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Americans' Average Net Worth by Age -- How Do You Compare?
I don't know if these numbers mean anything any more. They are just too low to be believable.
Look at the numbers for 65-69 excluding home equity. The question is: how are these people living? If they are collecting SS, even with a fully paid off house it would be a difficult life. And, I'm guessing these people in this range were not top SS earners.
The Fed published these results in 2015 for the year 2013:
On Home Equity:
"Another measure is to compare net worth to the median sale price of an existing home in the last several years--- about $200,000. Do that and you find that the net worth of the median household is no more than the value of a median priced home. Even among the top 25 percent, net worth is never more than about 3 times the value of the median home. This suggests that our collective wealth is pretty thin. Most people have the bulk of their wealth in home equity. (Talk about scary notions.)"
It sounds like the majority of people retired or nearing retirement still make mortgage payments. A leftover from the housing bubble? Their equity must be small.
Dex, I was thinking the very same thing i.e. the red bar which is the net worth excluding equity in home. I live in one of the lowest income regions of the country but most everyone I know here sure have far more than the red bars shown. Then again, my county has the largest farm income of anywhere in the state and if you think farmers are poor, think again.
The US, and most of the industrialized world, is awash in statistics. If you have a question that revolves around numbers, it is an easy task to quickly find a data source on the web.
Annual income in the US is an excellent example. It took about one minute and one input to secure an overwhelming array of current average annual incomes as a function of occupation and geography in the US. The obvious source is the Bureau of Labor Statistics. Here is the Link for May, 2014:
The list by occupational specialty is endless. For all occupations, the mean annual wage is $ 47, 230. Jungster was partially right: farmers aren’t as poorly rewarded as some might imagine, although engineers do substantially better. Farm labor contractors average $ 47, 790 annually.
But that single number is misleading. There’s a large range of incomes within the farming industry that is a function of specialty and location. See the 45-XXXX series of occupations much further down the listing to get a more refined answer. Click on the specialties to recover more geographic and distribution details.
Given the access that the Web provides, the world is only a few keystrokes away. Facts conquer speculation every time. Occupational advisors and students should examine these listings before making educational decisions.
Please don't bring in 'national debt', it completely misguides the argument about individual worth, has no bearing on this discussion, and is not at all like what most people think anyway. We have been over this before here: it is money owed to ourselves; my spending is your income and your spending is my income. Think of it as self-dealing, if you like. Unlike a household, we will run out of money when the NFL runs out of points. Percentage of GDP, that's more relevant.
@catch22, I was mostly joking as a reflection of the comments that the numbers were too low, which I thought were pretty reasonable because the numbers seem amazingly low to me also. Then I started thinking about our life expectancy and the idea that a lot of people who have lower net worth may end up having lower than average life expectancies and therefore working pretty much until the end, I guess the numbers start to become a little more believable. Thanks, though, for the website you linked. That was fascinating!
@davidrmoran, like I said I was joking, but I think your view of the national debt is overly simplistic. The government can certainly print the money necessary to pay those debts but to think that will have no economic impact on our children or their children or their children is sadly mistaken. It's an enormous Ponzi scheme that won't end well someday.
Thank you all for letting me understand why exactly i drink scotch.
On a more serious note, the comment on life expectancy and how much one ha saved is telling. there is little point in being miserable and old at the same time. Money will not make you happy is the guilt of the rich man. If it werent true, we wouldnt see such income disparity. so let me give you a different meaning of chrity begins at home. It means CEOs paying their employees living waves so that they do not need politicians charity for getting elected or CEO charity of donating cents of guilt. If you paid people enough they wouldnt need your charity.
@davidrmoran, like I said I was joking, but I think your view of the national debt is overly simplistic. The government can certainly print the money necessary to pay those debts but to think that will have no economic impact on our children or their children or their children is sadly mistaken. It's an enormous Ponzi scheme that won't end well someday.
Oh boy, here we go...
1. If you say what you said above three times, Paul Krugman will appear. To lecture you. If you get to hear about how a faked alien invasion would be a great thing for the economy, told in wild-eyed fashion, bonus, because that's just amusing on so many levels.
2. The government can print a million bajillion dollars and it will have no negative effect. We have had so many great discoveries and advancements over the years, silly us overlooked the idea that we can print our way to prosperity. Your children and their children will thank this generation for figuring this out while they sit on the beach watching funny cat videos on Youtube and texting each other while the robots (built with printed money) do everything.
3. No, the idea that we can print and print and print does not sound like porn to politicians and their cronies. No waste or malinvestment will happen, either. Government will print and print and print and not spend it on things like infrastructure or improving education in this country, because that would be just silly. By the way, no such thing as malinvestment. Solyndra was a "valuable learning experience".
For all of this incredibly, deeply sarcastic information.... you're welcome.
Jeez, nothing like sarcastic preemption to cloud the facts.
No one says enormous sustained financed spending (on anything, not just infrastructure, it could be on unneeded weapons) at multiples larger than productive economic activity is a good idea. Meaning sure, heedless debt can pose a threat to financial stability. But it's not like that now, and was not back then, and it is in all cases money we owe ourselves --- an asset. Throwing out phrases like ponzi, stealing from our kids, printing money, all that, shows only profound false misunderstanding. Damaging, too. Even Merkel does not get it. Pointing out how it really goes does enrage some.
If you cannot bear to have the name Krugman pass your eyes (his analyses are clearest and easier to understand for a layperson, imo --- 'Globally, and for the most part even within countries, a rise in debt isn’t an indication that we’re living beyond our means'), then go read Yellen, Fatas, and a host of thoughtful others.
Check out the graph of 325y of UK debt: http://krugman.blogs.nytimes.com/2015/02/06/debt-is-money-we-owe-to-ourselves/ 'Britain did not emerge impoverished from the Napoleonic Wars; the government ended up with a lot of debt, but the counterpart of this debt was that the British propertied classes owned a lot of consols.'
"Jeez, nothing like sarcastic preemption to cloud the facts. "
How about the religious zealot-level of devotion to theory, to the point where anyone who doesn't agree with you is insulted and given a reading list so you can make sure they are properly indoctrinated? I would be fascinated the response on this board if Krugman came out tomorrow and said he was becoming a Republican. It would be like telling kids there is no Santa.
