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Guest Post: The Chart Of The Decade
Submitted by John Aziz of Azizonomics blog,
This chart tells millions of stories. I’m trying to get my head around its implications.
That’s right: since 1984 (surely an appropriate year) while the elderly have grown their wealth in nominal terms, the young are much worse off both in inflation-adjusted terms, as well as nominal terms (pretty hard to believe given that the money supply has expanded eightfold in the intervening years). So why are the elderly doing over fifty times better than the young when they were only doing ten times better before?
Are young people a stupefied generation coddled by parents and government, addicted to welfare, junk food, drugs and reality TV?
To some extent, but are they any less fiscally and morally responsible than the marijuana-smoking, free-love-embracing, national-debt-accruing baby boom generation? That’s a matter of opinion, but my answer is probably not. Baby boomers hate Ron Paul, while the under-35s seem to love him.
Is it due to government policies that favour the elderly and screw the young?
America is suffering from excessive consumer debt:
Net worth is calculated by subtracting debt from assets. The biggest debt for most people is a mortgage. So having more mortgage debt or less mortgage debt tends to be a pretty good determinant of net worth. (And no — unlike in the United Kingdom and Australia which have a severe problem with housing affordability — housing in the USA is still cheap today priced in wages)
The elderly have very often already paid off their mortgages — no doubt helped by the 1980s and 1990s where both stock prices and house prices grew rapidly. And why did rise so rapidly?
Some say that it came on the back of excessive expansion of the money supply beyond the economy’s productive capacity. But that doesn’t seem quite true:
The money supply grew in tandem with industrial production. This was no bubble, but organic growth (albeit as I have shown before on the back of cheap Chinese goods and cheap Arab energy).
My hypothesis is that the present situation is a product of government expansion.
Here’s government expenditure as a proportion of GDP:
Government spending in democracies very often tends to constitute a transfer of wealth from non-voters to voters (as well as groups that can’t afford lobbyists to groups that can afford lobbyists — perhaps that is one reason why corporate profits are soaring while youth unemployment remains elevated, and why Wall Street banks get bailed out, but delinquent small businesses do not).
Here’s the voter turnout by age in the 2004-2008 Presidential elections:
Older people vote in droves. Politicians want their votes and therefore promise them more free stuff — medicare, medicaid, services — and they vote for whoever offers them the most.
The biggest issue though, is this:
Keynesians may say that this reflects a government’s failure to create jobs for young people. They claim that the problem is that there is not enough money circulating in the economy, and that government can “raise demand” by pumping out more cash. But there is plenty of money in the economy; so much money that Apple have built up a $90 billion cash pile. So much that China has built up a $3 trillion cash pile. So much that banks are holding $1.6 trillion in excess reserves below fractional lending requirements.
More likely is the reality that overregulation and barriers to entry preventing the unemployed from picking up the slack in the jobs market. As John Stossel reveals in a recent documentary film, in New York City it costs $1 million to get a licence to drive a taxi. Anyone who wishes to operate a food cart, or run a lemonade stand has to traverse reams of bureaucracy, acquire health and safety certificates, and often pay huge fees to receive the “necessary” accreditation. While some barriers to entry are necessary (e.g. in medicine), in other fields it is just an unnecessary restraint on useful economic activity. In many American cities it is now illegal even to feed the homeless without government certification and approval. Citizens who defy these regulations face fines, arrest, and even imprisonment.
In a recent article, the Economist noted:
Two forces make American laws too complex. One is hubris. Many lawmakers seem to believe that they can lay down rules to govern every eventuality. Examples range from the merely annoying (eg, a proposed code for nurseries in Colorado that specifies how many crayons each box must contain) to the delusional (eg, the conceit of Dodd-Frank that you can anticipate and ban every nasty trick financiers will dream up in the future). Far from preventing abuses, complexity creates loopholes that the shrewd can abuse with impunity.
The other force that makes American laws complex is lobbying. The government’s drive to micromanage so many activities creates a huge incentive for interest groups to push for special favours. When a bill is hundreds of pages long, it is not hard for congressmen to slip in clauses that benefit their chums and campaign donors. The health-care bill included tons of favours for the pushy. Congress’s last, failed attempt to regulate greenhouse gases was even worse.
