually the Boom & Bust cycles happen more frequently until the entire economic system collapses...and a new one must be invented.
But John Maynard Keynes knew this...that's why he abandoned his work near the end of his life. The guy who invented our system warned that this would be the result: the total destruction of our economy. Anybody paying attention?
Boomers kept our eye off the ball...and trusted the wrong people. WE partied while we watched the hostess spike our punch. We didn't care cause we felt so good about ourselves. We became YUPPIES and BUPPIES figuring we worked hard so we deserved to pamper ourselves. As we were getting "richer" (or so we thought), we didn't mind paying higher taxes, cause after all, we could afford to. Government kept getting bigger and bigger while taking more and more. They invented the 401K without telling us why, (read Robert Kiyosaki's book Prophecy if you want to know the full story). The cost of living went up and up and up...and people at the bottom didn't get a real raise for 30 years. Slowly the divide between rich and poor got bigger and bigger...until now we can't ignore it. Because the impoverished are us. We are about to get a taste of our own medicine. After all, the poor were required to pay higher taxes over the years as well. It was the affluent who were driving the tax code, not the minimum wage earner.
But we didn't care. The dollar wasn't going farther, but now we had a new thing to "pay" for the American Dream: credit cards. Inflation was an increase in prices right? But now we are all making more money. We should have seen first hand how inflation was destroying our lives if not for credit cards. It helped us "get ahead" and experience the American Dream. And we went deeper into the illusion of prosperity.
Baby Boomers are about to be competing for the same jobs as Generation X and Y and even Millenials!!! Desperate times will call for desperate measures and as Baby Boomers we need to let go of old thinking, outdated beliefs and face the truth: Yes, we have been betrayed and it is about to get worse. The Middle Class, the backbone and tax base of this great country, is about to be decimated.
I am sorry to be so intense, but we gotta wake up. If we don't do something only the rich will be going to college and our ability to rise out of poverty will end with this generation. War will continue to break out somewhere because John Maynard Keynes felt that wars should be started anywhere and everywhere to keep things stable. This was part of Keynesian economic theory...after all, wars are good for the economy right? But as Richard Maybury says "How is killing people good for an economy?"
This period we are going through will be studied a thousand years from now in the history books...so let us start demanding better leadership on both sides. From those that represent us and those that are leading the charge. WE ALL can do better...especially if all the generations come together and face the truth.
Politics has always been about economics. But at its root, it is about political power overriding liberty.
One final video: A 15 year old British student gives the government a piece of his mind.
Thank you again for reading,
Brad Szollose
Want to learn more about economics and how to protect yourself? Let me suggest a few books besides my own:
Whatever Happened To Penny Candy?
by Richard Maybury
Richard Maybury teaches how our current economic model destroys the value of the dollar. Easy read. Ever wondered why you can't get 5 pieces of candy for 5 cents anymore? Read this book.
Ancient Rome: How It Affects You Today
by Richard Maybury
Welfare, free housing, inflation, lotteries, government programs and Social Security are not new ideas. As a matter of fact they were the same economic policies we use today that brought down the Roman Empire and brought about the Dark Ages in Europe. Know things that others do not...but more importantly, learn how to protect yourself.
The Money Mystery: The Hidden Force Affecting Your Career, Business, and Investments
by Richard Maybury
During the 1980s the velocity of money circulation became erratic; now the entire country is affected. The Money Mystery explains why the Federal Reserve is afraid of inflation, why the stock market swings erratically and the precautions you should take.
Home run! Out of the park! Required reading!
ReplyDeleteWow...thank you;-)
ReplyDeleteI will confirm your economic facts are as I remember them.My first real job (besides babysitting) paid about $2 per hour, I usually walked to work but sometimes borrowed my mom's car. Gas was about 22 cents and $2 worth could get me to NYC and back, tolls were about a buck fifty and you could get a hog dog and soda for a buck.
ReplyDeleteIn 1972 I paid $20 rent for a room per month and two people could live on $3000 for a year.
I'm curious as to why you chose to focus on Boomers. Boomers betrayed? Doesn't the burden of inflation fall more squarely on the shoulders of Gen X and Gen Y? These people are being killed on student loans that charge credit card-like rates while any savings they manage to scrape together can't even be hedged against inflation because interest rates are so low and merely keeping pace requires risky investments?
ReplyDeleteMeanwhile, at least some Boomers had a chance to make some headway against inflation. That little housing boom before we had the housing crash? That 2-story colonial my parents bought for $60K in 1978 was worth $900K or better at the peak. Most Boomers in my parents' neighborhood capitalized on that, locked in a huge gain on their houses and downsized when their kids left the nest. If they're complaining, it's because they have to actively invest those gains with some risk, rather than passively invest it. But what about those younger than them? You know, the folks who have increased financial pressures just to keep their heads above water day-to-day? Plus they can't grow their savings at a rate that will fend off inflation?
I agree with much of what you're saying, but I'm not sure it's just the Boomers who have been betrayed. They have to sell their toys? How about the folks who never really had a shot at the toys in the first place?
Why did I choose to focus on Boomers Tom? Well first, ALL the taxes, all the programs, infrastructure, the entire country's roads, schools and such...the BULK of it, were bought and paid for with Baby Boomer's taxable income. Look around. WE paid the bulk of it simply because our fatter salaries...fatter salaries that were also taxed far more than previous generations.
ReplyDeleteAlthough The Greatest Generation saw more boom/bust cycles simply because of age, they never made the big salaries that Boomers have as a group over the past 25 years. And guess who is retired RIGHT NOW? The Greatest Generation. Guess who is paying for the BULK of Social Security, Pharmaceutical Programs and Medicare/Medicaid? Baby Boomers.
Social Security doesn't have a bunch of money in it like back in the early 70s. That money has been borrowed by Congress and replaced with Bonds. Each FICA payment goes straight in from someone with a job, and straight out to a retiree, minus operating costs.
Yes, Gen X as well as Gen Y have been paying as well, but you are just getting started. Your salaries, as a group, haven't reached your peak yet (they will between your late 40s and 50s). Boomers have paid the MOST, for the LONGEST...Case in Point: I have been officially working for 37 years. Most of The Silent Generation have been retired for over 20 years while inflation drove the cost of living through the roof.
As Boomers are just starting to retire, we realize that we will never see the kind of returns we contributed into the system as Generation Y will be the FIRST generation that will not be affluent since WWII.
Second: ALL of the PROGRAMS, whether Welfare, SSI, Medicare/Medicaid or Food Stamps and FREE Pharmaceuticals that were put in place, were done so WITHOUT Boomers having a say in it. It was just done, despite protests to the contrary. We didn't ask for it but we were forced to pay just like everyone else. Congress made promises on the backs of future generations.
So please, stop buying into "Boomers are to blame" mentality. Look to municipalities and ask: WHAT are you doing with our money? Ask for more efficiency.
Third: Inflation has beat the dollar into the toilet for everyone. What makes Boomers more affected by this is back to my first point: since we've been making bigger salaries each decade for almost 50 years, and taxed accordingly, the government has grown exponentially. Federal, State and Local in equal measure.