Raised in boom times, many Gen-X and Yers see their dreams go bust

Posted by Kendall Harmon

Jason Liebrecht used to write about his motorcycle adventures on his blog. But since early this month, the 36-year-old San Diego computer software engineer's daily musings have been about a less thrilling new experience: unemployment.

"Do I find a job, or do I head to Central and South America on the motorcycle?" he wrote on Day 4. By Day 7, he had become more realistic: "So far in the last week I've made $1,245 off of EBay sales. Mostly stuff I wasn't using, or don't need much. Nice way to clean the house up!"

After selling some stock and applying for unemployment, Liebrecht figures he can pay his $2,300-a-month mortgage and other bills for just two months. When his company health insurance runs out in a few weeks, he'll go uncovered because he can't afford the premiums.

"You have to just hope you land on your feet," Liebrecht said in an interview.

People everywhere are coping with rising credit card balances, falling home values and layoffs. But such worries are particularly jarring for a younger slice of the workforce that has known little but long-term financial prosperity and optimism.

Read it all.

Filed under: * Culture-WatchYoung Adults

53 Comments
Posted April 28, 2008 at 5:28 pm [Printer Friendly] [Print w/ comments]



1. Anglicanum wrote:

As a card-carrying member of the Most Screwed-Over Generation in the History of the Country, I can certainly identify (though I’ve got to wonder how someone gets a $2300-a-month mortgage).

April 28, 6:31 pm | [comment link]
2. Oldman wrote:

I hate to say it, but this could turn out to be the best lesson young men and women between 25 and 35 can learn. Times have been too good and so many I know are vastly overextended. They thought things would only get better as they rose in their professions.  They overspent in anticipation of those rising salaries. Now they know they have to live within their current means minus the enormous debts they must somehow pay off. Being a Great Depression child taught me thrifty living even after times did get better.

April 28, 6:39 pm | [comment link]
3. Saint Dumb Ox wrote:

I would easily be classified as a Gen X or Y.  I do live within my means and have done so for all of my adult life.  I have a family and can’t get a job to save my life.  I have a college degree and no one wants to hire me. 

Boom times may be gone but since the baby boomers turned us all into Consumer Units (re: a number, not a person), if you have no money….you have no hope of ever making any.
</rant>

April 28, 8:05 pm | [comment link]
4. Anglicanum wrote:

Ditto, Ox.  I have two degrees: a bachelors and a masters.  I’m finally able to teach at a local community college, but I was unemployed for three years before that.  I was over-qualified for half the jobs I applied for and under-qualified for the other half.

April 28, 9:20 pm | [comment link]
5. Jeremy Bonner wrote:

And a doctorate only seems to make things worse, as I can testify.

April 28, 10:07 pm | [comment link]
6. Larry Morse wrote:

Some see this as a recession. I see it as a return to normality, the bursting of a big and obnoxious bubble. The housing crisis is a crisis precisely because these homebuyers built on sand at low tide,  and paid no attention to the fact that the tide was really going to come in.
But come in it does, and that is, in fact, normality. In spite of the fact that the price of gas is killing me as a farmer, I know that the gas disaster is simply reality asserting itself. And I submit that TEC vaporous inanities, its bizarre assertions and incongruous actions ride on the same unreality, for TEC has been rich so long, its members       so comfy and fat that they have forgotten that the real world is harsh and unforgiving and that life’s protections are emphemera, not constitutionally guaranteed rights.  Larry

April 28, 11:14 pm | [comment link]
7. Jody+ wrote:

Anglicanum,

The question about getting a $2300 a month mortgage looks different depending on which part of the country you’re from.  Some people would be ecstatic to get a rental for around $2000 a month while for others it might get a house large enough for the aforementioned rental to fit in several times.  Depends on where you are…

April 28, 11:54 pm | [comment link]
8. Irenaeus wrote:

Anglicanum [#1]: I’m sorry about the difficulties you relate, but the phrase, “Most Screwed-Over Generation in the History of the Country,” betrays a lack of perspective. You didn’t go through the Great Depression. You didn’t die in Normandy, Saipan, Pusan, or Khe Sanh. You didn’t grow up in a demographic crunch that adversely affected both your income and your housing costs. You probably didn’t think much about nuclear annihilation. You probably didn’t enter the workforce during a severe recession. Nor did you face an academic job market in which people with PhDs from top schools had difficulty finding jobs because university and college faculties were full of people from their parents’ generation—-professors who did not begin retiring until the 1990s.

Is your generation better off than all its predecessors? No. Is it worse off than all its predecessors? Don’t be too sure about that.

Reality check: Business publications regularly discuss the difficulty of managing younger employees who (metaphorically speaking) expect a soccer trophy just for showing up. In the past people with that sort of attitude got the boot. Employers make do with it now because labor is scarcer.

April 29, 12:35 am | [comment link]
9. rob k wrote:

To add to no. 8 above - So many of the young see their wants as needs, i.e.; home entertainment systems, an expensive bike, resort vacations in Hawaii, etc., a new car every few years, often an SUV, all the electronic gadgets, and more..  Also did many of them really NEED a new home that required the kinds of arrangements that now have so many in trouble?  Some did, I’m sure, but others really didn’t.

April 29, 4:43 am | [comment link]
10. Words Matter wrote:

Piling on with #s 8 and 9 -

When I finished my masters in 1978, I returned to the same job I left to go to graduate school while I looked for an more appropriate job. Every job I applied for had 60+ applicant, most with degrees AND experience. This went on for a year or more until I finally decided it wasn’t that important to have a master’s level job and went on to other things. As a middle-of-the-boom baby, I have been behind the first wave of babies born after the war, so I got the hand-me-down jobs just like I got hand-me-down clothes as a kid.  You know what: it ain’t so bad. The house isn’t much but the yard grows fabulous roses. The job doesn’t pay well, but it’s interesting and satisfying. I don’t have the computer I’d like, but I’m typing on it now. And so on. Life isn’t about recognition and getting what I want. It’s about serving God, caring for my family, loving my neighbors, friendships, and so on.