And at least perhaps my light post gave a couple of people a chuckle. Ultimately, the decision that I have made is to do the only thing I can do: figure where I believe things are going and invest in a manner that expresses those beliefs. I will be light, I will occasionally be sarcastic, because honestly, we can sit here and argue about economic theory, but ultimately I don't believe that I have one iota of say (or do the people on this board, unless one of you is an FOMC member that the rest of us are unaware of) as to the ultimate direction this economy is being taken in. Beyond that, we live in an economy where there have been more than a few examples of "if the numbers don't confirm the narrative, change the numbers." We don't like GDP? Lets change how it's calculated. Ah, all better. Or, the goalposts are endlessly moved.
Given my lack of control, all I can do is attempt to try and think ahead and play futurist and invest accordingly. That's all I can do and coming to terms with that fact is ultimately freeing from the standpoint of, I don't care what one FOMC member does today and that another will ultimately probably contradict them a day or two later. I may not agree with monetary policy, but you know what, I really just don't care as much. I know that this period will end badly -and I say that with the utmost certainty - but I've invested in the manner that I think is appropriate. And that's all I can do. Maybe I'll crack jokes on here on occasion, I just think it's a better use of time than becoming stressed when someone says something I don't agree with.
All of this arguing on the internet does nothing, it fixes nothing and it's ultimately a waste of time. I love productive conversation - any sort of discussion of monetary policy or politics is ultimately futile because people have grown so deeply fixated on their beliefs that anyone else is often largely either shouted down or ignored. So, why do it? Or why not crack a few jokes. If I get someone to smile when I post a joke post with a "The More You Know" PSA at the end, that's worthwhile to me. I'm happy to talk about investments for hours on end, but the divisiveness of people in regards to certain topics does often lead to a joke because ultimately, I'd rather laugh than be upset over the internet about views of someone else's that I know with great certainty they have no interest whatsoever in changing. When I do crack a joke or make light, it's the almost religious devotion to political parties that shows itself. As I've said before on this board, it's the internet, don't get stressed by someone who doesn't agree with you - you'll never get everyone to agree with you. If you can have a constructive conversation on the internet - an increasing rarity - be happy.
As for Krugman, I find Krugman's delight over destruction (to the point where he went on cable news and suggested that creating a real life sequel to "Independence Day" would be a great idea) as "GDP positive!" to be disturbing, among other issues. This is not exactly something that one has to search for examples of, either - there are more than a few, to the point where Krugman has been parodied for this on multiple occasions.
"No one says enormous sustained financed spending (on anything, not just infrastructure, it could be on unneeded weapons) at multiples larger than productive economic activity is a good idea. Meaning sure, heedless debt can pose a threat to financial stability. But it's not like that now"
Well, I'm very glad that you are trusting of this government to spend money so wisely and regulate spending so well. The complete faith in the system and the small group tasked with regulating it is really quite remarkable.
"It's not like that now." Nor will it ever get out of hand, right? Nor have there ever been any examples in history, right? But we're different, right?
It's the attitude that the increasingly complex and interconnected global economy can be dialed up and down like an air conditioner that irks me. "It's fine now, right?" "Want it a little warmer, a little cooler? Easy peasy."
How much confidence do you have that you can control this? "100%?" I'm sure Bernanke wouldn't have said "Ehhhh, 50/50", but can you really have 100% confidence in controlling a system that has grown increasingly complex, even since 2008? In a system that is interconnected and relies heavily upon confidence - something that's difficult to control, especially once it is lost? Where are we, several years of ZIRP and multiple QE's later? The world isn't ending, but the ROI for what has been the easiest monetary policy in history seems rather lackluster and now we're here with weak GDP growth and little in the way to stop the Winter that we've been trying to put off and buy our way out of for so long.
I have a significant fascination with how things work. However, I tend to focus it on learning more about science, industry, other cultures and other such things. I can have my views on economic theory and monetary policy, but as I get a little older I suppose I want to devote time to topics that are ultimately more enjoyable and perhaps a tad more positive.
People lack respect for the potential volatility, complexity and fragility of the global economy - 2008 was a delightful example, but it's clear that we haven't learned anything.
Ultimately, going back to the topic at hand, as I noted above, there have been enough studies that I don't doubt that the graphs are likely "in the general vicinity" of being correct.
Is this all you got? What kind of theory? The data given and analyzed are the opposite of theory.
It is not a matter of agreeing with me, for heaven's sake. You make it personal and cultish, and I gotta wonder why you would do that. A matter of my deluded trust, or something. Man. I'm not an economist or close, but I do know how to study and am curious about how things work. Like you and investments, I would assume.
You offer nothing above but airy assertions, no data, no citations, no evidence of wanting to find out. Forget Krug; read the other guys. Did not intend insult; apologies; I believed that you were interesting in knowing some things. And actually, if you really think anyone is saying it's fine now and can be macro-controlled, you might well enjoy reading substantiated economics blogs.
Somehow, our thoughts have drifted away from a pure wealth distribution chat and into a discussion of a happiness/wealth correlation. Actually, this topic has a rich philosophical, academic research, and popular written history.
One invented word that continually surfaces in such a discussion is “satisficing”. What is satisficing? An on-line dictionary definition is: “A decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution.”
Investopedia offers that “The theory of satisficing finds application in a number of fields including economics, artificial intelligence and sociology. Satisficing implies that a consumer, when confronted with a plethora of choices for a specific need, will select a product or service that is "good enough", rather than expending effort and resources on finding the best possible or optimal choice.” We often satisfice when making investment choices.
Tradeoffs always exist. As Lao Tsu recognized: “He who knows that enough is enough will always have enough”. I suspect Tsu’s quote holds much water once a minimum income/wealth floor threshold is satisfied. That floor level varies for each person, and is dependent on factors like age and location.
Countless books have been written on this subject over the ages. Jason Zweig devotes the final chapter in his “Your Money and Your Brain” book to coupling happiness to an investment program. He states that “The most powerful and reassuring lesson from the new research into happiness is that you don’t have to be rich to be happy”. Happily, I learned that significant lesson a long time ago.
