enter bitcoin and emerging markets into this equation.. setting up for something explosive when BRICS and other nations dedollarize
Well sure, but do you really see self checkout machines being outlawed? There is a push such that everything in a store is tagged and when you walk out of the store it's charged to you phone, no bar code kiosk-ing necessary, with the next step being theft control cameras and software, no employees needed. Ever seen an iPod being sold from vending machine? When was the last time you talked to a person while ordering a pizza and why doesn't that extend to the rest of retail? That's how it is now... in 20 years? Poof!
This argument of automation seems to be the wrong one. The problem is people are buying more stuff and at higher prices now than ever. Cable Mobile phone with data ISP Laptops These are all new daily expenses that didn't exist a generation ago. Cars are way more expensive even adjusting for inflation. A 1978 v8 mustang coupe was $3,944 with inflation that is around $14K. MSRP on a 2014 is over twice that. With emissions and safety regulations car prices are astronomical and taking a larger part of people's budget. This prevents more people from buying a house and becoming what we think of as middle class. Imagine someone making 50K who didn't have cable, a phone, internet, or a laptop. They drove a car they bought new for $14K, and rarely ate fast food, or prepared foods. Their finances would be much better than the modern person making 50K. This is how most people lived a generation ago.
Well... ok, some people flock to the herd and keep up with the Jones' but just getting that 50k salary is not easy for those without connections or some kind of supreme intelligence. And you need 2 50,000 salaries to support a household with children unless you live in a trailer park or "off the grid." If anyone has a health problem, you're going into debt. This for survival, not for trips, special classes, all kinds of sporting/musical/technological equipment to give your kids the edge over others... I have been blessed with good fortune (to go with work ethic and diligence) despite no college education, but the problems for the current generation have more to do with predatorial corporate mentalities. Let's be honest, it's big pharma, oil, finance corporations who control the 1%, and they delegate what opportunities are available to the have nots. I don't see this ending up well for the country.
That's a good comparison but I think maybe it holds for two generations ago rather than one. I think one catalyst for the housing bubble was people's tendency to serially upgrade to bigger and better homes, that behavior in and of itself is a holdover from the '80s and '90s, if not necessarily with the high multiples, single-note rate variability and extra-asset borrowing ($250k on a $225k sale) as in the mid-'00s.
Except, of course, that it didn't - as evidenced by the fact that inflation has been minimal and your dollar actually buys you pretty close to what it bought you in 2008.
I was thinking mid 70's so I guess 1.5-2 generations is more accurate. downbytheriver brought up kids activities people are paying for vs sandlot baseball and medical expenses which have also exploded. I mean we complain about the salaries not being enough compared to generations ago but generations ago we didn't buy the crap we all buy today.
You are out of your depth here. But for fun -- how do you measure inflation -- using CPI? That's a poor choice if so. Look at M2 money supply. "Inflation" also can not be measured in the short term. There is a lag. Trust me when I say that the smart money is very very focused on inflation protection right now. Alan Greenspan made a similar mistake in the earlty-to-mid-2000's. It created the housing bubble which then brought the global economy to its knees. What the Fed is doing now far far surpasses any easy money policies that Greenspan had in place. QE is essentially negative interest rates, since rates are at zero and they are still buying bonds (providing stimulus).
Quite true, to a degree. I spend far more on cable for home TV compared to 20 years ago. I pay more for mobile phones, more for data services for both cable and mobile so I have broadband/internet access when and where I need it, which began in the late 1990's, but I don't consider laptops or PC's to be an unusual expense compared to what I used in the late 90's, when I payed a lot for my PC set up for gaming (which I still have, even if it's been replaced several times with higher end models). Also, laptops and PC's are not what I would consider a "daily expense." It's a bit like buying a refrigerator. A one time expense purchasing it, and an on-going expense for the electricity and service the rare times it's needed. Part of the cost of living, and only as expensive as you are willing to pay. I'm sorry, but I don't buy this argument at all. Car prices due to "emissions and safety regulations" are preventing people "from buying a house and becoming what we think of as middle class?" You have to be kidding me. That's all about choice. If you chose to buy a $30K+ automobile, and that "prevents" you from "buying a house and becoming what we think of as middle class," then you (the mythical person you are talking about) are simply making terrible decisions about priorities that are hurting your standard of living. One could buy a far cheaper car. A car with "emissions and safety regulations" that is very affordable, and certainly not stopping someone from living a "middle class lifestyle." With all due respect, while some of your points had some basis in fact, this particular one is simply nonsensical. If push comes to shove, you can ride a bus, or (gasp!) car pool, and pay for that house in suburbia in the good school district that denotes "middle class," and if wanted, with the 2 or 3 TV's, basic cable, basic ISP, going out to eat from time to time with your family, seeing a movie once a week, taking a vacation once or twice a year, if your work, and that of your spouse (if married) allows it (my significant other gets loads of vacation and comp time every year. She never uses all of it. Not even close. Her work doesn't allow the time off, even though she has it to take). In other words, you can be middle class and not have an expensive car. That's a decision, not a necessity. Someone can buy very good transportaion for $14K. Paying twice that, or more, was a decision, a choice, one that doesn't impact whether you are middle class, or not. Many don't even own a car. In cities that have them, millions ride commuter rail, subways, and the like. I was older than you are now, I suspect, a generation ago, and I paid more for our cars than 14K, went out to eat far too much, bought "prepared foods," ordered take out and, yes, we also cooked at home. What this has to do with our lifestyle compared to today, when we continue to do much the same thing, except leaning towards healthier stuff, is a mystery to me. The internet was in its infancy in 1994 for the general public, of course. As a result, I spent more money, and time, doing things outside of the house, instead of sitting in front of a screen and typing on a keyboard. Either way, it doesn't affect our standard of living. We are middle class. Perhaps towards the upper end of that group, but middle class just the same. What's your point?
