October 11, 2010

How Did This Happen?

You may wonder how our economy got to the point where it is now. I think Charles Hugh Smith summarizes it pretty well.

The middle class filled the growing gap between stagnant earnings and steep increases in living costs, healthcare (a.k.a. sickcare), education, and housing with a second income (Mom, aunty, sister and Grandma all entered the workforce en masse) during the 1970s, and then they filled the still-widening gap in the 80s, 90s and 2000s with ever-expanding debt.

The dot-com bubble provided the illusion that permanently rising equities would painlessly fill the gap (pension plans were happy to join in the mass delusion). When that fantasy imploded, it was quickly replaced with the exact same fantasy, only this time based on housing.

Hence our current economic troubles. The bottom line? Our children's future will be much different from the world we've been accustomed to for the past 30 years. It will be harder for many people to earn money. Our kids are going to need a variety of skills, not just a sheepskin.

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