American culture teaches us we deserve the very best, which they happen to be selling, by the way. And to whine if we don’t get it - NOW.  That’s all a lie. God has a better way.

April 29, 8:09 am | [comment link]
11. Saint Dumb Ox wrote:

Irenaeus,

I would argue about labor being scarce.  I also might argue that “Screwed-Over” implies someone is doing the screwing.  Not just a stock crash or legitimate war, but a concerted effort by local (U.S.) power holders to toy and manipulate and squeeze us just for our dollars (if we have any).  Credit is killing the soul of the country and the credit companies are pouring on the wood and watching it burn.

What we are a part of is a creation of a new classism or caste system.  The events you described still allowed a person transcend a financial class, but now that ability is being made obsolete.  The richest of the rich and the poorest of the poor can never now trade places.

April 29, 8:11 am | [comment link]
12. DavidBennett wrote:

As a member of Generation Y, I have experienced job market frustrations. However, part of my problems were self-caused. My B.A. is in Psychology, and I came out of grad school with a Master of Theological Studies. I was Episcopalian at the time, living in Southern Ohio, looking for a teaching job. In my silliness, I applied at local colleges (many of them evangelical) and even some Catholic high schools (as if a Catholic High School would want an Episcopalian teaching religion classes!). I ended up subbing for about 3 years. A few years later I became Roman Catholic and now teach religion at a Catholic H.S. My point? I wish I would have gotten a more marketable degree or at least a minor in something marketable along the way. Fortunately, during this time I had to live frugally, but also, because I was living with my parents, I was able to save up money. Now I don’t even have cable. I think part of the problem, already mentioned, is that so many things have become “needs” these days (like cable, a big house, a new SUV, etc), that even people making a respectable salary are feeling squeezed. Mind you, there are quite a few in my generation who ARE saving money, living frugally, and still can’t get a job or a fair wage, even after spending many years in college.

April 29, 8:57 am | [comment link]
13. Brian of Maryland wrote:

Several posts have mentioned how difficult it is to find a job, regardless of their educational achievements.  The other side of that coin, depending on which way it’s flipped, assumes someone is taking the risks of leading and managing the organization that might employ them.  A “job” entails many things, including the sales of products and services all because someone(s) who is/are willing to invest their hopes and resources in that endeavor.  Perhaps the tight market for jobs related to dreams and vision for a company that others are leading might spur a few to seek out ways to start their own small business. 

Yes, I am but a simple parish pastor, but I do understand that at the end of the day I am called to lead a particular mission outpost.  Though I can build on the good work of others who have served here in the past, what happens next week (attendance, finances, etc) is related to the leadership I and my team provide the congregation in its current reality.  Nothing focuses the mind more clearly than having to generate financial gifts needed to pay others a decent salary.

Brian

April 29, 9:46 am | [comment link]
14. Clueless wrote:

#13 The climate for starting a business is extremely unfriendly.  While it is true that it is extremely difficult to get decent jobs that pay well, it is even harder to build a small business, and find trustworthy employees that will accept a salary in line with the profits that the business generates.  Most small businesses are therefore family businesses done part time.  As such they have no health benefits and pay less than minimum wage (a small business owner does not need to pay himself minimum wage, and often earns less than his employees who have federal protections).

I have been booting around ideas for small businesses for when I leave medicine.  I anticipate that in a few years we will have some kind of national health system.  When it does it will be best to leave medicine, but building a small business would be more viable than it is now, since there would after all be access to health care.

Right now I am thinking of combining farming with substitute teaching or learning electrical work at night, and learning how to install and run solar panels.  However, whatever business I come up with will be unlikely to employ any but immediate family members.  The laws regarding the various “rights” that employees have, and the poor work ethic of the current generation makes them undesirable employees.

April 29, 10:17 am | [comment link]
15. Clueless wrote:

I might add that I have only modest sympathy for the “most screwed over generation”.  I feel bad for them that they were extended so much debt.  That was a wrong done them. 

Me, I did not own a car until after I finished my internship (at age 25).  Until then I walked, took the bus, and rode my bike everywhere.  I bought my clothes at thrift stores, and my boots and coat at Army Navy surplus stores. I went camping for vacation.  I rented apartments, and later town houses until I was 35 and all my debts were paid off and my training and numerous fellowships completed, and I had saved a 20 percent downpayment. 

I don’t understand why the “most screwed over generation” believes it is entitled to the trappings of wealth with home ownership between age 25 and 35.

April 29, 10:30 am | [comment link]
16. Andrew717 wrote:

As a 29 year old, I agree with #15 Clueless.  We aren’t screwed over.  Yeah, I graduated in the midst of the dot com crash, and had my first job interview on Sept 11, 2001.  Took me months to get a full time job, and even then I had to keep being a substitute teacher while working nights in order to make ends meet and pay down my debts.  So?  Too many of my peers expected to leave school and go directly into their dream jobs.  That simply doesn’t happen, outside of a very few.  I’m lucky in that my fiance was very frugal (living with her folks, driving a hand-me down car)while at the same time lucky enough to get vast amounts of overtime (working 60-80 hours a week) a few years ago, and able to buy a condo.  I’m thrilled to now be able to live in her parents’ basement till the wedding, so we can save for a honeymoon.  Life isn’t easy, Adam’s curse is still in effect, but all the same life is wonderful, and there isn’t any other time I’d want to be alive.

April 29, 11:03 am | [comment link]
17. Irenaeus wrote:

St. Ox [#11]: The unemployment rate is lower now than it was during the 1970s, 1980s, or early 1990s: http://www.bls.gov/cps/cpsaat1.pdf
That’s why employers feel they must deal with problem attitudes instead of just booting the employees in question and hiring one of the scores of others who wanted the same job [cf. Words Matter in #10).
_ _ _ _ _ _ _ _ _ _

I share your concern about an economic caste system in which upward financial mobility becomes increasingly difficult. Note that this has been a problem at least since the oil-price shocks of the 1970s. Many workers have seen their real wages grow only very slowly. Manufacturing jobs, the classic road to the middle class, have dwindled. But globalization now means that if you as an American produce something that can also be produced abroad (from toys to manhole covers to customer service to legal research), you are now competing with bright, highly motivated people from poor countries who are delighted to work for $1 an hour.

