Do You know Why it is so hard?

The house cheats a little more every day, week, month, and year....

Welcome my friends, and let’s talk about what, in my opinion, is the most pressing issue right now in our country.  It is the issue that I think will most likely lead to total deterioration of the social fabric and descent into chaos if that were to occur.  I say this because, unlike other threats that may be real, this one is not only significantly more than an inconvenience, but is an actual threat to the things the majority of people value and strive for.  We have talked about the loud ends of the socio-political spectrum, that range from the Social Justice Woke crowd to the crony capitalist freaks that get all the air time and in large part control the narrative.  I have mentioned in the past that the vast majority who do not exist on either end are generally reasonable and silent because all they want is to earn a living, raise their families, and be left alone to live their lives.  That is now under real and serious threat.  We discussed the macro economics of our descent to financial hell a few weeks ago (here).  In that paper, I covered why wages haven’t gone up since the 1970s and why our currency is being destroyed by inflation.

The same forces that are destroying our currency have destroyed American savings, causing most people to live paycheck-to-paycheck, and this happened in a relatively short period of time.  In 2008, 25% of people were living paycheck-to-paycheck and 34% saved less than $100 a month (here).  Putting 59% of people at serious risk of financial hardship due to nearly any emergency.  These numbers skyrocketed to 62% of people living paycheck-to-paycheck in 2022 and 30% saving less than 100 dollars a month (here).  If these numbers are to be believed, over 90% of people are on the edge of disaster.  This is a direct result of wages stagnating since the 1970s, while the cost of everything has exploded.  We see reports of the Consumer Price Index (CPI) over 8%. Unfortunately, that is a lie and doesn’t come even close to reflecting the true inflationary cost to the American people (here, here and here).  To further complicate things, none of the government calculations consider a loss of quality or standard of living, while always adjusting down for perceived increase in quality.  I personally think it is stupid (This is an example of how it works, rather than real numbers to illustrate my point.) because it results in the best laptop money could buy in 2000 costing $2500 and the best laptop money can buy in 2022 costs $2500, but is 200% better, so that is calculated as negative inflation rather than static pricing.  However, if ribeye steak can be replaced by 80/20 hamburger at no change in price then that represents static inflation and not positive inflation due to reduction in quality (here).  The result is typically a bullshit number that can and does say whatever is politically expedient.  Much like the unemployment number that when it got too high they just decided if you were unemployed and no longer receiving unemployment you didn’t want a job so you don’t count (here).

The truth is when inflation gets so out of control that Washington has to admit to 7 or 8% and growing inflation, the real numbers are horrific.  Using Shadow Stats (here) to see real inflation as it was calculated before it became politically expedient to tweak the numbers, we see that real inflation is much higher, at over 15% a year recently and between 8-12% a year since the 2008-09 crash.  Prices have gone up between 12-60%, depending on the category just this year

, and to make it worse some if it is hidden in shrinkflation, where the price stays the same but instead of 24 cans of Coke in a case you get 20, hiding but not easing the actual impact of inflation (I know the case of soda is obvious where half an oz out of a bag of chips is more hidden, but I just noticed the soda thing the other day).  While rent and housing are up in the high double digits since 2010, as is fuel.  For the average middle-class family in America, food, fuel, and housing are the three categories that matter most and the hyper-inflation being seen there isn’t reflected in any CPI calculation.  Gasoline is up nearly 100% since 2020, and in some cases over 100%, while food and housing are both up over all 50-150% in the last few years.

