THE MYTHICAL COLLAPSE IN AMERICAN LIVING STANDARDS

“The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.” – Adam Smith

It’s no secret by now that America is in an economic rut.   I’ve described our current predicament as a balance sheet recession which is essentially the hangover after a great great party.  And let’s not kid ourselves – Americans threw one hell of a great party over the last 20 years as they accumulated massive debts as they stockpiled McMansions with all the big boy toys a person could dream of.  But the bill on these toys has come due and now we find ourselves with a sizable private sector debt issue which is capping real growth.

But it’s also important to keep things in perspective.  What is not happening in America is some dramatic collapse in our livings standards.  I know it’s not popular to try to imply that things aren’t so bad in the USA these days, but we have to keep things in perspective.  We are after all, the largest economy in the world and our GDP per capita ranks at an astounding 7th in the world.  A remarkable feat for such a large country.   We are an enormously wealthy group of people despite the recent economic woes.

While recent times have certainly been tough, let’s not forget that the American growth story is, without a doubt, the most remarkable in the history of human kind.  This country has achieved an incredible amount in just 235 years.  In this brief period we went from a small group of colonies to the world’s superpower.  We have grown from poor immigrants to the wealthiest country on earth.  We have grown into the greatest innovation machine that man has ever witnessed.  These accomplishments are not good.  They are flat out incredible and anyone who tries to downplay them has not opened a world history book in their lifetime.

But this bigger picture gets lost in a “what have you done for me lately world” where we can’t remember anything past the last 140 characters we typed out.  So, how bad have things been lately?  Not great, but not horrible either.  As the above Adam Smith quote mentions, the true price of everything is the toil and trouble of having to acquire it.  So, when our wages don’t outpace inflation our standard of living declines as we have to do more work to obtain the same amount of goods and services in some prior period.

A good example of our extraordinary increase in standard of living over the last 100 years is to imagine all the things we can accomplish in an hours time.  Last night at 7PM I put my laundry in the wash, I put the dishes in the dishwasher (yes ladies, I am a man who cleans dishes), ordered dinner from a local restaurant and went upstairs into my office where I did an hour of work.  At 8 PM my dinner arrived, my laundry was done, I ate dinner on a fresh clean plate and I had done an hour of work in this period.  Imagine trying to do all that 100 years ago?  How long would it take you?  Days?  Perhaps even weeks?  That is a remarkable increase in living standards.  This is why, when someone says the dollar has fallen 95% since 1913, you should remind yourself never to listen to that person’s opinion ever again as they are just misconstruing the reality of our living standards, most likely in an effort to push some personal agenda.

But let’s put this into perspective with some data.  An analyst at Nomura forwarded me the median wage statistics from Social Security.  This data cannot lie for obvious reasons.  And if we compare it to inflation data we can see just how much our standard of living has increased or declined.  Over the last 20 years the data shows the following:

(Figure 1)

Not a bad looking picture considering the mess of the 2000’s.  As figure 3 shows us below, the total real increase is approximately 15% over this period.  Not great, but not a decline either.  Our real standard of living has increased since 1990.  The same cannot be said since 1999.  It has been a terrible period for the USA in terms of our living standards:

(Figure 2)

(Figure 3)

Social Security doesn’t have this data going back beyond 1990, but we can obtain a similar picture from the St Louis Fed database.  It confirms the Social Security data even though it is the per capita wages and not the median wage.  What we see is a near doubling in our living standards since 1960 and a rough patch in the 2000’s:

(Figure 4)

Don’t get me wrong.  I am not here to try to downplay the magnitude of the problems we face today.  If there is anyone that is familiar with the horrid disease that is the balance sheet recession, it is me.  But we have to keep things in perspective.  America is a fabulous country.  It always has been and I am confident that it always will be.  We will get out of this rut and one day we will look back at this period and hopefully learn from it.  But what we should not do is try to convince ourselves that the world is ending or that things are worse than they really are.  History, even our relatively brief history, has shown us that this would be a colossal mistake.

* Standards of living is being viewed from a purely economical perspective in this piece.  Clearly, there are many differing definitions of living standards.  

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. Another monster piece. This should be on the front page of the Money and Investing section in the Wall Street Journal. Nice work.

  2. CR: Your balance and perspective are “spot on”, as they say. Excellent message!

    One observation in re unintended consequences, as they relate to your comment: “We have grown from poor immigrants to the wealthiest country on earth.”

    As the wealthiest country on earth, we are now one of the highest cost countries.

    With the tremendous growth in globalization, we now have a difficult time competing with those countries (think mainly Asian) whose costs are much lower than ours. In many industries, it’s far from a level field.

    That will be a major challenge as we go forward, perhaps even a bigger challenge than overcoming our current balance sheet constraints.

  3. Have you seen that median household income is collapsing? (http://www.nytimes.com/interactive/2011/10/10/us/declining-household-income.html)

    Down nearly 10% in 3 years. Yes, I’d say that’s a collapse of living standards especially when the cost of living keeps going up. That’s why 50 millions Americans don’t have health insurance. Why 70 million Americans (near 25% of the population) are in a state of poverty or near-poverty (making less than $25k per household).

    The standard of living of so many Americans are falling apart at the seams.

  4. It’s only a major constraint if we continue to have a govt in place that doesn’t understand our monetary system. If we understood the foreign sector we’d understand that we can arbitrage costs out of the country for out corporations and obtain cheaper goods and services domestically as a result. But we can’t do this if our govt decides that they need to run balanced budgets in the name of the bankruptcy that is never going to occur. Ironically, they are bankrupting us by not providing us with the currency that allows us to generate productivity…..

  5. I would also say the last graph is very misleading because wages distributed in a highly unequal manner. The average worker has seen nowhere near that level of wage growth.

  6. I read that Sentier Research report when Cullen posted it a few weeks ago. It’s based on a survey. Do you trust a survey over the social security data? Because you shouldn’t.

  7. Perhaps. I don’t have the social security data to confirm that. But the St Louis Fed data is almost PERFECTLY in-line with the SS data over the last 20 years so I can’t imagine it’s far off going 30 years prior. Bottom line is, if you try to convince me that Americans are worse off in 2011 than they were in 1960, I think the burden of proof is on you to show that to be true. There is nothing that I see on a regular basis in this country that would confirm that and this data appears to solidify this outlook.

    I wasn’t around in the 60’s, but I’ll tell you one thing. There isn’t a chance in hell I’d prefer to be an adult in the 1960’s or at any time other than right now (except maybe the late 90’s. Pragcap would be going public :-) ).

  8. Cullen, I tend to agree with you but I’d estimate that people have a very short-term memory and short-term frame of reference, and they compare the state of affairs today to the artificial boom days of 2004-2007. Hence, it sure feels like living standards have imploded.

    We’ve greatly over-consumed as a society (fueled by our corrupt banking system and corrupt politicians) and are paying the piper now.

  9. “An analyst at Nomura forwarded me the median wage statistics from Social Security. This data cannot lie for obvious reasons.”

    I feel like a knuckle-head for asking….but would someone be so kind as to point out the obvious reasons? Thanks in advance.

  10. What incentive does the government have to lie about the social security data? If anything, they’d probably lie about the wage increases in order to make social security appear more viable.

  11. I don’t necessarily think they are lying, I have no idea…just trying to understand why we can safely conclude that they definitely aren’t lying about this data (in comparison to other sources of wage data)?

  12. I love your work, but keep in mind that not all of us live at the beach in California. I am not sure that your perspective on life is all that “normal”.

  13. Well which is it though? Are they lying about the inflation data? Are they lying about the income data? Are they lying about all of the data? The inflationists want us to believe the inflation data is all lies. Then they see reports like this one and say the income data is a lie. So they’re trying to make us sound poorer and they’re lying about the high rate of inflation? Which is it? You can’t have it both ways.

