The death of the American pension: Shifting the retirement burden from employers to workers has created an enormous financial crisis.
The American pension offered once by many companies was a benefit once afforded to most workers. That is, until the press started chanting the Wall Street party line and all of a sudden 401ks and mutual funds were all the rage. Who wants a tiny pension when you can become a millionaire by simply saving a few dollars per month? Well this experiment started in the early 1980s and here we are, one full generation into the plan and most Americans are entering retirement on the verge of being broke. And this is with the stock market recovering from the lows of 2009. Yet somehow, many Americans never had enough left over to invest after the bills were paid. It is interesting how the pension has been painted as some evil sin while corporate CEOs have ridiculous pay packages that would make Marie Antoinette blush. That is the environment we currently live in. Worship the financial gods while everyone that is poor or struggling is somehow a pariah. Corporate welfare for the connected and painful austerity for the working class. The pension has undergone a slow and painful death at a time when millions of baby boomers are retiring.
A recession is imminent: 5 charts signaling an oncoming recession. The market is overheated with debt and the public is anxious about the economy.
A recession is imminent and millions of Americans already live in an economy that feels like it never left the Great Recession. Low paying jobs seem to dominate this weak recovery. Younger Americans are realizing that they may not have it as good as the baby boomer generation where good paying jobs were plentiful and wages actually kept up with inflation. Benefits in the job market today are low to nonexistent and the new retirement model is work until you die. This might be a good motto if we were living in the Middle Ages. Instead, we live in a self-imposed modern day Gilded Age where Congress is bought and paid by the wealthy in our country. It is troubling that the government continues to spend money it doesn’t have yet continues to ask Americans to live a life of austerity. There are five signs that are starting to point to another recession.
How inflation is purposely underreported as a justification to maintain low interest rates: Two specific examples with housing and college tuition.
Inflation is largely misunderstood by the public at large. People for the most part think that inflation is the natural economic order and that prices go up naturally. Official inflation figures play a much bigger role influencing cost-of-living adjustments for things like Social Security but also serve as cover to maintain low interest rates. The CPI is largely underreporting inflation. For many young Americans the cost of college tuition is a big part of their budget yet the CPI allocates a small percentage to college tuition and fees. Another big problem with the measurement is how it looks at housing costs. You would think that the biggest expense for Americans would be reflected accurately in the official measurement of inflation but it isn’t. This is how you end up with the middle class becoming a minority yet in some way, we had continual reports that inflation was nicely controlled.
The Middle Class in America has just become a minority: For the first time in over 50 years low-income and high-income Americans outnumber the middle class.
It was only a matter of time but we can now officially say that the middle class in America has reached minority status designation. Recent figures show that there are more low-income and high-income Americans versus those in the middle class. Most of the growth has been fueled by the trend in adding low wage jobs. At the other end you have a small pool of Americans that are controlling a larger piece of the economic pie. It used to be the case that Americans for the most part were proud about our robust middle class. Now there is this temporarily embarrassed millionaire attitude flooding the nation all the while the system becomes more of a corporatocracy. Half of Congress is made up of millionaires so don’t expect them to have any idea what is happening in the lives of paycheck to paycheck Americans. Does losing the middle class matter?
We have traded building cars for mixing drinks: This year the US added nearly 300,000 waiters and bartenders, and zero manufacturing workers. Manufacturing was once 33 percent of all jobs and now it is below 10 percent.
While the Federal Reserve now looks to have the green light on raising interest rates after many head fakes, the employment report isn’t so clear. Sure, we are adding jobs but we are adding a large number of jobs in the low wage segment of our economy. Case and point? Since the start of the year we have added nearly 300,000 waiters and bartenders and have added zero net manufacturing jobs. These service sector jobs provide little in the way of benefits and job security and many young Americans are trapped in these low wage jobs with incredibly high levels of debt. The media is tone deaf on why Americans are so frustrated this year and one reason for this is their lack of basic economic knowledge or empathy for the regular working family. For example, half the country is living paycheck to paycheck. For most Americans, their retirement plan is work until you die. This all makes perfect sense when a large portion of Americans work in low paying jobs. We have traded building cars for mixing drinks.
Unable to afford homes, Americans dive into subprime auto debt to purchase cars: Auto debt getting riskier with extended terms and chasing borrowers with lower credit scores.
The word “subprime” was synonymous with the toxic loans that were made during the credit bubble. Some tend to think that those days are long gone but we simply have shifted the form in which toxic debt is filtered into the system. Instead of making no-doc no-income loans on houses, we are now offering no-income loans to college students and also, a large number of subprime loans to purchase cars. This is problematic for a variety of reasons. First, Millennials and younger Americans are carrying the disproportionate amount of debt in college loans and auto loans. College debt is causing major problems including forcing many young people to live at home with their parents well into older adulthood. At least with college if done correctly, you are getting a degree that should boost your earnings power. Of course you need to be weary of how much debt you take on and the quality of the institution you attend. But with auto loans, you are basically financing a purchase that is losing value the moment you take it off the lot. We now have over $1 trillion in auto debt outstanding and a large portion of this growth is coming because of subprime loans to riskier borrowers.
Are Millennials as broke as the media says they are? The answer is a resounding yes for the following reasons.
If you type in “characteristics of the Millennial generation” into trusty Google you will find a list of interesting headlines. Some of the titles given to Millennials are: Generation Y, Generation WE, The Boomerang Generation, and The Peter Pan Generation. Part of this stems from the way many were raised by baby boomers who were promising their kids the world. Many felt that leaving college with any degree would be enough for a high income and an avalanche of jobs hitting their email box. None of this really materialized. Unrealistically high expectations. Denmark, which typically ranks among the “happiest” countries in the world carries one interesting trait – have low expectations. In fact, most Millennials are struggling in the current economy. The Millennial generation leads the way in the amount of student debt it carries. Many are stuck in low wage jobs earning so little, they are living with their parents deep into adulthood. How broke are Millennials? Pretty broke when you look at the data.