Complexity costs money. Sarbanes-Oxley, a law aimed at preventing Enron-style frauds, has made it so difficult to list shares on an American stockmarket that firms increasingly look elsewhere or stay private. America’s share of initial public offerings fell from 67% in 2002 (when Sarbox passed) to 16% last year, despite some benign tweaks to the law. A study for the Small Business Administration, a government body, found that regulations in general add $10,585 in costs per employee. It’s a wonder the jobless rate isn’t even higher than it is.
The truth may be that the inability of the unemployed to become self-employed is the force that is squeezing the jobless most. Certainly, job migration overseas has changed America, but why should it mean continued elevated unemployment? There is enough money to keep the economy flowing so long as there are opportunities for people to make themselves useful in a way that pays. With the crushing burden of overregulation and the problem of barriers to entry, these opportunities are often restricted to large corporations.
These issues of youth unemployment and growing inequality between the generations are critically important. Unemployed and poor swathes of youth have a habit of creating volatility in response to restricted economic opportunity.
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the difference in Social Security benefits, adjusted for inflation, is a very minor contribution to net worth.
That's true-- I WISH my mom's net worth was increased by the $160K that went into her knees.
This is the very reason why as a young graduate from college I saw no other choice but to start my own limousine service company in Chicago. You have to survive somehow.
Chicago Limo| Limo Service Chicago| Chicago Limousine
PEW Research stikes again!
So, the baby boomers ate my future. Thanks a lot mum and dad!
this data suggests there will be precious little sympathy for boomers who have not already saved up a couple $ million and are prepared for the future.
I was born a couple years late to be a "boomer." I changed my strategy to hopefully reach the couple $mil. But who knows. I'm starting to realize that if I am finally able to quit smoking, I may be fucked.
Train the hungry to recognize bankers as a food source.
Think the bundle of Benjis in a noose is an adequate trap for Banksters?
So the chart is 0-35 and 65-120?
How many assets does anyone from 0-18 own?
Not to mention that people 25-35 have just started their screwed up mortgages, while people over 65 have already paid theirs off for the most part.
This chart is propaganda. It's like comparing someone who is dead (Heartrate 0) to someone alive (Heartrate 80)
Link bait.
Shiller ALERT: Suburban home prices may not recover in our lifetime.
Living in a fantasy world.
First you destroy a market through regulation and interference (i.e. affordable housing measures). Then rather than question whether perhaps you should stop interfering, you set out to convince people that this is a new normal. It's the only way you can continue to destoy the market and prevent it from correcting on it's own, because when you're ideology is to be against free markets it doesn't matter who you hurt, the means justifies the ends.
You "free market" people are on par with UFO abduction freaks, HONESTLY.
You act like there is some conspiracy to kill the free market.
HEADS UP, gov't regulation IS the free market. That's what happens when people are free to do what they want....those with the gold make the rules.
GROW UP, that is the free market, not some fairy tale that Milton Friedman read to you.
So, in conclusion, you're perfectly fine with getting raped by the System daily? Some don't think that way.
And.. this is what you get when people can vote themselves money from other people. The larger group votes for measures which benefit them. It doesn't matter what the means is regulation, tax deductions, you name it, once you give government that power then through tens of thousands of little measures the majority will vote in ways that benefit themselves at a cost to others.
So the baby boomer / hippies are again pointed at as the cause of all this... Hmmmm.. Bout time. Their greed is second to none.
Let's not forget to tune in tomorrow at 2pm EST for "The Collapse of MF Global: Part 3" where we get to hear Ms. Edith O'Brien plead the fifth.
http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=286182
We've been geared as youth to buy little more than disposable junk. Only after I turned 30 did I realize that by doing so I was only keeping myself poor while helping others get rich. That was when I finally grew the fuck up.
Nowadays I like to accumulate shit that lasts. Real assets. Net worth.
The young are easily fooled.
Craftsmanship is recognizable (AND expensive!)
Head around it?
Here you go.
"Under 35": these are the kids who grew up under parents that demanded and inculcated far lower standards of responsibility and of a "hard work/savings" mentality.
