Saturday, March 17, 2018

It's already past the point of no return to Make America Great Again if you are about to retire

It is perhaps ironic that the ending of the Cold War truly began the decline of the American economy as so much industry and manufacturing was tied to the military industrial complex and the need to protect the world from a 'perceived' enemy.  And we can easily see how this change began to take place starting with the 1987 stock market crash and followed quickly by fiscal and monetary policies focusing more on debt creation rather than in actual productivity.


Wages and GDP - 1987-2018


You can see in this chart that beginning in 1987, wages peaked in 1990 (around the time of the ending of the Cold War) then began to fall precipitously over the next 30 years.  And on the GDP side, growth held itself up moderately thanks primarily to the lowering of interest rates and massive increases in debt, the creation of asset bubbles (Dot Com, Housing, Equities), and the move towards the financialization of everything versus real productivity.

But unfortunately, these fiscal and monetary policies based on debt rather than productivity have lent itself to increased inflation.  And when wages stagnate or are in decline, then every single year American workers lose both savings capacity and purchasing power.

Inflation 1989 - 2018


What this means today is that for the first time in America's history, the current generations working (Gen X, Millennials) will earn and achieve much less than their parents did.  And as many of them get ready to hit the home stretch towards retirement, nearly half have little or no savings prepared.

Some 42 percent of elderly US citizens have less than $10,000 put aside for their golden years, according to the report by a personal finance resource GoBankingRates, which polled over 1,000 adults last month. 
The survey, carried out for the third consecutive year, suggests that a lack of planning and savings, along with a longer life expectancy, may shatter people’s retirement dreams. The California-based financial advisor also found out that the percentage of Americans with no savings at all had increased from 2016 through 2017. 
Low salaries or lack of opportunities to earn more is identified as the key factor for 40.1 percent of the surveyed, while 24.9 percent told the personal finance site that they were already struggling to pay bills. Adults 65 and older annually spend almost $46,000, according to the Bureau of Labor Statistics. Nearly 10.3 percent do not stash away money, as they don’t need any retirement savings. – Russia Today
While it is still too early to determine if the election of President Trump will succeed in creating good paying jobs over the course of the next decade, it appears to already be too late for many who lost most of their wealth during the 2008 Financial Crisis, and are standing on the precipice of retiring within the next 10-15 years.  Because at the rate both inflation and wages are going, the 42% number of Americans currently being forecast to have less than $10,000 saved could balloon up much higher, and mean that it is beyond the point of no return for America to actually become great again for the current population.

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