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b_b  ·  3713 days ago  ·  link  ·    ·  parent  ·  post: Highly Educated, Highly Indebted: The Lives of Today's 27-Year-Olds, In Charts

Well, let me preface by saying that I'm no economist either, so take this with a grain of salt. But, just think of the implications of this. $40k isn't that much money to begin with. You can live on it, but you're not gonna be high on the hog. $15k on the other hand is a joke. It's impossible to be a consumer at $15k. Given that our economy is consumption-based, this stat highlights why demand (the main reason why the economy still sucks is lack of demand) is going to be suppressed for a really long time. One can barely pay rent at $15k, let alone enjoy a night out with friends or buy school supplies for their kids.

One of the great problems with our economy is that the middle class is out of money. There's a ton of money in the system, but it's not making it to the middle, and certainly not to the bottom. The bottom fell out in 2008 when credit went dry, because the only way we could continue to spend money was through tapping (pretend) home equity or by using credit cards. Therefore, once access to credit was maxed, demand simply stopped.

Now we're in a situation where young people are scraping just to have enough money to pay rent. Imagine what those people are going to be up against in 10, 20, or 30 years. I can venture a guess that at $15k (hell, even double that) that one isn't saving a single nickel for retirement. But we aren't going to let them starve as retirees. So who gets to pay? We do!

Wealth accumulation seems to only be a one way street. Businesses are striving for a race to the bottom, with the winner being whoever can operate at the lowest margin. Corporate profits are at an all time high, while revenues haven't increased much over the last couple years. The difference is that they've achieved cost savings through almost exclusively cutting payrolls (either by more layoffs, forcing longer hours, restructuring union deals (see here for a great look at this), etc.). This trajectory will lead to the same failure as 2008. The math just doesn't add up. When the vast majority of people don't have any money, money doesn't get spent. Period. Doesn't matter how much exists at the top, because a rich person doesn't need that much more stuff than a poor person. Unless or until people can make a living wage doing a basic full time job, we're not going to get out of this cycle. It took a World War to solve this problem the last time around. Let's hope some other compromise can be struck to avert that scenario.