    Maybe they lie about all of the data in which case it’s all equally fake. I don’t buy the conspiracy theories though. The American government has the most transparent data reporting in the world.

  14. One thing to mention is that now it takes 2 incomes to stay afloat, vs as far as I understand in the 60’s when families were able to get by with 1 person working.

  15. First of all, the women’s rights movement has been one of the greatest societal increases in standards of living ever. Second, we choose to have many more things which require greater incomes. “getting by” in the 1960’s did not involve half of the fantastic things we all depend on today and take for granted….If you choose to live in a small house without AC, without a dishwasher, without a refrigerator, without a TV, etc etc then you can certainly go live a 1960’s lifestyle just fine on one income…..

  16. Very nice! In hard times, gratitude is usually the first feeling/emotion to go. This puts it in perspective.

  17. Year Civilian Population (16+ years) Employed Not Employed
    (in millions)

    1990 189 119 70

    2000 213 137 76

    2011 240 140 100(!!!!!)

    I don’t mean to send out negative waves, but we’ve added 27 million people of working age in the last 10-11 years, and 3 million more people were employed. Those figures don’t show up in the median wage tables.

  18. Here is some data as far as appliance adoption goes :
    http://opim.wharton.upenn.edu/enabletech/2010/01/19/adoption-rates/
    As you can see for 1975 the adoption rates are above 70%, so your argument is factually false.
    If you think the fact that it requires 2 people to work to have a roof above your head is irrelevant, redo the post with the salary per person, not per family.
    Then if the graphs are still the same you will be correct.

  19. Cullen,

    For SS data, you might want to check today’s publication in Zerohedge – they have some numbers, and the numbers are disappointing.
    All your charts are very informative and show very encouraging growth in the past, yet I, and (as I assume) majority of of the people, do not care how good it was 30 or 20 years ago. I somewhat care about last 10 years (no growth, according to your charts), about last 2-3 years (significant decline), and, most importantly, about present (see NYT piece) and future.
    So, what about future? From where should we extrapolate? 30-year chart? 10-year chart? or 3-year chart?
    As we now in balance sheet recession, I would prefer to use the chart corresponding to this recession duration (last 3 years). And it’s not good! Real median wages/incomes are falling and will likely continue to fall until balance sheet recession ends.

  20. Like this country, this quote was divinely inspired:

    “While recent times have certainly been tough, let’s not forget that the American growth story is, without a doubt, the most remarkable in the history of human kind. This country has achieved an incredible amount in just 235 years. In this brief period we went from a small group of colonies to the world’s superpower. We have grown from poor immigrants to the wealthiest country on earth. We have grown into the greatest innovation machine that man has ever witnessed. These accomplishments are not good. They are flat out incredible and anyone who tries to downplay them has not opened a world history book in their lifetime.”

    Now that is American Exceptionalism – the American Experiment in all its glory built upon the wretched, huddled masses yearning for freedom who through their blood, tears, and sacrifice built a shining city on the hill that serves as a beacon of freedom and justice for the entire world!

    Thank you, you put a big smile on my face and a warmth in my heart.

  21. As usual, selective data mining. Record debt, record number of people on foodstamps, highest number of long term unemployed since statistics on this started being kept. Highest income inequality since 1929. And of course we just hear the same crap – America is/was a great country and is going to get out of this just fine.

    And he has crony followers who label everything he writes as “fine piece of work”!! Enjoy this Cullen. For the day or reckoning is coming….when this great America has to fall to its knees (before it will get up, I am with you on that. I said it before and will say it again, a country that can elect an African American in the middle of the 2008 crisis is indeed capable of getting back notwithstanding the fact that the same African American turned his opportunity into a lost cause by feeding the same crony capitalism that everyone else before him did).

    There is no salvation before people get kicked to the ground hard…I still see way too many folks who have this entitlement approach just because they are in America. Going to get more rude shocks.

  22. I lived in the 60’s. It wasn’t perfect, but so what, neither is today. It was a better, simpler time. We didn’t have cell phones, personal computers, cable television, and yet life was every bit as immediate and rich as it is today if not more so, but you had to be there I suppose. We didn’t have cars all over the roads, making for excruciating commutes to and from work. We had trade policies that served us well, and didn’t stoop to the lie of labeling the policies “free trade”, which is utter nonsense (all trade is and always has been managed trade by ALL PARTIES). We had both parents working AND largely staying married. Rampant legal and illegal drug abuse was rare in comparison with today. Children actually learned in school too–poor and rich alike. And there weren’t fat people everywhere you looked. We had MUCH more social interaction within communities that were filled with respectful and responsible youth There were many more intact black families (much lower illegitimacy too). Crime was much lower. There was also a feeling of hope for the future (in spite of Vietnam).

    I could go on, but you get the picture. I was there and based on what I value (I’m not alone here), the 60’s (and 50’s too) run circles around modern day America. If you claim that we have more material things today to buttress your argument, then I’d again say so what? Materialists like Elvis had the whole world too. How’d that work out.

  23. CR,

    the first thing that springs to mind is Elizabeth Warren’s presentations and book on the vanishing middle class. She presents a ~30 year decline in standard of living that coincides with increased debt levels and decreasing savings rates. Basically things getting a lot tougher.

    This probably isn’t the best quote about her argument, but it’s the only one I could quickly find:

    ” Throughout the period 1979 to 2005, the average personal income of men remained virtually stagnant.
    Any gains in household income were a result of entry into the workforce of another wage earner, often the female of the household.
    Whatever gross gains were made as a consequence of the additional wage earner, were generally nullified by the enormous escalation in the cost of living though that period, particularly in the areas of home ownership (+80-100%), child care (+100%), health insurance (+103%), automobile expense (+70%) and tax rates (+25%). This doesn’t even take into account 2005 costs that simply didn’t exist in 1979, such as cell phones.”

    From here:
    http://retailprophet.com/blog/?tag=elizabeth-warren

    Here is her full lecture:
    http://www.youtube.com/watch?v=akVL7QY0S8A&feature=player_embedded

    How do you reconcile your position with hers? Did the women’s rights movement increase the societal standard of living, or did it simply provide a source of labor that was squeezed dry in an ever-increasing focus on productivity (much of which is longer hours for less pay)? I’m not being facetious, I’m actually curious. I’m Canadian, and I find that my American friends are constantly pushed into working late nights, weekends, and vacations without any sort of recompense, often out of desperation that they might be fired at will.

    Thanks.

  24. Our standard of living may not have declined that much, but for the first time in a long time, our children can’t reasonably expect to live a better life than we can. That should worry you.

    Can anyone reasonably say the current and next generation can expect better education, healthcare coverage, income and housing security, retirement standards than we enjoy now?

    We’ve already peaked in rock and roll, cars, and firearms – the rest can’t be too far behind. At least everone has an iPhone now, but we can’t eat those.

    And running your washer and dryer is going to get at least 5% more expensive next year thanks to SCE.

  25. Cullen, how does the SSA data account for benefits like employer paid health care and pension contributions? I suspect it makes a big difference.

  26. I dont understand those people who complain that the dollar lost 95% of its purchasing power. If I got paid 10 cents an hour way back then, and it cost me 10 cents for a hamburger, I’d be working an hour just to eat that night.

    Now today if I get paid $20 an hour, and it costs me $5 for a burger, Im still better off even though Im spending $5.

    I guess thats the point of this post. If it takes me less work to afford something, whats the point of caring what the nominal value is.

  27. Yes, lets not forget that two income married with children is no longer the norm anymore. I believe the last census data shows it to be 45%, the first time it has dropped below 50%. SITCOM (single income two children oppressive mortgage) is more likely to be the rule than the exception in the future.

