Blog Archives

The Hollowing Out of America

America is being hollowed out, but since we don’t measure what actually matters, the decline has been deep-sixed by the government and media. As I explain in my new book Will You Be Richer or Poorer?, there are a number of reasons why what’s important –social capital, for example–doesn’t get measured.

The most obvious reason is that it’s politically inconvenient for those in power for the hollowing out of America to be quantified. To conceal the decline, institutions only measure what can be massaged to appear positive. These statistics include inflation (Consumer Price Index, CPI),the unemployment rate, Gross Domestic Product (GDP), and hundreds of financial numbers: net wealth, bank loans and so on.

Everyone knows from experience that big-ticket expenses such as healthcare (see chart below), childcare, rent, college tuition, etc. have been rising at double-digit rates, while shrinkflation has reduced the quantity and quality of goods even as price has remained unchanged.

In other words, the official statistics are gamed to appear positive even as the nation is being hollowed out. People sense the disconnect but since what actually matters isn’t measured, there are few objective indicators of the decline we all experience in everyday life.

The second reason is that it’s difficult to measure intangible forms of capital such as social mobility and shared purpose. People are feeling increasingly insecure financially, but how do we measure this with any accuracy? We can track the number of people working second jobs in the gig economy, those with uncertain work schedules, etc., but even households with above-average incomes and conventional white-collar jobs are financially precarious in ways that don’t lend themselves to easy quantification.

And so while we’re constantly told the American consumer is in good shape, with manageable debt and rising incomes, in the real world auto loan defaults are soaring, 40% of those suffering from cancer are wiped out by the co-pays, and superficially middle-class households are one layoff away from default and insolvency.

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The Middle Class Is Now The Muddle Class

The first use of the phrase The Muddle Class appears to be The rise of the muddle classes (Becky Pugh, telegraph.co.uk) in January 2007. The “muddle” described the complex nature of defining “the middle class,” which includes education, class origins, accents, and many other financial, social and cultural signifiers.

Comedian Jason Manford claimed to have coined the term in June 2013“I’ve invented a new term; ‘Muddle Class’. When you find yourself being working class AND middle class at the same time.”

I’m using the term to describe the economic class that has the social signifiers of middle class status but little to no ownership of meaningful capital or control of their own financial security. In other words, this class “muddles through” the erosion of their purchasing power and economic security, claiming the social status of “middle class” while their financial status is impoverished when compared to the security of previous generations of “middle class.”

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Which Assets Are Most Likely to Survive the Inevitable “System Re-Set”?

Longtime correspondent C.A. recently asked a question every American household should be asking: which assets are most likely to survive the “system re-set” that is now inevitable? It’s a question of great import because not all assets are equal in terms of survivability in crisis, when the rules change without advance notice.

If you doubt the inevitability of a system implosion/re-set, please read Is America In A Bubble (And Can It Ever Return To “Normal”)? This brief essay presents charts that reveal a sobering economic reality: America is now dependent on multiple asset bubbles never popping–something history suggests is not possible.

It isn’t just a financial re-set that’s inevitable–it’s a political and social re-set as well. For more on why this is so, please consult my short book Why Our Status Quo Failed and Is Beyond Reform.

The charts below describe the key dynamics driving a system re-set.

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