The Risks of American Consumer Debt Hide Beneath the Averages

On the surface, consumer debt is a smaller risk factor than it was before the Financial Crisis. But the averages conceal the reality that income & wealth disparities leave in their tracks (11 minutes):

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  75 comments for “THE WOLF STREET REPORT

  1. alex in san jose AKA digital Detroit says:

    Not everyone has forgotten 2008. Most of us never recovered so it’s hard to forget. I have not had a credit card since then and would be very happy not having one again although I guess I should try to “build credit” IE build up a reputation in a system I want no business with, again.

    • Nat says:

      Yah that is the ridiculous thing, your credit rating effects everything in the US these days, even employability so everyone needs to be building good credit even to just have a hopes of getting a job. That is so screwed up, the people who need a job the most are the ones with no or bad credit and the system denies them.

    • safe as milk says:

      +1 i have one credit card left and that’s enough for me. it useful renting a car, etc. i took wolf’s advice and froze all my credit reporting. it’s like a huge weight has been lifted off my shoulders.

    • Jon says:

      I have lots of credit card and card companies pays me a lot to use them
      E.g. $600 bonus if I use 3k in first 3 months
      I get cards use them and close the account and redo all again

      I want to use the system.for me as long as i can

      • MB732 says:

        Careful Jon…Say you put 3k on a 10k 13% card and get hurt/sick/layoff. You make min payments (just couple months ’til you find new job). Defaults go up in general and CC co lowers your limit to 3.2k…You just went from 30% credit utilization to over 90% and that lowers your score so your interest goes to 33% even though you never missed a payment. Potential employers check your FICO.

        I know, I know…Won’t happen to you. But thinking you have these guys outsmarted is dangerous.

    • Nick Grigorenko says:

      In my 75 years I heard many, many times, “It is different now”

  2. Paranoid says:

    So you are saying people who were broke still are, 20% haven’t changed much, 20% are significant;y better off , another 20% are lots better off.. That’s called better where I come from.

    • Broker Dan says:

      Anecdotal only, but, I know not 1 person that is worse off or even the same as 2008.

      Most are significantly better with a few somewhat better. A couple others are just crushing it, ridiculous money.

      • Daniel Gallardo says:

        Broker Dan read some reports today that Bay area will add 10,000 millionaires this year because of upcoming ipo s think that’d plausible

        • Wolf Richter says:

          Daniel Gallardo,

          The real estate hype going around on this is breath-taking. These people are already millionaires and billionaires because they already own the shares or options, and they have value attached to them. They can be sold, and they can be used as collateral. There are special departments at banks here that issue huge mortgages to these people years before the IPO. This money flow and home-buying has already happened.

          The Uber founders, early investors, and early employees are already filthy rich and situated in expensive homes, based on their Uber shares. Do they have to wait till the IPO before they can buy an expensive house or more likely several of them? Nope. That’s not how it works. They already spent some of this money they’re going to get when they can sell those shares after the lockup period. In other words, they already bought those homes – years ago.

        • I remember what 44 said about the debt, that “it’s money we have already spent” You have to wonder in the interface of financial corporate and government ties, (and more with GND) that these new billionaires (and the rest of us) have anything to risk?

        • Intrigue says:

          Wolf – did these avenues to sell stock prior to IPO exist before Google and Facebook IPO’ed? I keep seeing comparisons to those, as they did indeed juice the housing market. Any insight?

        • kitten lopez says:


          after James asked if YOU’D taken this hype on, i understood (with the help of Boorstin’s “THE IMAGE” book), that this is a pseudo non event, and they’re fluffing up the market.

          i read what you said to James because the hype IS amazing. creepy, actually. it’s all so predictable and pavlovian. i’m getting numb to “future terror.”

          thanks for that, Boss. well done.

      • Cynic says:

        It all depends on the demographic which your are referring to.

        Many, indeed, hardly noticed 2008, above all in the higher income segment, and are still doing splendidly. Personally, I had never been so well-off as after 2008 (on the slide now as global economic performance declines).

        But the fact remains that, for the mass of people in the advanced (decay?) economies, their real prosperity has either stagnated or declined greatly since 2000.

        In some countries, this is very marked – for instance France.

