Why American Wealth is on the Decline
When I was growing up, America was considered the poster child for wealth and power. It had a strong and independent middle class, a thriving business and manufacturing sectors, and a solid commitment to free enterprise.
When I was growing up, we didn't talk about things like national debt, international monetary crisis, and the collapse of the dollar. We knew there were problems in the world, but they weren't in our backyard.
When I was growing up, people didn't fear retirement and knew how to build a comfortable life.
When I was growing up, people understood the phrase, "You have no one to blame but yourself."
When I was growing up, it was assumed that American wealth and power would always be a reality.
That was in the 1950's and 1960's. Today, things are much different.
Today, the Fed has bought $2.3 trillion in bonds through two quantitative easing programs (i.e., printing money)—and is considering buying even more.
Today, unemployment is officially at 8.3% and unofficially even higher as longtime unemployed simply drop out of the job market. And unemployment poses one of the biggest risks to the Fed's easy-money policies.
Today, the middle class is disappearing and there is really only rich or poor.
Today, the government oversees over $2.2 trillion in entitlement payments to its once independent citizens—versus $24 billion in current dollars in 1960...a 727% spike.
Today, the US debt is set to pass $16 trillion.
Today, the wealth and power of American are anything but a given.
So, what is wrong? Why are we facing such decline? Where has all the money gone? The answer is found in the decline of our independence.
As Nicholas Eberstadt writes in The Wall Street Journal, "From the founding of our nation until quite recently, the U.S. and its citizens were regarded, at home and abroad, as exceptional in a number of deep and important respects. One of these was their fierce and principled independence, which informed not only the design of the political experiment that is the U.S. Constitution but also their approach to everyday affairs."
He goes on to write: "The corollaries of this American ethos were, on the one hand, an affinity for personal enterprise and industry and, on the other, a horror of dependency and contempt for anything that smacked of a mendicant mentality. Although many Americans in earlier times were poor, even people in fairly desperate circumstances were known to refuse help or handouts as an affront to their dignity and independence. People who subsisted on public resources were known as 'paupers,' and provision for them was a local undertaking. Neither beneficiaries nor recipients held the condition of pauperism in high regard."
Today, Eberstadt argues, we no longer have a negative view of taking entitlements from the government or exchanging our freedoms for handouts. Today, we feel entitled to entitlements. Today, it's good to be a pauper.
Today, the middle class has exchanged its wealth for handouts. One explanation is that handouts feel securer than self-reliance. This is a fine sentiment till one day you wake up and realize that you're poor. It's even more frightening when you realize the government you rely on for existence is poor too.
In the future, as I've argued, there will really only be two classes of people. The poor and the ultra rich. Increasingly, which class you belong to will be a function of the choices you make on how you'll live your life. Will you be independent? Or will you rely on government handouts?
If you want to be rich, the choice is clear. You must be fiercely independent. You must take your future and your money into your own hands through financial education—something the government will never handout.
Today, your tomorrow can be better than your present. But it will take hard work, discipline, and independence, something often in short supply today.
So the question is, will you choose to be dependent or independent? Thankfully, the choice is still yours to make.
Do you choose independence? Check out our free, financial education community here.