Have Economists Ruined The Family Too?
The American economy has actually been backtracking since 1989.
The typical family in America doesn’t even have $500 to cover an emergency. And the typical ‘head of the house’ earns less today in ‘real’ (inflation-adjusted) terms than he did in 1973.
Economists can’t measure quality. They have no idea if anyone is really better off.
We're still reeling from yesterday's discovery - that the economy has actually been backtracking since 1989.
How do we know?
We just took the Fed's GDP growth numbers and adjusted them for inflation, as the Bureau of Labor Statistics would have done under the Reagan administration.
That helps explain why...
...3,000 years after the invention of real money...
...240 years after James Watt invented the steam engine...
...and 30 years after Al Gore 'invented' the internet...
...in the most advanced economy the world has ever seen...with 15,000 full-time economists...24,000 practicing psychiatrists...and 70,000 newly minted engineers leaving its universities every year...
...the typical family in America doesn't even have $500 to cover an emergency. And the typical 'head of the house' earns less today in 'real' (inflation-adjusted) terms than he did in 1973.
We've already seen how the Fed's EZ money perverted the financial system, the economy, and our political system. What did it do to the family?
A Time Before Economists...
The US economy grew rapidly from the founding of the Republic through the 19th century and into the 20th century.
With no central bank. No interest-rate policy. No economists on the payroll. No counter-cyclical stimulus. No nothing.
Then the foxy economists made their dens in the warm and fuzzy burrows of Washington and Wall Street.
In 1913, the Federal Reserve System was set up as a stealth central bank.
In the 1930s, economists working for the Roosevelt administration managed to stretch out a depression (they usually lasted only a few months) over an entire decade.
Then, in 1971, the Nixon administration did away with the old, reliable, gold-backed dollar and put in a new, ersatz, credit-based greenback in its place.
In 1978, the Humphrey-Hawkins Act charged the Fed with maintaining full employment, as well as steady growth and a stable currency.
From then on...economic growth slowed.
The more they pumped the heart...and turned up the juice to the defibrillators...the more the financial fantasy economy boomed. And the more the real economy slumped.
'Don't fight the Fed,' was the motto on Wall Street. The 'Greenspan put'...the 'Bernanke put'...and now the 'Yellen put'...were the surest gambles on the street.
In other words, the fix was in.
But we're suspicious of all statistics - even those we doctor up ourselves.
You should be, too.
Instead, as Yankees legend Yogi Berra once said, you can see a lot by looking. And when we look, we see an economy that looks suspiciously dead.
Recall that economists can't measure quality. So instead, they focus on quantity. They can turn up the dial on their numbers - but they have no idea if anyone is really better off as a result.
And in their simpleton effort to get bigger numbers, they've distorted and damaged our entire society - our economy, our government...even our families.
Just look around...
Malls where people shop on credit. Houses bought on credit, never actually owned...always refinanced. Cars financed for 84 months at 0% interest. Meals consumed in fast-food restaurants (the whole industry was largely a product of credit money; keep reading) paid for with credit. Students in college...only because credit makes it easier to go to university than to find a decent job.
And no wonder. The decent jobs - the 'breadwinner' jobs - are hard to find. Only 50% of working age people have full-time jobs. And only half earn more than $32,000 a year.
Because the cheap credit system made it easy to move the good jobs somewhere else...and made it hard to create better jobs at home.
New jobs come with new businesses. But the percentage of new businesses less than a year old...and the percentage of the workforce that works for them...are only about half of what they were in 1980.
The new money system rewards the established insiders. It punishes upstart, job-creating competitors.
Crony industries are protected by thousands of regulations that increase the cost of entry. And the cronies in the financial business control the flow of credit, too.
It's easy to get money if you're a big business. It can be very difficult if you're not.
In the old days, business startups would be financed from savings - often from friends and families.
But today, who's got savings? Who needs them when you've got unlimited credit on tap?
And as the breadwinner jobs went, so went the breadwinners. In post-1970s households, husband and wife won the bread. Families needed two paychecks, not just one.
You may ask, 'What's the problem? People decided for themselves... Women preferred to work.'
Yes, but they didn't decide in a vacuum. They decided in the wind tunnel of flying credit... and soaring prices. Salaries stagnated in the '70s. What were women to do?
Today, you can get any food you want at the supermarket - already prepared for you. Or you can go out to any one of dozens of different fast-food or family eateries. All very convenient.
You may say, 'Well, consumers have spoken. That's what they want.' But with husband and wife working, what choice did they have?
They got the convenience of eating out. But they gave up something that economists couldn't measure - the pleasure of preparing and eating home-cooked meals...the stability of having someone who was at home and focused on the family full-time...someone who was not part of the credit-fuelled, work-a-day economy.
The quality of family life changed. For the better? Hard to say.
Fast-food restaurant income went up. GDP went up. More burger-flippers were hired. Economists looked upon their work like God gazing at the world he had just created.
'It was good,' they said.
This article was originally published in the Equitymaster and has been republished here with permission.
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