Nov 24 2014

Economic goals of young and old pulling in diverging directions: times will only get tougher for young Americans.

Older Americans tend to vote in larger numbers and are more interested in politics than younger Americans.  In the past the older voting cohort was not as large so politicians were cautious about deviating too far for one group alone.  Today, we are having a large number of older Americans living longer into old age.  Social Security has become the default retirement plan for many older Americans.  It should come as no surprise that priorities of the young and the old diverge dramatically.  Younger Americans are interested in education while older Americans are interested in Social Security and military defense.  Yet each group needs each other to accomplish their goals.  The young fight wars and Social Security is paid out via current payroll taxes.  Education requires teachers and those willing to enlighten future generations.  Unfortunately people vote myopically and in many cases, setup systems that are detrimental to their own children.

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Nov 20 2014

Multi-generational living is here to stay in a low wage economy: Over 57 million Americans live in multi-generational households.

The Great Recession might be officially over on paper, but the social impact continues to be felt today. The structural changes are deep and profound and have caused a major rise in multi-generational households. Many young Americans burdened by low wage jobs and college debt may have no other option but to move back home with parents. The number of people living in such households has doubled since 1980. More than 18 percent of the population now lives in this arrangement. A large push has come from those 25 to 34 given that 1 in 4 now live in a household with multiple generations. Money is tight and rising living expenses including rents have kept many from venturing out on their own. The economy has been adding jobs but many of these jobs are coming from the low wage sector and are simply not providing a base for moving out. This latest election was driven by people unhappy with the economy but also wanting higher wages.

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Nov 17 2014

The mega inflation in college tuition: Since 1985 college tuition costs have soared by 538 percent. No surprise that total student debt is now over $1.22 trillion.

There was a time when college tuition was reasonably priced in the United States. In fact, college was downright cheap. These were the days when people worked a few hours a week at minimum wage jobs and were able to pay off their tuition on a semester basis. Too bad most of the new jobs in our economy are now low wage jobs and this is truer for those with no college degree. A Catch 22 for many. The per capita annual income in the U.S. is $26,000. You have many schools charging $30,000 or even $40,000 per year in tuition. Keep in mind the per capita income is based on the entire spectrum of workers, including those already with college degrees. So try imagining a student working at McDonald’s trying to carry the entire tuition burden of many schools. It just doesn’t work and that is why we now have a total of $1.22 trillion in outstanding student debt. Student debt is now the largest non-housing debt sector in the U.S. Student tuition has risen by 538 percent since 1985. This current generation is going to college at the most expensive time in history.

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Nov 15 2014

Winging it through retirement: 30 percent of Americans have no retirement savings.

Planning for retirement does not happen overnight.  You need to diligently plan and sock away savings like a squirrel stocking up for the season.  Many Americans have no retirement savings and more troubling, many near retirement face a compressed timeline where they will need to save or face a massive decline in living standards in their later year.  Retirement has become a sort of idealized vision of doing nothing.  Many think that once retirement hits, all expenses will go away and that they will have unlimited funds to purchase Margaritas and spend time at a beach with crystal blue water in some part of the Mediterranean.  Instead many will be working deep into older age and will be fighting off the cold because the heating bill is eating into their Social Security check.  Many Americans are fully unprepared for retirement and despite the massive surge in the stock market since the Great Recession ended, many Americans are looking at retirement and are planning to wing it.

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Nov 12 2014

The modern day Gilded Age of wealth: Top 0.1 percent now have more wealth than bottom 90 percent.

Wealth inequality is an extremely touchy subject. The main catalyst for “change” in the recent election had to do with most Americans being dissatisfied with the economy. But how can people be unhappy if the stock market is at a peak and housing values are going up? The reason for this is that most Americans don’t own stocks and the push up in housing values is largely driven by investors. That is a big issue. You also have 1 out of 3 Americans living paycheck to paycheck. All of these items combined make for a very unhappy populace. The election was fueled by anger but both political parties play on the notion of change but underlying it all is massive amounts of money keeping the financial powers well in place. The Fed has grown its balance sheet to over $4.4 trillion and much of this has been leveraged into the financial sector. And what has happened? Big banks are even bigger and are funneling their money into real tangible assets in the real economy. This includes single family homes which ironically, is the biggest source of net worth for households. So even this area is now being bought up by the new Gilded Age masters.

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Nov 9 2014

Low wage jobs dominate as waiters and bartenders will soon outnumber manufacturing jobs: Latest jobs report highlights continuing trend in low wage employment.

The trend to low wage employment continues as the latest jobs report shows that wages are being eroded by inflation. Of course, the public is told that inflation is muted but simply looking at your paycheck versus housing costs, healthcare costs, and food would tell you a different story.  Americans went to vote with economic frustration in their hearts.  That was the guiding energy driving the electorate.  The vast majority are frustrated with the current state of the economy contrary to a record in the stock market which is largely going to a very small portion of our population.  People want good jobs.  Good jobs are truly at the essence of the middle class.  So it should not come as a surprise that we will soon have more waiters and bartenders than actual manufacturing workers.  Those that serve drinks to calm away the struggles of a tough economy are in high demand apparently.

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Nov 4 2014

The government is already in a soft default and is addicted to low interest rates: Government expenses at $3.87 trillion while receipts enter at $3.29 trillion.

The term default has varying definitions depending on whether you are an individual, a big bank, or the government. For you as an individual, default will occur when you are unable to pay your debts with the income you are generating. You are constrained by your income. As we saw with the housing crisis, when you are unable to pay your mortgage a bank will foreclose on your home. Unable to pay your auto debt? Repossession is the likely next step. Not making those college loan payments? Garnishment of wages is a typical course of action. Yet for the government, they have the ability to print their way out of problems courtesy of our fiat money system. The end result is inflation in the real economy which ultimately impacts families. Banks of course have the ability to restructure debt and circumvent accounting rules to their own convenience. If we applied the same rules of default that individuals follow to the government, we would already be in a soft default. This does not happen but what ultimately occurs is inflation in items that are financed via debt (i.e., housing, student loans, cars, etc).

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