We were trying to explain a minor triumph. Our book, Empire of Debt, was named by The Economist as one of the most important financial books of 2005. But when a husband tries to explain his successes to his wife, his arguments are limited. He cannot attribute it to genius, or even to virtue. She knows it isn’t true. All he can do is bark…and roll over.
When David Brooks writes in the NY Times about what great people NY Times readers are and how the United States is the world’s rising power not China nor India, almost no one laughed…or rolled over. Instead, they perked up their ears and wagged their rear-ends; they liked the sound of it.
But every four-legged empire has its day, too.
The latest employment numbers reinforce this idea: just under one in 21 people are without work.
True: in America today, more people are working more hours than ever before.
False: they are better off for it.
We thank our dinner companion last night, financial strategist Simon Hunt, for pointing something out to us. He drew our attention to Elizabeth Warren, writing in Harvard magazine, who shows that the median family had only one wage earner in the early 1970s, who earned $41,670, in today’s money. Out of this, he or she paid the family’s regular, more or less fixed, expenses: taxes, mortgage payments, health insurance, car and gas payments, etc. Typically, these costs rose to 55% of monthly income. This left the family $1,630 to spend on food, clothes, entertainment and so forth.
Now, 30 years later — after the Reagan Revolution, the fall of the Berlin Wall, the disappearance of the last vestiges of the gold standard, and the biggest financial boom in history — the median family has two wage earners who, between the two of them, working nearly twice as much as before, earn around $73,770. But fixed costs have risen to 75% of income, leaving only $1,509 in “discretionary” spending.
Is there any doubt that U.S. economic progress is a swindle?
It’s not that we’re complaining. The U.S. economy has been good to us. We don’t want to be ungrateful. It’s thanks to the U.S. economy that we can afford to live in London and put our money into non-U.S. dollar assets! But being grateful doesn’t mean being blind. Nor does it mean forgetting about those other dogs whose day has not come.
The people who suffer the swindle are people who are stuck in the middle of it. For example: American couples, both working — with a large mortgage on a small house — toward the short end of the income stick. Those people, in the bottom 10%, have seen their incomes fall by nearly 2% in the last two years. These poor stiffs now work night and day…and earn less money. Their quality of life must have fallen sharply over the last generation, for they not only have less money, but they also have much less free time. They are the people who have been teased and trapped into carrying debt loads that crush them, who make mortgage payments with minimums that are now being reset, and who pay usurious rates on every dime they borrow.
Of course, it is none of our business, but we guess that even their health has deteriorated. With no one at home to prepare proper meals and no time to exercise, they eat poorly, get fat, and die young.
Again, we don’t mean to appear ungrateful. This weakness in American incomes is not exactly the fault of the U.S. economy itself or its working class lumps. All the world’s developed economies are being hounded by competition from overseas, where GDP growth rates are three times those of the United States, and where real wages doubled in the last 10 years. India, we read today, has 27 billionaires with a collective net worth of $106 billion. These trends are not likely to come to a halt anytime soon.
Americans work harder and longer than any people on Earth, says Brooks. They expect to rule the world. Alas, people don’t always get what they expect, or even what they think they deserve. They get what they’ve got coming.
Every dog has his day, we point out again. But the U.S. Empire’s day was probably yesterday.
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.