- The generational war of the haves and have nots…
- It’s not capitalism’s fault…
- Studies suggest 95% of IPO profits are made BEFORE a company goes public. The SpaceX IPO could happen less than two weeks from today.
Dear reader,
The eternal war of the haves vs. have nots is increasingly a war of the old vs. the young.
That is because Americans of riper vintage own an expanding portion of wealth-accruing assets.
More youthful Americans, meantime, own a declining portion of wealth-accruing assets.
Reports The Kobeissi Letter:
- The gap between older and younger equity holders has never been wider:
- Americans aged 70+ now hold a record 17% of all US equities and mutual fund shares outstanding.
- The percentage has TRIPLED since the 2008 Financial Crisis low.
- At the same time, Americans under 40 own just ~3%, in-line with 2003 levels.
- This percentage is HALF of what it was in the late 1980s.
- As a result, the difference between the two cohorts is now ~14 percentage points, the widest on record.
- By comparison, the gap stood at ~6 percentage points at the start of the 1990s.
- The wealth gap is widening.
A Generation of Renters
And as I have noted before: Many aspiring youthful homeowners have been frozen from the housing market.
The purchase simply ranges beyond their means.
The median United States home price hovers presently between $405,300-$415,450 — some 40% above 1990’s median home price — adjusted even for inflation.
The median United States house price rises 5.8 times above the median United States income.
In 1990, the median house price came in at twice the median income. And home price increases have doubled income increases since 1985.
Bankrate reported recently that Americans must earn some $111,000 to meet the down payment on the median home — a gobsmacking 50% increase since the distant days of 2021.
Meantime, mortgage rates have doubled since 2022.
The Employment Crisis
As I have likewise noted before, the youthful wallow in the siege of an “employment crisis.”
Reported The Wall Street Journal recently:
- Recent college and high-school graduates are facing an employment crisis. The overall national unemployment rate remains around 4%, but for new college graduates looking for work, it is much higher: 6.6%… That is about the highest level in a decade — excluding the pandemic unemployment spike — and up from 6% for the 12-month period a year earlier.
- That rate… applies to people ages 20 to 24 looking for work who have at least a bachelor’s degree.
- Young graduates typically face a higher unemployment rate than their counterparts who have been in the workforce longer, but the gap is growing wider between older workers and the young.
The unemployed — as a rule — do not purchase houses. Nor do they “get ahead.”
Thus they are unlikely participants in the American Dream as previous generations have understood it.
The Seduction of Socialism and Communism
Is it a wonder, then, that some 62% of Americans aged 18-29 years harbor a “favorable” impression of socialism… as recent polling has indicated?
I do not believe it is a wonder whatsoever.
Thirty-four percent of the same youthful cohort harbor a favorable impression of communism.
Of communism!
It is true, as I have argued before, youth is often given to fanciful flights. The youthful heart triumphs often over the youthful head.
Thus the gorgeous promises of socialism and communism seduce them.
Yet as recently as 15 years ago… the youthful cohort declared for capitalism over socialism.
What has changed? Why do today’s youth have such heat against capitalism?
The answer — I believe — reduces to a case of mistaken identity.
They believe capitalism has failed them. Yet capitalism has not failed them.
I repeat my claim that it is today’s false capitalism that has failed them.
The Fed’s Role
Enter now the villain of our woeful tale — the Federal Reserve.
The Federal Reserve is the principle author of the false capitalism under which we languish.
For years and years it has inflated asset bubbles of every model and make — a housing bubble, a stock bubble — an everything bubble.
This it has accomplished through the artificial suppression of interest rates.
Whom has Federal Reserve manipulation profited, primarily?
The answer is mature Americans. That is because they are the central owners of assets.
Whom has Federal Reserve manipulation punished, primarily?
The answer is the youthful. That is because they lack the wherewithal to purchase assets.
They cannot profit from asset appreciation because they do not own assets.’
Thus they are frozen out… and left to scratch along as they can.
The Fed’s Gift to Older Americans
Economics commentator John Mauldin:
- The income and wealth inequality that now plague us are, to a great degree, the result of persistently and artificially low interest rates…
- Interest rates are the price of money, and money helps you make more money. Hence, lowering its price is a gift to those who are in the best position to invest it…
- Those same low interest rates encourage speculation that raises asset prices, particularly for housing. So lower-income people have to spend more just for a place to sleep…
- That can’t go on indefinitely.
It’s Time to Clear Capitalism
I hazard the fellow is correct — it cannot go on indefinitely.
And that which cannot go on indefinitely does not go on indefinitely.
Yet capitalism is not to blame. The false capitalism spawned by the Federal Reserve is to blame.
Thus, as I have argued before, an innocent defendant has been pitched into infamy… and the youthful are hot to pack him off to the gallows.
It is time to clear capitalism of all charges, and restore its blackened name.
It is time to haul false capitalism into the dock.
It is time to haul the Federal Reserve into the dock.
Brian Maher
for Freedom Financial News
