The economy has changed. Expect hopes and dreams to follow.(Read article summary)
Concerned with saving money, young people are delaying moving out of their parents' homes
Malanie Stetson Freeman/The Christian Science Monitor/File
Not much action in the markets on Friday. It was a helluva week, though. At the beginning it looked like Europe wouldn’t make it to the end. Yields were rising to dangerous levels. Greece was clearly bankrupt. Italy would fall too, unless Germany came to the rescue. And investors weren’t too sure about France.
But as the week progressed investors calmed down. Or, at least they got used to being frightened. “Maybe they’ll muddle through after all,” they said to themselves.
And so the week ended. Nothing decided. Nothing resolved. More questions than ever.
Now, almost everyone has come around to our way of seeing things. In report after report, we see economists and analysts conceding that we’re in for a long spell of trouble. Official reports and estimates show next year’s GDP barely growing. Unemployment forecasts show the number of people without jobs staying high for years.
Most analysts now also recognize that 1) the real cause is too much debt, and 2) the feds can’t do much about it.
Here’s the New York Times with a typical hard-luck story:
Every year, young adults leave the nest, couples divorce, foreigners immigrate and roommates separate, all helping drive economic growth when they furnish and refurbish their new homes. Under normal circumstances, each time a household is formed it adds about $145,000 to output that year as the spending ripples through the economy, estimates Mark Zandi, chief economist at Moody’s Analytics.
But with the poor job market and uncertain recovery, hundreds of thousands of Americans like Ms. Romanelli (and her boyfriend, who also lives with his parents) have tabled their moves. Even before the recession began, young people were leaving home later; now the bad economy has tethered them there indefinitely. Last year, just 950,000 new households were created. By comparison, about 1.3 million new households were formed in 2007, the year the recession began, according to Mr. Zandi. Ms. Romanelli, who lives in the room where she grew up in Branford, Conn., said, “I don’t really have much of a choice,” adding, “I don’t have the means to move out.”
Ms. Romanelli, who works as an assistant editor at Cottages & Gardens magazines, is one of the luckier “boomerang” children who have found jobs and at least can start saving for their own place someday. As of last month, just 74 percent of Americans ages 25 to 34 were working. It is perhaps no wonder then that 14.2 percent of young adults are living with their parents, up from 11.8 percent in 2007. Among young men, 19 percent are living with their parents.
But even some young people who can afford to move out have decided to wait until getting on more solid footing. Prudence, not necessity, has kept them at home.
Jay Bouvier, 26, has a full-time job teaching physical education and health and coaching football and baseball at a high school in Hartford, near his parents’ house in Bristol. He could rent his own apartment — after taxes he makes about $45,000 a year, he says — but has decided not to. He says he will stay with his parents until he has saved enough to buy his own house.
“I have it pretty good at home, since it’s so close to my work, and financially I just feel like it’s smarter for the long run to buy,” he said. He says that living with his parents enables him to set aside about half of each paycheck. “It’s like I pay rent, but to myself.”
You see, it’s not just the economy that has changed. So have attitudes. Hopes. Dreams. Plans.
“Markets make opinions,” say the old timers. This market is turning Americans into a nation of pinch-pennies and stay-at-homes.
With the whole world economy in a bit of a funk you wouldn’t expect oil to be over $100 and gold to be over $1,700. Or would you?
As to oil, much of the emerging world is still growing strongly. Over the last 4 years, for example, China has grown 70 times faster than the US. That’s a lot more income in a lot more pockets in China. And that’s a lot of people who want to use from energy. It’s only natural that the price goes up…because supplies are sluggish; they can’t increase as fast.
There are also growing numbers of people who suspect the US and Israel are about to start another war. The Republican candidates are talking about Big Sticks. They expect to get money from the defense industry…and votes from the lumpen voters… by promising to throw their weight around overseas.
A war with Iran might be hard to contain. At the very least, you’d expect the price of oil to soar…which would almost certainly seal the deal on a worldwide depression.
As to gold, it appears that governments are buying. Here’s the Bloomberg report:
LONDON—Total central-bank gold purchases in the third quarter more than doubled from the second quarter and were almost seven times higher than a year earlier as countries continued to diversify reserves, according to a World Gold Council report.
At 148.4 metric tons, gold buying among central banks was at the highest since the sector became a net buyer of the precious metal in the second quarter of 2009, according to the quarterly report.
Central banks and other official institutions, by comparison, had bought 66.5 tons of gold in the second quarter and 22.6 tons in the third quarter of 2010.
*** A man in India was marrying his daughter. His old friend attended the wedding and noticed that the husband came from a different, and inferior, caste.
“Doesn’t it bother you that he’s from a different caste,” he said to the father of the bride.
And now the global financial Brahmins are on the case. Monti, Draghi, Papademos… ‘technocrats,’ the papers call them.
And US. Treasury Secretary Geithner too. Right schools. Right jobs. Right responses. As head of the New York Fed he was right there when the biggest bubble in history was created. He made no objection. He raised no alarm.
And then, when the bubble burst he was at the scene of the crime again…with the rest of his caste. At the height of the crisis in ’08, Lloyd Blankfein visited him 39 times. He spoke to the Goldman chief more often than he spoke to his own chief – US president Barack Obama.
This elite caste invented derivatives and sub-prime mortgage debt. Now, they pretend to solve the problems they caused.