Zweig lists many happiness tips including suggestions like: Turn off the tube, Go with the flow, Don’t let the old become bold, Get time on your side, and a host of other ideas. Zweig remarks that “the odds that merely having more money will make you happier are pretty close to zero”.
This broad assertion can be tied to Kahneman and Tversky’s 1979 Prospect Theory discovery. From experimental data with folks making decisions and their performance under uncertain conditions, they deduced a risk/reward tradeoff curve that is highly asymmetric and nonlinear. Negative payoffs hurt twice as much as positive outcomes enhance wellbeing, and the incremental benefits from positive outcomes approached nearly a zero slope level when enough is enough.
A very formal literature has evolved based on serious academic research. One finding from a highly mathematical research paper by Stuttgen, Boatwright, and Monroeis is that “Given this heterogeneity in potential choice rules, we agree that a satisficing choice model may not always be the appropriate model when analyzing consumer choices.” Basically, we all make choices differently with a mix of facts, logic, and emotional factors guiding our decisions.
Denials aside, the research suggests that we are mostly happy and independent warriors. We satisfice within the constraints of our own world views, resources, and needs. And we’re reasonable pleased (happy?) with our compromises.
Edit: Well the discussion has taken yet another turn. The economic policy battle is now joined. Great exchange guys over a complex subject. Based on my postings, MFOers likely can guess my position with considerable accuracy. But I choose not to further muddy waters that will not be cleared here and now. I choose to be silent. Good luck guys.
>>>Zweig remarks that “the odds that merely having more money will make you happier are pretty close to zero”.<<<<
I take my life lessons from my personal experiences, not what I read in books. Zweig obviously was never dirt poor for almost two decades of his life. Having more money where you never have to worry about it anymore does make one happier - much, much, happier in fact. However, in the hierarchy of things it's far below health, friends/relationships, and our relationship with God. Edit: and probably should add enjoying whatever one's passion is. Albeit that often requires money.
"“the odds that merely having more money will make you happier are pretty close to zero”."
Can I have his, then?
Over the past few years, I've increasingly focused on having a long-term view and preparing for that and being satisfied with that and then going with the flow to some degree. I just find it ultimately healthy. Hobbies, learning, reading. Ultimately, I've found that I've learned a great degree via investing because it has lead me in unexpected directions as I try to research companies, countries, industries, etc. I'd always found healthcare to be something that I "didn't understand, so let a fund manager do it." One day, I went, why couldn't I try to understand a lot of these concepts? It's ultimately been rewarding on a number of levels.
That said, in terms of people going, "Money doesn't make you happier" often leads me to saying some variation on what I do above.
As for occasional humor, I just find it better than being so serious about certain subjects I ultimately don't think I will change nor will I change someone's opinion on. Perhaps a little humor will lead someone to maybe be a little more open than arguing with them would or maybe have a second thought about something they'd stood firm on. Maybe not.
Perhaps there's a part of me that feels monetary policy has been distorted over the last several years to the point where perhaps it is a little ridiculous the kind of "Twilight Zone" we find ourselves in, where the focus is not really on anything but what Yellen might say (this Friday btw) and good news is regarded as bad because the market is so addicted to easy money.
As for the graph in the original post, perhaps it really does show that those who are doing well are doing well and much of the rest of the economy is not, or muddling along. Perhaps it further illustrates the lack of financial education (was told by a relative the other day when mentioning financial education that their 25-year-old had no idea how to write a check.) We are all on an investing board. What % of the population hasn't been taught or taught themselves basic investing concepts? I'd be willing to guess a larger % than most would think and that's unfortunate.
Additionally, in terms of wealth distribution I'd be curious to know what the population of the "1%" looks like over the years and whether or not that uppermost level of wealth is held by more or fewer hands.
When I viewed the Paul Krugman video link that Scott posted, I became motivated to violate my own promise to stay away from the economic policy debate.
I am definitely not an economist by training, but I’ve accumulated a ton of practical experience over my eight-plus decades. I need and seek simple models when assessing the complex and interactive impact of economic options.
The Broken Window Fallacy goes a long way to provide a simple understanding of mostly non-productive projects. I say “mostly” because just about all projects do some good; it is a matter of output and efficiency (that’s the engineer in me speaking). Here is a Link to a Broken Window Fallacy short video:
Enjoy. The video is skillfully done. If you have questions or comments, please address them to Davidrmoran and/or Scott, certainly not to me. I wash my hands of the whole controversy.
A silly youthful libertarian-style video unworthy of someone with your decades of engineering experience.
This entry is thorough, if you're genuinely interested in the complex subject, which somehow I bet is not really the case: http://en.wikipedia.org/wiki/Broken_windows_theory . Note absence of any von Mises Institute fellow mention.
Sorry, I forgot you have washed your hands of this. You simply wanted to throw a youtube brick through the thread's window and scamper.
"Additionally, in terms of wealth distribution I'd be curious to know what the population of the "1%" looks like over the years and whether or not that uppermost level of wealth is held by more or fewer hands."
I would think that the numbers to reach the 1% level are being adjusted upwards. Even with that said, I suspect there are more people in that category than before. The average person didn't invest in the markets just a relatively short time ago in history.
I did briefly examine your Broken Window reference.
It is totally inappropriate for the present economic policy discussion. The Booken Window of your reference applies to a criminal containment policy and plan. The Broken Window that I referenced deals with the time and people integrated impact of economic theory.
I find the video that I referenced refreshingly easy to assimilate. Yet it captures the essence of the need to consider both easy to observe short term impacts and less obvious longer term impacts of economic decisions.
I didn't see anything silly about the video. In fact, it is quite serious stuff. In the short haul, war might jump start an economy, but over an extended timeframe, it must lower wealth since it is resource and manpower wasteful.
I reject your referenced Link as not pertinent. The names are the same, but their designed purposes are totally divergent.
"If you cannot bear to have the name Krugman pass your eyes (his analyses are clearest and easier to understand for a layperson, imo"
Everyone's entitled to their opinion. I find that Von Mises has a better hold on the subject. Pouring money into problems doesn't work all the time. The War on Poverty is an example.
