Tag Archives: federal reserve z1 data

America’s Debts: Those Who “Came of Age in the 1960s and Early 1970s” are Still In Charge

Federal Reserve Z1 data on total U.S. debt for 2017 was released in March, and it appears that while it took eight years, the Obama Administration finally had an economic year it could be proud of.   A year when inflation-adjusted GDP increased moderately, in this case by 2.3%, but the increase was not driven primarily by rising debts, with Americans continuing to sell off its future to consume today. Total U.S. non-financial debt actually fell by 0.5% of GDP, from 253.5% of GDP in 2016 to 253.0% of GDP in 2017. Federal government debt fell from 86.0% of GDP to 84.9% of GDP, the first decrease of the Obama Administration. Household debt edged down from 78.8% of GDP to 78.7% of GDP. These improvements took place, aside from 20 days, after President Obama had left office, but while the policies he had hashed out with Congress mostly remained in effect.

By the end of 2017, however, the new President and “King of Debt” Donald Trump finally began to get some of his agenda through. His huge, deficit-increasing tax cut was signed on December 22, and will take effect in 2018.   A huge deficit increasing spending bill followed this March. And he has been moving to get rid of government restrictions intended to prevent the financial sector from lending people more money than they could pay back, and from speculating on derivative bets while having taxpayers bailout their losses. Last year I wrote that Generation Greed was planning one more economic and fiscal orgy at the expense of its children and grandchildren, and at the expense of the future of the United States. This year, in light of the Harvey Weinstein brouhaha, the term “orgy” seems too consensual.   The last economic and fiscal gang rape is probably more like it.

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Generation Greed’s Last Economic Orgy: Federal Reserve Z1 Debt Data for 2016, Rising Housing Prices, Census Bureau data on Worse Off Young Adults, Falling Life Expectancy, Etc.

The problem with socialism is that you eventually run out of other people’s money” – Margret Thatcher in 1976

The problem with capitalism is that given enough inequality, eventually businesses trying to sell things run out of other people’s money” — Larry Littlefield, 2016

For 35 years, generations of Americans born after 1957 or so have been paid less but sold more, with the difference covered first by more household members in the workforce, then by inadequate requirement savings, and then by soaring public and private debt. The richest and most entitled generations in U.S. history worked hard and were very creative, but they over-consumed what even they were able to produce and expected too many years in retirement with too little in savings, at the expense of the poorer generations that have followed them. With some members of those generations grabbing far more than the others. With too much money in too few hands, the whole world economy has become dependent on Americans spending more than they had. And since America finally started to go broke with millions retiring into poverty, the world economy has faced a global crisis of demand.

When you put all the trends together, as I have below, it adds to a shocking picture that puts every current debate in context. Today’s young adults paid less than Generation Greed was paid at the same age in 1975, and forced by government policy to pay more for housing. Life expectancy falling. Personal and federal debts once again soaring, all the mistakes of the 2000s being repeated. Topping it off, we now have Donald Trump as President. Does this mean that the U.S. is finally prepared to admit, face and tackle its problems? Or does it mean that the most over-privileged and entitled members of the most over-privileged and entitled generations in U.S. history are just grabbing more, in one last economy orgy before the final collapse?

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