Few charts stand out more than the one below. Since interpretations can be vast and diverse, I invite you to administer a “self-Rorshach test” and forward me your thoughts. As for me, I see the death of America’s Middle Class, tiering of society into “castes,” and permanent, multi-generational debt enslavement.
In 1984, the speed of the proverbial “treadmill” increased dramatically, when the first of 25 million U.S. manufacturing jobs left for good, and the first of $20 trillion of government borrowings emerged from the Fed’s printing press. Times were considered prosperous, with a healthy economy, low debt, and generational peace as the Cold War concluded. The global economy was becoming more competitive, but the U.S. was more than equipped to defend its financial and manufacturing strongholds.
Unfortunately, it was around this time that America contracted financial cancer, eventually proving terminal to the entire global financial system.
In 1981, Ronald Reagan appointed Wall Street’s first White House plant, Merrill Lynch Chairman and CEO Donald Regan. Regan served as Secretary of the Treasury during Reagan’s first term and Chief of Staff in the second, well known as a micromanager of day-to-day White House activities. Regan was an adamant support of financial deregulation and architect of Reagan’s “Supply Side Economics,” the original euphemism for unchecked deficit spending.
My comments below have nothing to do with a “left” or “right” leaning, as I hate ALL politicians – except for Ron Paul, of course. I just find it comical how “revered” Ronald Reagan was, when in fact he was simply lucky to start his term with a miniscule $1 trillion of national debt, i.e. a ‘blank check’ according to Donald Regan. Throw in the fortuitous end of the Cold War – NOT due to Reagan’s “toughness” but Soviet bankruptcy, and voila – an historically “great president,” despite his legacy of tripling the national debt and initiating the Wall Street takeover of Washington that took less than three decades to DESTROY THE WORLD.
Ditto for Bill Clinton, another smooth-talking orator with limited political experience but much charisma. He was lucky enough to run for election amidst the post-Reagan recession, providing the opportunity for Democrats to re-take the White House, and more lucky that Alan Greenspan had just taken over the Federal Reserve chairmanship, printing money so prodigiously that the subsequent stock market bubble erased all his sins, most of all the expanded partnership with Wall Street that led to Robert Rubin taking over the Treasury in 1995 and the repeal of Glass-Steagall in 1999.
Bush II and Obama are as conniving as they are stupid, but in essence have been charged with cleaning up the toxic mess of three decades of Washington policy failures since abandonment of the gold standard in 1971, and two decades since Wall Street took over Washington. By all means, Bush II and Obama have made things VASTLY worse – and I cannot underestimate the term VASTLY – but America passed the point of no return a decade ago, once it was clear the jobs were gone for good, and the debt un-payable.
Back to the initial chart, consider the M2 money supply has risen by 4.5x since 1984 while estimates of the since discontinued M3 measure are up 6.5x, not including what I call “M4,” or M3 plus the TRILLIONS of covert, i.e. unpublished MONEY PRINTING. Per the chart below, cumulative GLOBAL money printing has exploded as well – with the top six central banks’ cumulative balance sheets rising by 5x just in the past eleven years, and dramatically more since 1984. Even the fudged U.S. CPI Index has more than doubled since 1984, yet the average net worth of Americans under 36 years of age has plummeted 68%, bordering on turning NEGATIVE.
Back in 1984, the U.S. economic outlook was dramatically stronger, and $11,521 a healthy nest egg for a 20 or 30-something. Today, however, $11,521 is a pittance compared to surging inflation, a decimated job market, and near-negative interest rates that make saving impossible. The stock and real estate markets have destroyed trillions of capital, and the Fed’s permanent ZIRP scheme will continue to do so ad infinitum. Consequently, the U.S. labor force has dramatically contracted, and welfare payments exploded.
It is hard to make the case that even twice 1984’s median net worth of $11,521 provides a sufficient cushion today, much less a retirement nest egg. Social Security is broke, Medicare broke, and debt loads mushrooming across-the-board, from individuals to corporations to municipalities to sovereigns. The big banks that destroyed the nation are considered “too big to fail,” but everyone else is not, certainly not the 30-somethings with $3,662 to their names. Frankly, I don’t believe for a second that average net worth’s are actually positive for this age group, given the veritable EXPLOSION in mortgage, automobile, student, and other debts, which have cumulatively KILLED the U.S. Middle Class, never to revive.
In a nutshell, the prospects for America’s youth climbing from that (optimistic) $3,662 net worth to six figures, let alone seven, are slim to none. Consequently, the gap between those that need money the MOST (35 and below) and the LEAST (65 and over) is likely to dramatically expand, yielding the aforementioned “caste society” wherein you’re either the 5% that are rich or the 95% that are poor.
Unfortunately, the historical response of government to such disparities is socialism, or in the case of lobbyist-dominated America an evil socialist hybrid laced with fascism, militarism, and, lurking in the not-too-distant future, totalitarianism. I should weep for America’s youth, but in reality their fate is not so unique, shared by perhaps 95% of all the people that have ever lived.
America’s “15 minutes of fame” started when the rest of the world destroyed itself in two world wars, ending NOW due to 40 years of government profligacy and a cancerous relationship with Wall Street and other corporate campaign contributors.