        And the fundamental reason for this lies in the steady disintegration of the energy basis of industrial economies, from the 1960’s peak.

        The ‘mills of God grind slowly, but they will get everyone in the end. Over-shoot, stagnation, collapse is an age-old civilisational cycle, and one cannot escape it.

        But yes, for many among the well-to-do, the thought of one day being on the conveyor belt leading to the mill stones is still a comfortably distant one.

      • Enquiring Mind says:

        Drive around the western end of the San Fernando Valley to see a different landscape. Industrial parks and big box store shopping areas have scores of old RVs parked along the quiet streets. Many have taken up semi-permanent residence, so to speak, with blue tarpaulins covering roof leaks, and shopping carts to hold whatever may supplement their existence. Propane tanks and the odd generator with extension cords help ease the colder nights. The RVs are not the current models, and many look like they have not had regular maintenance or the luxury of bodywork in years, like their occupants.

        Those scenes repeat themselves across the country however the average person might not see them due to the out-of-the-way locations, or pay much heed to the cautionary tales.

      • Gene says:

        That’s the way it is with me, also. I live in northern Virginia, just outside the Beltway, and this area is always looking affluent. I’m sure there are financially stressed people even here (often as a result of competitive consumption), but with everybody having access to easy credit it’s hard to see. As for me personally, I’ve been the beneficiary of the bubble in stock prices over the last 30+ years.

        • Ethan in NoVA says:

          I live in the same area, and notice that my neighbors are mostly immigrants. They bought their townhouses and houses, paying quite a bit more than the recent prior comps. Now they all rent out theirs basements and such to make the high payments. Parking is a headache, all guests spots are taken by their tenants. Direct neighbors are renters like me, except they have 4 AirBnB spots for rent in their townhouse.

          If the job market goes south, there will be little recourse by the banks because they can all just bounce back to whatever country. Maybe HELOC before hand. No idea that they would do that, but it’s an option they would have that I wouldn’t.

    • MrPaitent says:

      The problem is how exposed those ok->better off 66% are to the not ok 33%. How many more layoffs from over leveraged corporates to maintain BBB “IG” ratings in order to increasingly smaller amount of people who can afford their services before we start to see, again, what tail risk actually means?

      • Cynic says:

        That is an economic point, of course, about ‘exposure’; but if things decline too far, and the disparity of income grows too large, then the ‘exposure’ takes the form of endemic violence, political instability, gang-growth, and house-raids…….

        • RD Blakeslee says:

          In other words, a revolution. The form it takes depends upon the culture of the day. In France in the mid-nineteenth century, it was ostensibly against the crown; today it would be more directly against wealth per se.

          So today in France, the have-nots are burning automobiles; in 18th century France, they burned palatial furnishings to keep warm, among them, harpsichords.

          So, when I built a harpsichord in 1970, I discovered there were very few French harpsichords to study, but Italian harpsichord cadavers are stacked up like cordwood in one of the Smithsonian’s basements.

        • Cynic says:

          R D Blakeslee, thank you for the anecdote about French harpsicords; amusing, and something I’d never come across.

          Sad, too, that they threw my favourite monarch Good King Henry IV out of his tomb, as of all of them, he did the most for th ordinary French person, within the limits of the times: ‘Screw my people, and you’re screwing me!’

  3. Bologna says:

    Dollar strength has been driven less by trade imbalances and more by interest rate differentials. A speculating bank for its own book or for a hedge fund client can borrow 3-month Euro Libor at minus 0.354% and invest it in 3-month US Treasury bills at 2.36%, for a round trip of over 2.7%. Gear this up ten times or more, either on a bank’s capital, or through reverse repos for annualised returns of over 27%. To this can be added the currency gain, which at times has added enough to overall returns for an unhedged geared position to double the investment.

  4. Old Engineer says:

    Wolf, that was one of the most factual, straightforward, and understandable evaluations of the credit risks I’ve seen or heard. I really appreciate your intense focus on data rather than opinion and the integrity with which you let the conclusions fall where the data points, regardless of how inconvenient.
    My wife and I are fortunately not in the bottom 40% but we live in a a community where many live and we see their plights on a daily basis. Your report helps quantify and add data support to the trends I see in the community but have no way to quantify.
    But the most alarming point I get from your analysis is that all the wealth at the top won’t prevent a catastrophe if a big part of the bottom 40% start having problems. Maybe it is time for the Fed to start worrying about the weak link.