  28. I usually enjoy Cullen’s work but this is really out of touch. America has a bloody, extremely violent history of oppression of nearly all popular groups–from workers to immigrants to women to minorities. And a lot of wealth was made from looting the treasury and exhausting our natural resources. Our environment is completely trashed, our political system in the hands of a vicious oligarchy. Families are suffering more than they have in generations. This is a success story to Cullen?

  29. Cullen, I really think you should read “A People’s History of the United States” by Howard Zinn and learn a bit more of how this country got its great wealth (which is now concentrated in a few hands and being exported to offshore havens)

  30. Not to pile on, but I should also add that much of the world is in shambles because of American imperialism, another great source of our wealth…I mean profits.

  31. Great post Cullen,

    While we live through incredibly difficult time for many, let’s not forget about the accomplishments which have been achieved in such a short period of time.

    And for people would like to have the complete macro picture of the evolution of the world economy throughout the ages, I can only recommend reading the great Angus Maddison, Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History, for comprehensive data relating to the evolution of economy in the world.

    Yes, we face in all our lives, struggles, difficulties and more. But once in a while it is important to put things into perspective:

    http://www.economist.com/node/21533361

    “MAN has vanquished only one disease, smallpox. In 2007 Bill Gates set out to eradicate another, malaria. The World Health Organisation (WHO) was soon rallying its troops to the cause and a flood of money followed. $612m went to research in 2009 alone. This week the Bill & Melinda Gates Foundation trumpeted another announcement: results from a phase III trial (the more extensive process of testing drugs in people) of a malaria vaccine called RTS,S. This is the world’s most advanced vaccine for malaria and the results, published in the New England Journal of Medicine, were encouraging.”

    Best,

    Martin

  32. Cullen

    I find you consistently ignore those on
    – fixed income
    – unemployed

    What % of the population are seniors and underemployed are not represented my median income?

    I’m happy for you that you can afford a dishwasher and order out but not everyone can. I’m sure life is good for you but I don’t think you are representative of the median.

  33. Keep in mind Cullen, while it would be ideal if people viewed thing’s in absolute terms, its ALL relative…

    For most their memory is biased towards recentness, and this is a natural. Someone who has only seen what life has been like for that last ~25 years cannot think in terms of what life was like 40 or 50 years ago, because they did not experience it. It’s irrelevant how familiar with history they are. Dishwashers, laundry machines, computers, ordering food in, is all we know. Call it entitled, but it’s what we know. Moreover, they did not live in another country, so its silly to take such factors into consideration in an analysis of standard of living.

    “The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.” – Adam Smith

    For most, especially those age ~25 and below, it’s much much harder to obtain the same quality of job today than it was ten, twenty, fifteen, or five years ago. It’s much harder to find a good apartment for a decent price (as so many folks are moving from owning to renting), its much more expensive to pay for the necessities of life, it’s a much more competitive world globally and wage arbitration has killed the youth’s earning potential (unless your entrepreneurial – easier for youth to do this today), its harder to get credit for business ventures or a home purchase, the list goes on and on…

    We watched everyone play the keeping up with the Jones’ game for the past twenty years, and we are suffering from it now, and we are the ones whose voices are last to be heard while we are the ones that will be required to do most of the ‘heavy lifting’ for years to come.

    I love your optimism Cullen and visit this site daily, but we have some serious pain ahead of us before it gets better. We have to rid ourselves of the profit maximizing activities of corporations/banks that are aligned with the interests of our politicians. These entities are only interested in sustaining themselves even though the business model has been proven wrong for many (its understandable as they are merely organisms that do what’s in there interest to survive) . We’ve allowed them to do this because of our near term fears of creative destruction and this will make the pain worse in the end.

    Please watch Dylan talk – he makes very good points.

    http://www.youtube.com/user/wearechange#p/u/30/UDj52mNaUVg

    IF we adopt the MMT perspective at the federal level, get money OUT of politics, and decentralize political power – making choices in the interest of the individual (w/out diluting the military’s strength), this country will experience a renaissance we’ve not seen for quite some time. Things are falling into place for the US to lead a global economic resurgence – but the global divisiveness – that is growing – must abate and cooperation must replace it. We live in a world of F***ed up paradigms, and until that changes our ill fortunes will persist and grow worse. We need new perspectives and to me it seems only crisis will bring this – OR a GREAT LEADER, who can be the breath of fresh air we all need!

    But without that leader, before we see any real change I suspect its going to get much much worse. Mankind is just too stupid or naive for another outcome. Plus, the more educated the majority become the more pissed off they’ll be at the way things are. Again, GET MONEY OUT OF POLITICS!!

  34. So a 1960 house and all the goods and services we use today are the same as the 2011 house. Come on Dimm. You and I both know this is FAR from true.

  35. Boy you’re negative. Come fishing with me one day Haris. We need to inject some optimism into you. Bud lights and a few dozen rock fish should do the trick.

  36. It’s not about material things. It’s about time. Our great innovative progress has provided us with more time. And there’s nothing more valuable.

  37. “A good example of our extraordinary increase in standard of living over the last 100 years…”

    Taking 1911 as the baseline certainly puts a different perspective on it!

    Undoubtedly, the standard of living has improved dramatically since 1911 – most notably in the 50s-70s – the problem is, much of the maintenance of those standards since has been not through wage growth, but debt creation.

    How about 2008 to, let’s say, 2058, which will be more pertinent to those still living.

  38. I agree with the premise that we (probably) aren’t doomed. That’s not a self-fulfilling prophecy though. We don’t get to look back on it through the lens of history and high five each other over our exceptionalism until we actually come out the other end of the crisis. Meanwhile we need more urgency, as much as can be mustered.

  39. Bud Lite!!! Cullen you just fell a peg or two in my book. Of course my friends refer to me as a beer snob.

  40. If the world hates America so much, why are they still banging down our doors to live here? I am not trying to say Ameria is some flawless place where everyone can live happily, freely and peacefully. But I think this negativity has become a bit extreme when one steps back and looks at the bigger picture…..And this message can be said for much of the world. We have made great progress in the last 200 years as human beings.

  41. This data isn’t about me. It’s based on the median. My example was simply for illustrative purposes.

    Gosh, people are negative. One remotely happy post and everyone here acts like I pissed on their couch.

  42. There’s very little I disagree with here. I am well aware of the pain and suffering that this country is going through. I understand our economic plight as well as anyone. My message is simple. Times are tough, but it’s times like this when great wealth can be amassed. If you are willing to continue grinding and working hard you will find that your efforts paid off when, in 20 years, the world is a much better place.

    This isn’t some happy go lucky slogan. I am just trying to keep things in perspective. I am sorry that more people don’t see it this way.

  43. Cant call yourself a fisherman while you’re holding a Stella Artois. I grew up on Milwaukee’s Best. The Beast as we called it back then. Contrary to the beliefs of some readers, I am a man of simple tastes…although I have become a White Russian drinker of late…. :-)

  44. AlbertW

    What was the world like in 1200? 1400? 1600? 1800? 1901? 1942?.

    The numbers don’t match your pessimism. People don’t live longer in terrible conditions. They just don’t..

    The wars, the dark ages and today is the worst time in history?

    “much of the world is in shambles because of america” What?

    Do you travel? r we responsible for the shanti towns in Rio? The slums in Africa?

    Oh…you mean the middle east. Things are worse in IRAQ for the people?(i’m not a right wing who defends wars)

    I won’t spend too much time going through your comments but show me a better way. Who would you choose to be in the position we are in? Please let me know how you think that country and political system would have shouldered the burden? What would the world be like if Hitlers Germany, England Imperalism, Japans Imperalism, Communist Russia, Communist China, Modern day Brazil, Modern day IRAN, Modern day Isreal or UAE. Maybe Turkey..please let me know which one you would rather have.

