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The Real Financial Crisis That Is Looming
Submitted by Lance Roberts via STA Wealth Management,
There is a financial crisis on the horizon. It is a crisis that all the Central Bank interventions in the world cannot cure. It is a financial crisis that will continue to change the economic landscape of America for decades to come.
No, I am not talking about the next Lehman event or the next financial market meltdown. Although something akin to both will happen in the not-so-distant future. It is the lack of financial stability of the current, and next, generation that will shape the American landscape in the future.
The nonprofit National Institute on Retirement Security released a study in March stating that nearly 40 million working-age households (about 45 percent of the U.S. total) have no retirement savings at all. And those that do have retirement savings don't have enough. As I discussed recently, the Federal Reserve's 2013 Survey of consumer finances found that the mean holdings for families with retirement accounts was only $201,000.
Such levels of financial "savings" are hardly sufficient to support individuals through retirement. This is particularly the case as life expectancy has grown, and healthcare costs skyrocket in the latter stages of life due historically high levels of obesity and poor physical health. The lack of financial stability will ultimately shift almost entirely onto the already grossly underfunded welfare system.
A recent article by Kelley Holland via CNBC addresses this issue:
"Part of the problem with the 4 percent rule is that it was developed in the 1990s, when interest rates were significantly higher. Retirees with their savings in safe instruments such as bonds and annuities were getting more income than retirees today do with similar assets.
Another problem, though one with a positive side as well, is that life expectancies have increased. Americans are living longer after they stop working, which means their savings have to last longer. A man reaching age 65 in 1970 could expect to live 13 more years, but by 2011 that figure was 18 years. A woman's life expectancy at age 65 rose from 17 years in 1970 to 20 years in 2011 (the most recent year for which such data is available from the Centers for Disease Control).
Research published in 2013 by Michael Finke of Texas Tech University, Wade Pfau of The American College, and David Blanchett of Morningstar Investment Management found that using historical interest rate averages, a retiree drawing down savings for a 30-year retirement using the 4 percent rule had only a 6 percent chance of running out. But using interest rate levels from January 2013, when their research was published, the authors found that retirees' savings would grow so slowly that the chance of failure rose to 57 percent."
However, that is for those with financial assets heading into retirement. After two major bear markets since the turn of the century, weak employment and wage growth, and an inability to expand debt levels, the majority of American families are financially barren. Here are some recent statistics:
47% of US households save NOTHING from current incomes.
American families in the middle 20% of the income scale earn less money and have a lower net worth than in 2007.
More than 50% of the children in US public schools come from low-income households.
65% of children live in households on Federal aid programs.
62% of Americans currently live paycheck to paycheck.
53% of wage earners make less than $30,000 per year.
The wealthiest 5% of Americans have 24 times the wealth of the average household in 2013, up significantly from 16.5 times in 2007.
Over 100 million Americans are enrolled in at least one welfare program run by the federal government. This figure does NOT include the 64 million in Social Security or 54 million in Medicare.
It is important to remember that the total population in the US is currently around 320 million. In other words, more than 1:3 individuals in the United States is currently being supported by some form of government assistance. This is at a time when roughly 70 cents of every tax dollar is absorbed by government welfare programs and interest service on $18 Trillion in debt.
Here is the problem with all of this. Despite Central Bank's best efforts globally to stoke economic growth by pushing asset prices higher, the effect is nearly entirely mitigated when only a very small percentage of the population actually benefit from rising asset prices. The problem for the Federal Reserve is in an economy that is roughly 70% based on consumption, when the vast majority of American's are living paycheck-to-paycheck, the aggregate end demand is not sufficient to push economic growth higher.
While monetary policies increased the wealth of those that already have wealth, the Fed has been misguided in believing that the "trickle down" effect would be enough to stimulate the entire economy. It hasn't. The sad reality is that these policies have only acted as a transfer of wealth from the middle class to the wealthy and created one of the largest "wealth gaps" in human history.
The real problem for the economy, wage growth and the future of the economy is clearly seen in the employment-to-population ratio of 16-54-year-olds. This is the group that SHOULD be working and saving for their retirement years.
With 54% of this prime working age-group sitting outside of the labor force, it is not surprising that in a recent poll 78% of women in the U.S. want a "man with a J.O.B."
The current economic expansion is already pushing one of the longest post-WWII expansions on record which has been supported by repeated artificial interventions rather than stable organic economic growth. While the financial markets have soared higher in recent years, it has bypassed a large portion of Americans NOT because they were afraid to invest, but because they have NO CAPITAL to invest with.