Given these challenges, you’d think Americans would overwhelmingly want to spend wisely, invest prudently, and make the most of educational opportunities. You’d also think they would demand that the federal government balance its budget. Under President Bush, the federal government’s publicly held debt has grown from $3.2 trillion to $5.2 trillion as of today—-a 63% increase in just six annual budgets.

April 29, 11:37 am | [comment link]
18. Irenaeus wrote:

Following up on Rob K & Clueless’ points about seeing wants as needs:

If you went and checked etiquette books of the 1950s or 1960s, you might see Emily Post or Amy Vanderbilt fielding an affluent reader’s question about whether it was proper to let children wear prestigious-label clothing (e.g., Saks Fifth Avenue or Abercombie & Fitch) to school.

Answer: OK, but cut the labels out so that children who can’t afford such expensive clothing don’t feel bad.

Now the labels (or their equivalent) are much larger and you wear them on the outside.

April 29, 12:25 pm | [comment link]
19. Little Cabbage wrote:

Oh, please!  As a middle of the ‘Boomer’ who graduated in 1973 with a BA from a top school:  it’s been BAD for f35 years for folks who lacked an engineering degree, or computer savvy, or connections, or lots of family money to pad their way into adulthood.

Get off the generational stuff.  Many of us who are ‘boomers’ have lagged far, far behind our parents in economic opportunities and options.  I personally know of at least SIX PhD types who have never been able to pursue the academic, scholarly careers of which they dreamed.  Their problem?  They majored in English Lit, languages and history—instead of Computer Science, Engineering or something related to medicine (my dozen or so friends in the latter field made out like BANDITS and all took early retirement).  Heck, I wish I had ditched college (I was the first in my family to attend, much less graduate) to pursue building houses!  I would have been a multimillionaire by now, with loads of time to take college courses as I wished.

Life ain’t easy, no matter what the generation.

April 29, 8:05 pm | [comment link]
20. Anglicanum wrote:

At no point in my (one line) comment did I say my generation was ‘worse off’ than any other generation.  I said we were ‘screwed over.’  Certainly, my standard of living is better than someone living 50 or 100 or 150 years ago.  But that’s not what I’m talking about.  I’m saying that the generation of people born between 1965 and 1982 has been given the shaft. 

To take just two pertinent examples, preceding generations have run up a massive deficit that we’re going to be left to pay off, and we pay a ridiculous amount of money in Social Security taxes that will most likely not be available to us when we retire.  All the while, our liberal arts degrees are essentially worthless (and yes, many of us were encouraged to get liberal arts degrees by our high schools counselors, who told us that they would always be helpful and relevant and ‘open doors’—probably because they *did* open doors when the counselors themselves graduated from college in 1968).  We leave college (and grad school) with massive student debt that we have no hope of paying off.  And our children, God bless them, are a financial liability, because they cost entirely too much to raise.  And there’s certainly no relief in sight, because the preceding generations are going to do everything they can—usually through organizations like the AARP—to ensure that they get ever last penny of their entitlements.

It’s very very easy for people to say, “Ah, just get over it.  Your life ain’t so bad!”  But that really does nothing to mop up the anger and cynicism so many in my generation feel for being left to clean up the messes the two previous generations have made.  Surely I’m not the only person here who feels this way.  (Well, I know I’m not.  I know several of you personally: you’re my age, and this is what we talk about when we get together.  Might be helpful if you chimed in, actually.  It’s lonely out on this ledge.)

And you’re right, Irenaeus: perhaps it was unrealistic to expect that things were going to continue the way they have for the last 100 or so years ... you know, people doing better than their parents, making money, buying houses and all that.  Maybe we *should* have known that things couldn’t continue that way.  But such Monday morning quarterbacking isn’t actually helpful to me or my family.  I was told that this was the way things worked, and it was certainly what I saw my own (Baby Boomer) parents do: graduate high school, go to college, get married early, do everything right, and the American Dream is supposed to kick into full gear.  Well, it hasn’t: I live in a very modest house that I can barely afford, had all of my children in wedlock, have two degrees under my belt, buy as little on credit as possible, and am simply not making it ... largely because I pay too much in taxes, it costs too much to raise children, and can’t find a better job to save my life.

When you tell me, in not so many words, to ‘just get over it,’ I feel like I’d like to kick you in the shins.  I can’t get over it ... my parents both retired at 54 and take trips down to Cancun every other month.  I’m looking at working until I die (literally: I have come to the realization that I will not be able to retire, especially if there’s no Social Security) and I can’t even afford to take my kids to the movies once in a while.

I’m not even sure if I want to click ‘submit’ here, because I’m afraid the reaction to this will be either (1) just get over it, or (2) “Well, I’m a Gen-Xer and I’m doing *just fine!*”

Oh well, tear it apart if you want.  It’s my experience and its the experience of a lot of us.  I guess that’s what the original article was about.

April 29, 10:24 pm | [comment link]
21. Anglicanum wrote:

Whoops! I should make it clear that I don’t want to kick Irenaeus in the shins.  He seems like a very nice man, actually.  The ‘you’ in the third from the last paragraph was second person plural.  Sorry, Irenaeus.  I would never kick you in the shins.

April 29, 10:26 pm | [comment link]
22. KentuckyLutheran wrote:

I guess I am part of generation Y, and while I certainly don’t think we are “the most screwed over generation,” I do think that those older than us overlook some of our challenges.

Take college for example. Tuition is rising so fast that it is forcing many of us to go into deep debt through loans. I got my BA at a state school and watched my tuition go up by 10% or more each year. People who start a freshman now are paying almost double what I paid my first year. Tuition is greatly outpacing inflation, and sadly for many scholarships, federal aid, and parental largess are not keeping pace. People are graduating with huge debts, and are more likely to work during school.

