A closer look at the cost of living between 2000 and 2015: Looking at tuition at USC and the typical priced US home.
We keep hearing that the Fed is tepid about raising interest rates because there is no sign of inflation. In fact, they assume that wages are keeping up for most families and that is not true. Inflation is running rampant. You don’t need giant price increases to disrupt lifestyles when many of the new jobs are being added in the low wage service sector. Numbers mean little without actual case examples. So today we are going to look at tuition at a big private university and the cost of buying a home. These are big ticket items and many people need a college degree to even have a remote chance of not falling into the low wage hamster wheel. But choosing a school and managing costs is like navigating through a landmine field. This is why total outstanding college debt is now at $1.36 trillion and growing. While nominal wages have gone up since 2000 all of the gains have been stripped by the rising cost of items. People try to keep up by going into debt to finance these purchases. This is why inflation is a slow dollar killer. Let us look at this in practice.
Social Security supports 1 out of every 5 Americans: Most retirees heavily depend on Social Security for their retirement income.
It is great that people overall are living longer but adding years to your life can get costly. Retirement can be a long time. For some, retirement can last as long as their working career. With a pension people didn’t have to worry about longevity as if this was a bad thing. Yet pensions are rare in our current low wage environment. Social Security has become the backbone of income for millions of retirees. Numbers can be daunting but as I dug deep into the Social Security figures, we now have more than 64 million Americans receiving some form of Social Security. In other words, 1 out of 5 Americans is receiving funds from a system that heavily relies on those actually working. The challenge is now emerging where many young Americans are being pushed into low wage jobs while older Americans scrimp by on their monthly benefit payment. Things work until they don’t and math eventually catches up.
7 million college debtors have yet to make a single student loan payment in last year. The college debt bubble grows.
The student debt problem continues to spiral out of control as millions of young Americans enter the workforce only to be greeted by low paying jobs and the monthly bill for their college experience. For the most part studies show that college graduates do better than non-college graduates. Yet these studies fail to take into account the soaring cost of college today. These studies also mix in top performing schools with paper mill operations. There was a recent analysis showing that there are now 7 million college debtors who haven’t made a college payment in the last year. This is a staggering 17 percent of federally held student debt while many others are inching closer to the 360-day delinquency window. In other words, many people are simply not paying back their college debt. The amount of student debt is staggering coming in at over $1.36 trillion. The student debt bubble is symptomatic of the way our financial system is now operating and that is debt is piled upon debt and strung out over years to be paid back in hopes that inflation will pass the bill to future generations. The bill is getting harder to pass.
The casino of Wall Street enters official correction territory: S&P 500 has increased on the back of a massively expanding Fed balance sheet.
The casino effect of Wall Street is being played out in full. The Fed balance sheet recently stopped growing at an astounding $4.5 trillion. This is the first time in nearly three years that the balance sheet has slowed down in large part for the oncoming rate hikes that seem to never materialize. The market is largely funded by a few and wealth concentration has increased over the last decade into fewer hands. You need a buyer if you want to sell so many large investors are unloading inflated stocks, real estate, and bonds onto unsuspecting dupes. In China, a large part of the public jumped into the market and many only have an elementary school education. Today many are getting an education on the casino nature of the stock markets. In the US a large part of the bull market has come from the Fed expanding its balance sheet to ungodly proportions. The Fed balance sheet since the financial crisis has grown from $800 billion (mostly Treasuries) to $4.5 trillion of QE junk and asset swaps that are still lingering. The public realizes this is one giant charade and that is why they are revolting in the political arena.
Get used to the idea that you will never retire: GAO report shows that half of Americans 55 and older have no retirement savings at all.
Some of you might remember the glossy highly produced advertisements back in the early 1980s when Wall Street decided it was time to turn American retirement plans into casinos. The slow and agonizing death of the pension plan was supposed to be replaced by the beautiful and wonderful world of the 401(k) plan. Save for 30 years and in the end, you will be a millionaire just like your friends on Wall Street that sincerely care about your financial future. Of course since then, we have found out about junk bond scandals, mutual fund fees that make loan sharks look conservative, and of course the financial shenanigans of giving people toxic mortgages that were essentially ticking time bombs of destruction. This was the industry that was put in charge of helping you plan for your future. We are now a generation out from those slick ads and the results have been disastrous for most Americans. A recent analysis found that half of US households 55 and older have no money stashed away for retirement.
The Average Net Worth by Age: The massive financial chicanery brought on by housing equity figures and the new real estate bubble.
The best indicator of wealth is your net worth. Take you assets and subtract out your liabilities. It should come as no surprise to most Americans that half of this country is living paycheck to paycheck. One third of Americans have zero dollars for their net worth or in many cases for young Americans, have a negative net worth thanks to mountains of student loan debt. The latest data from the Census and Federal Reserve show skewed views on net worth figures. First, the recent housing bubble led by investor money buying single family homes isn’t really helping most Americans. In fact, the home ownership rate has fallen for about a decade now. Investors are thrilled as they leverage cheap funds to boost their own net worth but the main driver of net worth building, housing, is now being held by fewer Americans. The bull market with stocks has also pushed wealth figures up but it should be noted that only half of Americans actually own any stocks outright. Let us look at net worth figures by age ranges.
Trends in low wage America: 1.4 million waiter/bartender jobs gained while 1.4 million manufacturing jobs lost since 2007. Top 4 employment sectors pay $10 an hour or less.
The media pundits are scratching their heads as to why two political outsiders are garnering all the attention. You want to know why? Both are addressing the low wage epidemic plaguing the country. Now we can debate their policies since both stand at the extreme opposite ends of the spectrum but their message is clear – the reason you are going broke is because of the way things are and the deep capture of the financial status quo. And when we look at data, the trend is unmistakable. For example, since 2007 we have lost 1.4 million manufacturing jobs. During this same period, we have added 1.4 million waiter/bartender jobs. It is really no surprise that our top 4 employment sectors in the US pay $10 an hour or less. Keep in mind that with talks of the minimum wage being pushed up to $15 an hour, all of these employment sectors will be impacted. We are still seeing a dramatic growth in low wage jobs across this country. It also doesn’t help that true inflation is hitting people directly in their slimmed down wallets.