Millionaires, the New Middle Class...

[Makalakumu]

Looks like Bernanke and the Fed are going to cut interest rates again, further inflating the dollar and weakening its value. I thought it would be some time before we saw millionaires being lumped into the middle class, but if this keeps up, it'll happen sooner then we think.

http://articles.moneycentral.msn.com/Investing/Dispatch/071210markets.aspx

This is an all out financial meltdown. The problem is that its happening slowly, so normal folks don't see it right away. The bottom line is that American wealth and power are drifting away as the printing presses spin faster and faster.

Something needs to be done before its too late...

 

[terryl965]

Well then I just went from upper middle to street bum, What is next?

 

[exile]

As time goes by, more and more people forget about the inflation in the 1970s that almost crippled the middle class and completely wrecked working class families and people on fixed incomes. That experience put a very healthy does of fear into the financial system and for a long time the Fed's main obsession was never letting that recur... but as always happens, the memory of past pain is really transient.

If something like that happens again, though, the results are going to be utterly catastrophic. Given the size of private sector debt in this country, and the fact that people are already at their limits affording what they need (forgetting for a moment about what they don't need!), any major spike in cost-of-living is going have horrific impacts through the current house-of-cards economy. It's like all those Roadrunner/Coyote cartoons where Coyote runs off the edge of the cliff in hot pursuit and does fine until he looks down and notices... I get the feeling we may be right about at that point now... :erg

 

[CuongNhuka]

So people that are poor know will become what new social class? Serfs? Or will be bringing back slavery?

I say we round up all the rich people, and re-distribute there wealth! Yay Communism! Hehe

 

[MA-Caver]

Well then I just went from upper middle to street bum, What is next?

Hey you're lucky. I'm so low income that I can't afford to be "poor" I'm just "po" because I can't afford the "or" that spells the rest of the word.


But that's okay... I know some folks who are just plain "p"

Seriously, this is a problem. My measly paycheck of roughly 140 a week usually dwindles down to a few bucks by the time next one comes around. I'm not flagrantly spending but damn; gas prices, food, simple entertainment and life bills are just getting either outrageous or my buck isn't buying what it used to... McDonald's (and other fast foods) dollar menu(s) not-withstanding... and who'd want to eat THERE everyday anyway? :barf: But sometimes it's all one can afford.

 

[Steel Tiger]

I hadn't realised that the situation in the US was this bad. I can, however, see what Upnorth is refering to. My mother raised my brother and me on an income of about 23 thousand (Aus), but about fifteen years ago, with the death of my stepfather she became a millionaire. While she doesn't work anymore, she doesn't live like you would think a millionaire would. If you were to visit her you would think a normal middle class woman.

We have seen this before and, Exile pointed out, we never seem to learn from it. Is it going to take something catastrophic like 1929 to wake people up? A return to the inflation level you guys had in the seventies and we had in the late eighties and early nineties will see a lot of soup kitchens opening up.

It is also indicative of something we have created ourselves, our societies that is. In the pursuit of reduced costs and greater profits a vast amount of bottom level manufacturing has been outsourced to other countries, especially in Asia. Where are the boom economies now? Asia. We have sown the wind, the whirlwind just hasn't arrived yet.

 

[Makalakumu]

The problem with inflation is that the government defines inflation however it seems politically convenient. The Fed only looks at the price of consumer goods.

Real inflation includes things like education, health care, energy prices, housing, etc. Both organizations cherry pick so the numbers look good.

What we are left with is a picture that is very muddy and the average joe has no idea what is happening.

A big warning sign that should be flashing for everyone is that the value of our dollar has eroded to a level where the Canadian dollar has reached parity.

That hasn't happened since the 70s when inflation was out of control and the economy took a nose dive.

The difference between today and then, IMHO, is the availability of personal credit. This is what keeps our markets afloat. Are people going to be able to continue borrowing no matter what? What happens when that sea of credit dries up?

Either way, this can't last.

 

[Flying Crane]

A million dollars here in San Francisco gets you a broken down shack in gangland territory. Millionaires here are nothing special, and most of us, myself included, have given up the fantasy of actually owning a home. That is the kind of debt that I simply will not take on, and we are seeing the forclosure rates rising as those who thought it was a good idea are getting smacked.