I remember when I went to college (2001), a member of my congregation told me about how when he was in school he worked construction all summer and had enough to pay his tuition and living expenses for the upcoming school year. This man graduated with a BA from a religiously affiliated private institution in the mid 1960’s. Maybe he was exceptionally lucky, but I would still love for someone to show me a summer job where you could set aside enough money to pay normal tuition for two semesters at a state school.

These are things that don’t really register with boomers, most of whom went to school during a time of huge expansion of higher education. Say what you will about your challenges finding a job 35 years ago, now imagine them with $40,000 in debt hanging over you.

April 29, 10:27 pm | [comment link]
23. Clueless wrote:

I am not unsympathetic to the problems of generation x/y.
I think the problem has to do with expectations.  I do not expect that social security will be there for me when I retire, indeed I expect the money in my 401k funds to be confiscated via taxation and I anticipate working my entire life.  (which is part of the reason I am looking to set up busineses that can be worked in retirement). 

My parents did enjoy retirement (and I am glad for them) however neither I nor my brother or sister will do so.  On the other hand my grandparents never got to “retire” so whatever.

Retirement is a luxury that will be looked on as a historical anomaly.  I’m happy my parents got the benefit of it.

As regards housing and college, yes, the costs for these have sky rocketed.  Therefore I have made it plain to my children that they will be attending the local state school not pricy private schools.  (They are good with that).  I also made it clear that I expect them to work their tails off during summer and the school year in order to get enough dual credits in so that they can graduate in 4 years not 6, and I have made it clear that I will not be subsidizing any airy fairy liberal arts degree.  (They are good with that also).  They also understand that nobody in my household (including myself) gets a credit card unless they need a temporary rental, in which case it comes out of the strong box for the purpose.  We pay in cash.  My eldest is trying to save enough money to buy a car, but will not be permitted to do so until she can buy the insurance for it also.  My kids don’t have cell phones, I don’t have cable, and I sleep in the same bed I slept in in my parents home 40 years ago.  My furniture is college style.  My clothing is Walmart/Target.

Nor are jobs as secure for boomers as Gen X/Y might think.  I personally have held 8 different jobs (some part time) over the past 10 years, for a variety of reasons (need to move for family reasons; need to move because an employer had unethical business practices; need to move because of illness in the family; need to move because of cutbacks due to the economy; and the age old need to make more money.  At one time (when a kid was sick and needed pricey treatment) I worked 3 jobs.

So yes, other people have found the economy difficult, and nobody has had as much fun as the folks entering their careers in the post WWII boom.  Every generation has had its challenges.  Some generations whine about their challenges more than others.

April 30, 12:08 am | [comment link]
24. Andrew717 wrote:

My apologies Anglicanum.  I interpreted your early posts and St. Dumb Ox’s as a “gee, older folks had it so much easier” rant.  Which is something I hear a fair bit from our contemporaries.  I empathize with your troubles.  If money were no object I would dearly love to be a history professor.  But I recognized that job prospects were slim, especial for male WASPs who aren’t communists, and history must remain my hobby.  My best friend persisted in seeking an academic career (despite his father suffering the same sort of problems in the late 70s you’re experiencing now and abandoning academia) and he is now, at age 31, starting his first full time job.  And no, it has nothing to do with any of his degrees.  But he has at length come to the same conclusion as myself, that we are not entitled to academic careers, and sometimes one must take an economically productive career instead of the contemplative career one would prefer. 

I do agree that those to whom the answer to every question is more taxes, more government, and less individual freedom are doing their damndest to screw us.  But I don’t feel like they’re singling us out, the Left screws everyone.

April 30, 12:19 am | [comment link]
25. Irenaeus wrote:

Anglicanum [#20]: You have every right to criticize those who have saddled your generation with an enormous debt. Just remember who they are.

Under President Clinton, the federal government reduced its publicly for the first time in a generation—-and sharply slashed the size of the debt in relation to the nation’s total output of goods and services. Had the Clinton Administration’s fiscal policies remained in effect, the United States would have paid off its publicly held debt by the end of this decade. Instead, Bush Administration policies will have doubled it.

But don’t expect to have a meaningful discussion of that with T19’s more outspoken right-wing commenters. They wouldn’t want to sully their preconceptions with unwelcome facts.
_ _ _ _ _ _ _ _ _ _

Three points about Social Security.

First, Baby Boomers have paid for Social Security coming and going. They helped pay for their parents’ and grandparents’ retirement. They also paid SocSec taxes at higher rates, to higher maximums, and for more of their lives than previous generations. Why? Social Security funding was comprehensively revised in 1983 (when most Boomers were still in their twenties) to assure the financial strength of the system. The 1983 reforms may not be enough—-but they probably represent the most fiscally stringent steps taken in the history of the system.

Second, official predictions about depleting the reserves of the Social Security trust fund rest on conservative assumptions about future growth in U.S. population and economic productivity. Somewhat higher increases in population would leave the fund in the black.

In any event, even if the trust fund depleted its reserves, you would still get benefits (assuming that future Bushes and their followers have not succeeded in wrecking the government’s finances). Current revenues from SocSec taxes would cover most of scheduled benefit payments—-and if we were currently paying down the national debt, it would be easy to make up any shortfall from regular tax revenues.
_ _ _ _ _ _ _ _ _ _

“I was told that this was the way things worked…: graduate high school, go to college, get married early, do everything right, and the American Dream is supposed to kick into full gear. Well, it hasn’t”

Poignant and true. But keep in mind that many Baby Boomers could say and have said the same thing. They entered the workforce at a time of slow economic growth, high interest rates, downsizing, and skyrocketing housing prices. Many of them aren’t much better off than their parents were. That doesn’t help you—-but remember that the sort of economic challenges you face have been at work for some time.

April 30, 12:30 am | [comment link]
26. Irenaeus wrote:

“[When] a member of my congregation…was in school, he worked construction all summer and had enough to pay his tuition and living expenses for the upcoming school year. This man graduated…in the mid 1960’s”—-Kentucky Lutheran [#22]

Exactly. This man, whom you see as a prototypical Baby Boomer, was born during the 1940s, near the beginning of the Boom. He came of age at a time of broad prosperity and high employment.