    But as long as you can AlberW enjoy the freedom you have to express your distrust in the United States…that’s a right we will defend. No matter how pessimistic you become. Until what you say comes true and we relinquish the reins I hope the new power affords you the ability to say what you wrote.

    Control what you can. How you live your life. Things are ok. Maybe not how you want them….but boy the alternatives are much worse. We’ll get this thing worked out…but I don’t think it will affect how you see life.

  45. That’s a rather large assumption to assume the world will be a better place in 20 years. I hope you are right, and I don’t quibble with the notion of moving forward in that hope. Deep down, however, I’m still skeptical and will temper my enthusiasm for the future with an understanding that progress and complexity might very well have reached their limits.

  46. I’m an ale drinker myself – the hoppier the better.

    “The Beast” flashbacks from high school!

  47. You just have to love the irony of a bunch of people sitting around (probably at work) complaining about the state of the world as they type into their brand new Mac Book Air on their high speed internet connection. You Americans don’t have a clue what it’s like to see your living standards decline.

  48. (@Adam 1- ditto on the highschool flashbacks and beer snobbery, I once interviewed for a job at Dog Fish Head)

    Cullen,

    You know I respect you, but I’m saying this to agree with you. You obviously are of simple tastes when it comes to beer if your example of ‘good’ or high end beer is Stella. Stella is bad beer (of course, this is just my opinion. People think they like it because its 7 percent alcohol and don’t realize they’re confusing the taste of the beer with its effects.

    That all being said. Bud light is good fishing beer. I don’t know how to explain why I think that. There’s something about the old and beautifully simple nature of fishing that makes it just right.

  49. I have college aged children. I for sure don’t want to come off as daddy doomer, and I don’t believe that I do. If you put my back to the wall I’d likely bet that things will pretty much be the way they are now 20-30 years down the road. Still, I think it’s prudent to hope for the best but plan for possible SIGNIFICANT bumps in the road. And far too many people suffer in the world for me to be completely sanguine about the present or the future. We’re at an important crossroad globally and domestically. Pie in the sky doesn’t feed starving or oppressed people. In other words we need to fix what’s not working before we can confidently lay claim to a better world just down the pike.

  50. Yeah, I only used Stella because it was the snobbiest sounding beer that came to mind. That said, I don’t have much of a fancy beer pallet so guilty as charged.

  51. Cullen you are wrong on this one.
    The 60’s where very good and consumers had a lot less financial cost when paying there goods. Medical care was affordable and College tuitions where affordable.
    http://theconservativereader.com/2011/08/05/college-is-a-bad-investment/

    No one can argue that there are and will always be progress but it happened despite of monetary policies not because of it. Income increase should not have to compensate inflation (production dilution per capita) The more we produce on an aggregate basis the more our money should be worth (such as my iPhone).
    More products per dollar= more value per dollar.

    It would not have been deflationary in a negative way as Keynesian would suggest if money supply would have been lower. That is the deflation fear-mongering song that Central printer like to sing to scare people that if they stop printing we could get deflation which as been identify by them as equivalent of depression.

    Loading a truck with more weight will not slow it down if the engine is improved and stronger. No one can ague with this but take the bricks of that dump and see whet happens.

    Money creation simply can not exceed production growth.
    Monetarist have had a free ride on this because a lot of it has been exported to low cost manufacturing countries. Prices from cheap labor was a benefit to US consumers and compensated the excess money printing but the sad consequence is now manufacturing jobs are gone. In the 60’s the US was growing manufacturing country.

    I sense that for a temporary period the traditional inflationary and monetary measures and criteria are not applicable when you use other country cheap labor to produce your goods. The consequence only starting to show up.

    The result of the Vietnam War in the 60’s also showed up much later.

  52. Pie in the sky might not feed the starving, but negativity also isn’t conducive to the kind of innovation and forward thinking that makes the world a better place for us all. It is the optimists who dream of improvements and new and better ways, that ultimately steer the world in a better direction. It’s not pie in the sky that makes the world a better place, but the people who are willing to dream that there is a better world out there worth fighting for.

  53. You’re right from an economic perspective, but that is just using the definition of standard of living from an economic perspective. A true standard of living includes better health, better environment, better understanding of our fellow man and many other intangible things that can not be measured from an economic data set. And I would argue that the USA is going backwards in many of these areas. Most notably our health.

  54. I didn’t mean to imply you are a pie in the sky thinker, so I’m sorry that I didn’t make that clear.

    I’m not sure, however, that positive thinking is necessarily up to the task before us. There are many, many not so positive intellectuals throughout history who also have contributed mightily to the advancement of mankind. I believe that a combination of positive, negative and realistic thinkers are what will hopefully move us to a better place. That doesn’t imply more gadgets either. Man does not live by bread alone. That coming from me, an agnostic.

  55. Haven’t seen any articles about banking or housing recently…here’s an interesting analysis of bank exposure to 2nd mortgages from Nomura…

    The whole 2nd mortgage discussion has been pretty much kept under wraps, yet it represents a pretty serous issue for banks, since they cannot unload them at the docks of Fannie Freddie, etc.

    Sorry for the non-sequitor…carry on…

    http://ftalphaville.ft.com/blog/2011/10/10/696591/the-mystery-of-us-banks-second-mortgage-exposure/

  56. OK, that made me laugh!

    Stay balanced Cullen. That is what separates you from all of the angry alarmists in your field!

    Speaking personally, everything today is far better than the 60’s, and I daresay it is the same for all of my 10 surviving siblings, even though our present circumstances are all quite different.

    I do have a problem with the growing wealth gap in the country, and I’m not exactly sure if your graphs capture that, and the dis-ease that such gaps create.

    To steal an analogy from another post, Americans are pretty good at getting out and pushing the car when needed, just as long as they have some confidence that the guy sitting at the wheel steering knows what to do, and won’t leave the pushers staring at the cloud of dust receding in the distance…

  57. The question is; do the have those wonderful goods or do the owe them?
    Credit growth is not growth its a loan.

    Soon we will need a third wife to go to work.
    Notice that childrens now adult well in to there 30’s live at there parents home longer than at any time. Is this also part of prosperity ?
    45 million on Food stamp helloooooooo……..

  58. You have convinced me that we are materially better off than most of those Americans living in the past. But have we been resting on our laurels? That is, how is our recent rate of increase in standard of living compared to other countries? I understand we really compare ourselves to the living, and not the dead.

  59. LOL!!!

    “You obviously are of simple tastes when it comes to beer if your example of ‘good’ or high end beer is Stella.”

    I was thinking it but couldn’t bring myself to say it.

    Before I went to grad school I tried to figure out how to finance a micro-brewery. That said I probably drink too much already and certainly don’t need to be my own monopoly supplier of beer.

  60. Are you the same person as back then? You gained no relevant experience or education for all those years? Did you do the same job back then as you do now?
    Small things like that matter you know.

  61. Just from my own experiences I don’t think the collapse in living standards is a myth.
    In the early 70’s I worked at a factory. Went to college at night, lived in a nice lakeshore apartment, had a new car, and hit the clubs 2 or 3 times a week. No debt except for a mens clothing store credit card. I graduated with a $600 college loan. As I think back I still remember arguing with some friends over whether or not I should buy a house. I hated cutting grass (still do) but nevertheless I could have easily bought a decent house on my income alone. Show me the 21 year old blue collar worker who could do that now.
    I see no need to get into the issues the of the highest income disparity since 1929, the record number of people on food stamps, the highest unemployment since the early 80’s, the super low labor participation rate, the Misery index nearing record highs, etc. These things have been well discussed by others.
    I do have to question the validity of that graph you posted though. I personally know one heck of a lot of employed people who would give their eye teeth to have an income level that matches that graph not to mention the retirees earning a half a percent on their savings who are even worse off.
    Yes I guess they all do have more spare time. Problem is they spend most of it trying to figure out how to meet their monthly expenses.

