{"id":35713,"date":"2013-01-25T13:38:59","date_gmt":"2013-01-25T18:38:59","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=35713"},"modified":"2013-01-25T13:38:59","modified_gmt":"2013-01-25T18:38:59","slug":"the-biggest-mistake-middle-class-famililes-make","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/01\/25\/the-biggest-mistake-middle-class-famililes-make\/","title":{"rendered":"The Biggest Mistake Middle-Class Famililes Make…"},"content":{"rendered":"
<\/div>\n

\"Founder<\/p>\n

Today, every gas and electric meter in Baltimore is spinning. It’s a winter wonderland here. Which means, it’s damned cold.<\/p>\n

Our thoughts turn to heat… and then to the expense of it… and
\nthen we begin to wonder how ordinary families keep up with it all.<\/p>\n

Heat… food… cable. It adds up.<\/p>\n

But we have advice. In a few words: Don’t play that game.<\/p>\n

We’ll explain that later. First, let’s review America’s middle-class
\nfamilies. Everyone seems to be worried about them. President Obama
\nthinks they’re getting a bad deal. So did presidential challenger
\nWillard Mitt Romney. Some think the middle class are disappearing. How
\nare they really doing?<\/p>\n

Real, hourly wages have not gone up since 1964. Nearly half a century of flat earnings. We’ve been saying that for years now.<\/p>\n

But wait. How come people seem richer?<\/p>\n

Because they are richer. At least in a way. They have bigger houses, more marble countertops, more cars, wide-screen TVs.<\/p>\n

They’ve got a lot more stuff. Even better stuff.<\/p>\n

Better Off Than in 1964?<\/h3>\n

That is the point of an article in yesterday’s Wall Street Journal<\/em>. The authors argue that America’s middle class<\/span><\/span><\/strong><\/a> is actually much better off today than it was in 1964.<\/p>\n

For one thing, they say, families have more members working (wives
\nwent to work in the 1970s and 1980) so that family income is higher.<\/p>\n

OK. Whether that is good or bad… we don’t know.<\/p>\n

They also get the benefit of more health benefits.<\/p>\n

Hmmm… We don’t know about that either. Families didn’t seem to need
\nhealthcare benefits back in the 1960s. Because healthcare was
\nreasonably cheap and simple back then. Now, it’s complicated and
\nexpensive.<\/p>\n

Yes, say the authors, but it’s also a lot better. Which would you
\nrather have, they ask, 1960s healthcare at 1960s prices or 2013
\nhealthcare at 2013 prices?<\/p>\n

Hmmm… Again, we’re not sure. They say people live longer today. But
\nthat may have nothing to do with healthcare. They live longer in other
\ncountries too \u2013 places where people spend a fraction of what we spend on
\nhealthcare.<\/p>\n

And many of those tests that are included in our healthcare plans \u2013
\nmammogram, PSI, colonoscopy \u2013 might be useless. That’s what the latest
\nresearch shows.<\/p>\n

Oh… And now we all have access to jet airplane travel, iPhones and big TVs with options out the wazoo.<\/p>\n

Electronic Voodoo<\/h3>\n

As to this last point, we offer a little personal anecdote. We didn’t have a TV<\/span><\/span><\/strong><\/a>
\nfor a long time. Not from about 1982 to 2012. We bought our first one
\nthis Christmas. A gift to the family. We watched a few movies over the
\nholidays. After the children left, we forgot about it.<\/p>\n

Until last night…<\/p>\n

Wife Elizabeth was away so we decided to turn it on for company.
\nTrouble was, we couldn’t figure out how. There were four remote control
\ndevices. Which controlled what? It was far from obvious. We clicked
\nevery button we could find. Nothing. Then we picked up the phone and
\nclicked a few buttons on that too. Perhaps there was some sympathetic
\ncommunication going on… some electronic voodoo.<\/p>\n

In 1964, we turned one knob to turn the machine on. Another changed the channel. There was no doubt about it.<\/p>\n

But come the miracle of electronics, and it took us a good 15 minutes
\nto figure out how to get the thing to work. Then we spent another 15
\nminutes riffling through dozens of programs before we realized that
\nthere was not a single one that we wanted to watch.<\/p>\n

Time lost: 30 minutes. Gain: negative.<\/p>\n

So as to the wonders of modern gadgetry, we are less than impressed.<\/p>\n

An Awkward Situation<\/h3>\n

But there is no doubt that the middle class is better equipped in
\nstuff than its hourly wages suggest. This is partly because the price of
\nthe important stuff \u2013 food, shelter, clothing and utilities \u2013 has
\nactually gone down as a percentage of household income, from 52% of
\ndisposable income in 1950 to only 32% today.<\/p>\n

But the piece in the Journal<\/em> doesn’t pay any attention to
\nthe other side of the ledger: debt. In 1964, total public and private
\ndebt in the U.S. was 140% of GDP. Today, it is 375% of GDP.<\/p>\n

Hmmm… That’s about two and a half times as much debt per family.<\/p>\n

The figures show NET WORTH per household at about the same level it
\nwas 50 years ago: about five times disposable income. But those figures
\ndo not include government debt<\/span><\/span><\/strong><\/a> \u2013 a huge and largely uncharted iceberg.<\/p>\n

With so much debt to reckon with, the typical family is much more exposed to interest rate increases and other setbacks.<\/p>\n

Right now, the cost of carrying debt is low. Because interest rates
\nare at their lowest point in more than half a century. But they were low
\nin 1964 too. And if they go up from here \u2013 as they did then \u2013 we’ll
\nhave quite a hoopty-do. How many families could afford a 10% mortgage
\ninterest rate?<\/p>\n

And, of course, this calculation doesn’t include the trillions of
\ndollars in unfunded liabilities that the feds choose to ignore. Those
\nliabilities barely existed in 1964. Today, they come to (according to
\nprofessor Lawrence Kotlikoff at Boston University) more than $200
\ntrillion \u2013 or about $150 trillion more than net assets. Now, how’s the
\nmiddle class doing?<\/p>\n

But families don’t yet feel the weight of those unfunded liabilities
\nbecause they don’t have to pay them. In fact, they hope to be on the
\nreceiving end… to be collecting Social Security… disability… and
\nhealth benefits, not paying for them.<\/p>\n

Which just goes to show how corrupt and awkward the whole thing is.
\nMiddle-class families work as hard as they can to keep up with expenses
\nnow… and everyone hopes to live at everyone else’s expense in the
\nfuture.<\/p>\n

It ain’t going to work.<\/p>\n

A better approach… on Monday…<\/p>\n

Regards,<\/p>\n

\"Bill<\/p>\n

Bill<\/p>\n

\n

The Next “Flash Crash” Could Happen Tomorrow…<\/span><\/strong><\/p>\n

Computers have taken over the stock market. One of every two trades
\nis done automatically by a computer.
\nThese “high-frequency traders” — as they\u2019re called — caused a 9% loss
\nin five minutes during the “Flash Crash” of May 6, 2010. And they\u2019ve
\nonly gotten more powerful since.
\nThis report will show you how to protect yourself from catastrophe right away.<\/span><\/span><\/strong><\/a><\/p>\n

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