The hallmark advice of retirement planning was always to scrimp, save, and put away enough money to make up for retirement’s lost salary, increasing medical bills, and the supposed good life of the “golden years.” If a couple had saved, say, $300,000 over a lifetime (again, say, putting $500 away each month for 30 years at modest compounded interest), then they might expect a so-so annual return at 5% of about $15,000 a year on their stash, or about $1,250 per month.
In other words, perhaps Mr. and Mrs. Retiree could find enough with Social Security to live okay and pass on the principal to their kids. But well aside from the fact that many Americans have been laid off, taken pay cuts, lost home equity, had their 401(k)s pruned, or had to take care of out-of-work relatives, there is no 5% any more on anything, not even 2% or in most cases 1%. Saving money means nothing really in terms of return, only the realization that inflation eats away the principal each year.
The New Terrifying Normal in Victor Davis Hanson’s article of the same name is another snapshot of the imploding economy.
The Federal Reserve perhaps had its reasons to keep interest rates low, given the massive spending, 2008 collapse, and the anemic “recovery,” but whatever the purported aims, the policy is not working. Yet cheap money proves to be no stimulus, even at rock-bottom interest rates.
This is where the progressive impulse always goes wrong because it is rooted in getting people to do what the planners want, rather than allowing people to do what they want. People act responsibly for their own long term goals. Progressive tinkering makes it impossible for them to achieve those long term goals, destroying any plans that they have and taking productivity and the economy with it.
This is somewhat the USSR did at every turn with horrible consequences and its people stopped working and planning for the future. That is happening here now and it will mean the end of a viable America and the death of its spirit.
near-zero interest (and calls for “cancellation of debt and redistribution of property”) represented a vast transfer of wealth from those who saved to those who owe.
In a debt economy, the system is always trying to plug the debt gap with more debt. It has no interest in savers, they are the obstruction to getting people to spend as much money as possible in the short term to stimulate the economy in the short term while amassing more debt in the long term.
Few seem to note that those who receive nothing on their retirement savings don’t retire so easily. And when they don’t retire, jobs don’t open up — which brings us to my next observation: the lost generation of those between 21 and 30, who at various ages and periods came into the workplace the last four years. Many have 8% plus student loans. I doubt half of those will ever be paid off, given the epidemic of unemployment in this cohort.
When no one can retire, except through death or disability, then even fewer jobs will open up. A surplus of young workers devalues their value even as wage standards create a shortage of jobs and mass unemployment. Hanson paints a picture of an America where everyone is trying to hang on to what they have, where older workers are staying on the job to help their unemployed children while competing against them in the marketplace.
Unemployment rates of those 16-24 are now officially over 50%. Even the cohort between 16 and 29 suffers from 45% unemployment. In short, in four years we have become Europeanized:
In eight years we won’t just be Europe, we’ll be Spain and Greece.