  62. Cullen,

    You are absolutely right with your big picture and and your sigh about people s negativity. That is, when you focus on material living standards. Even with the temporary setback that many now feel, who would really like to go back 10 years from now, let alone 20 years? From a MLS perspective, I mean? Come on, nobody.

    However, looking at the social and moral fabric of our western societies (I live overseas in Europe and I am not discussing emerging societies), the picture is less rosy. That was, clearly, not the subject of your analysis. But I think many people who long to ‘the better old days’ mix that aspect in.

    Yes, we have terrible political and economic leaders everywhere. Where are the types like Helmut Schmidt from Germany, who dared to take the risk to say and do what he considered necessary (after some rational analysis), without consent to pressure groups, party finance, opinion polls and the lot? Well, the simple answer is, the very same people complaining here, would probably oust such a person from office in a couple of months.

    Let’s be real, i am from 1964 and we (that is people of my age and below) are a terribly spoilt generation. Just look at how we raise our kids. Absolutely horrible. We pamper them to the point, well, beyond imagination. Marc Faber, in his monthly market comment, recently quoted a study by Patricia Greenfield about the shift in values of young American teenagers. The level of narcissism in our culture is ….let me shift back a few gears, and taking out some superlatives…. quite high.

    We really do not understand how well off we are. We can all start by ourselves and try to be honest and decent people.

    The only thing we really lost, at least in my country and in many other countries, is the amount of nature, free space, houses with a decent view, unoccupied streets that Malmo talked aboutetc. That is population growth. We ll have to live with that. Most of our other plights are largely our own’s. We can fix them with a more positive attitude.

    Keep up your good work. I am really ahppy to be experiencing this crisis from behind my own comfy desk, with all the persepctive that people like you and other bloggers provide.

  63. That is true, but it depends on perspective.
    People complain when things get worse as they do in the US. The american population in general is clueless of the living conditions of the rest of the world.

  64. Since the US workforce is aging and since salary tends to increase with age, we would expect increases in median wage simply because of this, even if nothing else in the economy changed.

    So it would be interesting to see charts of median spending power for people of specific ages over time. What these charts seem to be showing is that the today’s older workforce has roughly the same purchasing ability that younger workers enjoyed a decade ago.

    CPI is a tricky thing to measure and I suspect that it may be underestimating increases in purchasing power due to technological advances. For example, you can now purchase a laptop computer for under $1000 which has vastly more memory and performance than the supermini computers that were selling for a couple of hundred K in the late ’70s.

  65. Cullen,

    I’ve commented in the past that your chosen way of evaluating standard of living improvements is FAR to narrow, so I’m not real surprised at the backlash today. To say that because we have more gadgets and tasks take less time, doesn’t come close to an honest comparison of living standards between generations.

    Two parents MUST work to keep up where one formerly did, families MUST limit family size to 0-3 kids where 5-9 used to be normal……all just to financially be able to keep up……and this doesn’t factor in the mountains of household debt we’ve taken on to keep buying those gadgets. For proof that the gadgets and shorter chore times aren’t yielding more “time”, just check out how little time parents now have for their kids….despite having only 1-3 of them.

    To suggest that because incomes have gained ground on CPI is misleading without breaking down the incomes. As the middle class dwindles while more fall into poverty and the income of the higher earners gets higher, overall income may keep pace with CPI as you say……but that does NOT reflect what is going on in real families.

    Regarding whether we should review 10 years or 50 years or some other amount of history…..beware, as a trader you of all people should know that things always look best at the top. Which leads to my last point……

    Step back a little from the argument you make and you may recognize the danger of it. The last thing we should allow our country’s leaders to perpetrate on us is to allow them to adopt your argument, and remove the sense of urgency required to address our problems. We are in our economic mess because of persistent short termism in our policy decisions…..the last thing they should be allowed is long termism as they reflect how well they’ve done their job!

    We may indeed move on to restored prosperity as you suggest, but it is my belief that we minimize our deterioration of the last 3-10 years at our own peril. Every empire of the last 3000 years followed the same path through rise and fall…..the reason it’s repeatable, like in trading, is because it reflects human behavior, which never changes…..and the demise of those empires each started someplace with a bad 3-10 years. The American experiment is showing cracks, the powers-that-be are getting desperate, they’re gaming the system, wealth is being redistributed up the wealth chain…….I suspect we would have seen exactly the same thing had we been around during later stages of all prior empires. Hope lies in the fact we can, at least in theory, vote out those leaders and fix the system. You seem to be assuming that will happen inevitably……I’m not so certain. Like you’ve said, it’s all in the time frame you choose…….3-10 years is ugly, 50-200 years and it looks great as you say, but 200-1000 year perspective and it gets pretty ugly again.

    If we’re going to provide the urgency to our problem-solving leaders to get serious about addressing our problems, we NEED to keep focused on the 3-10 years look back. Just my 2 cents worth…..sorry for the length. krb

  66. Yes they are different, but that is not the point.
    A real way to measure things would include unemployment level, access to healthcare, childcare, education, vertical mobility, leisure time, housing costs, indebtedness, net worth, environment, etc. It is not as simple as having an Iphone and living in a McMansion that you really do not own.
    The other issue is that the trend in the last 10 years is downward. Things are getting worse not better and that is what concerns everyone, but the selected few.
    And yes, the US is not Uganda, but it is moving in that direction.

  67. “Money creation simply can not exceed production growth.”

    This is where all the monetarist types get it wrong. It’s spending/demand that can’t exceed production growth. Who cares how much “money” is around. If I have $1T sitting around and I’m not spending it who cares (and no my Bank is not going to lend it out, that’s not how loans are made).

  68. Whoa now. No one is saying we don’t have huge problems that need to be fixed. Anyone familiar with my work knows I am not saying that. In fact, I hope people will take away the exact opposite perspective. I am not trying to say that the world is all bright and dandy. But I am also saying that we should not be excessively pessimistic.

    In remaining optimistic about our futures, we should take the time and care to understand our current problems so we can fix them and move towards that better future. This is what great thinkers and innovators do. They find problems and say “this can be done better” and then they make it happen. This is the lesson we should be learning now. Not this: “We are turning into Uganda so screw it all I am building a bunker in Nevada and buying a bunch of gold rocks…..”

    If anyone wants to do that then good luck. I hope the rest of us will find the time and patience to think through our problems together, fix them and get back to living well.

  69. Here! Here!

    I’m glad you said it, because I agree that we’re, for the most part, better off. I don’t think our social distribution of income (currently) is good and that far too many American’s are not better off because of it. And as the monopoly issuer of the currency we can ensure full employment which would help keep the national distribution of income more fairly distributed. We just need to start doing it and asking how best to do it.

  70. You may get MMT , but there’s a lot of real simple stuff that you don’t get at all.

    A revealing piece , made even more so by your responses to comments.

  71. Not nearly as revealing as your comment which is standard for people who have nothing to contribute to the conversation. If you have some coherent rebuttal then let’s here it. But comments like this provide nothing other than to reveal that you having nothing to contribute and would instead prefer to retort via weak minded and low insults.

    I never claimed to be right about everything, but the last thing we should seek to do here is turn this into a discussion forum where we sling mud at one another. It is exactly this sort of mentality that we should try to change in the future. You clearly didn’t pick up that message while reading….

  72. We just need to start doing it and asking how best to do it. Adam1

    How about we abolish the counterfeiting cartel, the government-backed banking system, the chief source of wealth inequality? But since that would be massively deflationary by itself, how about we also bailout the entire population equally, including savers with new fiat?

  73. This second working family member argument is BS. We saw it all over the place though. This data is based on the median wage PER person. If you get married and have a family then that’s your choice. But that has nothing to do with the fact that the median wage per person has still outpaced inflation since 1990.