If you were born at the midpoint of the Boom, your college years would have coincided with the worst recession since the Great Depression—-and, more broadly, with a decade of “stagflation.” Few college students had the sort of summer earnings you describe.

People often speak as though Baby Boomers were all born between 1949 and 1950, but it just isn’t so. As Words Matter [#10] and others have pointed out, those born later often faced slim pickings (not to speak of missing out on LSD, hippies, and campus riots).

April 30, 12:50 am | [comment link]
27. Clueless wrote:

I am a Boomer (age 50) and current revenues will not ensure benefits.  The so called SS trust fund is no more a “retirement” vehicle than is the IOU from your Uncle Bob 20 years ago that is sitting in a drawer someplace.

The so called benefits will be paid by debasing the US dollar as it has been debased since Nixon took us off the Gold standard in 1977.  Thus, yes we will have SS however our checks will just about cover our water bill, and not much more.

The fact that the Boomers paid into the so called trust fund that was then stolen by the Left to pay for current entitlements both for their parents and for themselves does not detract from the fact that those on the later end of the Boom will seen little of their money, and those in Gen X/Y will see nothing at all.

As for Clinton slashing the debt, Clinton simply changed accounting techniques so that that is how it looked.  The debt rose during Clinton’s time, and has risen more since. It is now so high that the only way it can be paid is in depreciated currency which is WHY college, health care, gasoline, food and indeed everything other than the CPI (changed under Clinton to make inflation disapear) has skyrocketed.

April 30, 12:53 am | [comment link]
28. Irenaeus wrote:

Correction to #25: the second paragraph should begin, “Under President Clinton, the federal government reduced its publicly HELD DEBT for the first time in a generation.”

And in 1983, Boomers ranged in age from 19 to 37, with most in their twenties or early thirties.

April 30, 12:55 am | [comment link]
29. Clueless wrote:

As to being a “history professor” I too had academic dreams.  Most people would have loved the life of a college professor of the 70s.  Spent 15 years in academic medicine before realizing that it was a fools game that I was born too late to win. 

Life goes on.  And it can be very sweet once you get over initial disappointments

April 30, 12:59 am | [comment link]
30. Irenaeus wrote:

Dear Clueless (one of my favorite commenters): You’re wrong on a great many points in #27.

But I’d particularly like to see you substantiate two of your assertions:

—- First, that the Clinton Administration “simply changed accounting techniques” to make government debt look like it was falling when it was actually rising. What was the accounting change and when did it occur?

—- Second, that the Clinton Administration “changed [the CPI] to make inflation disappear.” What was the change and when did it occur? In what way was it misleading?
_ _ _ _ _ _ _

On a couple of other points:

—- President Clinton’s last four budgets were in surplus—-the first time in 70 years that the federal government had four consecutive years of budget surpluses. Record deficits under Reagan and GHW Bush became record surpluses under Clinton.

—- The government’s publicly held debt, which under Reagan-Bush policies would have grown to $6-7 trillion, instead fell to $3.2 trillion.

—- The total public debt (a larger figure) grew modestly under Clinton in absolute dollars but fell sharply as a percentage of GDP.

—- The market price of gold FELL from $360 per ounce in 1993 to $280 in 2000. (It is now $890.) If your assertions about huge depreciation of the dollar (plus all the inflation) under Clinton are correct, then the market price of gold should have soared. Instead, it fell by some 25%.

Here is historical data about gold prices: http://www.measuringworth.com/gold/

April 30, 1:55 am | [comment link]
31. Anglicanum wrote:

Life goes on.  And it can be very sweet once you get over initial disappointments.”

This is very true.  I wouldn’t want people to think that I’m a seething cauldron of bitterness and cycnicism.  Actually, my wife and I have come to terms with the fact that this is just how things are.  We’re really a very happy family.  No cable (which we can’t afford, but wouldn’t have anyway), which leaves more time for reading aloud in the evenings and taking walks to the park.  The church is the center of our life.  My kids all have good friends.  We write and draw.  I wouldn’t trade any of this.  Paul tells us to ‘give thanks in all things,’ and I take that duty seriously: I thank God that we aren’t rich.

Having said that, with gas already close to $4 a gallon and going higher, and food obnoxiously expensive, I’m not sure how much longer our boat can stay afloat.  It’s difficult to *not* be bitter when the older folks across the street are on a safari in Africa and I’m not sure where dinner is coming from.  But dinner always lands on the table in the end, even when it’s cornmeal mush and store-bought bread.  (And keep in mind, my wife and I are both holding down full-time jobs.)

Clueless: I understand what you’re saying about the difficulties of starting a small business.  If I could, I would own a little bookstore.  There’s no way now, though.  Good luck with the farming.

April 30, 7:57 am | [comment link]
32. Andrew717 wrote:

Gold almost always falls during the final throes of a bull market, as people sell gold to buy the wildly soaring assets, in the case of the late Clinton years, dot com stocks.  And as the economy overheated (leading to a temporary surge in tax reciepts) and the Republican congress (not yet sunk into the rot of the more recent years, but still of a gingrich-esque complexion) held down domestic spending and the gap between the end of the Cold War and our being forced to take notice of the radical islamist threat allowed military spending to be slashed.  So yes, the deficit declined.  But Ireanus, you can’t honestly think the tax recipts of the height of the dot com bubble would have continued all this time, if only Bush hadn’t been elected?  You’re smart enough to know better.  Is bush pefect?  No.  Is Bush capable of traveling back in time to several months before his election and popping the dot com bubble?  Also no.  I’m sure you’ll dismiss this, as you dismiss any facts with snide comments about my being right wing and blind to “facts” like how ahistorical economic growth can continue forever, so long as people have “(D)” after their names on CNN.

April 30, 9:38 am | [comment link]
33. Clueless wrote:

http://www.shadowstats.com/article/53

Hi Irenius:

Manipulating the CPI was not unique to Clinton.  It was done rather more under Clinton than under his predecessors, and unfortunately Bush has continued the scam.

Currently Inflation is running about 12% using 1980 methodologies, (not so far from the worst of the Carter years) and unemployment is running also around 12% (about half that of the Great Depression).

