Nothing to Lose
There is a specter haunting America … and all the developed nations of the world.
It is the specter of a debt revolution.
We left off yesterday talking about how the economy of the last 30 years – and especially that of the last six years – has favored the old over the young.
“Rise up, ye young’uns,” we as much as said, “you have nothing to lose but your parents’ debts.”
We showed how the value of U.S. corporate equity, mainly held by older people, had multiplied by 28 times since 1981. That was no honest bull market in stocks; it was a market sent soaring by an explosion of credit.
But what did it do for young people whose only assets are their time and their youthful energy? Alas, the real economy has increased by only five times over the same period.
Non-financial corporate equity valuation vs. GDP 1980 – 2015, indexed. The gap has never been larger than today, via Saint Louis Federal Reserve Research – click to enlarge.
A Grim and Menacing Specter
And when you look more closely at work and wages, the specter grows grimmer and more menacing. Average hourly wages have barely budged in the last 30 years. And average household incomes have fallen – from $57,000 to $52,000 – in the 21st century.
But as our fingers came to rest yesterday, there was one question hanging in the air, like the smoke from an exploded hand grenade: Why? Was this huge shift – of trillions of dollars of wealth from young working people to old asset holders – an accident?
Was it just the maturing of a market economy in the electronic age? Was it because China took the capitalist road in 1979? Or because robots were competing with young people for jobs? Nope… on all three counts.
Industrial robots – not at fault
Photo credit: BMW
First, old people, not young people, control government. Ultra-wealthy campaign funders like Sheldon Adelman and the Koch brothers were all born in the 1930s. The big money comes from wealthy geezers like these, eager to buy candidates early in the season when they are still relatively cheap.