"Over 65": great to see their networth higher, why?. The ONLY upside to Uncle Ben's punishment of savers and the elderly is that he is taking from those who didn't do their job in the first place. The "retirement" aged people are the ones who voted in all the socialist BS that cant be paid for....except by taking it from all the old people that voted for it in the first place.
So in the macro, a silver lining may not be visible. But the laughable irony of the fools who got everyone in this mess are the the ones being slowly being robbed by the Fed cabal.
If you think this is bad wait until another 10 years of NAFTA and other "beneficial" Free Trade Agreements.
Young people have understood that voting is worthless.
"But there is plenty of money in the economy; so much money that Apple have built up a $90 billion cash pile. So much that China has built up a $3 trillion cash pile. So much that banks are holding $1.6 trillion in excess reserves below fractional lending requirements."
You clearly mis-spoke. Plenty of hexadecimal data credits have been created in banks via Fed games. However, piles of money has not been put into the economy.
The reason all these entities are hoarding cash is clear.
For those who are not insolvent, why waste the ammo during the lul in the battle? Wait for a weak player proves he wont die of debt poisoning and can make it out of the completely CB generated lame GDP growth rates.
For those who are insolvent, e.g. the banks, well that's part of the accounting game to ensure the Fed doesn't blow up. If all the banks put velocity to the hexa-credits, inflation would run and the Fed would implode.
So the game is slow roll and wait for the two great forces of economics to carve out the future; demographics and some as yet unseen technological revolution. If you doubt the latter, consider what would happen if medical technology was at the Star Trek level? What then would happen to factoring of future entitlement costs?
Since some on here feel that those collecting social security / medicare are taking out more than they paid in I have a solution. Pay me back just what I paid in PLUS PRIME RATE INTEREST. Thats more than fair. By the way, the GOV made a contract deal with those who's money they took about how much they were going to pay out in return and if the money is not there, then its up to the GOV to find it and hold up to the contract deal.
Yes of course, you are owed. You got snookered by a bunch of con artists and expect your grandkids (assuming you are even one of those who could be bothered to raise people to pay in for you) to foot the bill.
Your money got spent. Its gone, vanished, poof- and you expect everyone behind you to make you whole on a deal that you got burned on due to a collective lack of paying any attention whatsoever. You want yours, and others want their food stamps because they paid in, and two years of unemployment cause they paid in, and obscene government pensions because they paid in, etc. etc.
Between all of it we are swirling the drain. Im 45, I wont get a flipping dime but I would be happy to kiss it all goodbye to end this hoax now and give my teenager a freaking chance.
Outstanding! ..Thank You
Let's first end the bankster bailouts, the endless terror war, the recast Prohibition war, the health care fraud handouts ...
and then determine what is affordable.
Well this is easy to diagnose:
The old:
-worked during the prime years of the US
-made sure they had pensions
-had fewer old to take care of
-made world class wages, a college degree meant a job
-racked up loads of debt for grand kids to pay off
The young:
-working during the worst economic period since the great depression
-not only are they not getting pensions....the company they work for is still paying for the old's pensions
-has the largest swath of elderly to pay for
-making globalized low-income wages, if they can find a job, a college degree means you reach the position of "fry guy" faster than the competition
This is the situation I see, an older person is making more on pension/SS than the young are making in a working salary. The young have $100,000 of college debt and they're paying the taxes to support the old. They're paying for the old's pensions when they won't get any. All while jobs are scarce and globalization is killing wages.
It's not that hard to diagnose. The prior generation had it good. The current generation has it bad....and they ARE STILL PAYING FOR THE PRIOR GENERATION'S LIFESTYLE, both in accrued debt and taxes/pensions.
The "old" generation had that wonderful time from about 1980-1983 when there was a severe recession.
Not sure how old you are, or how much you paid attention to current events of that time, but ask anyone of that time what interest rate they were paying on thier mortgage, and you will think that they paid for their mortgage with a credit card (Read 15% + interest on a mortgage).
It is disingenious to blame all of today's problems on the baby boomers.
"Dreams Come Due, Government and Economics as if Freedom Mattered", ISBN: 0-671-61159-3, by John Galt
The book is dated, but many of the things it talks about are still valid today.