Good grief. The WoP is for the most part this huge success, with truly lousy PR.
Not opinion, evidence-based, something von Mises was in short supply of. (I don't trust my opinions myself; need to read intensively and skeptically.) Suggest googling before posting assertions. I have posted this before; shield your eyes if Krugman glare is too much:
MJG, point taken, thanks; I will try to respond with something thoughtful about stimulus spending and the fallacies in that callow youtube thing. And not the cartoon homeowner with burning house talking to newly arrived firefighter: 'No, thanks, I'm a libertarian.'
Krugman said "Antonio Fatas, commenting on recent work on deleveraging or the lack thereof, emphasizes one of my favorite points: no, debt does not mean that we’re stealing from future generations." Fatas said absolutely nothing about stealing from future generations. He only said that rising debt levels don't necessarily mean we're living beyond our means and he provided as an example the government of Singapore. He also admitted subsequently that Singapore is an outlier among governments.
Fatas even says "This argument does not deny that the actual composition and ownership of assets and liabilities matters" and goes on to say that one has to be careful drawing conclusions from analyses that refer only to the debt side of the balance sheet.
So Krugman goes on to say "Globally, and for the most part even within countries, a rise in debt isn’t an indication that we’re living beyond our means, because as Fatas puts it, one person’s debt is another person’s asset; or as I equivalently put it, debt is money we owe to ourselves — an obviously true statement that, I have discovered, has the power to induce blinding rage in many people."
The only thing that's obvious is that Krugman is either an idiot or he's blatantly lying. I'm not sure which is worse. Fatas didn't say that debt isn't an indication that we're living beyond our means. He said it doesn't have to be. And then Krugman claims that one person's debt is another person's asset is equivalent to debt being money we owe to ourselves. I guess if I loan money to myself that's true but as of last August, more than one third of our debt was owned by foreigners.
That's something more than $6 trillion of "our" debt that is someone else's asset!
The rest let's say is our own asset. But when you look at what started this discussion, the median net worth of Americans, that counts the asset (all the Treasury bonds we hold are counted as assets in our net worth) but it doesn't count the debt. Similar to what Fatas is saying, it’s dangerous to draw conclusions paying attention to only one side of the balance sheet. Yet when I made a comment about the national debt you suggested we should exclude that because it misguides the discussion. If you really believe we owe the money to ourselves and that we're not stealing from future generations why would you be comfortable with a discussion of net worth that counts the asset but excludes the liability?
The question of whether we're stealing from future generations isn't solved even if all of our debt was owned by Americans because it's not about Americans and foreigners, it's about which Americans got the benefits and which Americans pay the costs. The benefits have already been given. The costs have yet to be paid. We've been running annual deficits since the mid 1950s with only a couple years of surpluses at the end of Clinton's presidency. I'll agree with Fatas, growing debt doesn't have to mean we're living beyond our means, but it sure looks that way. We're not at all like his Singapore example where they take the money they raise from issuing debt and save it because they regularly run budget surpluses. I would love to hear a logical explanation why future generations aren't going to be worse off than if we handed them a country with far less debt than we'll pass on, but Krugman isn't even close.
>> counts the asset (all the Treasury bonds we hold are counted as assets in our net worth) but it doesn't count the debt.
Why do you think that is?
>> not about Americans and foreigners, it's about which Americans got the benefits and which Americans pay the costs.
right
>> The benefits have already been given. The costs have yet to be paid.
it is always this way !
>> We've been running annual deficits since the mid 1950s with only a couple years of surpluses at the end of Clinton's presidency.
So? It does not matter, all that matters is percentage of GDP.
>> I'll agree with Fatas, growing debt doesn't have to mean we're living beyond our means, but it sure looks that way.
You are not getting it, and I would say do not want to, but your writing is so clear and your interest in reading is manifestly so high, that cannot be the case. Keep reading is all I can suggest.
... Except if you really think Paul Krugman is 'not even close', well, then, no, there is no point in more reading. Quite aside from his being idiotic or blatant liar.
>> Fatas didn't say that debt isn't an indication that we're living beyond our means. He said it doesn't have to be.
Help me understand how this is something other than hairsplitting.
Finally, share what you think the answers are yourself, to whatever you say the problems are? Somehow cut more spending? What? Gold standard? Raise wealthy taxes back to 90%?
No, no! Your brief concession that you touted an inappropriate Broken Window reference doesn’t answer the muster call. It didn’t sound the trumpet; it was barely a whisper.
In your reply posting on this matter you predicted that I would not even read your reference. Well you were wrong; I did.
Apparently you posted that Link without reading it yourself. The very first paragraph in your referenced article clearly identifies it as a social policing initiative, and not one that addresses economic theory issues.
In your initial response to me you said : “This entry is thorough, if you're genuinely interested in the complex subject, which somehow I bet is not really the case…”. Well I was "genuinely" interested enough to access your article. Given its unsuitable character, I suspect you yourself never did even casually examine it. That’s shamefully dishonest.
Your creditability is shot; it is done and it is your own doing. Based on this present experience, any checking of your references is a grand time sinkhole. I will not play that wasteful game. Please don’t bother to now search for seemingly applicable counter references. You would be wasting your precious time.
I am not a devoted Austrian economics conscript. I am also not a committed Keynesian follower. Both economic schools have something to offer, but are circumstance dependent. Both are right sometimes and wrong sometimes. Krugman is right sometimes and wrong sometimes. Economics is not a hard science. What worked economically yesterday might be a complete failure today.
I never intended to get embroiled in an economic theory food fight here. It’s sloppy slogging, and surely will not be fully explored on a website designed to exchange mutual fund data and ideas. My contribution to this food fight ends now.
Apparently, other MFOers are prepared to pickup the gauntlet. Good luck to all. This debate has little chance of any meaningful resolution.
