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My friend was speculating that as a result of this crisis, there's going to be a new underclass of (former) professional people, mostly over 40, who will never recover financially from being laid off. What do you think?
There are many people who lived extravagantly in the past,on the assumption of continued affluence.Financing any income shortfalls (kids college,credit card bills,etc.) through home equity withdrawals or refinancing.Now,the job is gone,the youth is gone,and the home is going or gone.40+ people can possibly recover,but only if they immediately change their lifestyles,MUCH easier said than done.As for the 50+ crowd,only the very talented few will be able to recover.JMHO
My friend was speculating that as a result of this crisis, there's going to be a new underclass of (former) professional people, mostly over 40, who will never recover financially from being laid off. What do you think?
It is not just former professionals, it is a whole generation. Gen-X will be hurt the most and once they start to recover they will be paying the bills for their elders excesses.
I also recommend The Fourth Turning. Excellent read on how even generations are cyclic in line with history and economies. He goes into how history is cyclic rather than linear and it sure does make the mark as he compares the highs, the lows and the wars with generations.
The underclass is here and all around us-- they just don't know they're the underclass yet. They think they're still middle-class because their credit cards haven't been cut off yet. They cover all age groups and educational levels. But if you're a 29 year-old college graduate who lives with mom and dad because you don't have a job and no reasonable prospects of finding one, then you're part of this new underclass. If you're 55 or 60 and you've been unemployed for three years and you're about to finish off what used to be your 401k, you're in the new underclass.
I'm more than a little tired of smug moralizing by people who think they're ants, lording it over people they think are grasshoppers. Most people didn't save for the last 20 years because they spent and borrowed to maintain the middle-class lifestyle they thought they had earned by virtue of education and dedication to work. Hell, it would have been damn close to unpatriotic NOT to spend-- and the economy is going to continue to suffer because people are finally not spending, and 70% of the economy is consumer spending.
But go ahead and believe that you can John Galt your way to riches, and vote for politicians who will tell you what you want to hear but represent those who bought them, at bargain-basement prices.
Hell, it would have been damn close to unpatriotic NOT to spend-- and the economy is going to continue to suffer because people are finally not spending, and 70% of the economy is consumer spending.
It's patriotic to save. By becoming a spend-crazy country that bought more than we produced, we've created massive trade imbalances with countries like China and OPEC nations like Saudi Arabia. When we save, we keep capital that can be invested domestically and we reduce our reliance on foreign parties.
Yes, but when we have a tax system that completely rewards spending and completely punishes saving, then what do you expect people to do? If consumption were taxed much more relative to income, I don't think we would have seen as much debt-financed consumption.
Add that to the cheap money policies of the Federal Reserve, and you can see why we've become a nation of spenders.
Now, of course, the American people are ultimately responsible in the sense that they elected these fools who wrote our tax code and appointed yet more fools to run our banking system
The problem now is that you can't get a good rate of return on a CD anymore. Do you want to risk putting it in the stock market. And if we have inflation, will those savings be worth as much?
My friend was speculating that as a result of this crisis, there's going to be a new underclass of (former) professional people, mostly over 40, who will never recover financially from being laid off. What do you think?
This is such an interesting question... and my husband and I were just having this talk. Short answer, "Yes". We are mid-40's and don't see ourselves ever fully recovering. We look at our parent's generation... neither of our fathers had college degrees, yet had houses paid for by the time they were 50. Our moms stayed home to raise children. They are receiving their Social Security, which we are paying into, but may never see ourselves. They were able to build wealth from their homes because they stayed put in their jobs; now our society is so mobile. Even with graduate degrees, our generation cannot seem to accrue wealth and financial security. For some, it's because they did live above their means; but not all of us.
We never received help with college or anything... we were raised with the idea that once you are 18, you are on your own. However, we DID pay for college for our kids, weddings, cars, etc., only alot of our kids' generation is boomer-anging back home because they can't find jobs! So, it feels like we are paying for our own lives and those of our children... plus, now our parents are getting older and we think about how it will soon be time to take care of them.
Sometimes it seems our generation is the "filling" in the sandwich being squeezed. I don't see the word "retirement" as a word in our vocabulary. I guess if we would have kicked our kids to the curb after high school, we'd have more saved, too. Is it different generational expectations?
I might add, we don't put big expenses on credit cards and have no line of home equity... heck, we don't even have home equity because of all the foreclosures around us! We don't/didn't live above our means, but I think what's making it hard is being between the boomers and the young adult generation. To top it off, it couldn't be a worse time in our lives to have the economy collapse. Anyone else out there in this group?
The problem now is that you can't get a good rate of return on a CD anymore. Do you want to risk putting it in the stock market. And if we have inflation, will those savings be worth as much?
those are very good points. I do think the market is undervalued now after the recent selloff, and instead of putting extra cash I need (By extra, I mean cash that I won't need for at LEAST 6 months) into CDs, I've been either keeping it in cash, or buying solid blue-chips with dividends when the market panics (like it did recently).
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