"Socialism works...until you run out of other people's munny!"
To some extent, but are they any less fiscally and morally responsible than the marijuana-smoking, free-love-embracing, national-debt-accruing baby boom generation? That’s a matter of opinion, but my answer is probably not. Baby boomers hate Ron Paul
Let's address the word Hubris............you have a wheelbarrow full of it.
Your holier than thou blanket condemnation is similar to the ongoing Traybon shooting FIASCO, the shooter is a murderer,he needs to be arrested.(vigilantes, and pre-judment galore).
Traybon a thug, a thief, a trouble maker par excellance(w/pics of him as 13yr old all over the MSM and internet,looking like fresh puppy), pre-judge the shooter, EVEN when he has eyewitnesses(plural) to corroborate his story.
But, like the radical blacks,and the ignorant crackers, lets make sure FACTS do not enter into this story,as we already have judged the man who was back jumped, beaten almost senseless/broken nose, had his head pounded mupltiple times into a concrete sidewalk.
HANG that bastard!!!!.
Poor little Traybon...............innocent lamb.
And like the typical MSM (Gag), you throw a blanket over that ENTIRE generation of Boomers as dopers, and nutjobs.
Which 99% of, did not particiapate in what you whitewash them all with.
Shame on you.
And Boomers do not HATE Ron Paul, I love the guy, he is the only honest ,Constitutionally knowledgeable/correct man or woman in D.C..
Every Boomer I know respects him above all others running.
nor would it be correct to write off the entire younger generation just because so many of them were (and still are) enthralled with Obama.
nor would it be correct to write off the entire younger generation just because so many are the gun-toting soldiers and police who protect the status quo.
The Economist "overlooked" a effect of complexity: it stifles competition.
The "retirement" aged people are the ones who voted in all the socialist BS that cant be paid for....except by taking it from all the old people that voted for it in the first place.
Really???,I voted none of it in, it was in place before 99.5% of the people on this site were even a dream of their Daddy's, if he was born,get your head out of your ass and READ who & when really started it, and put it into play.
I'm 25, debt free, work in IT and pull down 70k/yr.
Most of my peers are barely scraping by in sub 25k/yr jobs. I put a decent chunk of my earnings into real assets but I do have an unquenchable penchant for drinking expensive beer, doing expensive drugs and eating good food. Perhaps it's just the fact that I know things will fall to ruination soon, I want to live it up while I can.
Question: I feel trapped by what's taking place right now. The deteroriation of the general economy and my purchasing power have severley affected my morale. What investment/business opportunities are left, outside of PM's? I've contemplated investing in section 8 apartments, as I know the demand for subsidized housing will continue to skyrocket so long as there is a bleak outlook and a federal government there to pick up the tab. Any advice on where to go from here? I want out of this game, but it looks increasingly more difficult each day.
maybe sober up and you'll begin to see things more clearly.
the section 8 slum lord path, not so smart, as it relies on gov handouts - tho' if you lose your job, you'll always have a place to live. ^^
invest in a dock & land that's outside the USA. Invest in learning survival skills so you can acquire things needed for life & comfort even without money. Hey, what else do you have to do? You're good for cash & employment, you know the metals game. Expand your horizons.
Get yourself the SAS survival book / John Wiseman. Make sure your passport is current. Consider a Goldmoney account but take GOOD CARE to realize a) it's not in your hand and b) in another destination country it may not be viable there. Read up ahead of time.
Well look it's not too complicated.
Either you create something now, or you create something later. In the case of the big credit boom of the 80s and beyond, alot of fake fiat wealth was created. It may be fake, and in the process of being inflated away, but it's still there. Alot of this was pulled artificially forward. All of these products and roads and buildings...they were created too soon, too fast. So that explains why older generations are richer...they were around for the good times.
Now, as long as we don't have hyperinflation, that will force young ones to sort of shack up with older people who have fiat, have paid off homes, etc. And that will allow them to survive. And eventually, they will of course inhabit those homes as the older ones die off.
It's called inheritance. To the young people of America who have parents who are doing ok...that money is YOURS. It will be yours as long as your parents don't waste it away, as long as they invest some of it in gold and silver. That paid off home...it's yours eventually too!