Comments
On Home Equity:
"Another measure is to compare net worth to the median sale price of an existing home in the last several years--- about $200,000. Do that and you find that the net worth of the median household is no more than the value of a median priced home. Even among the top 25 percent, net worth is never more than about 3 times the value of the median home. This suggests that our collective wealth is pretty thin. Most people have the bulk of their wealth in home equity. (Talk about scary notions.)"
chasing_the_big_dogs
Dex, I was thinking the very same thing i.e. the red bar which is the net worth excluding equity in home. I live in one of the lowest income regions of the country but most everyone I know here sure have far more than the red bars shown. Then again, my county has the largest farm income of anywhere in the state and if you think farmers are poor, think again.
http://money.cnn.com/2013/06/24/pf/emergency-savings/
http://www.theatlantic.com/business/archive/2014/03/are-the-suburbs-making-people-live-paycheck-to-paycheck/284586/
http://time.com/2742/nearly-half-of-america-lives-paycheck-to-paycheck/
http://www.nbcnews.com/business/retirement/one-third-high-earners-are-living-paycheck-paycheck-n342726
The details and numbers vary but the volume of articles about this has me thinking these numbers are probably not far off.
Don't know about the calculation; but here is the Debt Clock. If you hover the cursor over the number area, the source data will be indicated.
The US, and most of the industrialized world, is awash in statistics. If you have a question that revolves around numbers, it is an easy task to quickly find a data source on the web.
Annual income in the US is an excellent example. It took about one minute and one input to secure an overwhelming array of current average annual incomes as a function of occupation and geography in the US. The obvious source is the Bureau of Labor Statistics. Here is the Link for May, 2014:
http://www.bls.gov/oes/current/oes_nat.htm
The list by occupational specialty is endless. For all occupations, the mean annual wage is $ 47, 230. Jungster was partially right: farmers aren’t as poorly rewarded as some might imagine, although engineers do substantially better. Farm labor contractors average $ 47, 790 annually.
But that single number is misleading. There’s a large range of incomes within the farming industry that is a function of specialty and location. See the 45-XXXX series of occupations much further down the listing to get a more refined answer. Click on the specialties to recover more geographic and distribution details.
Given the access that the Web provides, the world is only a few keystrokes away. Facts conquer speculation every time. Occupational advisors and students should examine these listings before making educational decisions.
Best Regards.
If a nation's infrastructure is falling apart, is that not a form of "national debt"?
And if said nation prints currency on paper and converts the paper into infrastructure rebuilding, has it substantially increased its "national debt"?
@davidrmoran, like I said I was joking, but I think your view of the national debt is overly simplistic. The government can certainly print the money necessary to pay those debts but to think that will have no economic impact on our children or their children or their children is sadly mistaken. It's an enormous Ponzi scheme that won't end well someday.
On a more serious note, the comment on life expectancy and how much one ha saved is telling. there is little point in being miserable and old at the same time. Money will not make you happy is the guilt of the rich man. If it werent true, we wouldnt see such income disparity. so let me give you a different meaning of chrity begins at home. It means CEOs paying their employees living waves so that they do not need politicians charity for getting elected or CEO charity of donating cents of guilt. If you paid people enough they wouldnt need your charity.
1. If you say what you said above three times, Paul Krugman will appear. To lecture you. If you get to hear about how a faked alien invasion would be a great thing for the economy, told in wild-eyed fashion, bonus, because that's just amusing on so many levels.
2. The government can print a million bajillion dollars and it will have no negative effect. We have had so many great discoveries and advancements over the years, silly us overlooked the idea that we can print our way to prosperity. Your children and their children will thank this generation for figuring this out while they sit on the beach watching funny cat videos on Youtube and texting each other while the robots (built with printed money) do everything.
3. No, the idea that we can print and print and print does not sound like porn to politicians and their cronies. No waste or malinvestment will happen, either. Government will print and print and print and not spend it on things like infrastructure or improving education in this country, because that would be just silly. By the way, no such thing as malinvestment. Solyndra was a "valuable learning experience".
For all of this incredibly, deeply sarcastic information.... you're welcome.
No one says enormous sustained financed spending (on anything, not just infrastructure, it could be on unneeded weapons) at multiples larger than productive economic activity is a good idea. Meaning sure, heedless debt can pose a threat to financial stability. But it's not like that now, and was not back then, and it is in all cases money we owe ourselves --- an asset. Throwing out phrases like ponzi, stealing from our kids, printing money, all that, shows only profound false misunderstanding. Damaging, too. Even Merkel does not get it. Pointing out how it really goes does enrage some.
If you cannot bear to have the name Krugman pass your eyes (his analyses are clearest and easier to understand for a layperson, imo --- 'Globally, and for the most part even within countries, a rise in debt isn’t an indication that we’re living beyond our means'), then go read Yellen, Fatas, and a host of thoughtful others.
http://fatasmihov.blogspot.com/2015/02/those-mountains-of-debt-and-assets.html
Check out the graph of 325y of UK debt:
http://krugman.blogs.nytimes.com/2015/02/06/debt-is-money-we-owe-to-ourselves/
'Britain did not emerge impoverished from the Napoleonic Wars; the government ended up with a lot of debt, but the counterpart of this debt was that the British propertied classes owned a lot of consols.'
How about the religious zealot-level of devotion to theory, to the point where anyone who doesn't agree with you is insulted and given a reading list so you can make sure they are properly indoctrinated? I would be fascinated the response on this board if Krugman came out tomorrow and said he was becoming a Republican. It would be like telling kids there is no Santa.
And at least perhaps my light post gave a couple of people a chuckle. Ultimately, the decision that I have made is to do the only thing I can do: figure where I believe things are going and invest in a manner that expresses those beliefs. I will be light, I will occasionally be sarcastic, because honestly, we can sit here and argue about economic theory, but ultimately I don't believe that I have one iota of say (or do the people on this board, unless one of you is an FOMC member that the rest of us are unaware of) as to the ultimate direction this economy is being taken in. Beyond that, we live in an economy where there have been more than a few examples of "if the numbers don't confirm the narrative, change the numbers." We don't like GDP? Lets change how it's calculated. Ah, all better. Or, the goalposts are endlessly moved.
