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While there are many stories floating around the media as to why we are in this economic mess but I feel the greatest cause is our own greed. Greed by fat cats on Wall St. Greed by shady mortgage brokers. Greed by CEO's. Greed by those who don't want to pay their workers a better wage. Greed by those who feel they are entitled to a rock-star lifestyle. Our country was not founded and built on the AIG's and Wal-Marts. It was built on the small business owner and blue-collar worker. While I don't feel sorry for the people that lived beyond their means and are loosing their mansion and Mercedes, there are many that did live within their means and are a victum of circumstance. Even those with masters degrees and high level jobs are out of work. We as a country must get back to our roots. We need to teach our kids that they don't need this bling-bling lifestyle. I strongly urge EVERYONE to read "War On the Middle Class" by Lou Dobbs. Then you'll see what I'm talking about when it comes to greed. It's hard to save money when your wages stay the same and the costs of living keep going up. I read a statistic that 4% of the population controls 80% of the wealth. I would not be a bit surprised if someday we are a third world country. Call me crazy, but that's my gut feeling. There are too many reasons to mention here. I am self-employed with my own dump truck and wouldn't be a bit surprised if I loose my ass in the next couple months if things don't turn around. Being in business has shown me just how cut-throat and dishonest we are as a society. I'm not surprised we are in bad shape.
The other day, I was reading comments in an op/ed article written last month and one of the comments stood out to me:
Quote:
At last! Only three hours ago, in comments on another column, I asked why the Times wasn't addressing the big question - what will a sustainable economy look like? Now here, for the second time in two days (the first was "Job Losses Hint at Vast Remaking of Economy"), someone at the Times is approaching the real issue.
It's not just the environment - it's the entire economic model, based on principles a 7-year-old can see through. In 1929, it wasn't just about rampant greed and financial manipulation - the buying power of the populace was simply inadequate to sustain the productivity of the capitalist engine. After WWII, the solution implemented was the consumer economy - make staples less durable and convince people to buy things they don't need: "Throw it away and buy a new one, and we'll all have jobs."
We were able to sustain this for awhile, but ultimately we had to start borrowing to continue buying things we didn't need. From Reagan to Bush II, we borrowed more and more - against our future earnings, and then our children's - to maintain the illusion of prosperity. In 2007, I believe household debt rose by more than household income; i.e. we were spending twice as much as we earned.
Meanwhile, the Fed was printing more money each year than the economy grew in real terms. Couple that with implementing mechanisms for the rich to rake off ever more money, and the middle class fared worse and worse.
Checkpoints:
1. In 1968, my Ivy League tuition and fees were $2,400. This year it's $36,504 - 15 times as high.
2. In 1968, I bought my first car - a 6-year-old Chevy Biscayne with 84,000 miles, for $200. A quick search finds a 6-year-old Camry with 80,000 miles currently goes for around $11,000. It's a better car, but still - that's 55 times as much as I paid in 1968.
3. The house I moved into in 1970 was worth about $24,000. Now it's worth $850,000 - 35 times more.
4. My starting engineering salary in 1969 was $7200. Latest Dept. of Labor statistics say that the current equivalent starting salary is $45,000 - an increase of 6.25.
The car has gone from 2.7% of a first year's salary to 25%; tuition and fees has gone from 33% of a years's salary to 81%; the house has gone from 3-1/3 times a year's salary to 19 times a year's salary. Worse, after 40 years of various engineering and management roles (including Managing Director of a small firm), in my current very senior engineering position I'm earning only a fraction more than twice the salary of a 21-year-old, fresh out of school. Cut the current percentages for a starting salary in half, and you'll get the amount of purchasing power I've lost in the last 40 years of work.
In other words, there's not going to be a "recovery". We can talk about energy efficiency and independence (remember we started that in 1978, but Reagan killed those programs and instructed the Department of Energy to concentrate on nuclear weapon development), but energy to do what? It takes far too few people to produce the food, shelter and clothing we require; the rest of us are engaged in making, buying and selling things we don't need. Only we stopped being able to afford them 15-30 years ago, and now we have to pay the bills. Car sales are down 30-45% just in the last few months; they're not going back to prior levels in the foreseeable future, if ever. The stores which are being shuttered are not going to come back, and surviving competitors are not going to take up the slack - there isn't any. We've killed the goose; demand was unsustainable, propped up by enormous debt, and it's not coming back.
So where are the jobs going to come from for a sustainable economy? The less energy we use, the more the energy companies will have to charge (and the government - see today's articles about new taxes to make up the decline in gas tax income, as people drive less and cars become more efficient). Any attempt to return to buying rubbish just to keep the economy turning over is doomed. Where's the tax base going to be?