My advice to Gen X is
1.  Don’t depend on either SS or on your 401k (which will be taxed away).
2.  Pay off all debts (using retirement monies if need be) including your mortgage.
3.  Grow your own food.
4.  Lower your monthly expenses.
5.  Buy precious metal and keep it in a safe place in physical form, preferably not in your home or bank safe deposit, and definately not in “shares”.
6.  Be prepared to work at something that can be done on a barter system, and that does not require subsidies from the government.  Preferably your own business (get your hands dirty).
7.  Anticipate hyperinflation and prepare accordingly.
8.  See that your home is protected.

As to why gold dropped, it dropped for the same reason that silver dropped.  More silver and gold shares were sold on COMEX.  Interestingly about three times more silver has been sold on COMEX than has been mined in the history of the world.  Thus, (obviously) silver and gold have been leveraged.  Unfortunately, the chinese and the japanese are begining to distrust the concept of paper precious metals.  Also, silver has multiple industrial uses, and the worlds silver shares are running low.  This shell game can go on a long time (as did the real estate leverage game) however it can’t go on indefinately.  You can’t make a cell phone chip with a paper share of silver.  Industry needs the actual metal.  When this is discovered, the deleveraging of precious metals will equal the deleveraging of the housing market (under way) and the deleveraging of the stock market (which will fall within 2 years if not this summer).

Because, like Social security, 401ks and the price of gold is a ponzi scheme.  those who got in early got wealthy.  Those who got in late got shafted.  As the boomers retire (if not before) the great run up in stocks caused by them buying stocks and banks leveraging this will operate in reverse.

And when it does eventually, after the inevitable “horror” and “shock” who’d have thunk?” Gold will rise.  (Silver more so).

I recommend you read the two power points on this web site:
http://www.prudentbear.com
and this
http://www.thelongwaveanalyst.ca/cycle.html

Shari

April 30, 10:33 am | [comment link]
34. Irenaeus wrote:

Shari [#33]: Silver trading exceeds the available supply of silver for two innocent reasons. First and most importantly, on an exchange like the Comex, you typically buy or sell a contract to deliver a specified amount of silver on a specified future date. That date could be two months, two years, or five years from now. The contract could change hands every day for five years and yet the amount of silver delivered at the end remains the same. Second, any silver delivered under that contract can become the subject of another futures contract. All above board.
_ _ _ _ _ _ _ _ _ _ _

I don’t have time right now to read all the way through the conspiracy website, but here’s a thought for the moment.

As Fed chairman, Alan Greenspan took a keen interest in how to measure inflation. (BTW, he had high regard for the integrity of the Bureau of Labor Statistics.)

Greenspan would pose this question to illustrate the difficulty of measuring the “cost of living” as life itself changed over the decades: Let’s say you can choose now between (1) receiving 1950s medical care at 1950s prices (meaning that it will be dirt cheap) and (2) receiving 2008 medical care at 2008 prices. Which would you take?

April 30, 11:43 am | [comment link]
35. Clueless wrote:

I didn’t say it wasn’t above board.  All of these fancy CDO derivative stuff is legal and above board.  So is the idea that the entire world can enjoy retirement as part of what used to be called a “rentier” class by living off of 401k proceeds above board.

I’m saying that it is obviously not going to work.  The 401k concept is doomed, because it is premised on the assumption that it will be possible to sell stocks for more than you bought it (meaning the assumption that stocks will rise in price).  In point of fact, averaged over 100 years stocks eke out a historical gain of 2%, with negative percents for up to two decades at a time.  If the bull market reverses (as it must, because you can’t sell a stock if there is nobody there to buy it) stocks will fall in a bear that will be equal in length (roughly) to the preceeding bull.

Silver shares are legally traded.  Nobody doubts this.  Just like housing mortgages can be legally traded.  They can be cut up, sliced and diced and folks can get their financing fees on both ends.  Thus subprime housing is now held in derivative form by pension funds, 401ks, all over the world, with the amount of money multiplied by the magic of leverage.  This again depends on Trust.  If folks suspect “Gee those subprime borrowers may never pay” they want their money back.  The cascade then works in reverse, and credit dries up (as as happened).

Silver futures also operate on trust and are leveraged.  This works as long as everybody honestly believes there is enough silver/gold/oil other commodities out there so that when they need the product they can have it.  If folks realize “Gee I may never see my money back” then they call those options back.  Then folks who really need the physical commodity start hoarding, then the rout begins.

I Never said it wasn’t legal.  Said it was a ponzi scheme that was designed to fail after those who had set up the scheme had retired.

As to Greenspan’s comments, I personally would prefer 2008 medicine at 2008 prices paid in 1950 dollars converted to gold.  Then I would have excellent medicine at even better prices.

April 30, 11:59 am | [comment link]
36. Irenaeus wrote:

“Gold almost always falls during the final throes of a bull market, as people sell gold to buy the wildly soaring assets, in the case of the late Clinton years, dot com stocks”—-Andrew717 [#32]

Andrew: You don’t know what you’re talking about. Stock prices rose substantially during the Clinton years because Clinton’s commitment to reducing the federal deficit allayed fears of future inflation and thus brought down long-term interest rates. Other things equal, as interest rates fall, stock prices rise. So does long-term investment of the sort that boost productivity. Take the case of an A-rated corporation thinking about whether to open new plants and finance them with 10-year bonds. If the corporation must pay 10% interest, it will be much less ready to open new plants than it would be if it could borrow at just 6% interest. If long-term interest rates fall, the corporation will become more willing to make productivity-boosting investments. Lower interest rates facilitate sustainable economic growth.

Now let’s look at things from investors’ side. If a cautious investor can get a 10% return from A-rated corporate bonds (or, for that matter, a 9% return from Treasury bonds), she may be glad to take it. But if those yield only 5%, the investor will become more willing to buy corporate stock. The stock is riskier but has a higher potential return. As investors become more willing to hold stocks, corporations can more readily raise equity capital—-and use it finance additional productive investment. That is what happened during the Clinton years.