Given my lack of control, all I can do is attempt to try and think ahead and play futurist and invest accordingly. That's all I can do and coming to terms with that fact is ultimately freeing from the standpoint of, I don't care what one FOMC member does today and that another will ultimately probably contradict them a day or two later. I may not agree with monetary policy, but you know what, I really just don't care as much. I know that this period will end badly -and I say that with the utmost certainty - but I've invested in the manner that I think is appropriate. And that's all I can do. Maybe I'll crack jokes on here on occasion, I just think it's a better use of time than becoming stressed when someone says something I don't agree with.
All of this arguing on the internet does nothing, it fixes nothing and it's ultimately a waste of time. I love productive conversation - any sort of discussion of monetary policy or politics is ultimately futile because people have grown so deeply fixated on their beliefs that anyone else is often largely either shouted down or ignored. So, why do it? Or why not crack a few jokes. If I get someone to smile when I post a joke post with a "The More You Know" PSA at the end, that's worthwhile to me. I'm happy to talk about investments for hours on end, but the divisiveness of people in regards to certain topics does often lead to a joke because ultimately, I'd rather laugh than be upset over the internet about views of someone else's that I know with great certainty they have no interest whatsoever in changing. When I do crack a joke or make light, it's the almost religious devotion to political parties that shows itself. As I've said before on this board, it's the internet, don't get stressed by someone who doesn't agree with you - you'll never get everyone to agree with you. If you can have a constructive conversation on the internet - an increasing rarity - be happy.
As for Krugman, I find Krugman's delight over destruction (to the point where he went on cable news and suggested that creating a real life sequel to "Independence Day" would be a great idea) as "GDP positive!" to be disturbing, among other issues. This is not exactly something that one has to search for examples of, either - there are more than a few, to the point where Krugman has been parodied for this on multiple occasions.
His wild-eyed rant on CNN about how a "fake alien invasion would help GDP" - where to begin, aside from the fact that the man looked out of his mind. As far as I'm concerned, if someone can look at this video (http://hotair.com/archives/2011/08/15/krugman-you-know-what-this-economy-needs-a-space-alien-invasion/) and say, "Gee, he sounds like someone who I want to follow", then please, go right ahead.
"No one says enormous sustained financed spending (on anything, not just infrastructure, it could be on unneeded weapons) at multiples larger than productive economic activity is a good idea. Meaning sure, heedless debt can pose a threat to financial stability. But it's not like that now"
Well, I'm very glad that you are trusting of this government to spend money so wisely and regulate spending so well. The complete faith in the system and the small group tasked with regulating it is really quite remarkable.
"It's not like that now." Nor will it ever get out of hand, right? Nor have there ever been any examples in history, right? But we're different, right?
It's the attitude that the increasingly complex and interconnected global economy can be dialed up and down like an air conditioner that irks me. "It's fine now, right?" "Want it a little warmer, a little cooler? Easy peasy."
How much confidence do you have that you can control this? "100%?" I'm sure Bernanke wouldn't have said "Ehhhh, 50/50", but can you really have 100% confidence in controlling a system that has grown increasingly complex, even since 2008? In a system that is interconnected and relies heavily upon confidence - something that's difficult to control, especially once it is lost? Where are we, several years of ZIRP and multiple QE's later? The world isn't ending, but the ROI for what has been the easiest monetary policy in history seems rather lackluster and now we're here with weak GDP growth and little in the way to stop the Winter that we've been trying to put off and buy our way out of for so long.
I have a significant fascination with how things work. However, I tend to focus it on learning more about science, industry, other cultures and other such things. I can have my views on economic theory and monetary policy, but as I get a little older I suppose I want to devote time to topics that are ultimately more enjoyable and perhaps a tad more positive.
People lack respect for the potential volatility, complexity and fragility of the global economy - 2008 was a delightful example, but it's clear that we haven't learned anything.
Ultimately, going back to the topic at hand, as I noted above, there have been enough studies that I don't doubt that the graphs are likely "in the general vicinity" of being correct.
It is not a matter of agreeing with me, for heaven's sake. You make it personal and cultish, and I gotta wonder why you would do that. A matter of my deluded trust, or something. Man. I'm not an economist or close, but I do know how to study and am curious about how things work. Like you and investments, I would assume.
You offer nothing above but airy assertions, no data, no citations, no evidence of wanting to find out. Forget Krug; read the other guys. Did not intend insult; apologies; I believed that you were interesting in knowing some things. And actually, if you really think anyone is saying it's fine now and can be macro-controlled, you might well enjoy reading substantiated economics blogs.
Somehow, our thoughts have drifted away from a pure wealth distribution chat and into a discussion of a happiness/wealth correlation. Actually, this topic has a rich philosophical, academic research, and popular written history.
One invented word that continually surfaces in such a discussion is “satisficing”. What is satisficing? An on-line dictionary definition is: “A decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution.”
Investopedia offers that “The theory of satisficing finds application in a number of fields including economics, artificial intelligence and sociology. Satisficing implies that a consumer, when confronted with a plethora of choices for a specific need, will select a product or service that is "good enough", rather than expending effort and resources on finding the best possible or optimal choice.” We often satisfice when making investment choices.
Tradeoffs always exist. As Lao Tsu recognized: “He who knows that enough is enough will always have enough”. I suspect Tsu’s quote holds much water once a minimum income/wealth floor threshold is satisfied. That floor level varies for each person, and is dependent on factors like age and location.
Countless books have been written on this subject over the ages. Jason Zweig devotes the final chapter in his “Your Money and Your Brain” book to coupling happiness to an investment program. He states that “The most powerful and reassuring lesson from the new research into happiness is that you don’t have to be rich to be happy”. Happily, I learned that significant lesson a long time ago.
Zweig lists many happiness tips including suggestions like: Turn off the tube, Go with the flow, Don’t let the old become bold, Get time on your side, and a host of other ideas. Zweig remarks that “the odds that merely having more money will make you happier are pretty close to zero”.
This broad assertion can be tied to Kahneman and Tversky’s 1979 Prospect Theory discovery. From experimental data with folks making decisions and their performance under uncertain conditions, they deduced a risk/reward tradeoff curve that is highly asymmetric and nonlinear. Negative payoffs hurt twice as much as positive outcomes enhance wellbeing, and the incremental benefits from positive outcomes approached nearly a zero slope level when enough is enough.