    • Cynic says:

      Quite right: an industrial economy can only function if the overwhelming majority of the populace can comfortably afford the full range of basis gods and services.

      It is all too easy for those at the top to ignore this fundamental fact, (after all, they have little idea how most live) and perilous to attempt to paper over it with unsustainable debt.

  5. Bobby says:

    Good podcast! I’m always searching for the best indicators to find out when markets could roll-over, i’ve been watching the inverted yield curves and 10yr-1yr spread on the Treasury, but it seems to have stayed the same for the past month. The “doctor copper” telltale isn’t much help, copper looks technially okay. After listening to the podcast, listening in-between the lines: I should watch/wait for any breakdowns in the non-bank lenders!

    • The spread in the disparity gap tends to support higher market prices. A few people going broke is incentive to buy stocks. You need to follow the flow of funds to determine the health of the market. Bad economic news begets accommodation. If not here, in the EU, and we are talking money without borders. The forces of liquidity struggle with valuation, and financially engineered profits spend as well as any other kind. In the end the non-bank lenders will sell (transfer) their paper to charter banks which at this point are GSEs with no other business model other than toxic security waste dumps. Don’t expect a supply driven rise in yields, yields and price went up in tandem, they will go down the same way. Wall Street sees lower yields, lower prices, until they see deflation, nothing will happen.

  6. Max Power says:

    I am not so sure the situation is quite as as dire as the podcast seems to imply.

    If you look at a graph of mortgage originations by credit score (and especially if you adjust the amounts for inflation or median income growth, meaning you must stretch up the bars the further back you go) you realize that there is simply no comparison between the go-go’s 2000-2007 era and now. That was a once in a generation unholy amalgamation of risk, leverage and speculation the likes of which has not been seen since and probably not ever before in the US housing market.

    • David Calder says:

      Come to Seattle.. An entire city was torn down and rebuilt catering to the tech boom and most of it done after 2008 and really after 2011-12. I don’t have the charts offhand, but Wolf does showing that most large cities are now above their peak before the 2008/07 crash. That doesn’t mean we will repeat 2008 but it doesn’t mean we won’t either.

      • Brixton77 says:

        I think it’s different this time. Unlike 2000-7, which was a leverage bubble, this is systematic asset inflation in the service of elite consolidation. Whether fully-consolidated oligarchic capitalism will continue to suffer the same kinds of shocks we saw during the last 40 years is anyone’s guess, but my bet is no (and it’s been a decade already). There’s no obvious reason why the oligarchy can’t keep pumping debt through the consumer system while continuing to inflate asset prices by further debasing the dollar. I’d love to be wrong but this has been going on for a very long time now.

        • NothingNewUnderTheSun says:

          Its called solvency, more debt cannot increase it. In fact more debt makes the solvency ratio worse (assuming cash flow income grows at a slower rate). The questions now are: how many more company layoffs will it take (short term cashflow fixes that have negative externalities for consumer spending, and by proxy, corporate incomes), will it take to to increase corporate loan default rates by 1%? What % of corporate loan defaults will rock the 60% BBB “IG” fixed income portfolios into default?

        • John Taylor says:

          In my humble opinion, the next big market risk is political.
          The large wealth divide is already shaping up to be a big 2020 issue.
          Note that the wealth divide and resulting political instability is not just a US phenomenon either – it’s pretty much everywhere.

        • Cynic says:

          There is a reason why they cannot do this ad infinitum: real, physical energy and resource constraints, and we are entering a phase when they will really start to bite,together with obviously accelerating eco-system collapse.

        • safe as milk says:

          it’s all about confidence. let’s see what happens when interest rates rise. a few cities or states go bust and all bets are off.

        • Harrold says:

          “I think it’s different this time. ”

          “Stock prices have reached what looks like a permanently high plateau” – Irving Fisher, October 1929

    • Bankers says:

      Maybe you are not seeing the side of the picture Wolf is painting ? I don’t know how dire the situation is or not, but let’s look at what has happened :

      Though I am not sure at all of the presentation of monetary theory in “Income Distribution, Household Debt, and Aggregate Demand:
      A Critical Assessment J. W. Mason”, if you search it you will find most of the debt increase during the boom was by the middle to high portion of society. That makes sense because they have high income to service that.

