Friday, Aug 06, 2010
Fascinating social commentary
FT: The crisis of middle-class America
(I think we lag the US, in some ways, by about 18 months.)
It only takes about 30 seconds to tour Mark’s 700sq ft home in north-west Minneapolis. Cluttered with chintzy memorabilia, it was bought with a $50,000 mortgage in 1989. It is now worth $73,000. “At one stage we had it valued at $105,000 – and we thought we had entered nirvana,” says Mark. “People from the banks kept calling, sometimes four or five times an evening, offering equity lines, and home improvement loans. They were like drug pushers.”
Posted by another alan @ 03:24 PM (1422 views) Add Comment
15 Comments
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1. another alan said...
Another quote:
"most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the multiple is above 300.
The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility."
Incredible, in a way.
Recaptcha: I'm weimar!
2. braindeed said...
For me the most telling part of the story, is the fact he thinks of himself as 'middle-class'
3. another alan said...
A side issue really, braindeed. The article demonstrates how systematic the issues are. The results of unthinking free market policies.
I think it is a possibility that this is where the UK may be heading if our political 'leaders' get their way. (I think I'm with Tony Benn!)
"More than half of household bankruptcies in the US are caused by a serious illness or accident." Thank god or whoever for the NHS (even though it could be more efficient.
4. another alan said...
Sorry to comment on my own thread again, but here is another housing quote:
Out went the pestering calls from the banks urging them to take on even more debt. In came the bailiffs. “One day, the banks are sucking up to you, the next they hate your guts,” he says with a Gallic shrug. Only through the help of a friendly lawyer did they escape foreclosure. The Bank of America, which received a $45bn taxpayer bail-out in late 2008, lost the Freemans’ paperwork several times. Each time they had to go through the laborious appeal process again.
“I suspect the bank wanted to foreclose because we were so near to paying off the mortgage,” says Mark. “It was more profitable for them that way.” Eventually the Freemans proved they could keep up with the payments. Mark calculated they have paid $163,000 so far on a house they bought for less than one-third of that amount. It could all have been for naught. More than four million homes have been repossessed in the past three years.
Buy a house in this climate, paying the banks a lot of interest... no thanks.
5. quiet guy said...
Interesting post.
"For years, the problem was cushioned and partially hidden by the availability of cheap debt. Middle-class Americans were actively encouraged to withdraw equity from their homes, or leach from their retirement funds, in the confidence that property prices and stock markets would permanently defy gravity (a view, among others, promoted by half the world’s Nobel economics prize winners, Spence not included). That cushion is now gone. Easy money has turned into heavy debt."
Does anybody have any idea how the UK compares to the US regarding the use of housing equity? I'm assuming that equity withdrawal was relatively uncommon here i.e. we're not as deeply in the pooh as the USA but I don't have the stats to confirm that.
6. Paul B said...
At $73,000, there probably aren't too many FTBs priced out of that market! Coming down from $105,000, that's a 30% drop in house prices. Oh, and their combined income is 95% of the property's value. Paints a very differnt picture from the UK!
7. drewster said...
There's some heavy debunking of that article here: Scott Winship's blog. Definitely worth a read. I'm not sure who or what to believe now.
8. enuii said...
Very good article whose sentiment will transfer very well to Britains semi-detached suburbia in the next couple of years.
9. Simon said...
I feel more sorry for the average American because in general they are harder working and take greater personal responsibility , the 21st century word for it is suckers .
A huge proportion of Brit's on the otherhand , and I'm one myself , strike me as lazy and espouse a disgusting entitlement culture .
It will be a long time coming but the elite will push too far and civil unrest will be innevitable .
10. braindeed said...
3. another alan said...
A side issue really, braindeed. The article demonstrates how systematic the issues are. The results of unthinking free market policies.
Not a side issue in IMHO - $70kwas £35K= for two full time.ull time earmers, no health insurance....(and I'll bet their pension provision was crepe)....overborrowed working class kidding themselves on.
11. Pwez said...
"Scott Winship's blog. Definitely worth a read. I'm not sure who or what to believe now."
If you read it carefully it doesn't actually refute the article. The fact is (and I've heard it repeatably in many media sources) you cannot get unskilled (i.e. no degree) high paying jobs in the US. $40/hour without a degree? forget it.
The crippling cost of health care IS a serious problem in the US. Economic mobility is feeble, born poor you will stay poor in the US.
12. uncle tom said...
One of the things I notice when I visit the US, is that while the Americans are generally far better educated than we are when it comes to math(s), the sciences and engineering; their understanding of the world beyond their borders is truly lamentable, and media coverage of such matters is dominated by interest groups who have no agenda to be honest or impartial.
In recent years, the same mentality has prevailed in their financial services sector, which has quite ruthlessly preyed on its own citizens; in a manner we have never seen, and hopefully never will.
The American people need a wake-up call, and to some extent voted for one when they elected Mr Obama; but there is little evidence that he is capable of delivering the social revolution that the US needs.
It will not be long before China trumps the US as the global top dog; something the US is not remotely prepared for, and will probably take with very poor grace.
The American people badly need a bloodless revolution; a new identity, purpose and direction; but I don't see it happening any time soon..
13. braindeed said...
UT @9 said...
In recent years, the same mentality has prevailed in their financial services sector, which has quite ruthlessly preyed on its own citizens; in a manner we have never seen, and hopefully never will
You don't get out much, do you?
14. montesquieu said...
Personally I blame their boll**cks constitution - or rather, their infantile reverence of it.
It's a useful document but it hasn't stopped them being duped, shafted, chewed up and spat out repeatedly by the same vested interests that wrote the damn thing originally, while they still line up to salute the flat like good little boy scouts.
Meanwhile that sense of manifest destiny continues to give them delusions of grandeur and an atrocity-justifying sense of being in the right that used to be the preserve of Victorian imperial Britain - but this is 2010 FFS and they still think that way.
They believe their own propaganda, that's why they will never rise up against the system, and are doomed to fall into barbarism and penury ... in my view long before old Europe does. I recently re-read Gibbon's Decline and Fall, someone should loan them a copy.
15. letthemfall said...
montesquieu
Well done on reading Decline & Fall (a second time??). I have all 6 volumes but yet to finish the first - laziness really because it is very readable. I recall Alistair Cooke comparing America with ancient Rome. The sense of decay in Western democracy, especially the US, seems strong to me.