 

[exile]

my buck isn't buying what it used to... McDonald's (and other fast foods) dollar menu(s) not-withstanding... and who'd want to eat THERE everyday anyway? :barf:

But sometimes it's all one can afford.

Your buck isn't buying what it used to, MA-C. Look at the percentage of people in our parents' (or for you... less chonologically challenged ones :lol:.... grandparents' ) generation who not only owned their own homes, but were able to actually pay off their mortgages with plenty of lifetime left over... and now?? [cue in Flying Crane's post here]. Houses that were built at a cost to the homeowner of $25K in Vancouver in the 1950s are now selling there for prices hovering around $2,500,000. An increase of 10,000%. And it's not just ultra-desirable west coast cities like San Fran and Vancouver that are seeing this kind of jump. The fact is, our salaries look vastly bigger, but our immediate ancestors probably enjoyed a higher standard of living than we do... their food was probably more wholesome, they actually owned their own own homes, and they didn't wake up in the night in cold sweats nearly so much, probably, worrying about repo men and foreclosures the way so many of our even well-off types do.

I hadn't realised that the situation in the US was this bad. I can, however, see what Upnorth is refering to. My mother raised my brother and me on an income of about 23 thousand (Aus), but about fifteen years ago, with the death of my stepfather she became a millionaire. While she doesn't work anymore, she doesn't live like you would think a millionaire would. If you were to visit her you would think a normal middle class woman.

We have seen this before and, Exile pointed out, we never seem to learn from it. Is it going to take something catastrophic like 1929 to wake people up?

In a word, ST, yes... probably. We are really rotten at planning, as a species. Instead, we keep waiting for the necessary miracle to kick in.

return to the inflation level you guys had in the seventies and we had in the late eighties and early nineties will see a lot of soup kitchens opening up.

Exactly what I'm thinking. This whole `boom' we've had going for the past couple of decades is predicated, in the end, on continual consumer spending. A savage inflation spike and that's the end of that... and then what happens to an economy which crashes and burns if it's not in full-tilt-boogie mode? When you can't afford stuff and stop most or all of your `discretionary' buying, what happens to an economy where most of the profit seems to come from income on people's credit buying? And that's when the repo men start leaving calls on your voicemail and the nice people at the bank who own your house suddenly seem to develop a very unpleasant, flinty side...

It is also indicative of something we have created ourselves, our societies that is. In the pursuit of reduced costs and greater profits a vast amount of bottom level manufacturing has been outsourced to other countries, especially in Asia. Where are the boom economies now? Asia. We have sown the wind, the whirlwind just hasn't arrived yet.

Yes, I'm afraid that the bill for all the `affordable' consumer goods we've been filling storage lockers full of is just about to be presented to us. You say, there's no such thing as a free lunch, and everyone nods sagely... but it's like we still really think there is such a thing.

A big warning sign that should be flashing for everyone is that the value of our dollar has eroded to a level where the Canadian dollar has reached parity.

That hasn't happened since the 70s when inflation was out of control and the economy took a nose dive.

The difference between today and then, IMHO, is the availability of personal credit. This is what keeps our markets afloat. Are people going to be able to continue borrowing no matter what? What happens when that sea of credit dries up?

Either way, this can't last.

That's what I was getting at about private sector debt. Plus, at this point, the US economy is heavily built on loans controlled by other national governments, unlike the situation in the 1970s. Everyone hates taxes, everyone applauds when you generate capital by borrowing (because it shoves the repayment problem down a few generations), but it also makes you hostage to what's happening in a dozen other parts of the world... no, it's not good at all...

 

[newGuy12]

Plus, at this point, the US economy is heavily built on loans controlled by other national governments, unlike the situation in the 1970s. Everyone hates taxes, everyone applauds when you generate capital by borrowing (because it shoves the repayment problem down a few generations), but it also makes you hostage to what's happening in a dozen other parts of the world... no, it's not good at all...

We're getting soaked by private contractors in the war. We aren't raising taxes to get the funds. Its all borrowed. Its not prudent at all to do this, but you never hear anyone speak of this. If a country goes far enough into debt, you don't need arms to overthrow it.