A very formal literature has evolved based on serious academic research. One finding from a highly mathematical research paper by Stuttgen, Boatwright, and Monroeis is that “Given this heterogeneity in potential choice rules, we agree that a satisficing choice model may not always be the appropriate model when analyzing consumer choices.” Basically, we all make choices differently with a mix of facts, logic, and emotional factors guiding our decisions.
Denials aside, the research suggests that we are mostly happy and independent warriors. We satisfice within the constraints of our own world views, resources, and needs. And we’re reasonable pleased (happy?) with our compromises.
Edit: Well the discussion has taken yet another turn. The economic policy battle is now joined. Great exchange guys over a complex subject. Based on my postings, MFOers likely can guess my position with considerable accuracy. But I choose not to further muddy waters that will not be cleared here and now. I choose to be silent. Good luck guys.
Best Wishes.
I take my life lessons from my personal experiences, not what I read in books. Zweig obviously was never dirt poor for almost two decades of his life. Having more money where you never have to worry about it anymore does make one happier - much, much, happier in fact. However, in the hierarchy of things it's far below health, friends/relationships, and our relationship with God. Edit: and probably should add enjoying whatever one's passion is. Albeit that often requires money.
Can I have his, then?
Over the past few years, I've increasingly focused on having a long-term view and preparing for that and being satisfied with that and then going with the flow to some degree. I just find it ultimately healthy. Hobbies, learning, reading. Ultimately, I've found that I've learned a great degree via investing because it has lead me in unexpected directions as I try to research companies, countries, industries, etc. I'd always found healthcare to be something that I "didn't understand, so let a fund manager do it." One day, I went, why couldn't I try to understand a lot of these concepts? It's ultimately been rewarding on a number of levels.
That said, in terms of people going, "Money doesn't make you happier" often leads me to saying some variation on what I do above.
As for occasional humor, I just find it better than being so serious about certain subjects I ultimately don't think I will change nor will I change someone's opinion on. Perhaps a little humor will lead someone to maybe be a little more open than arguing with them would or maybe have a second thought about something they'd stood firm on. Maybe not.
Perhaps there's a part of me that feels monetary policy has been distorted over the last several years to the point where perhaps it is a little ridiculous the kind of "Twilight Zone" we find ourselves in, where the focus is not really on anything but what Yellen might say (this Friday btw) and good news is regarded as bad because the market is so addicted to easy money.
As for the graph in the original post, perhaps it really does show that those who are doing well are doing well and much of the rest of the economy is not, or muddling along. Perhaps it further illustrates the lack of financial education (was told by a relative the other day when mentioning financial education that their 25-year-old had no idea how to write a check.) We are all on an investing board. What % of the population hasn't been taught or taught themselves basic investing concepts? I'd be willing to guess a larger % than most would think and that's unfortunate.
Additionally, in terms of wealth distribution I'd be curious to know what the population of the "1%" looks like over the years and whether or not that uppermost level of wealth is held by more or fewer hands.
When I viewed the Paul Krugman video link that Scott posted, I became motivated to violate my own promise to stay away from the economic policy debate.
I am definitely not an economist by training, but I’ve accumulated a ton of practical experience over my eight-plus decades. I need and seek simple models when assessing the complex and interactive impact of economic options.
The Broken Window Fallacy goes a long way to provide a simple understanding of mostly non-productive projects. I say “mostly” because just about all projects do some good; it is a matter of output and efficiency (that’s the engineer in me speaking). Here is a Link to a Broken Window Fallacy short video:
Enjoy. The video is skillfully done. If you have questions or comments, please address them to Davidrmoran and/or Scott, certainly not to me. I wash my hands of the whole controversy.
Best Wishes.
This entry is thorough, if you're genuinely interested in the complex subject, which somehow I bet is not really the case: http://en.wikipedia.org/wiki/Broken_windows_theory . Note absence of any von Mises Institute fellow mention.
Sorry, I forgot you have washed your hands of this. You simply wanted to throw a youtube brick through the thread's window and scamper.
"Additionally, in terms of wealth distribution I'd be curious to know what the population of the "1%" looks like over the years and whether or not that uppermost level of wealth is held by more or fewer hands."
I would think that the numbers to reach the 1% level are being adjusted upwards. Even with that said, I suspect there are more people in that category than before. The average person didn't invest in the markets just a relatively short time ago in history.
I did briefly examine your Broken Window reference.
It is totally inappropriate for the present economic policy discussion. The Booken Window of your reference applies to a criminal containment policy and plan. The Broken Window that I referenced deals with the time and people integrated impact of economic theory.
I find the video that I referenced refreshingly easy to assimilate. Yet it captures the essence of the need to consider both easy to observe short term impacts and less obvious longer term impacts of economic decisions.
I didn't see anything silly about the video. In fact, it is quite serious stuff. In the short haul, war might jump start an economy, but over an extended timeframe, it must lower wealth since it is resource and manpower wasteful.
I reject your referenced Link as not pertinent. The names are the same, but their designed purposes are totally divergent.
Regardless of this distraction, Best Wishes.
Everyone's entitled to their opinion. I find that Von Mises has a better hold on the subject. Pouring money into problems doesn't work all the time. The War on Poverty is an example.
Not opinion, evidence-based, something von Mises was in short supply of. (I don't trust my opinions myself; need to read intensively and skeptically.)
Suggest googling before posting assertions. I have posted this before; shield your eyes if Krugman glare is too much:
http://krugman.blogs.nytimes.com/2015/05/02/poverty-policy-truths/
more recent:
http://www.salon.com/2015/05/04/paul_krugman_gop_enabled_poverty_is_a_death_sentence_for_both_blacks_and_whites/
This is best, but long:
https://www.whitehouse.gov/sites/default/files/docs/50th_anniversary_cea_report_-_final_post_embargo.pdf
older overviews:
http://time.com/3659383/war-on-poverty-1964/
http://www.newyorker.com/news/john-cassidy/how-the-war-on-poverty-succeeded-in-four-charts
http://www.msnbc.com/msnbc/the-war-povertys-surprising-success
MJG, point taken, thanks; I will try to respond with something thoughtful about stimulus spending and the fallacies in that callow youtube thing. And not the cartoon homeowner with burning house talking to newly arrived firefighter: 'No, thanks, I'm a libertarian.'
