The economic war on the young: young Americans are being priced out of the housing market, pushed into student debt, and many see no growth in wealth.
The job market continues to be depressed for young Americans. As graduation season comes to an end, many are going to start getting letters in the mail from their friendly student debt service organization. Other recent graduates continue to live at home facing a failure to launch as rents rise and the prospect of home ownership continues to fall beyond their reach. In fact, we have many people in their 30s and 40s living at home because of financial constraints. This isn’t exactly what older parents had in mind but many are battling their own lack of retirement funds as they enter into old age. Young Americans are facing a trifecta of economic depression that wasn’t present in the previous generation; they are unable to compete in this investor heavy housing market, many of the decent paying jobs of today require a college education that is becoming more expensive by the day, and finally many are unable to find a good paying job stunting their savings plan. On many fronts, while orchestrated or not, it appears to be an economic war on the young of this country.
Temporarily embarrassed millionaire Americans go back into credit card debt: Credit card debt begins to tick up as tapped out Americans re-leverage once again. Average household has $7,000 in credit card debt.
It is hard to believe that a large part of the nation has already forgotten the Great Recession. A crisis created by too much debt and the financialization of global markets is now once again unleashing high levels of debt to keep consumption going. This makes sense given that 1 out of 4 working Americans is actually in a job that pays less than $10 per hour. Instead of confronting the storm clouds of low wage economics, banks after getting their bailout fill are now handing out credit cards to induce Americans to spend money that they really don’t have. There is a very reasonable place for debt in any economy. It becomes dangerous when we constantly rely on debt versus real economic growth to move forward. Credit card debt contracted severely during the Great Recession. Most of this came at the hands of bankruptcies. With the memories of the Great Recession fading away in this fast paced instant media culture, we are seeing credit card borrowing picking up. Without a doubt, solicitations for credit card offers are coming in at a steady flow in 2014.
The slow process of turning the US into a low wage McJobs nation: US breaks even with jobs lost since 2007, those not in the labor force jumps nearly 13 million, and 1 out of 4 is working for $10 an hour or less.
The US is slowly becoming a McJob nation. While the press jumps up and down that the US is now finally at a breakeven point from the jobs lost since the recession started in 2007, they fail to mention that those not in the labor force is up by nearly 13 million. Even looking into the recent employment report, we continue to find a heavy trend of hiring in low wage employment sectors. For example, 32,000 jobs were added in “leisure and hospitality†bringing the annual total of jobs added to 311,000. Another 21,000 jobs were added in social assistance which pay very little but will grow as demand for health support grows by an aging population. The system at least in the eyes of Wall Street and the government is working perfectly fine. We have a plentiful supply of low wage labor while laws and bailout mechanisms are in place for the financially and politically connected. The middle class continues to fall off the bandwagon one by one and enters a labor force of permanent low wage labor with very little prospect of a decent retirement. In fact, most will be working until all the wheels come flying off. We also find that 1 out of 4 Americans are working in jobs that pay $10 or less per hour. How about trying to earn the Americans Dream on that McJob salary?
Central banks and a global soft default: Current interest payments on public debt now exceed $415 billion per year. In 2000 $1 trillion in Fed debt was held by foreigners while today it is up to $6 trillion.
Global central banks are fully addicted to the opiate of debt. The financial system has created a rentier class that chases investment yield even when the economy isn’t necessarily growing. Think about that for a second. Why should someone expect a guaranteed return at any point in an economic cycle if the real economy is actually contracting? The U.S. for example while trying to play the role of responsible manager of debt is going full throttle when it comes to debt issuance. We have a spending, revenue, and financial system problem in the way incentives are structured. For example, all talk of the Fed tapering is really just hollow rhetoric. The Fed now has a balance sheet well into the $4 trillion range (or twice the size of California’s annual GDP). There is no sign of pulling back. U.S. debt to the penny is now at $17.5 trillion and growing as we spend more than we take in. People do realize that this principal is never going to be paid back right? This is why inflation is occurring in many areas of the economy even though the CPI understates inflation in many categories including housing, tuition, and healthcare. Global central banks are fully aware that most countries are already in a soft default. In other words, the trajectory ahead is to inflate our way out of this debt mess.