The real crisis that is to come will be during the next economic recession. While the decline in asset prices, which are normally associated with recessions, will have the majority of its impact at the upper end of the income scale, it will be the job losses through the economy that will further damage and already ill-equipped population in their prime saving and retirement years.
With consumers again heavily leveraged with sub-prime auto loans, mortgages, and student debt, the reduction in employment will further damage what remains of personal savings and consumption ability. That downturn will increase the strain on an already burdened government welfare system as an insufficient number of individuals paying into the scheme is being absorbed by a swelling pool of aging baby-boomers.
At some point, the realization of the real American crisis will be realized. It isn't a crash in the financial markets that is the real problem, but the ongoing structural shift in the economy that is depressing the living standards of the average American family. There has indeed been a redistribution of wealth in America since the turn of the century. Unfortunately, it has been in the wrong direction as the U.S. has created its own class of royalty and serfdom.
For many, retirement years will not be golden. They will simply be more years of working to make ends meet as the commercials of "old people on sailboats," promoted by Wall Street, will become a point of outrage. While the media continues to focus on surging asset prices as a sign of economic health, the reality is far different.
The real financial crisis in the future won't be the "breadlines" of the 30's, but rather the number of individuals collecting benefit checks and the dilemma of how to pay for it all.
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Full bullshit is more like it.
and what little they do have will surely be vaporized in the crash.
Retirement yeah, lol...
200 k is a lot half higher half lower.....not good
Hell, even if there is never a crash, in 20 years it'll cost $200K for a car, economy size. No honest person can possibly "save" enough to retire.
I freelance over th? internet and earn about 80-85$ an hour. I was without a job for 7 months but last month my paycheck with big fat bonus was $15000 just working on my computer from my home for 5-6 hours. Here's what i have been doing... www.globe-report.com
What's new pussy cat?
Woah woah woah woah
And that is just the tip of the icebergs of the tidal waves yet to come ashore set in place long ago.... waiting for a cherry on top as it rolls on in....
The solution to poverty: have plenty of money.
... which goes a long way toward explaining why the 'civilized' world is turning into a monkey house ...
Other peoples money is better than working......
A woman wants a man with a job,
so she won't need one.
Eeeeeeck Quality Beetches.
Better up your game fast...
If you are over 45 then its too late. There isn't enough time for you to save. History shows that you will truly get fucked if you are in the category. I understand ketchup goes well with cat food.
Things are going just swimmingly... Both sides of my family survived the Great Depression and the Dust Bowl and I was raised that you have to be self-reliant because the only person that really cares about you is you. Most of the population are in the dependency class now and that will be very bad if your living in a coastal blue state....
need to move to one of the "racist" red states, acc'd to Google's search criteria
http://www.washingtonpost.com/blogs/wonkblog/wp/2015/04/28/the-most-raci...
all the above is not a crisis it is according to THE PLAN. also, stop ascribing benevolent qualities to the fed. the growing wealth gap is no accident, they are PURE EVIL.
I upvoted you despite your insulting PURE EVIL like that. He seems like a decent guy.
Another non-article from this verbose author.
1.Define "looming" .
2. What do you think FEMA camps are for?
Or all those nukes? Not for the Russians, that's for sure. They can shoot back. Flyover Americans, not so much.
Nuking farmland is kinda stoopid, my friend!
The zombies cometh.... humans living in or near a large metropolis are strongly advised to evacuate .....
Without money, survivors must learn how to fish, farm, hunt and shoot.
Emphasis on "shoot".
Being prepared is one thing. Being prepared to protect what you have is a different story.
Just ordered another 1,000 rounds of "savings" today.
How can Satan cast out Satan? Central banking---any monopoly over money, actually---is the disease, not the cure for anything.
On the contrary, the goal of our masters for a long time has been to expropriate, enslave, and when their usefulness as slaves is at an end, exterminate anybody with any chance of posing a threat to their wealth and power.
Women, understandably, want a man with a stable, disposable income who can support them in their youth while they raise the children who will support both of them when they're old. There aren't that many men like that any more, with working class white men lucky to be able to support themselves.
If that's not our cue from our masters to stop reproducing and save them the trouble of making us stop by any of a number of methods, each more horrifying than the last, what could be?
Why did he put "savings" in quotes?
Because every day you save a dollar it is worth less.
The most expensive house listed on Zillow in my neck of the woods is a foreclosure.
WTF?
Like so many others, Roberts suggests that it's a long, drawn-out process of 'decades' or longer. Is this how they deal with reality? We're long past the 'long process' Lancelot. This isn't the 60's, 70's or even 80's anymore, and Bretton Woods is on the way out as well.