Fatas even says "This argument does not deny that the actual composition and ownership of assets and liabilities matters" and goes on to say that one has to be careful drawing conclusions from analyses that refer only to the debt side of the balance sheet.
So Krugman goes on to say "Globally, and for the most part even within countries, a rise in debt isn’t an indication that we’re living beyond our means, because as Fatas puts it, one person’s debt is another person’s asset; or as I equivalently put it, debt is money we owe to ourselves — an obviously true statement that, I have discovered, has the power to induce blinding rage in many people."
The only thing that's obvious is that Krugman is either an idiot or he's blatantly lying. I'm not sure which is worse. Fatas didn't say that debt isn't an indication that we're living beyond our means. He said it doesn't have to be. And then Krugman claims that one person's debt is another person's asset is equivalent to debt being money we owe to ourselves. I guess if I loan money to myself that's true but as of last August, more than one third of our debt was owned by foreigners.
forbes.com/sites/mikepatton/2014/10/28/who-owns-the-most-u-s-debt/
That's something more than $6 trillion of "our" debt that is someone else's asset!
The rest let's say is our own asset. But when you look at what started this discussion, the median net worth of Americans, that counts the asset (all the Treasury bonds we hold are counted as assets in our net worth) but it doesn't count the debt. Similar to what Fatas is saying, it’s dangerous to draw conclusions paying attention to only one side of the balance sheet. Yet when I made a comment about the national debt you suggested we should exclude that because it misguides the discussion. If you really believe we owe the money to ourselves and that we're not stealing from future generations why would you be comfortable with a discussion of net worth that counts the asset but excludes the liability?
The question of whether we're stealing from future generations isn't solved even if all of our debt was owned by Americans because it's not about Americans and foreigners, it's about which Americans got the benefits and which Americans pay the costs. The benefits have already been given. The costs have yet to be paid. We've been running annual deficits since the mid 1950s with only a couple years of surpluses at the end of Clinton's presidency. I'll agree with Fatas, growing debt doesn't have to mean we're living beyond our means, but it sure looks that way. We're not at all like his Singapore example where they take the money they raise from issuing debt and save it because they regularly run budget surpluses. I would love to hear a logical explanation why future generations aren't going to be worse off than if we handed them a country with far less debt than we'll pass on, but Krugman isn't even close.
Wow. What a thing to write. Talk about heat instead of light.
Here:
[Fatas] Let me start with the obvious point: your debt is someone else's assets.
http://fatasmihov.blogspot.com/2015/02/those-mountains-of-debt-and-assets.html
>> counts the asset (all the Treasury bonds we hold are counted as assets in our net worth) but it doesn't count the debt.
Why do you think that is?
>> not about Americans and foreigners, it's about which Americans got the benefits and which Americans pay the costs.
right
>> The benefits have already been given. The costs have yet to be paid.
it is always this way !
>> We've been running annual deficits since the mid 1950s with only a couple years of surpluses at the end of Clinton's presidency.
So? It does not matter, all that matters is percentage of GDP.
>> I'll agree with Fatas, growing debt doesn't have to mean we're living beyond our means, but it sure looks that way.
You are not getting it, and I would say do not want to, but your writing is so clear and your interest in reading is manifestly so high, that cannot be the case. Keep reading is all I can suggest.
... Except if you really think Paul Krugman is 'not even close', well, then, no, there is no point in more reading. Quite aside from his being idiotic or blatant liar.
The below is rather deep in the weeds, but may be of interest. Maurice above for example thinks there is a real problem with Paul Samuelson as he read him and the sophisticated views on debt needs and levels today:
http://delong.typepad.com/sdj/2013/03/bill-black-is-justifiably-irate-monday-hoisted-from-comments-weblogging.html
This might help those who read Samuelson (Paul) in college:
http://krugman.blogs.nytimes.com/2009/12/15/the-incomparable-economist/
http://krugman.blogs.nytimes.com/2009/12/14/samuelson-friedman-and-monetary-policy/comment-page-1/
>> Fatas didn't say that debt isn't an indication that we're living beyond our means. He said it doesn't have to be.
Help me understand how this is something other than hairsplitting.
Finally, share what you think the answers are yourself, to whatever you say the problems are? Somehow cut more spending? What? Gold standard? Raise wealthy taxes back to 90%?
No, no! Your brief concession that you touted an inappropriate Broken Window reference doesn’t answer the muster call. It didn’t sound the trumpet; it was barely a whisper.
In your reply posting on this matter you predicted that I would not even read your reference. Well you were wrong; I did.
Apparently you posted that Link without reading it yourself. The very first paragraph in your referenced article clearly identifies it as a social policing initiative, and not one that addresses economic theory issues.
In your initial response to me you said : “This entry is thorough, if you're genuinely interested in the complex subject, which somehow I bet is not really the case…”. Well I was "genuinely" interested enough to access your article. Given its unsuitable character, I suspect you yourself never did even casually examine it. That’s shamefully dishonest.
Your creditability is shot; it is done and it is your own doing. Based on this present experience, any checking of your references is a grand time sinkhole. I will not play that wasteful game. Please don’t bother to now search for seemingly applicable counter references. You would be wasting your precious time.
I am not a devoted Austrian economics conscript. I am also not a committed Keynesian follower. Both economic schools have something to offer, but are circumstance dependent. Both are right sometimes and wrong sometimes. Krugman is right sometimes and wrong sometimes. Economics is not a hard science. What worked economically yesterday might be a complete failure today.
I never intended to get embroiled in an economic theory food fight here. It’s sloppy slogging, and surely will not be fully explored on a website designed to exchange mutual fund data and ideas. My contribution to this food fight ends now.
Apparently, other MFOers are prepared to pickup the gauntlet. Good luck to all. This debate has little chance of any meaningful resolution.
Best Wishes.