It is a choice but the reality is people who make 50K spend more than you are suggesting they COULD on cars. You are suggesting the ability for people to not buy these things, a point I made already. I am saying buying these things is the norm today. 14K is the todays money cost of a 1978 V8 Mustang. Which car did you buy around 1974-1978 that cost way more than that? What prepared, frozen foods besides Campbell were around in 1978? Fast food was MCDonalds and KFC. Wait. You wrote a wall of text without understanding my point?
Trying to live in today's digital world without internet access just isn't a reasonable comparison. Without internet access, if you have kids, they cannot complete a lot of their assignments. I never realized how much schools rely on the students having internet access until Refgal's kids were in high school...and that was five years ago. As for buying a middle class home...if you think a family with kids can do so on an income of $50k a year, you haven't priced modest homes in the suburbs recently.
$1,500 a month mortgage is impossible with 50K per year? Also I am not saying not having these services is the way to go. I am saying if your definition of middle class going away is because people have less savings or disposable income, look at all of the extra stuff people are buying.
Assume a family of 3 (married couple with one child). $50,000 a year married with 3 tax exemptions and no insurance deductions, etc yields $1,774.00 in net pay twice a month...so roughly $3,500 monthly. A $1,500 monthly mortgage payment is almost half of the household income. This does not even consider things like food, electricity, HOA dues, water, retirement savings, a modest car payment, car insurance and gasoline. Food. 400. (Assumes less than $5 per person per day) Electric. 100 (low balling) HOA. 50 Water. 50 Car note. 200 Car insur. 100 Gas. 150 (assumes filling up every 10 days) Health ins.300 (again a lowball for a family,of 3) ------------------ $1,350 Even with lowball figures, the necessities plus a $1,500 per month mortgage is $2,850 per month. That would leave $650 left over. So yes, very possible IF: 1. They can stick to this budget, 2. They can make do with one car, 3. They save nothing for retirement, 4. They have no health issues, 5. They have zero in internet or phone, 6. They never have any home repairs or maintenance, 7. They never spend anything on entertainment or children's activities, 8. They never take a vacation. 9. They set aside nothing for the child's education. In short, that is a pretty unrealistic budget for a family of three. Given what a realistic budget would be (factoring in retirement savings, home maintenance, etc etc), a $1,500 per month mortgage would require that they spend almost every dollar they make each month...it is a recipe for disaster.
It is the nature of unfettered capitalism that those that obtain advavtages use them to further their own interest, developing monopolies, cornering markets, buying favorable laws, importing cheap labor, busting unions, trending toward a feudal model. The only interest in The People is maintaining markets. We are in a devolving period of history where corporations and oligarchs are emerging as the new ruling class. Combine that with the rapid emergence of smart machines and the future seems dystopian for the population at large only menial jobs at minimum wages for most. The counter to that is that cheap labor provides cheap creature comforts. Most of the world's population would be very happy with retail job , a 800 sq.ft. apartment , and beans for dinner if they had a flat screen and cable. And it seems that it is a fairly natural progression that as countries advance, especially in welfare systems for the aged, that populations actually trend down.
A byproduct of the "two income household" has been an increase in expenses, many of which seem unnecessary but are hard to turn down when there is little time. I am fortunate, my wife does not work. However I look at friends and my sister. They spend more on processed food and eating out, they spend on child care, they spend on sport classes, they consistently spend more than they would with a stay at home spouse. So while there is more money coming in, most of it is flushed right out on expenses.... In the 70's there would be one car in a household, not two and if there were two cars... They were not ringing up 50,000 miles in travel every few years and associated costs.
I'f I may interrupt, I'm about to head to the westside and stretch out in a 900 sqft apartment for less than $1000 a month. I have lived three years inside the loop near Rice Mil and never paid more than 900$/month in rent. But there are kids paying 50% more than that to get 750 sqft inside the loop. I kept up with the Joneses but I never paid that much. $1500/month on $50k per year sound crazy. That's 36% pretax income. That'd probably be about 45% after taxes, insurance and, if you've got it, 401k. It's a choice to pay those prices. Their choice. Your choice. My choice (but I don't). We can't all stretch out in the downtown condo with an M5 and the newest Apple product. Tough luck.
Purchasing power measures what you can purchase. So the simplest measure of purchasing power is ... measuring what you can purchase. Look at prices in 2007. Look at prices today. People haven't lost their purchasing power as you claimed. Now you seem to be switching to "oh, it's coming soon! Trust me!". People have been saying that for years now and they are consistently wrong for the same reasons you are - a very simplistic view of the issue by just looking at money supply. There are all sorts of reasons for a non-correlation between money supply and inflation that you all just conveniently ignore. That said, you still may be right or wrong about the future results of QE. But you are have been completely wrong about the present, and you are completely wrong about the idea that the Fed's actions have decreased purchasing power of the dollar. All the critics have been completely wrong about everything regarding the Fed's actions thus far into the recovery - everything from the launch of QE to the results of QE to the results of tapering.
