The scary reality of our slow, steady financial collapse

Charles Hugh Smith, whom we’ve met in these pages many times before, illustrates the financial conundrum facing ordinary Americans like you and I – the 99% – compared to the wealthy – the 1%.

We’ve reached an interesting juncture in history, and I don’t mean the pandemic. I’m referring to the normalization of extremes in the economy, in social decay and in political dysfunction and polarization.

Let’s ask a very simple question. The S&P 500 stock index went up five-fold from its 2009 low at 667 to a recent high around 3,400. Did your income rise five-fold since 2009? Probably not.

Houses that sold for $150,000 in 2000 are now valued at $900,000, a six-fold increase since 2000. Did your income rise six-fold since 2000? Probably not.

State university tuition has risen about 2.5 times from 2004 to 2019. Did your income rise 2.5-fold since 2004? Probably not.

Even burritos from the local taco truck have tripled in price in the past 15 years. Did your income triple? Probably not.

The average household income in 2000 was about $42,000. To match the six-fold increase in urban housing valuations, that household would have to earn $252,000 this year. How many households saw their income soar from $42,000 to $252,000? Not many.

The average household income in 2009 was about $50,000. To match the five-fold increase in stock market valuations, that household would have to earn $250,000 this year. How many households saw their income soar from $50,000 to $250,000? Not many.

To keep up with tuition (never mind healthcare insurance), the household earning $45,000 in 2004 would have to bring home $112,000 this year.

The household earning $100,000 in 2004 would need to boost its income to $250,000 to keep up with college tuition. How many households boosted their income from $100,000 to $250,000 in the past 15 years? Not many.

In other words, what’s been normalized over the past 20 years is the total subjugation of labor by central-bank inflated asset bubbles that benefit the top 0.1%. Labor has lost ground while assets have soared, leaving those whose income is earned less able to buy over-valued assets and more prone to borrowing money to maintain their lifestyle– a situation I call debt serfdom.

There’s more at the link.

Those figures also illustrate the insanity of the “official” inflation rate.  It bears about as much relationship to reality as I bear to Mata Hari.  It’s been carefully calculated to include as many irrelevant factors as possible, and exclude as many relevant ones as can be achieved, for political purposes.  (To illustrate just one aspect of that:  if inflation were accurately calculated every year, Social Security and other inflation-index-linked payments would have to be vastly increased compared to their present, artificially-low levels.  Neither Republicans nor Democrats can afford to do that, so they connive in covering up the real rate of inflation instead.)

Take a look at Mr. Smith’s figures again, and compare your own income and expenditure over those same periods.  Makes you think, doesn’t it?  We’re all a whole lot worse off today than we were just twenty years ago.  Where will we be in another twenty years?  For that matter, where will we be twenty months from now?  I’m not sanguine about the answer to that question.



  1. We are mostly aware of the problem. Now just what can we do to reverse the process? The wealthy are just as much in control this time around as they were in 1929.

  2. Hi Peter, good afternoon. You're on to something here.

    Service economy jobs may pay the bills right now, maybe, but they won't make it easy for anyone to save up a cash reserve against "lean years", much less invest for the future when they might not be able to work. I've also seen your own posts where you honestly discuss the impact health issues can have when everything seems like its ok.

    Just as you've sensibly advised your readers to take prudent action regarding equipping themselves against lawlessness by arming themselves and getting skills to do so safely, so people need to do a really hard thing by seeking ways to get a bit of security, even if it's just a small margin. It will never seem like one can do enough, but even so it's the right thing.

    Not to write a book, but information is out there, even if it's a matter of sifting the wheat among the chaff, and boy is there a lot of chaff. Books have been written on logical steps, like getting out of debt (guys like Larry Burkett), saving something, even a little bit, to get up a cash reserve, and initially approaching investing. Wolves and charlatans and just conflicted idiots with bad advice are all over out there. I have a degree in finance, but the best, most practical things I've learned were all in books i read long after college. Some are in the bible.