And of course the 55+ crowd staying in jobs that they don't want to do, but have to, kills opportunitities for advancement for everyone in line behind them waiting for that valuable job.
This is going to make the government *attempt* to force people like me (former middle class) to pay more taxes, which IS JUST NOT GONNA HAPPEN. More and more people are just going to completely check-out of the system, and make the problem worse.
There was one good statistic in that report, declining marrage. DON"T FUCKING GET MARRIED. If you get married you are a fucking asshole. We make fun of the basement dwelling jerks playing video games all day, working dead end jobs (if employeed at all) and not getting married, but the fact is they are rationally responding to the perverse economic incentives that society places on them. Robbed by taxes, then frivorce rape, fuck that just stay in the basement!
I agree. I would add DONT HAVE CHILDREN either.
kudos twice
I am mixed on this one. If you take yourself out of the system, have no "reported" income that the famly courts can take, and live in a state that does not put you in jail over missed child support, then, you should find a baby-momma have as many children as possible, without getting married.
I think people VASTLY over-estimate what it costs to raise a child. I was raised in GRINDING FUCKING POVERTY including being homeless for a short time as a kid, and I turned out ok, my poor friends for the most part turned out ok as well.
kudos
both neo-democrats and neo-republicans are united in the belief that the Neo-Fascist Solution is....... Murder by Neglect
These people are going away even with $1 million in capital - pension funds, SS and life insurance will not be there at the level anticipated.
which is why the SSI - Social Security "Insurance" Administration requisitioned a lot of ammo!
hahaha... I love the title... Even Hitchcock never repeated the same movie twice!
This is a never ending drama...But I would like to see another title other than "real financial crisis looming"...
Yes, looming is not what WS does and looming is not what Ukraine, Syrac, Greece and all those others experience.
So looming is somewhere between the third world and the first world. Its loomed in one but not in the other where looming is not admitted in the vocabulary.
I stand corrected he made "the man who knew too much" twice!
So it must be you!
Top of the World, Ma!
The squid has sucked all the life out of the economy. The whole thing has been "financialized" and stripped.
It's not an accident.
Instead of listening to their propaganda and lies, look at what's happening.
The .0001 percent are getting even richer, so rich that 80 men control more wealth than half the planet, the middle class is going going gone, and the poor are destitute.
Meanwhile, they gain even more control over their global serfdom.
Read the protocols for extra credit.
That stat gets me every time.
Hail zero interest rates which gave the corporations the means to malinvest as well as to invest overseas, gave retirees sweet f... all for their retirement nest egg, gave young people the ability to buy overvalued real estate, gave investors massive gains but much reduced yield, gave governments the ability to borrow phenomenal amounts without the ability to pay back and so on and so forth.
Bernanke and Greenspan and whoever was pulling the strings should have been shot early in the peace.
After reading this article no one should be surprised we are having riots in Baltimore. People are losing hope. America is now a welfare police state. Police relations are merely a symptom of the societal disease called welfare control.
Welfare states go against human nature. Human beings need to believe if not our generation than the next generation will escape the poverty of the welfare state. Escape is not happening for the vast majority. It is getting worse.
Politicians on the other hand are at their maximum power today collecting welfare votes. As the Detroit collapse shows people the more you vote for socialism and welfare (dems in total control for 50 years) the wilder the promises, the less you get back and the more decay becomes rampant…
You're kidding right? The Crips/Bloods are deep into political economy, eh?
In a democracy, people can vote for what they want. Problem: they want it without having to pay for it. If it is good for the country, we should pay for it.
solution: balanced budget amendment. Keep it simple: Every spending bill is a taxing bill. Every spending bill must be reapproved every 6 years minimum. That way, if it is important enough to pass, it must be funded. No more "I voted for tax reduction" when you voted for spending bills. Doesn't matter if spending is for Army/Navy/Airforce, public health, retirement [social security/medicare], or whatever. If it passes, the funding is proportioned in to the budget and tax rates are based on budget, not on some damned policy grab to buy votes or pay back for 'donations' by corporate sponsors.
Maybe if we did that, the reality of the taxation would keep spending in line. And, every 6 years you get to reconsider - is that really worth it?
Welfare votes include corporate welfare votes, you know. It seems that between corporations buying politicians outright, and politicains trying to by votes, most of us are sucked into this whirlpool of governmental excess with the congress critters pointing at each other, trying blame each other. It is all distractions. Time to wake up!!