The very mechanisms used by the government since 2008 to prop up massive, bankrupt institutions that are “too big to fail” with nearly infinite unbacked fiat dollars, the same mechanism has been draining the middle classes by way of inflation.  This, coupled with stagnant wages or lower wages, has created this situation where a significant majority of Americans, 62%, are living paycheck-to-paycheck.  If we want to look for some historical context, someone making $5 an hour in 1960 would need to make $49.06 an hour now to have the same spending power (here), and that is using the governments numbers. So, in truth, it is probably closer to $65 an hour (All inflation calculations will use the government calculator for consistency. Even if it is lower than reality, it still makes the point nicely).  The median household income in 1976 (the year I was born) with one wage earner was $14,960 on average (here) and adjusted for inflation is the equivalent of $77,357.19 a year today.  The median income in 2019 was $65,712 (here) that is a 15% drop in real income and buying power.  The change is especially shocking considering 2019 is homes with two incomes on average as opposed to the single income most common in the 1970s.  It is worse when we see the median new home price in 1976 was $33,000 or $170,640.86 in today’s money, yet the median home cost today is $357,000 (here).  The functional result is, as a people, Americans make less money and necessities essentially cost twice as much.  For fun, let us look at these same numbers from 1940 to 1970. In 1940, the average wage was $1,368 and that was equivalent to $3,759.54 in 1970 (here).  The median income in 1970 was $9,430 (here). So, people grew much richer between 1940 and 1970.  Then, August 15th, 1971 happened and it all went off the rails over the next 50 years (here).  While some of the pain felt in the middle-middleclass and lower-middleclass is self-inflicted, much of it is also unavoidable due to economic mismanagement on the macro scale.  The truth is people making a median income in America can just barely afford the basics of food, clothing, and shelter.

We are and will see much more economic degradation and poverty as a result.  As a real-world example say a family buys a home in 2019 and has a mortgage payment of $1200 a month, groceries are budgeted at $500 a month, fuel at $90 a month, and all other expenses are $550 a month.  This family doesn’t have credit card debt or lots of loans. They have a car note, utilities, cable or streaming services and dance lessons. However, even with that there isn’t enough for any real savings.  Things go very well for a number of years until suddenly groceries go from $500 a month to $650 a month, even when reducing the quality of items purchased and then gasoline goes to $200 a month.  This increase in expenditures of $260 dollars can be borne by cutting other expenses like dance lessons and cable or streaming services (However this option has carry-on effects such as reducing the income of the dance teacher or cable company that ripple as more people cut extra expenses).  Then, after a couple months food goes to $750 a month.  Unless something happens, this family and millions of others will be squeezed to death and it won’t take a massive amount of time to do it.  With each cutback or retirement savings withdrawal to survive, there will be rippling effects that cause more cutbacks and withdrawals.  Sadly, this is probably an optimistic picture.  For most people, the increased costs strip anything extra out of the budget almost instantly and, as costs continue to rise, start cutting into necessities too.

This is where the danger lies and it isn’t with the mewling children complaining about lost opportunities for things they have no chance of earning.  The danger is with their parents, who did everything right and as a result have something to lose.  This potential loss is tied directly to their self-image and self-worth.  The stage is set. Millions of families just trying to do the right thing and get by are having everything they have worked for threatened by outside forces they don’t fully understand.  This will create an entire class of desperate people and it will be the people who actually work, strive, and do the things that need to be done.  We will see some violent backlash I am sure, but I also think we will see more people losing hope and walking away.  We are already starting to see it (here, here, and here). Imagine a world where you can’t see a doctor, get a plumber, or have an electrical outage repaired without waiting weeks or months because it isn’t worth it, as more people realize the way things are moving it doesn’t matter how hard they work or what they do, it is becoming more and more impossible to win.  It is a grim thought and we are not there yet.  Right now, most of the people throwing in the towel are on the fringes: the young, the unskilled, and the low wage.  That being said, all change happens on the fringes and works its way in until it is the mainstream.

I am not ready to say this is our future, but I will say it is the path we are on and the shift has begun.  At this point, there isn’t an easy way to fix it, but it can be fixed and the first step is to stop printing money that isn’t backed by anything.  The second part is to let those companies that are insolvent due to mal-investment, mismanagement, or incompetence fail.  I say this because as long as the government is giving new full value dollars out to massive banks that then loan them at near zero interest to massive companies who get the full benefit of their initial value, it creates a cycle of continuous devaluation of the money main street and normal people get to use, resulting in the destruction of the middle class.  Some will bow out and just quit, while others will not go so quietly, but either way this fiat death spiral is probably the greatest risk we face, that could and probably will lead to a full collapse of society as we know it.

Isaiah 41:10 So do not fear, for I am with you; do not be dismayed, for I am your God. I will strengthen you and help you; I will uphold you with my righteous right hand.

Keep the faith and God bless you all.

-Sam