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Originally Posted by barry12345
Your mother bless her heart was totally right. I have been aware that if the majority did financial things like the wife and I practice. The economy would collapse is almost certain.
This is a consumer based economy that can only exist if insane consumption levels are maintained. It has reached a stage where money in the form of credit is being basically forced on consumers to sustain it.
I have no ideal of when the point of too much credit saturation occurs if at all. I suspect some form of effort will evolve to force the continuance of what currently is. Reducing the average practical current lifespan of many products is already a necessity.
It is already too late. North America society in general has gone from a basically paid up existence to a primary debtor society. This is a reduction of the financial well being of too many citizens. As well as all levels of government. The standard of living has fallen but excessive credit usage is masking it. For too high a percentage of the population.
So it is just not the spread of incomes involved as a problem. There is a larger gap forming between the haves and have nots as well.
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I worked at a Navy engineering laboratory in a low-cost-of-living area. Most of the STEM's will end their careers making the exact same salary, around $100k. Their net worth at retirement age varies from a negative number to somewhere around $4M. I have to say "at retirement age" because many of those near or below $0 net worth die while getting ready to go to work.
Yeah, the middle class is shrinking. A lot of that is because of the loss of manufacturing jobs in general, and high-wage manufacturing jobs in particular. The days of making $40/hour running an electric screwdriver are over. The days of fat pensions are over, too.
I had an old girlfriend (with an AS in business, no less) who measured her financial well being by how much more she could borrow on her credit cards before max'ing them out. So, to her getting a new credit card with a $5000 limit was the same as getting $5000. FICO scores are another sucker metric. I've never seen anybody who knows their FICO score who isn't broke.
I ran into a friend Friday at lunch. He's in his mid-60's and now completely penniless, other than vehicles and home equity. He had about $100k in some stock that he inherited 20 years ago. The brokerage told him they were going to start charging inactivity fees. So, he sold the stock and off to the BMW dealership he went, turning in his just over two year old leased M240i for a new M4. He's lucky, though. He squeaked into the old federal pension system (CSRS) right before the gate came down in 1983, and brought four years of active duty time with him. He pretty much just shows up to earn that 100k/year, so working a few more years would be easy. His take-home pension will be about 85% of his take home pay when working, and his house will be paid off. He's gone form college commencement to retirement close to zero net worth.