  74. “If I have $1T sitting around and I’m not spending it who cares”

    How many times has this happened on the last 60 years ? Three years.

    Where do you think the treasury spends its deficit funny money ? How do you get 3.9% inflation ? Demand ?

    Money sits around when risk reward is not in balance as a result of ridiculous past credit expansion.

  75. There’s a huge bull market in fear going on right now. I am actually surprised you haven’t been trolled more on this post. Say anything positive in the investment world these days and you’re liable to get punched in the mouth. Prove it with data and you get called names by people who can’t think of anything smart to say.

  76. ” But what we should not do is try to convince ourselves that the world is ending or that things are worse than they really are!

    No the world is not ending because of debts and wars.
    What you forget is, that we have polluted the world to its extend during that take off.
    THe price is becoming chronical ill/ over sensitive beings, you forget that side of the coin!

    Did you know that the oceans produce more than 70% of the oxygen supply?
    Did you know that oxygen production is drastically vanishing, and that large parts of the oceans are already dead!

    Our technology believe in combo with the money system made us blind for the effects on the environment.
    In my eyes you see things way to neo liberal!

  77. Thanks for the reply Cullen! First, I’m not “…..building a bunker……”.

    While you and others may believe I’m just chicken little, I’d argue I’m the one who is the realist. You’re absolutely right…..our problems ARE solve-able, but not when the sense of urgency is only in the middle and lower classes while complacency permeates the leaders who have the task of fixing the problems!

    There are persistently optimistic and pessimistic…….I believe I’m realistic. I’m waiting to acknowledged we’ve troughed in our leadership and policy making when I see a sign, any little sign, that our leaders recognize the nature and seriousness of our problems and understand what corrective actions are needed……so far I’ve seen NO signs in govt….there has been nothing but denying, minimizing, covering up. Serious problem solving talk is only taking place in the blogosphere…and not many of them at that. By your own admission, no one in govt is getting it……under these circumstances what would cause you to believe it will inevitably get corrected? You know what Einstein (I think?) said about doing the same things over and over but expecting a different outcome. I don’t think its realistic to assume, let alone place a timeline on, a return to prosperity until we a least see the first little sign that our decision makers understand the problem. :) krb

  78. We largely agree there KRB. I am not in denial about our lack of leadership and the poor outlook for actually fixing our current problems. But I am hopeful that we can move in the right direction.

    And no, I don’t think you’re a chicken little. Now, if you were building a bunker that would be different. But even most of the internet hyperventilating hyperinflationists don’t have the time to built bunkers. They’re too busy cashing in on the bull market in fear (getting paid in dollars of course). :-)

  79. I am 83 years old. The social scene, interperson familiarity, has changed. Our ‘improved’ electronic lifestyle seems to have encouraged a less sensitive armslength relationship, allowing a hurtful style of expression. Marriages, I think have been affected, and children seem to enjoy the ability to demonstrate some kind of superiority to other youngsters, even in groups. I don’t claim to know what is at the root of of a less warm American society, but it should be part of valuing a “Standard of Living”. It seems to even affect politics. This may not have to do with the income people have, and so I guess this is not the proper forum.

  80. Thanks for your perspective Gerald. I always appreciate hearing from someone who has been through a lot more than I have. I think there’s a great deal of merit to your comments. “Standard of living” is obviously very vague term and it’s different to different people. I probably should have stated that more clearly when I wrote this. And I agree with you – there is a sense of loss in our relationships as we become more technologically inclined. It’s impossible to measure that, but I think you’re certainly right….Thanks.

  81. I have read it, a great book and an eye opener. Howard Zinn tells the History of the U.S. that school boards won’t allow and the media avoids.

  82. the pendulum has swung too far – we are richer than anyone, and greatest success story ever, etc, etc. But income and wealth inequality, hatred and fear mongering, are all at peaks not seen since the great depression. Things may have to get even worse before they get better – maybe we’ll get some john dilligers before it’s all said and done. But the wealth, production, know how, etc is all there. We just have to stop crapping all over ourselves and we can get out of this mess.

    This article is a perfect example of the insanity that is gripping our nation
    http://townhall.com/columnists/dennisprager/2011/10/18/why_is_class_hatred_morally_superior_to_race_hatred

    So if you feel that top 1% have too much, you are akin to a genocidal murderer.

    I’m optimistic long term – all pendulums swing back. I’m pressimistic short term because we have an entire party who are trying to out-do each other in impressing the know-nothings, while the other party lies on their back and allows themselves to get trampled on. And since no one other than pragcap readers understand MMT there is no hope that anyone with good policies solutions can win an argument since they don’t know why they’re good – or how to defend the attacks.

  83. Ugh, what a sh1t-storm here today. I have a completely different perspective on this. And I am not sure even *I* have the energy to vomit. I shall return once my head stops spinning. And once I declare email bankruptcy. And once my “smart” phone stops…bzzzz, bzzzz, bzzzzz, bzzzzz…BECAUSE SOMEONE ON FACEBOOK PARTED THEIR HAIR ON THE OPPOSITE SIDE OF THEIR G-DAMN HEAD TODAY. AND STOP TEXTING ME..WHAT ARE YOU 12???

    I need a drink.

  84. Albert W,

    Whatever you paid for your degree you should ask for your money back and reparations to cure your delusions.

    “America has a bloody, extremely violent history of oppression of nearly all popular groups–from workers to immigrants to women to minorities. And a lot of wealth was made from looting the treasury and exhausting our natural resources. Our environment is completely trashed, our political system in the hands of a vicious oligarchy. Families are suffering more than they have in generations. This is a success story to Cullen?”

    This level of ignorance is not only astonishing it’s dangerous.

    You get your history from Howard Zinn, perhaps?

  85. “everyone here acts like I pissed on their couch.”

    That’s what you get for mixing light beer and white russians in the same post! Never a good idea dood.

    Reading through the comments it seems a lot of the issue is 1) from people comparing the top of a business cycle to a trough (hopefully the trough) and 2) concerns that this isn’t the trough but rather a waystation on the way to something worse.

    I have a lot of sympathy for the latter concern.

    America enjoyed a great advantage for decades after WW2 as ours was the only large 1st world country not destroyed by war. That growth advantage ran nearly all the way until the Cold War ended and a couple of billion perfectly smart people previously restrained by authoritarian socialism all of the sudden hit the labor market. That’s a good thing for capital and the managerial class (and consumers), but deadly for your average medium-skilled, medium-educated worker.

    One thing though. In reading your comments defending your post I was struck by how much of our advance in living standards is due to the advance of technology vs the dismal science. You’re young. If you want to change the world, there’s still time to enroll in engineering school…

  86. Understand where you’re coming from Wulfram – healthcare, college tuition, and even housing have grown faster than inflation over the past decade which has really hurt the middle class. Letting housing decline to historical norms should help and I’m hopeful we’ll find some disruptive technologies to address healthcare and education inflation.

    I wouldn’t be too gloomy though – there are now a lot of wonderful, free resources to advance one’s knowledge via the internet (university lectures, Khan academy, TED talks, economics blogs). We also have an amazing diversity of high quality books, music, movies & TV, sports, and even food and drinks that simply weren’t readily available to the average person even a decade ago.

    I also wouldn’t sleep on the technologies in the pipeline – cleaner energy, artificial intelligence, electric cars that may drive themselves, and biotech advances will almost certainly improve our lives as we work out of this economic funk. I tend to think the next generation will be just fine.

