There is certainly a lot to be thankful for in terms of living in the United States or any other first-world country. It is also nice to live in the 21st century where there is not widespread famine and misery. Most people don’t have to go hunting and gathering for their food each day.
We live in a kind of contradictory time. Our living standards have never been higher in terms of technology and luxuries. It doesn’t even compare to just 20 years ago. Most people are walking around with smartphones that give them instant communication to the world, along with a video camera that fits in their pocket.
But in this same world of exponentially growing technology, we find struggles to pay for basic necessities. People can afford smartphones, but they can barely afford health insurance and their grocery bill.
If it is a choice between a smartphone and food, I hope most would choose the food. Most people aren’t starving, at least in the United States. In a place such as Greece, it is actually becoming a problem.
I feel a similar euphoria now as how it was in the mid 2000s. The stock market it booming. Most people who want work are working, even if it isn’t for the wage they want. Housing is not booming as much, but it is still relatively strong in many areas.
Just like the mid 2000s, I detect that people are struggling. Most of my friends and relatives are middle class to upper middle class. I don’t have any billionaire or deca-millionaire friends, at least that I know of. Just from my general conversations, I find that people are tight on money and they can’t even really figure out why.
The consumer price index (CPI) has stayed relatively low in the face of major monetary inflation by the Fed. As we know though, the CPI does not tell the whole story. It can’t tell the whole story. There is surely asset price inflation, especially in stocks. But even for consumer goods, our basic needs tend to be the most expensive these days.
The obvious big expense is health insurance. It isn’t just because of Obamacare, but that is part of it. Most people are seeing double-digit price increases from year to year for their health insurance. Meanwhile, their coverage tends to get worse. The CPI has hedonic adjustments. If you applied the same principle to health insurance, it would be going up at 40% per year in many cases because you are paying more while your coverage (the quality) is getting worse.
Food prices overall are not going up by double-digits, but they are probably going up by more than the stated CPI numbers. Even if food prices are going up by 5% per year, this really hurts the average middle class family over the course of just a few compounding years, especially when people’s wages are barely going up 2% per year, if that.
The biggest expense for most people is the cost of government. That is why so many families have two working parents. One parent has to pay for all of the government taxes and regulations and inflation and debt.
When you factor in the spending (not just taxes) by government at all levels, the costs are enormous. This does not include the cost of government regulations, which is impossible to determine, but obviously really significant. Many Americans are working to pay half of their money over to some level of government in some form.
I know of many people who make a decent salary who are struggling. I know of many families that make six figures and are barely able to save any money. It may sound ridiculous, but when you throw a few kids into the equation and you add up all of the expenses, you don’t have to be a big spender to find yourself in this situation.
The point is this: Life today is really expensive.
The main reason it is expensive is because of big government at all levels, along with central bank monetary inflation. Some recognize this more than others, but almost everyone suffers under it.
This reminds me of the housing bubble. Everyone is supposed to be feeling good about the good times. But secretly, people are struggling. Most don’t want to admit it openly. They don’t understand because the economy is supposed to be doing at least somewhat well again. Yet they find it difficult to pay their bills each month without going into debt.
This is a government bubble. It is going to pop because people simply can’t keep up with it. It can’t go on forever. Either government gets rolled back or we start declining in our living standards. I think it will initially be the latter, but will eventually lead to the former. Government will get rolled back when people start to openly suffer more.
I can find out more by talking to 10 middle class families in America than I could looking at all of the government statistics about GDP growth, inflation, unemployment, etc. Those middle class families are struggling to keep up right now. Money is a major stress and most of them don’t really know why they can’t get ahead.
The government bubble is going to pop. I think it is going to be sooner than most realize. It will initially come in the form of a recession or depression. It will be the best of times and the worst of times. It will be really hard for most people, but at least we may get some relief from big government as a result.