Rising stock prices and rising incomes increased government revenue. Falling interest rates reduced the cost of financing the public debt. But turning record deficits into record surpluses was not a quirk of rising stock prices. Clinton took office near the bottom of a recession—-at a time when people did not know a recovery had even begun. His fiscal 1994 budget slashed the deficit through a combination of spending cuts and tax increases. Long-term interest rates fell. Productive investment increased. The economy began years of balanced, sustainable growth.
_ _ _ _ _ _

You assert that gold prices fell because people were selling gold to buy technology stocks. But the recent real-estate bubble has been much larger and more pervasive than the tech bubble. Under your reasoning, the gold price should have fallen during the real-estate bubble to levels at least as low as in 2000. It hasn’t.
_ _ _ _ _ _

We have huge deficits through a combination of Bush tax cuts and spending increases. Bush pushed tax cuts during the 2000 campaign, insisting that they would not cause deficits. He could never get the math to work during the campaign and it hasn’t worked since. Gore argued that tax cuts of the size proposd by Bush would result in massive and chronic deficits. They have. Whatever you may think of Bush and Gore, events have validated Gore’s projections and discredited Bush’s. You cannot, in the long term, run an economy on make-believe.

April 30, 12:34 pm | [comment link]
37. Irenaeus wrote:

“Averaged over 100 years stocks eke out a historical gain of 2%”
—-Clueless [#35]

Over the past half-century, stocks have provided an average annual return of 10.4%.

I don’t have 100-year data handy, but your 2% figure sounds way to low. If it were true, then investors as a group are monumentally stupid. Why accept a 2% return on stocks when you can get a higher return by investing in bonds or tangible assets? Investors make mistakes like that from time to time—-but then stock prices fall and opportunities to profit from stocks present themselves once again.

Financial markets, flawed though they are, are not nearly as grim as you think.
_ _ _ _ _ _ _ _ _ _

BTW, how will politicians manage to confiscate your retirement savings? It’s not clear they have enough resolution to collect a modest tax on gasoline. Barring a dictatorship, how will they have the political support to swipe your 401(k)?

April 30, 1:12 pm | [comment link]
38. Andrew717 wrote:

Ireaneaus, if you think the late 1990’s stock market was rational and had correct pricing, you are truly lost and there is no point discussing this further.  Yes, a portion of the increase followed what you describe.  But the unbridled lunacy of much of the pricing is, I thought, plainly obvious to anyone.  The S&P;500 was trading around double the “normal” price in P/E terms.  And you think it’s an accident that Clinton’s good economic policy started the same year that Republicans took the House? 

As an asside,  I think Clueless is talking about inflating away the value of the 401(k), the so-called “invisible tax.”

April 30, 1:21 pm | [comment link]
39. Andrew717 wrote:

And a 2% return after inflation sounds about right.  According to Niall Fergusson the real rate of return on British bonds was negative for much of the 20th century.

April 30, 1:27 pm | [comment link]
40. Clueless wrote:

Very easy.  It will be called the “Save Retirement Bill” or some such.

“Panicky” speculators and idiots will be blamed for withdrawing their 401k funds, and withdrawals will be frozen (so that the funds will be there when you _really_ need it).

Since we are in a period of historically low taxes these will be increased (tax the rich scum or Tax fairness act).  Since the 401k are pretax to be paid at income tax rates on withdrawal this will tax them away.  Recall that the tax rate was has high as 70% quite recently.

Actually Hillary was talking about a “one time” 15% tax on all IRAs and 401ks back when Bill was in office (didn’t happen) to fund her health bill.

It is quite easy to tax a pretax account.  It is after all pre tax.  You didn’t think taxes would stay low indefinately did you?

And that is before inflation.

And yes, if you begin looking at the stock market in 1900 2% real return is what you get.

April 30, 1:39 pm | [comment link]
41. Irenaeus wrote:

“Ireneaus, if you think the late 1990’s stock market was rational and had correct pricing, you are truly lost and there is no point discussing this further”

Andrew717 [#38}: This sentence neatly exemplifies the difficulty of conducting a reasoned, fact-based discussion with you. I offered a long, thoughtful comment [#36]. You offer a silly caricature of it—-as though there were no difference between years of real growth and the excesses of an advanced bull market—-and imply that I am too delusional to merit any further waste of your time and insights.

Rather than entering into serious reasoning that might not square with your emotion-laden preconceptions, you toss up a straw-man argument and go away justified in your own eyes. Not for the first time, either.

April 30, 3:10 pm | [comment link]
42. Irenaeus wrote:

Shari [#40]: Can you point me to a source for your 2% figure?
_ _ _ _ _ _ _

If you’re concerned about U.S. inflation, you have a wide range of investments available for your 401(k), ranging from inflation-indexed bonds to the stocks of top-quality foreign companies.

April 30, 3:17 pm | [comment link]
43. Irenaeus wrote:

Some earlier comments suggest that inflation confers a financial benefit on the federal government. That is true only if the government can largely avoid future borrowing. Inflation increases the cost of all new borrowing (e.g., to fund deficits) and of refinancing existing debt when it comes due.

April 30, 3:23 pm | [comment link]
44. Andrew717 wrote:

You offered a “thoughtful comment” that ignored major facts concerning the period in question.  We weren’t talking about the reduction of the deficit in the mid-90’s.  We were talking about the tax situation in the late 90’s as it related to the projected budget surpluses of the 2000’s which did not in fact come to pass.  That situation was tied inextricably to the market froth at the time, as stated in this New York Times article from October 2000:
http://query.nytimes.com/gst/fullpage.html?res=9907E6DE103EF933A15753C1A9669C8B63
You offered a long, thoughful but ultimately off-topic comment.  The period under discussion is infamous for tossing the normal modes of asset valuation out the window.  This isn’t news.  It isn’t an emotion-laden preconception.  It’s the generally accepted fact.  And has been for close on a decade.

April 30, 3:30 pm | [comment link]
45. Irenaeus wrote:

“You offered a long, thoughful but ultimately off-topic comment”
—-Andrew717 [#44]

Another hit-and-run evasion. I responded (among other things) squarely to your arguments. If mine were off-topic, so were yours. Now you plead “off-topic” rather than risk grappling with unwelcome substance.