No matter what, our banking system relies on someone going into debt. That is just how it is. Unless that changes, there will always have to be winner and losers and people that have to buy in order to support those that save. Everybody can not be savers in our economic system.
I didn't say everybody should be savers. I'm knee-deep in a wonderfully exciting () macroeconomics class right now, so I do have somewhat of a grasp on reality. Somewhat.
My point was that people have to draw a line at how much personal debt they are willing/able to carry. Those lines have been fuzzy for a lot of folks recently, and that's where their troubles lie. Hopefully in the future things will be clearer for them.
I guess I'm one of those people. DH and I have a grand total of $390k worth of debt. Yes, most of that is our house, but $70k is consumer debt - credit cards, car loans etc. We have a small cushion in savings. If one of us should lose our job, times would get very tough, very quickly. Knowing that, and seeing how much of our income goes to getting rid of that debt, we vowed to never be in this position again. The debt we have is too much, and we realize that. Does that mean we're going to cut up all our cards, never take out another loan and save like misers? No. Are we going to make occasional big purchases, but be a little wiser about spending. Absolutely. It's about balance, and a lot of folks are only just figuring that out.
Luckily for us, it didn't take losing our home to figure it out but, for a lot of people, that's exactly what is happening before they realize it themselves. Yes, there will always be winners and losers, but the losers wouldn't fall so far if they were just a little wiser.
I didn't say everybody should be savers. I'm knee-deep in a wonderfully exciting () macroeconomics class right now, so I do have somewhat of a grasp on reality. Somewhat.
My point was that people have to draw a line at how much personal debt they are willing/able to carry. Those lines have been fuzzy for a lot of folks recently, and that's where their troubles lie. Hopefully in the future things will be clearer for them.
I guess I'm one of those people. DH and I have a grand total of $390k worth of debt. Yes, most of that is our house, but $70k is consumer debt - credit cards, car loans etc. We have a small cushion in savings. If one of us should lose our job, times would get very tough, very quickly. Knowing that, and seeing how much of our income goes to getting rid of that debt, we vowed to never be in this position again. The debt we have is too much, and we realize that. Does that mean we're going to cut up all our cards, never take out another loan and save like misers? No. Are we going to make occasional big purchases, but be a little wiser about spending. Absolutely. It's about balance, and a lot of folks are only just figuring that out.
Luckily for us, it didn't take losing our home to figure it out but, for a lot of people, that's exactly what is happening before they realize it themselves. Yes, there will always be winners and losers, but the losers wouldn't fall so far if they were just a little wiser.
I agree becwells,
That there is a more "suitable" level of debt for households. The problem with our economy is that, If everybody were to just spend and save at that suitable level (currently savings rate is at around 3%, capacity utilization was at 70% (Feb), and unemployment is at 8.5% and increasing).... we get 5.5+ million people unemployed, underemployed, and seniors coming back from retirement to work. http://www.bea.gov/briefrm/saving.htm http://www.federalreserve.gov/releas...nt/default.htm
http://www.dol.gov/ (broken link)
So, what happened? Where did all the jobs go? What happened to the buying power of wage earners? Where did all the capital and wealth disappear to? Why do we have to continue to go into debt in order to sustain the economy?
Well, jobs went out the window to the developing countries (BRIC) and through technological advances (efficiency/productivity). More workers and fewer jobs and global competition for resources stagnated wages and purchasing power. A lot of the capital and wealth got funneled to the wealthiest of the nation (upper 5 percentile holding 80% of the wealth) and their counterparts around the world. And we have to continue to go into debt to grow the money supply because the interest on debt is always going to be higher than the current money on hand (usery and fractional reserve system).
So, there goes your formula for disaster in a nutshell. What is a sustainable economy? Well, if 3% savings is good, then 8.6%+ unemployment is also the natural rate of unemployment. If we continue saving, and being frugal, I believe unemployment is only going to get higher as the unemployment benefits disappear.
The only way to get more jobs, is for households/businesses to take on more debt - which banks and govco is already working on by loosening the requirements by taking bad debt from banks and transferring available credit from the responsible to the irresponsible. Alternatively, other Countries have to take on more debt. But, their wages don't support it, and the Chinese, Indians, etc. aren't people that take on credit as willingly as the folks at home.
It's sickening. We just gave how many trillions of dollars to "under-developing countries" while our own people cannot find work. Unemployment is near 9%. There have been two million jobs lost this year alone, and its just the begining of April!
Yes, you deserve criticism... I bought a pair of Faded Glory jeans for $8.00 from Meijer
You got them cheaper cos they were faded. Mine have plenty of color left in them
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) macroeconomics class right now, so I do have somewhat of a grasp on reality. Somewhat. 
