The income gap wasn't gargantuan in the 50s, either. You didn't have the top 5% of the population controlling 60% of the wealth. You had a vibrant, massive middle class, that could afford a nice home, in a safe neighborhood, and in a good school district. You didn't have CEOs of publicly traded companies making 450 times what the average employee at that same company made. The spread was more like 40 times.
Your (1) is entirely inconsistent with your (2). - I.e. if there is just one "world economy" then by your (2) you are you asserting that living standards are globally the same? Clearly not so. I.e. your(1) is false. There is a US economy distinct from those in other parts of the world. Perhaps you mean that the US economy is not isolated but depends on others for its oil, etc.? On (3) you seem to have little foresight as to what is coming. True a farmer can slaughter his cows, toast his seed corn, etc. and have a party for all his friends, but he will be soon hungry. Likewise, the US is having a great feast on credit. Spending the younger US generation's future to have your "great economy" (defined by you as a high living standard). You do not really think that spending more than you earn can continue indefinitely do you? Soon the piper must be paid, but yes the dance was nice while it lasted.
I don't have little foresight. I have plenty of it; thank you. Again, I mean the US economy is not isolated from the world, because of commodity and trade interdependence. Clearly, you're right - credit consumption can not be sustained indefinitely. But - habits can change and laws can be reformed. Tighten credit, raise taxes and lower entitlement benefits, and automatically you strengthen the currency (and by process have less debt to sell) while keeping yields down (since supply of treasuries is lower while at the same time currency strength makes them more attractive). Aside from that, the other worry is that if credit tightened to realistic standards, and people actually didn't overextend themselves, they would stop consuming and thus the US economy would die. [your thesis?] Tell me in detail how you think it would play out. I maintain that any severe movement in one direction would yield a counterbalancing response (thus disaster wouldn't be as bad as you plan on), ie: we stop consuming -> we stop exporting our dollars -> trade balances 'rebalance' (market no longer flooded with dollars), thus dollar strengthens -> gives fuel towards improvement to the local US economy [ie commodities become more affordable] for growth in next cycle. etc. etc.
I grew up in the South. The South was dirt poor in the 50's. This South started to prosper in the 70's when the migration to the sunbelt began in ernest. In the 50's most people didn't even have air conditioning in the South. My point is no times have been better then now in terms of the depth of the economy and how it has reached everywhere and is of benefit to anyone willing to gain skills and work hard. John
My opinion is that 95 through 99 were the absolute best times hands down. Wages seemed higher and costs seemed lower. You could buy a nice small house for under 200k and, if you rented, you could rent a nice apartment as well for a reasonable rate. In 1999, you could find a job for a professional wage. Jobs seemed to be everywhere too. I remember quite a few recruiters who cold called me all the time back then. The general atmosphere and attitudes of people in 1999 were very positive all around. It was a party atmosphere and everyone thought the good times would continue into the new millenium. There was a general sense of prosperity in the air and the feeling that something even better was coming in the future. Today is a different time. The jobs seem to pay the same or just a little bit more then what was paid in 1999 (some 8 years later). In contrast, costs have skyrocketed. Houses are not affordable. Some families have to live in small cramped condos or apartments which they can barely afford. The price of food has doubled and tripled. Lets not forget gas. In 1999, you could find a gallon for a little over a dollar where as today the sign at my station reads 3. Some people look at places like North Carolina or Phoenix as alternatives to living in NYC or Southern California. Although both those places probably have their merits, no one considered living in those places back in 1999 (over NYC and SoCal). There are some people who have made large sums of money in the last few years. Traders, corporate executives, house flippers etc. You have the rich, but then you have everyone else who struggles. In the last few years, the times have not been especially bad, but they have not been especially good for everyone. Ordinary people who have regular jobs missed out on what was happening between 2003-2006. Looking forward, its difficult for me to imagine times that will be as prosperous especially under the current Bush administration. The same salaries paid, but costs have tripled. You have to be either a savy speculator or businessperson in order to really thrive in today's economy. Everyone else is left out and they can almost forget about retiring in a secure manner as well. My advice to all who read this is to make the best of the good times because those times will not last forever.
