By Michael Castaneda
Published: November 7th, 2018
This is boom time. Do you feel it?
Despite recent market volatility, the stock market is at historic highs. The interest rate is at a historic low. Money is awash. Never in the history of the world has there been a country other than the United States to be the richest at the turn of two centuries. The United States is unsurpassed militarily and is once again energy independent. Every student at Brooklyn College should be brimming with hope for the future. Are you?
Ten years ago the economy was tittering on the edge. It seemed very possible that the world was going to enter another Great Depression. Companies had jobs, but they couldn’t hire because it wasn’t clear if there was going to be a market at the end of the week. What followed was the Great Recession, but with massive government bailouts, Quantities Easing (printing money), stress tests, higher liquidity standards, the economy slowly came back.
The government printed $3.6 trillion between 2008 and 2015. Unemployment peaked at 10% between 2009 and 2010. By end of the Obama administration the unemployment rate was at 5%. Today the unemployment rate is at 3.7% (Source: Bureau of Labor Statistics).
As a Brooklyn College graduate, the median income after two years of graduating is $30,500 and $43,500 after 6 years from graduation. Herein lays the rub.
Doing a tax calculation for 2018 for Residents of New York City, if you earned $40,000, your take home pay would be $2,667.73 whilst an average studio apartment in Brooklyn is $2,350 (Dec 2017). So, after four long hard years of school and 6 hard years of work, you are pushing 30 years old and you still can’t afford rent.
We live in the richest country on earth but most of us feel poor.
Companies have money. According to a PriceWaterhourseCoopers™ study from March 31, 2018, the top 10 biggest companies by Market Capitalization are all American. Apple™ alone is worth 1 Trillion dollars.
However, if you look at political discourse, it would seem like the country is on the edge of existence. Social programs need to be cut, because there isn’t enough money. Salaries have barely risen. One common theme I hear in racist diatribes that make the news is that people feel there are not enough resources to accommodate people different from them. The idea is, “you can’t come in here and use our precious resources when I don’t have enough.” These are usually directed towards blacks and Hispanics even though the group who are the highest recipients of public assistants are white.
An interesting phenomena here is that many people receiving public assistance are actually working, which suggests that wages are so low or costs are so high that working people can still not have enough money to live.
So where is the money? According to Thomas Piketty’s Capital in the Twenty-First Century, we run the risk of having a few hundred people that are so rich that they can live just on interest alone. Would this be a good things? Former Fed Chairman Paul Volcker said in a New York Times interview (10/23/2018) that: “We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes.”
What scares me is that we have political discourse of scarcity and we see acts of violence against from people who feel like they are dispossessed at time of record wealth in this country. How bad will things be when there is another downturn? A special report from the October 13th issue of the Economist was titled, “Another economic downturn is just a matter of time,” and they are not only ones reporting this. It’s coming.