  87. My dad once told me that 1973 was his best year ever, and from then on it was all downhill in terms of real purchasing power. He retired in 1990 and died in 2000. 1973 was the USA’s best year before the 1970s inflation struck. It was the year of the oil embargo, and the year Nixon abolished the gold standard of Bretton Woods. From 1981 to 2008 we have been living off the benefit of continually declining interest rates that allowed the private sector to borrow ever greater amounts of money at a constant carrying cost. As interest rates have hit bottom (short term), or nearly so (long term), those days are now over.

    Once the balance sheet recession is finally over, the only pathway for interest rates is up.The question is: how long will that take?

  88. LVG,

    You’re mixing two different arguments that are UN-related……

    1. One wage earner can not support a middle class family like it could in prior generations.

    2. Higher wage earning individuals that grossly outpace inflation in their wage gains can cover for many low wage individuals that barely keep pace or fall behind……together keeping “income per person” ahead of CPI.

    Respectfully, krb

  89. I prefer Guiness, but I can’t drink more than 2 pints without getting a headache the next morning.

    Arrogant Bastard (Stone Brewing Co, CA) is a truly excellent beer, but few bars in VA or DC carry it.

  90. Wow–the pessimism is apocalyptic. I vividly recall similar attitudes in 1976-80. The visceral reaction of the public to Watergate and Nixon produced the election of Jimmy Carter. He was supposed to be a simple peanut farmer who carried his own bags; a novelty. He turned out to be a misguided leftist who combined excessively easy money with hair shirt environmentalism, goofy tax policy and pessimism about the future of America. Sound familiar? I expect to soon see the bumper sticker that was popular in 1979: “Hang on America–the Republicans are coming.”

  91. “Wow–the pessimism is apocalyptic. I vividly recall similar attitudes in 1976-80.”

    Me too. Of course it took until 82 to find the bottom. And Reagan.

  92. “I think it’s hugely foolish to buy 2030 puts on the S&P at today’s prices…..”

    Well said…and for all our problems I wouldn’t trade for anyone else’s…but most of your readers (and clients) surely have plans for the money before 2030.

    That’s how you earn the big bucks…

  93. Oh, here we go.
    Cullen’s factual work has brought out all the “boo hoo, whoe is me” whiners complaining that their standard of living is “falling apart at the seams” because they had to reduce their Neflix from 3 DVD to 1 DVD at-a-time, and have to hold on to to their iPhone 4 rather than upgrading to the all new i Phone 4S

  94. This is truly unbelievable. Are people here actually arguing that healthcare was “better” in the 1960s – or for that matter in the 1990s – than it is today?
    Really?
    In the 1960s you would be DEAD fromm many of the diseases that can be routinely treated and/or cured today. And that gives you more TIME here on Earth, with reasonable quality of life, which is all you can ask for.
    And for those whining about the cost of healthcare “skyrocketing” (I hate that cliche), much of the increase is due to the advances in technology and treatments. We are spending more on healthcare because we can do more too SAVE YOUR LIFE. In the 1960s they woulld have sewn you back up and sent you home to die for many things that can be treated/cured today.

  95. One can argue that we never really got out of the 1970s’ malaise. One can even argue that under Reagan, the FIRE economy really took off, de-industrialization increased, and our economy took on more and more ponzi characteristics.

    Did we really get out of the 1970s malaise? Or are we paying for how we temporarily got out of the 1970’s malaise today?

    The FIRE economy is imploding. Global wage arbitrage is destroying the western middle class, and the world is transforming into the haves and have nots, and the capital classes will always be bailed out, and will always find an investment opportunity somewhere in the world, while the labor classes that are pinned down geographically enter poverty. (BTW, I hate sounding Marxist)

    When we began trading with nations that have a fraction of the labor laws we have, we began to import their poverty as well. There’s always a cost when importing cheap goods. In China, children get cancer due to lax environmental laws, and in the US, workers get laid off. There is a tremendous societal cost we will end up paying that many are not aware of.

    But many of us that invest(including myself) may not be so affected. But you know what? At least I have some humanity and humility to understand that others will never be as fortunate. We can’t all tap on keyboards all day and call that a vibrant economy, can we? We shafted our middle class into debt bondage and global wage arbitrage.

    Yea, we got out of the 1970’s slump – we got banks on steroids, a de-industrialzed consumption based ponzi economy – and look what it got us into. Massive debtloads on public and private balance sheets.

    Ask any 50 year old that has been recently laid off what the future looks like.

  96. Linking to McCargleBargle as evidence someone else makes things up? Now that’s a real scream.

  97. Am I missing something?

    You’ve jumped from wages to living standards as if they’re the same thing. That’s an incredible leap given there’s no definitive defintion of “living standards”

    One point however if you do want to compare through the ‘fall’ is the collapse of deposable income. So I see the mention of a 10% fall in wages. Not cataclysmic I grant you but for the majority on low incomes they’ve seen the cost of living remain constant / increase while their income has decreased.

    Thus say you spend 50% of a monthly wage of $1,000 on rent. Another $250 on bills, electricity, healthcare. That’s $250 of spending that they can make. If wages fall by 10%, suddenly that’s the same bills, but only $900 spending. Dropping your actually ability to spend down from $250 to $150. That’s a massive fall, and can have a huge effect on peoples’ lives.

    I think this example is more realistic to what people are actually going through than just seeing 10% off everything.

  98. I read all the way through this blog, every comment. How many people in this country are willing to do that? The issues are complex and are understood by too few, although readers here sees to have a handle on it. My views are a little left of center but that is not important. What is important? How many people in this country are really willing to get an understanding of the problems we face? 30 second sound bites are all people seem to know. Knowing you’re getting screwed isn’t enough. My optimism for those at the median will be in proportion to the amount of knowledge John Q. Public is willing to acquire.

  99. If only someone could put together a fear ETF for the little guys like me.

  100. Stone is an amazing brewery. For how ‘specialized’ their beers are I’m very surprised by how far the distribute. I find them all over the place in the greater NYC area.

  101. Nearly 20% real unemployment, unsupportable private debt levels, municipal defaults, $1.5 Trillion dollar budget deficits, a failing education system and industries fleeing to other countries at a record pace. Oh yeah and we might have already passed peak cheap oil and other commodities and the economy is headed into another recession or something close to it.

    I guess it’s time to look on the bright side.

  102. Great friggin article Cullen!

    I wrote something similar in January in response to Stansberry’s End Of America tirade. It has caused a ton of bickering, with people writing on the net all over what an idiot I am. Speaking truth in the face of selling doom is not well accepted:

    My article:

    http://seekingalpha.com/article/248003-the-end-of-america-not-quite
    http://seekingalpha.com/article/286247-debunking-myths-of-a-u-s-monetary-collapse

    Awesome article, had to say it again.

  103. Damn. I went to all the trouble of reading The Two Income Trap and Mcardle when all I had to do was listen to you scream to get enlightenment?

    Sorry. Not convinced.

    Did you even read the article much less the book?

    BTW…KP…didn’t mean to slap at your comment. Just trying to add some perspective on my way out the door.

  104. Here’s a thought on rising healthcare costs….. would you rather have a heart condition or cancer today, or in 1960?

    How about the quality and size of the homes? I bought my home, built in 1947 with single pane windows, no insulation, wood shake roof, etc. Had to bring it up to date so the family didn’t freeze a few years ago. Costs for these things have increased, but so has the quality.

  105. Ha. No worries – I am still in debt to you for all I have “stolen” from you.

    You have been a great help in turning my doom and gloom mood into more optimism, without needing to fish and drink.

    Keep it up!

  106. Ha. Well, I still need to fish and drink to get over my concerns about the US economy and its leadership! To each his own I guess. Thanks Tim.

  107. “If the world hates America so much, why are they still banging down our doors to live here?”

    I work with several H1B India immigrants and they can’t wait to get enough experience in the US so they can go back to India and work for Indian local US companies. I have not meet one that wants to make the US a permanent home. They view the US as expensive and materialistic and don’t want to raise their children here.

