Savings and Debt plus the follow up lead us down an interesting path. I have gotten my mind stuck on this topic for a few days. In order to fully grasp my thoughts you might want to skim through these past posts (1, 2). Now that I have referenced myself a lot lets get to semi new thoughts.
I think most of us grew up on more or less the same American Dream. Do the right thing and study hard then get a good job. By doing this you will be able to do a bit better than your parents did, assuming equitable career choices. Somewhere along the line you get married and buy a nice house with a white picket fence. Get a lovable dog and a good (not necessarily flashy but not shabby either) family vehicle. Join the local Rotary club or the Kiwanis or Lions or Moose lodge (in order depending on how much you actually want to help people and how much you like to party:) have 1.8-2.4 kids who also do the right thing and study hard. Maybe get a water ski boat or a hunting cabin or a time share in Hawaii. A few more years down the road and then a gold watch and a comfortable pension. Now you have time to make ships in bottles or spend winters in Arizona and of course enjoy the grand kids.
So where are we now? Some folks would say that the American Dream is dead. I would not say that it is dead but I would say that it is realistic for fewer people than it was 40 years ago and far less realistic than 60 years ago. What were some factors that let then, well be then.
If we look at 60 years ago we see 1950. Things were pretty darn good. A lot of this was because the rest of the world was basically blown to bits and missing a big chunk of two generations of workers, under the iron grip of Communism or both and the rest of the world was still largely undeveloped.
40 years ago the nations largest employer was General Motors and wages started at the equivalent of $17.50. Someone could graduate from high school or get out of the Army and walk into a good job with the kind of wage where you can afford the American Dream. Most jobs also had pretty good stability in addition to health care and pension plans.
So why are things not going so well now? I think it is a combination of a lot of different factors. Lets look at some of them:
First as noted pretty much everywhere real wages are going down for a lot of jobs. Most notably manufacturing which used to be the ticket for a minimally educated and skilled person to have a solidly middle class American Dream life has taken a real hit. A nice young man can't graduate from high school and get a job at the plant with a secure future for him and a family anymore. The same sorts of folks are often getting the same sort of jobs; those jobs are just buying less.
Also what we consider to be "normal" has gradually trickled up. Homes are bigger and not surprisingly more expensive. We also fill our homes with all manner of expensive gadgets and electronics. People in 1970 did not have $150 a month IPhone and Blackberry packages or tv's that cost as much as a decent used car. As with anything else when the cost rises it means fewer people can afford it.
The above two reasons are the biggest issues at hand but a couple others are in my opinion notable.
Interesting credit and debt have also been factors, if smaller ones. I am under 30 and I distinctly remember a time when many stores and shops did not accept credit cards. Debit cards were still a dream for some time after that. It is pretty hard to rack up debt when you can't buy stuff on credit. Of course stores have had payment plans and such but not too long ago most people only borrowed money for homes and cars.
Along with the long period of Greenspanian artificially low interest rates, an explosion in home prices, Fanny, Freddie (and eventually derivatives) home mortgages as well as other debt started becoming more and more available to less and less qualified people. I guess when it started bankers were confident that the long and reliable increase in home prices made them getting their money back a sure deal. Later on bankers made their quick money and sold the loans off anyway.
Somewhere along the lines it became more socially acceptable to be further and further in debt. Home prices were a huge factor in this. Getting that 3 bedroom 2 bath with a decent yard got a lot more expensive, but it was still the dream. People used to have to wait until they could buy something or a reasonable person who was concerned about getting their money back (from them, not in general) would give a loan. For the reasons listed above the grip on reality in our economy loosened a bit and then just plain took a vacation for a couple years. Also to make matters even worse as it got more acceptable to be in debt the American Dream got even bigger.
So people were having a harder time and trying to reach bigger goals to boot. Also folks were were getting further into debt trying to get the American Dream. Somewhere along the line maybe a nice slightly idealistic idea turned into an unrealistic, unsustainable and warped vision of its former self, at least for some.
As Mayberry noted "EVERYONE is force fed the "American Dream" virtually from birth." Our parents, family, teachers and friends as well as the ever present media say this is a good thing and we should want it. I certainly would not say that (at least in the slightly more retro interpretation) it's not a nice idea. However sometimes the dream isn't for everyone, at least not today.
Tomorrow I will talk about defying the norms.