  3. I'm about 25% of the way through reading THE CREATURE FROM JEKYLL ISLAND. It supports what you're saying here.

  4. My wife and I lived fairly frugally, saved in our retirement accounts, and didn't splurge on new cars or fancy toys like a boat or cottage. We kept educating ourselves, moving up the job ladder in our careers and staying out of debt.

    We're not in the 1% by any means, but a heck of a lot better situated than many other people our age.

    In a way, I don't have much sympathy for the profligate ones that are facing retirement with little or nothing to fall back on. The warnings and good advice have always been there. Now the bad financial decisions are coming home to roost. The fact that our government is insane about money policy and spending won't be changed. What people have to do and plan for is how to work and survive in that environment.

  5. With regards to the real inflation rate. Last week I purchased a used 2014 Ford F-150 for $24,000. It is replacing my 2002 F-150 which I purchased new in 2003 for $21,500. Compare that to the purchase of my first house a 3 bedroom 1 bath brick structure for $22,000 in 1976!

  6. Additional thoughts…

    There's a estimated 40 to 50 trillion untaxed dollars sitting in off-shore accounts controlled by the elite. This has been skimmed off in the last two generations.

    Also, no one knows if the gold in Fort Knox is actually there anymore…

  7. In 1974 I purchased a brand new – straight of the showroom floor – Chevy pickup truck. Full size, V-8, power steering and power brakes, ANM radio, towing package, two-tone paint job. Cost? $7,600. Today that's nor even a down payment. Word.

  8. I believe the inflation examples given are far from typical. We just sold our house and received a decent but not extreme amount for it.

    Then you can do your homework when buying. Our most recent vehicle sold new for $27,000, but we found one used with 3600 miles on it for $17,000. The down side was a hidden defect that took 2 months for Ford to track down, but all the repair work was under warranty.

    The real rate of inflation as we experienced it was not close to what the article you quoted claimed.

  9. When you allude to only the 1% owning those over-valued assets, don't forget that the top ten share holders in most of the Dow/S&P listed securities are institutional investors on behalf of individual regular savings and 401(k) etc. retirement accounts, pension plans, and the like. It's not only the 1% who have enjoyed that increase in asset values.

    Dave Ramsey preaches getting out of debt, funding for emergencies, and building wealth. Another guy, Jonathan Hoenig, wrote a wonderful book in teh language of 20-somethings titled "Greed is Good," in which he uses the word "greed" to represent simply accepting responsibility for your own financial well-being and squeezing out savings, no matter how small the increments, by living beneath your means. I bought each of my kids a copy when they first made earned income.

    Lastly, you're spot on re: inflation. Again, when my kids were learning personal financial management & dealing with purchasing decisions, I suggested that they think about an item's cost, not in absolute dollars, but rather in how many hours of labor they'd have to trade for that item. It gave them another perspective from which to view the item's value.

  10. @Unknown: That inflation calculator is almost useless. It uses "official" inflation calculations and figures that are, as pointed out above, not trustworthy.

  11. Peter you know that saying "When it's important You LIE" Inflation, Unemployment and I suspect food stock levels are being "Artfully" recreated (Aka Lied about) to make things look better than it really is. They are juggling hard to keep the system going just a little longer as to secure even more real wealth.

    I have friends in Wal-Mart, BJ's, Hannaford and Tractor Supply telling me how unreliable their truck deliveries have been since the COVID event started. Careful rearranging of stock on hand has been the rule not the exception. Even Toilet Paper has been bought from other non-American suppliers so you and I get some language lessons in Spanish.

    When the "Big Show" curtain is pulled back and a bare brick wall is shown we The people will slam into it.

    IF you think times are crazy NOW wait until all the EXTRA electronic digits on the EBT cards Buys you NOTHING (Charlie and the Cholate Factory scene here).