Craig
I wish to thank my former employer so much for the gift he gave me when I became sixty years old. Not only did he FUCK me over with eliminating my department, his timing was exquisite. The market crash in 2008 meant that my 30 plus year history in an industry was meaningless. Not one single "friend" could help since they were holding on for dear economic life.
As a consequence I saw my 401k savings destroyed, my home utlimately foreclosed, and I took two jobs and made a readjustment to my living that continues to this day.
It just doesn't matter.
The people with whom I work are a great bunch. They have no savings. In fact they can barely make it to the next paycheck. This is America.
People wanted unlimited credit in the system and more cheap off-shore shit - well sheeple, you got what you wanted. No jobs and no future.
Yikes, I'm in the 55-64 group and the stats fit me to a T.
Oh to be 30-something again [sigh]
Viagra might help lol
I'm in the same group.
My approach is to live simply and stay fit.
Who knows what the future will throw at us.
The abilty to adapt is probably the most important skill you can have.
Worst case, if you can't make it on your own anymore, get yourself am illegal firearm, go into a jewellers store and ask 'em to fill your bag. Shoot into the ceiling. Don't rush - the cops will show up and you can surrender.
3 hots and a cot guaranteed.
Old wrinkly fuckers would likely be left alone. The big down-side would be stripes in your sunlight, but you can't have everything!
Another tril in money printing can keep the sheeple in bread and circus for many more years - get accustomed to a bare existence - even camping is now out of the reach of most people. Forget the sailboat ad on tv. I have not seen the ad for a while - maybe the lie has been exposed.
'Another tril in money printing can keep the sheeple in bread and circuses for many more years..."
It took 3.5 trillion to keep the 'bread and circuses' going for 6 years; with the diminishing returns of QE I think it will take 10 trillion or better in 'money printing' to keep the 'sheeple in b ande c for many more years'...
Not much of QE reached the sheeple. Just enough to avoid the torches and pitch forks.
The fascist-socialist state has greatly improved the lot of those of social security age. Most Merikans in general gobble up every morsel of the above ideology. Hope they starve to death someday...just saying.
Give me a stick, I will kill it.
" but rather the number of individuals collecting benefit checks and the dilemma of how to pay for it all." Tyler
Part of the solution is an equal distribution of new, interest-free fiat to all US citizens. And to avoid price inflation risk, further credit creation* by the banking cartel needs to be banned until they are 100% private with 100% voluntary depositors and the fiat distribution metered to just replace existing credit as it is repaid (destroyed) until all demand deposits are 100% backed by reserves.
To provide even more room for a price-inflation-free fiat distribution, the Fed should be forced to reduce its balance sheet as nearly as possible to zero thus removing reserves from the economy so as to allow more fiat to be given away to US citizens.
*As opposed to 100% reserve lending which could still occur and for which the new fiat distribution would provide the new reserves necessary for no reduction in the money supply.
Soylent green, institutional euthenazia, and government scoops, are looking less science fictioney.
Hi All:
We, as a people, have a bigger problem than the financial markets and that is our inability to call a spade a spade. If we don't, as a group, start dealing with objective reality and stop dabbling in probaganda and fantasy, we're noever going to get anywhere.
Case in point, from above:
"Despite Central Bank's best efforts globally to stoke economic growth by pushing asset prices higher, the effect is nearly entirely mitigated when only a very small percentage of the population actually benefit from rising asset prices."
This line is bullshit, period. Central banks did NOT do anything to 'stoke' the economy. Cental banks don't give a rat's shit about the economy. The central banks care about their member/owners, which are the comercial banks. Everything the central banks have done, most speicifcally the Fed, the BoE, the BoJ and the ECB is to take actions to keep their member banks solvent...on paper anyway. They lied, cojoled, changed accounting standards, bought shit assets form their members with freshly printed currency and done everything in their power to try and rescue the balance sheets of the banks. If this happens to help the economy, so be it, If not well......that is where we are today.
This tom-foolery of PRETENDING that central banks have done what they have done to save/improve the economy is poppycock/nonsense/fantasy. They have done nothing to help the economy and never intended to. Saying so is just pap filling for the populace and especially for the morons in congress. Their actions have been WHOLLY to save their member banks. That's it.
The fed mandate, blah, blah, blah. Congress is filled with idiots and has been for 60 years. If Congress passes legislation intrusting the fed to change water into wine, can the fed do it? Congress is also living in a fantasy world....for the last 60 years. What is coming, very soon, is fantasy crashing into reality. That point when an airplane is coming into land and the tires hit the pavement....that is what is coming and that puff of smoke you'll see is going to be HUGE.
Lets all stop fantasizing the the fed wants to help anybody but its owners. It doesn't and it can't.
Squid