So it's best to try to work with older generations, try as much as possible to get them around to our way of thinking. It's largely futile but we have no choice.
That way, you can inherit real, genuine, physical wealth, rather than fiat of questionable value. Convince your parents to buy gold and silver and write a will!
phew. why do lyle & eric menendez come to mind. . .
Oh?
It's called inheritance. To the young people of America who have parents who are doing ok...that money is YOURS.
wait till you see a combination of "windfall profits" and "inheritance tax" aka death-taxing.
And that's before bringing in snakes in the family who will contest wills & blow everything on shoes, hookers & blow in a week.
I'd like to think that the angry, justice-minded young people will lead us to a better future. But the problem with young people is that they get old.
not me: I'm either getting killed or offing myself before I get too damn old and end up like those old invalids that are nothing but a burden on state and family.
And back in '68 Mick Jagger said he'd kill himself if he was still singing "Satisfaction" when he was 45...
"Hope I die before I get old" - The Who, still going strong. . . bloody boomers, lol
The funny thing is how you write a post like this target 1984 as your key date and miss the obvious implication that this is the result of dis-inflation which in basic economics would mostly take from the young and give to the old as it boosts the return to financial assets and drives down the return to real assets, the largest of which is human labor.
And yet, deregulation created the financial crisis. The problem isn't the regulations, its the loopholes and lack of enforcement. Deregulation serves the banksters very well.
Per Bill Black:
"We have trashed a regulatory system that was the envy of the world. It helped bring us prosperity, far greater economic stability, fewer and less severe recessions, and reduced income inequality. It made freer enterprise possible because the regulatory cops on the beat helped limit the Gresham’s dynamic in which bad ethics drives good ethics out of the marketplace. When frauds prosper honest businesses are among the victims. The three de’s have brought us recurrent, intensifying financial crises, the end of any material gains by the middle class, losses for the working class, the expansion of poverty and extreme inequality, and the domination of our political system by crony capitalism. Elite fraud and corruption are now common in America."
http://www.nakedcapitalism.com/2012/03/bill-black-on-how-the-jumpstart-obamas-bucket-shops-act-is-just-another-in-a-long-series-of-fraud-promoting-legislation.html
"A study for the Small Business Administration, a government body, found that regulations in general add $10,585 in costs per employee. It’s a wonder the jobless rate isn’t even higher than it is."
'tis but one and the same.
The problem isn't the regulations, its the loopholes and lack of enforcement.
see, the loop-holes are 100% created by explicit regulation, and the non-enforcement is 100% created by regulations that refuse to be specific about punishments or criminal actions, merely delegating all decisions about what may be a crime, and what may be a punishment, to a bought/captured regulator.
I like Bill Black but I disagree that it's enough to have good regulators. It's NECESSARY but insufficient. Regulations need to spell out harsh punishments that always exceed the dollar-cost of the crime, without exception, and offenses/violations need to be spelled out so that NO interpretation by ANY judicial body, regulator, etc., can ever dismiss or reduce the severity of the offense.
I am in Canada but the challenge of self employment applies equally. I had a job, went into consulting, private practice. Worked my butt off over 5yrs and saved $300k. The the gov't said they would regulate the grey market I worked in. $300k/yr to get a license, $100k/yr to maintain. I wasn't sure they'd enforce though so I asked the regulators. "Its going to take my nest egg of $300k to get that license. Do you promise to regulate?" Yes was the reply, and they gave examples of how they'd enforce
Next thing the unregulated guys who didn't believe them on enforcement are eating my lunch as the first $100k a year they make they put in their pocket so they bid half me on the same project.
I complained to the regulators who apologized and said they have no enforcement budget.
I have now lost my license and my $300k nest egg is gone and am 7yrs older. My advice for young people is to leave. Why bother?
Wow, that makes me angry. You trusted them, and were lied to (essentially). Sorry to hear that.
"The money supply grew in tandem with industrial production. This was no bubble, but organic growth"
This has and will continue to decouple - M1 money growth is out of control. Thanks Helicopter Bennie...
According to the proponents of Obamacare, the healthy red bar folks who don't consume health care need to be in the insurance market pool to offset the costs of the blue bars who do consume health care on a regular basis.