You write as though this were one of those political food-fight shows on television in which one “wins” by having a snappy last word and never admitting to any error or uncertainty.

April 30, 3:47 pm | [comment link]
46. Andrew717 wrote:

It’s not a hit-and-run evasion.  My argument is that the projected surpluses were naught but air and wishful thinking.  You respond by saying I don’t know what I’m talking about, and proceed to discuss asset valuation as it exists in a rational market enviroment.  My whole point is that was not the case.  I provide a link to a source that is, if anything, left-leaning to support my argument.  Again, how is providing a contemporary source from the “newspaper of record” hit and run?  You frequently talk of the budget surpluses of the late 90’s as if they were repeatable for the last eight years if only we didn’t have Bush.  My argument is that those projected surpluses were based on fallacious reasoning, and would not have come to pass if Bush had not been elected and Gore had continued the Clinton policies, because the underlying economic situation changed, and the surpluses were the result of an ahistorical anomaly.

April 30, 3:56 pm | [comment link]
47. Irenaeus wrote:

PS to #45: This thread involves an article about Gen-X and Y-ers’ travails and and disappointments. The liveliest discussion turned on whether the latter are “the Most Screwed-Over Generation in the History of the Country.” Eminently relevant to that question is what sort of government debt and macroeconomy that generation inherited. Debt run up during the past decade isn’t just something that “They” are doing to “us.”

April 30, 4:01 pm | [comment link]
48. Andrew717 wrote:

I haven’t found anything on the web about the long term real rate of return, at least nothing the filter here at work will let me see.  But for a long, very detailed discussion see

The Cash Nexus
Niall Fergusson
Basic Books, 2001
ISBN 0-465-02325-8

He mostly uses British figures (partly because he’s British and was teaching at Oxford at the time, IIRC, partly because they have the longest data set)  Should be at your local library.  I’m sorry I haven’t got a web reference.

April 30, 4:03 pm | [comment link]
49. Clueless wrote:

Inflation indexed bonds that are linked to a bogus CPI are not much use to me.  Also, in the event of a Treasury default (whether a forthright “we aint gonna pay” or a backhanded money printing default by hyperinflation while pretending that hyperinflation doesn’t exist) again Treasuries will not be very useful.

I do have some investments in saver nation index stocks (notably Japan) because I figure that while their stock market may well tank, the drop in their stock market will be less than the drop in the dollar.

However the problem is the US printing money (actually “borrowing” money from the Fed (nominally independent) who then sells IOUs to impoverished but trusting Chinese peasants who will be paid back in debased greenbacks.  I might add that it is curious that both Japan and China have been reducing their Treasury levels, while “hedge funds” in the Carribean have somehow been able to buy up our debt at over 40 billion a month, now being our 3rd largest “foreign” debtor.

I was not aware that the drug lords of the Carribian were rich enough to surpass Saudi, and yet stupid enough to buy long term US treasuries at a time that everyone else is fleeing. Still somebody apparently can come up with 40+ billion greenbacks to buy our IOUs (Can you spell “printing press” ).

This sort of stupid inflationary behavior would indeed cost any other government dearly, insofar as nobody would buy new debt.  The ONLY reason that the US gets away with doing this is because we are or were the reserve currency of the world.  If China dumps its Treasuries the dollar will plunge, inflation will soar (already happening) and its export driven market will collapse. 

Further China will then need to do something with the sacks of greenbacks we hand back to them.  Invest in the chinese stock bubble?  (already happening) Invest in the chinese housing bubble (already happening) buy our food (already happening).

We are exporting inflation to the poor nations of this world because we insist on living beyond our means and pretending that we can afford the Great Society programs that had bancrupted us in 1977 when Nixon had to take us off the gold standard to keep us solvent, and which have plunged us even further in debt ever since.

If those Chinese pesants would be happy never to cash in our IOUs this could go on indefinately.  Unfortunately they (like us) are aging.  When they need to eat, they will want to trade our IOUs for food.  This will result in food inflation.  And commodity inflation.

It has already begun.

April 30, 4:12 pm | [comment link]
50. Clueless wrote:

http://www.zealllc.com/2001/deflate.htm

The above website will give you the Dow adjusted for inflation

April 30, 5:59 pm | [comment link]
51. Clueless wrote:

http://www.safehaven.com/article-2764.htm

The above will give you the curious information about the apparently fabulously wealthy but secretive “Carribean Hedge Funds” who just love long term treasuries.

April 30, 6:04 pm | [comment link]
52. Clueless wrote:

As to whether Gen X/Y are more screwed over than anyone else, I think that nobody will be spared in the period between now and about 2020.  Not the young whose earnings will be taxed into oblivion.  Not the old whose savings will melt in the heat of inflation.  Not the sick or weak or those who love them.  “Evidence based Guidelines” ostensibly directed at preventing “fraud and abuse” will surely find them “scientifically” ineligible for all but the most basic of care.  Nobody wins in a Great Depression.  We are all screwed over, those who bought more house than they could afford and those who bought more Medicare and SS than their country could afford.  And finally, the rest of the world who trusted us, and who thought we were honorable and would never lie to them when we borrowed money that they would need for their old age.
I wish that the “Greatest Generation” had had the courage to pay their debts before it got to this point.  However, I also am quite sure that if we can keep our kids

April 30, 6:15 pm | [comment link]
53. Clueless wrote:

sorry.

The last sentence was simply a note to the effect that if we can get out kids safely through to 2020 the economy should turn once more.  Nothing lasts for ever, though some things can be dreadful for a long time.

We are in a “Kondratieff winter”  It is part of the “normal” economic cycle.

http://www.kwaves.com/kond_overview.htm

The last “winter” happened in the Great Depression.  If you read only one link, read the above.

April 30, 6:23 pm | [comment link]
Registered members must log in to comment.




Next entry (above): NPR: Why Do We Borrow So Much?

Previous entry (below): LA Times: McCain Doesn’t Put his Faith out Front

Return to blog homepage

Return to Mobile view (headlines)