We are not talking apples and apples though. Look at all the crap people piss their money away on now. How many pairs of Nike's do you need. How many silly electronic toys? How many cars? How many clothes? How many plane trips do you need to take for vacations? How many times do you need to go out to eat every week? If we only spent money today like it was spent in the 50's which was only on food, transportation and a modest house the country would have tons of millionaires. We piss money away now on stupid stuff and then complain about how much it costs to live. Their are more jobs that pay more now then every before by far. Its not the money earned its how its spent that cause the problems for people. Basics of life are cheap now its just people don't understand what they really need versus what they really want. John
----------------------------------------------------------------- BuLoSellHi: I agree with your comments and I'll second your calling the middle class massive. ...and the middle class did NOT need to have the wife working. It was a great time and well deserved for those who went through the 1930's depression and WW-1 and WW-2. There was a Wall Street saying that what was good for companies like General Motors was good for America (and the rest of the world) A great time for sure... agpilot
Things changed. WW II caused an impetus in tech. And families were recovering from the disruptions still. The baby boom was there and a lot of people were very determined to better themselves. Every opportunity in the world was coming down the pipe. I can say that we put 20 tons of coal in the basement for the boiler and it just cost 400 dollars. Gas and bread were running 15 cents each. My account was in place in the late 50's and I do recall that my trading was a thing that wasn't appreciated by some and wasn't understood by others. The leisure thing was there for sure. Summer golf was on a course that three families chipped in the land for. There were no crusts on the sandwiches from the clubhouse kitchen. The the 50th annual family Labor Day tournament was around then and we were the only club of the first ten in the country on the original ground. Traditions reigned. Later there was an emancipation of opportunity and War bonds came due. The GI bill had an effect and News was available visually. The downside showed finally.... in drugs.... then aids. When the US became the greatest debtor nation things changed more and the squeese on the middle class began to get earnest. Bubbles came and went too. Financially, the 50's were dull and very profitable for traders and no one else traded. Then the leisure generation got very old and there was a compression of space and use of time for leisure. Nouveau came into existance. minis and Ira's got invented. The PC, FAXing and copiers changed things as did real time data. Billionaires came along all over the place and thankfully anyone could not have to work since money made money. And you could live anywhere and there wasn't a family restraint to live in Social Register territory. Banks hire brains today along side blood. Money is everywhere and "owners" get all the money possible. In the 50's we couldn't imagine the general way life could be the way it is today; it is so bad now. Our culture is global now and the US isn't a standard to want to have anymore. The thing about today and trading is how HUGE the amount of money that is available for the taking. Thank goodness for tech and data. In the fifties, you pencilled charts to make the equities bucks. Today, you have it made with the automated backups for trading to get every nickel coming down the pipe in very liquid leveraged markets. It was "unbelievable" then and its still unbelievable now. But everything in the world is different.
If GDP growth is your measure of how well an economy is doing here are some statistics. I took a look at GDP data from 1790 to the present to see what light that would shed. A few results: 1. The highest GDP expansions over a 20 year period follow recessions and occur during war periods. For example, the best periods were the 1870s to the 1890s, and the 1930s to the 1950s with the WWII years standing out for stellar performance. 2. The 1996-2000 period was strong (average 1.24% p.a. real growth) but not nearly as strong as 1962-66 (1.88% p.a.) or as strong as 1982-87 (1.53% p.a.). 3. In the postwar period the highest 20 year average growth was from 1958-1977 (1.17% p.a.), which is interesting since that included the horrendous early '70s but it also included the Vietnam war period (post Kennedy tax cut) before the inflation hit. 4. The postwar period has consistently had avg. growth rates over 20 year windows that are above average (.73% real growth). GDP data source: http://eh.net/hmit/gdp/gdp_answer.p...on&CHKrealGDP_percap=on&year1=1790&year2=2005