  108. America does indeed have a violent history. Native Americans didn’t fare so well. Neither did the Koreans, Vietnamese, Afghans, or Iranians. But, hey, we were granted divine rights to fulfill our manifest destiny.

  109. I think your analysis needs to go to the next level, Cullen. How does this look if you break out income percentiles? I’d bet that the lowest decile hasn’t done so well.

  110. Thanks for the additional insight into H1B Visas.

    I will also add that the US does not have a monopoly on immigration. I live on a Greek island that over ten years ago was practically all Greek.

    Today you will find living permanently on this island: a few thousand Albanians, a few thousand English pensioners, Pakistanis, Chinese, Africans, and even Eastern Europeans. They all live and work here. Admittedly, most illegal immigrants enter Greece to go into other EU countries. But many have stayed. Obviously, given the crisis, things are changing now – but the same can be said for the US as well. How many Mexicans have left the US when the construction industry imploded in 2008?

    So even lowly Greece had a recent influx of immigration. But somehow, the average American thinks that the US is unique in that it is the only place to experience immigration.

  111. You cannot be serious Winston..

    Shadowstats? Really?

    Williams has been calling for hyperinflation for years. Meanwhile he continues to collect fees in USD. I don’t know if he knows it or not, but regardless his analysis is flawed.

  112. Your article is complete garbage. Inflation adjusted wages have been falling since 1973. In addition, to equate technology with standard of living is dishonest.
    Standard of living is a composite of ability to purchase goods and services, combined with ability to quit working and comfortably live without indentured servitude.
    While both the cost of production of goods and technological advancements make it appear as if we are getting more for our money today, the quality and quantity of the service we receive, and our ability to survive debt free and secure without employment is considerably less than previous decades.

  113. I offered fact based proof for my argument. So far, the readers who disagree have done nothing but make general statements that do nothing to actually refute the data here. “Garbage” is making an argument without any facts or data to back it up. For instance, this:

    ” the quality and quantity of the service we receive, and our ability to survive debt free and secure without employment is considerably less than previous decades.”

    Is a statement you could never actually prove. If you think the USA was a better place in 1973 then let’s see your thorough data and facts. But I think you and I both know this country is in far better financial standing than it was then and our citizens are substantially more wealthy. Yes, I agree that std of living is a vague term, but from a purely wage based position, my data speaks for itself.

  114. I forgot to mention that most state retirement funds are ponzi schemes that are rapidly headed towards $0. When the money runs out old people will elect politicians to steal money from young people to pay for their power chairs, stretch pants and dinners out at Applebees.

    Taxes are headed up, up and then up some more.

    Predicting that incomes over the next 20 years will look anything like the last 20 years is pure craziness.

  115. Well Cullen, I have to remark that you are way too optimistic. I’m definitely not one of the 99% and I have serious doubts about making it through what lies ahead for America. IMHO we’ve had a great ride but not all things go up for ever. What you fail to address in your CPI and wages graph is monstrous in it’s simple depiction of numbers without hidden factors. You completely ignore the debt that was created to pay all those silly white collar workers that produced nothing in America. It like patting people on the back that got rich in a Ponzi scheme.

    America fell into a sweet spot and also massaged it by bullying the rest of the world and using the poor around the world to enhance our position of wealth. Read John Perkins “Confessions of an Economic Hitman” By the time we entered WW2 the rest of the world was so broke, it was a cake walk to take over the world and then of course America was Saudi Arabia when it came to oil. Later we made an unholy alliance with the house of Saud to further our grip on world power via making all oil sold tied to the dollar.

    Today we face a media run by corporations that work to keep people dumb.

    even Obama tells us we can compete with businesses in China that pay their labor pennies rather than dollars an hour. The day America becomes competitive again will be the day when our wages match those of Indian and Chinese workers. The days of America living in the land of milk and honey are way over my friend unless some miracle technology arrives very very soon.

    My biggest worry is the crime that will fall on our nation when the collapse occurs. Back in the last depression, something like 95% of the nation either lived on a farm or had a close relative living on a farm. You fail to mention the security that comes from knowing at least you will have food to eat. Yes today our food is readily available and people can afford the power of a washing machine and all the other modern conveniences. Everyone assumes the machine will just run for ever. Today the number of people with access to a farm is less than 5%. My aunt tells me stories of how lucky they were. They lived on a farm and had a dad that was a mailman, so they got to have lard spread on their sandwiches while the other kids just had bread for lunch at school.

    It might be fun to be optimistic but it’s safer to be a realist. 99% of us are fast becoming realists while most born with a silver spoon in their mouths still remain clueless. Imagine what life in China was like before America let them trade with us and consider what life might be like here in the not too distant future. At least the Chinese knew how to grow food. Americans are a bunch of spoiled idiots with little if any ‘live off the land’ skills and I’m one of them. I would humbly salute you if my prophecies are wrong and your prove right 5 years from now but I’m betting everything that I own that you are wrong. Buy gold, silver, guns, bullets, farm land or fishing boats.

    My advice to this forum is to buy farm land now and get ready.

  116. Perhaps there are issues with Warren’s work, but if so they aren’t in that link and they won’t be discovered by ArgleBargle. The woman is both lazy and ignorant.

  117. I grew up in the Syracuse, NY area and used to go to a real Irish pub with some buddies and I could drink Guiness all night. Those days are gone :( Now I can’t do more than 2 without a headache either.

  118. Will Rogers on technology during the Great Depression:
    We’ll hold the distinction of being the only nation in the history of the world that ever went to the poor house in an automobile.

    Will Rogers on prosperity and debt:
    Don’t make the first payment on anything. First payments is what made us think we were prosperous and the other nineteen is what showed us we were broke.

  119. Anyone can rig up and article to sell a message. Stats that I have seen show that real disposable incomes in the US have fallen since 1970 and that the ‘deficit’ in consumption has been taken up by debt. This is not peculiar to the US.

    The other point is that rose tinted articles like this ignore structural issues such as the distribution of wealth. Granted the US maybe 7th in terms of GDP per head but that is an average. The Gini coefficient for the US has change dramatically over the last 20 years to show that a small minority take more of the nations wealth.

    The US could have internalized is productive capability via an ‘innovation economy’ many decades ago but chose to go down the route of cost arbitrage (cost of capital and labour) driven by Wall Street and large US transnationals so the US labour pool is now part of a global labour pool that includes a couple of billion Chinese and Indians. Hence the off-shoring, out-sourcing and in-sourcing.

    The consequence is that US workers are being deskilled and significant pool of ‘reserve labour’ is building up in the US and this will only get worse as the US population is still growing and more will enter the US labour pool..

    In the face of the above and other effects I’d expect living standards to fall in the US and this will accelerate if the dollar starts to lose value. Once it does this it will increase living costs within the US.

  120. I was around in the 1960’s
    Whether or not I was an “adult” is debatable, but I can tell you that I much preferred being in my teens and twenties then to what I see my kids friends going through today. We waltzed (ok, we watusied did a lot of much better dances) and faced a future with confidence. Today they struggle.

  121. Cullen said “America’s a fabulous country” – Yeah, only if you like fascism!

  122. That’s be an interesting chart if it actually showed the real inflation rate, instead of the modern CPI that was created to specifically hide the substantially higher real inflation rate.

    We’re baking at a 9% to 10% real inflation rate per the 1980 CPI right now.

  123. The point of looking at what we’ve done wrong is that it allows us to try and improve ourselves. Justifying the way things are by saying that they could be worse is not productive. Things could be worse but they could also be better.

  124. Those who had work during the great depression didn’t find it that bad especially with ongoing deflation. But those who were not working however suffered greatly. I think someone is wrong hiding behind statistic may prevent some from understanding or concluding what is occurring in reality.