The middle class has gotten whacked much harder than almost anyone realised.
If you are middle class, you are like Custer’s soldiers at the Battle of Little Bighorn: they were in a far more dangerous situation than they thought…
Our advice: get out while the gettin’s good.
But first, a trip to Brooklyn…
“You wouldn’t believe how much this neighbourhood has changed”, said the cab driver.
“All of a sudden, everybody wanted to buy something here and fix it up.”
The Williamsburg neighbourhood is mostly warehouses and small factory buildings. But there are also quaint little houses, much like those in Baltimore, and ramshackle retail outlets.
The place was not very attractive. But recently, money is coming to town. Our hotel is a converted factory with bare cement floors, and naked, old brick walls along with stylish bathrooms and a booming bar. Big windows in the rooms made it kind of fun to look out, especially when it was snowing early Monday morning.
Even in a slack economy, there are pockets of robust investment. This seems to be one of them. People are coming from all over the country, and all over the world, to live in Williamsburg.
The middle class was a comfortable place to be in the post-war years. Their suburbs were pleasant. Jobs, cars, TVs, people found what they wanted there.
But for the last three decades or so, being in the middle class hasn’t paid off. And recently, it’s been disastrous; more disastrous than even we realised.
Here is something that we were slow to pick up on. For many years, critics have complained about the feds’ way of measuring consumer price inflation. The critics said they were low-balling it.
We thought the critics were probably right, but we were not swift enough to realise the implications. It seemed like a technical issue. Sure, the feds were cheating in order to keep their Social Security and pension adjustments down. But it didn’t seem like a big deal.
Now, we know better. Because, over the 20-year period, since they began fiddling the numbers, the cumulative difference is huge.
Chapwood Finance and John Williams Shadow Stats both have looked at consumer price inflation in a straightforward way – without all the bending and twisting. They just look at the prices of the same things over time.
What do they show? An inflation rate that is about five times what the feds claim. Currently, consumer prices are going up at about 10% per year.
Figure that this sort of legerdemain has been going on for at least 20 years. And now you see that our understanding of what has happened over the last two decades is mostly illusion.
Instead of being flat, wages for most people – including college graduates – have been in a steep fall for at least two decades.
Trillions of dollars’ worth of investments – in stocks and real estate – that people thought were profitable actually lost money on an inflation-adjusted basis.
Bonds – where people put money just to keep it safe – are actually losing real value at a rate of about 10% per year. Put money in bonds today and, unless there is a dramatic change, your money will be cut in half in just a few years.
Meanwhile, back in Brooklyn…
“Yeah, people are moving in”, the hotel clerk elaborated.
What people? People from Europe. People from California. People from Manhattan.
Brooklyn is not cheap. But it’s cheaper than Manhattan. And it has a gritty charm that young people seem to like. Artists, musicians, entrepreneurs, developers, people just getting by, students – young people are drawn to it.
We came because our son, a musician with a local band, has made it his home.
“You’re staying at the Wythe Hotel”, he asked us. “That place is supposed to be cool. It’s young and hip. It’s a place that cool people from Europe go back and tell their friends about.
“But when you walked in the door you brought the average coolness down a few notches.”
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