    Reference the ColoComment thoughts SOMEBODY needs to buy the overvalued toxic gunk of the market. Thus the repackaging of non-performing loans and bad mortgages just like in 2007 that blew up in the face of Mom and Pop investors.

    The smart money and business officers (CEO's and such) have been NET Selling their stocks in %'s not seen since 2008.

    Go long HOLD IN YOUR HANDS valuable metals like gold, silver, brass and lead. Go long Seeds, water purification, storable foods, tools both garden, rebuilding and protective. Go long with building trustworthy friends and family. Avoid those that are easily angered, or users of drugs both ilegal and legal like Alcohol and Legal Opiates.

    KNOW that even those you "Know" may betray you so keep some things close to the chest. Go long caches incase Antifa and Co decide your neighborhood is worthy of their arson attacks as even if you can beat them back with firepower your supplies are *Still* in that burning home…

    Bible history shows the people of Israel blessed by God, that turns their backs on Him and fall, repent and are lifted up only to during Good Times go back to turning their backs etc. Sadly it's America's time to fall unless the literally Godless Communists (Inpatient Socialists with guns) are purged from our Government and streets.

    I'd love to be proven wrong but Orville's 1984 quotes about "The past is rewritten as so the Party is ALWAYS Right and the present is also rewritten etc…" The memory holing of everything showing the Democrats real history of being the Slave Owners in the Confederacy, the KKK birth, the Jim Crow Laws and all that have been erased from the internet. You have to read real paper history books written before 1970's to see what was the real story.

    Where is the OUTRAGE that all the "Systemic Racisms" and Police Brutality (mostly made up aside from those truly bad cops) COMES FROM Cities that have been CONTROLLED by Democrats for DECADES? Oh no the Liberal Democrat (but I repeat myself) Mouthpieces the MEDIA will NOT tell that story. Black Lives Matter (A SELF Declared Marxist Leadership) where is their OUTRAGE that in Democratic Controlled for Decades Cities that Black ON Black murder every week is many times the "Deaths" from Bad Policing IN those SAME Cities?

    Rome did not fall from the Visigoths, it was murdered by traitors from with in and the Bread and Circuses MOBS demanding their Free Stuff or they would riot and destroy. Weak Roman Senators afraid for their lives (OR being DOX'ed and Twittered today) tried to appease the MOBS with the public treasury's.

    Peter what is the proverb about fire NEVER say's ENOUGH?

    Pray for wisdom, the troubles are going to get worse and soon we will call TODAY the Good Old Days.

  12. This touches on a very significant reason of why my ex-wife despised me. I was self-employed. She worked for a city government. Every small business owner knows the struggles I faced daily.

    She benefited – and me, indirectly – from a wonderful scheme that, when the subject of pay increases (separate from COLAs) came up, each city had a select list of other like-sized cities to compare to. The problem was most of these cities thought more highly than they ought, that they were equivalent to high priced tourist destination cities. So each of those like-sized city had several pricey cities on their list. It is easy to realize that this scheme was not too different from a shakedown of the taxpayers.

    They would literally pick up the phone to call their counterpart at other cities to ask what do you pay this or that position? And the conversation would go right down the list covering every employee classification from new hire janitor to senior city attorney. That conversation took place about every 3 or five years. As my ex- was the one who made that call, I got to see some of those lists. I was astonished to see how much some of those pay increases jumped year over year. Of course there was always a 'reasonable' excuse for it.

    As a small business owner, my earnings were capped by what the market would bear. 'People vote with their feet' if a business charges too much. Yet a government is impervious to the market. I tried to adapt that system to my industry. I called my competitors. Of those who would divulge the information, every one said it was unworkable aside from the fact that this entered the realm of illegal price fixing.

    By her reasoning, I should have been charging nearly treble what I did. She could not understand how that was impossible. Therefore, in her eyes I was lazy and loathsome.

Leave a comment

Your email address will not be published. Required fields are marked *