 

[Makalakumu]

Your buck isn't buying what it used to, MA-C. Look at the percentage of people in our parents' (or for you... less chonologically challenged ones :lol:.... grandparents' ) generation who not only owned their own homes, but were able to actually pay off their mortgages with plenty of lifetime left over... and now?? [cue in Flying Crane's post here]. Houses that were built at a cost to the homeowner of $25K in Vancouver in the 1950s are now selling there for prices hovering around $2,500,000. An increase of 10,000%. And it's not just ultra-desirable west coast cities like San Fran and Vancouver that are seeing this kind of jump. The fact is, our salaries look vastly bigger, but our immediate ancestors probably enjoyed a higher standard of living than we do... their food was probably more wholesome, they actually owned their own own homes, and they didn't wake up in the night in cold sweats nearly so much, probably, worrying about repo men and foreclosures the way so many of our even well-off types do.

...its a wonder why we are taught to hate the french so much. Perhaps there is a reason...they invented the guillotine to deal with people who did stuff like this.

That's kind of a joke and kinda not.

I'm currently voluntarily putting money into my retirement and being forced to put money into a social system that is completely meaningless if the dollar continues to devalue. And I think to myself, why not spend those dollars right now while they are worth something? Why bother with the future and pay off my debts now?

I'm just your average young adult trying to raise a young family amidst all of this mess. I feel like that Bob Dylan song, "...you see that train wreck a' comin from a long ways away..."

And most everybody else is completely oblivious...

 

[Steel Tiger]

I'm just your average young adult trying to raise a young family amidst all of this mess. I feel like that Bob Dylan song, "...you see that train wreck a' comin from a long ways away..."

And most everybody else is completely oblivious...

This is the true hidden power of the almighty dollar.

Marx said religion was the opiate of the masses, I wonder what he would think now. Give people a few extra dollars in their pay packet each week and they will go on blindly spending with no concern for why everything keeps getting a little more expensive each year.

We just had an election and a resulting change of government. The interesting thing is that the former government announced a huge raft of tax cuts. The polls following that showed a noticeable improvement for the then government, even though everyone you spoke to wanted them out. A little more money and people might vote for anything.

 

[mrhnau]

A million dollars here in San Francisco gets you a broken down shack in gangland territory. Millionaires here are nothing special, and most of us, myself included, have given up the fantasy of actually owning a home. That is the kind of debt that I simply will not take on, and we are seeing the forclosure rates rising as those who thought it was a good idea are getting smacked.

I've had frequent discussions with my wife about that. It seems some sectors are near impossible to get into the housing market. I make decent money, but there is no way I could afford a million dollar shack, you know? I fear there is going to be a painful correction in some grossly inflated markets... Hopefully though, this will coincide with my new need for a bigger house LOL

 

[grydth]

Labels in politics are now meaningless to most of us, and depend solely on the agendas of those applying them.

The Republicans always want to assist their (already disgustingly rich) owners, er contributors, so they'll label something as "Middle Class" relief when it actually enriches kazillionaires.

Soon though, President Hellary will want an enormous tax hike.... but only on the "super rich", mind you......... yeah, those making over 30,ooo a year.

:bs:

 

[Makalakumu]

All of this has put me into some serious speculation. Will the dollar bounce back or will it continue to weaken? Is this how the Fed will pave the way for the Amero? Am I making a mistake with saving any money? How about retirement investments? Maybe I should just cash out now while there is a little value and just pay off debt?

 

[Grenadier]

A million dollars doesn't nearly as far as it used to, of course. Back in the days when a million dollars was a huge amount of money, a luxury car sold for 5,000 dollars.

When I was a freshman college student (1989), a year's of tuition, room, and board, at a private university cost $14,000 / year. These days, that same year of tuition, room, and board, now costs $39,000 / year. Every year, I would get that letter from the university, asking for donations, where they claim that they are increasing tuition by 5-10% a year, and they claimed that they only want the best professors, the best facilities, etc., and that they needed the funds to pay for them.

Just as a comparison, though, an ice cream cone at the local McDonald's cost about 40 cents, and today, that same ice cream cone costs about 70 cents. Something just ain't quite right...


All of this talk of money reminds me of the first Austin Powers movie, where Dr. Evil has been recently thawed out, and tells the UN that he demands a ransom of:

"One MILLION dollars!"

and gets laughed at by the world leaders.