      The bottom half have very little debt in nominal terms, but they are increasingly leveraged because of low income ( search )

      While their share of debt ( apart student loans) continues to decrease – these charts are top vs. bottom quintile ( search

      But if you look at the trends in household wealth (% change) at ( search the lower half are getting poorer, the rich richer.

      Caveat – some of the data is outdated, but that is all there is as far as I could find in search.

      The moral of the story? The lower to middle households are likely much less able to tolerate any financial shocks, probably less so than before the gfc. In their favour maybe is fixed interest mortgages and less consumer loans on their property. The only change in the above picture maybe is a return to fuller employment… but I do not know how real or durable that is. As for subprime – well property prices are well up in spite of standsrd changes, and the subprime market is now renting instead of mortgaged… is there a difference really, as they can only pay what they can pay, who is the new landlord going to rent to instead before going broke?

      I leave it there for contemplation, if I don’t reply to any replies it is because of time constraints.

    • Wolf Richter says:

      Max Power,

      In the podcast, I point out that consumer debt per-capita, adjusted for inflation is down 16% from where it was in 2008. And that the consumer-debt-to-GDP ratio is down by a quarter. So yes, we agree. The averages look a lot better than they did in 2008.

      But what I was trying to say is that that the bottom 40% on the household income scale are in just as much trouble or worse than in 2008; and that investors who can walk away from mortgages, and did walk away from mortgages in 2006-2011, play an even greater role in the market today than they did before the Financial Crisis. This is where I say the risks are — and these risks are NOT reflected in the averages. That was the point of the podcast :-]

      • Broker Dan says:


        But those investors now have way more skin in the game vs 2002-2010. Today’s investor getting a mortgage, needs 15-35% down depending, whereas, back then programs were available at 0% down for “investors”.

        So, this time it is quite different in terms of simply walking away. Will many sell at a loss? Sure.

        But I don’t think they’ll simply walk away as they once did, since, there’s already a large buffer baked in.

        • Wolf Richter says:

          Well, lets see, I know a guy who does a cash-out refi to get the cash for a minimal down payment on this next several properties…That’s not his skin in the game, but the bank’s skin in the game. His down payments are in the low single-digit percentages. Rinse and repeat. Been doing that for years. He has also used a special lender that issues loans for down payments (down-payment assistance loans), and he in effect has zero skin in the game on those deals. He’s pretty proud of how he is leveraging his properties. So far, so good :-]

        • SocalJim says:

          Back in the early 90s, when I graduated from college, I was buying beach close fixers with small down payments. The bank I was working with sent a representative to look at prospective properties before we got too far into the application process. If the bank did not like the property, they shot down the deal before it got off the ground. Most often, the bank pushed me towards wealthier locations, otherwise they did not want to do a low down mortgage.

          Some number of years after that, redlining laws stopped that process and banks started loaning with low downs on any property. This is what got so many into trouble … low quality properties with low downs is a bad formula.

          Now, the have just eliminated low downs in the name of not violating redlining laws. What a shame.

        • Enquiring Mind says:

          That cash-out refi guy with the borrowed down payment is like a guy picking up dimes in front of a steamroller. Steady money as long as you stay aware of that machine.

          If things change you just step aside as they aren’t very maneuverable.

        • safe as milk says:

          @ Wolf Richter “Well, lets see, I know a guy who does a cash-out refi to get the cash for a minimal down payment on this next several properties…”

          that’s certainly been the game here. it has the nasty side effect of emptying out all the storefronts in my neighborhood. it seems that, if you have a vacant retail space, you can borrow against it based on it’s expected rental. the appraisal always overvalues the expected future rent on the vacant space. often doubling the monthly rent. the landlords take the credit line and use it to buy another property. they can’t rent the vacant storefront on the first property for less than the expecteded rent or they will have to pay back the loan. since the money is tied up in other properties, the result is empty storefronts everywhere. some have been empty for eight years and this is one of the wealthiest zip codes in the nation.

      • Max Power says:

        I get you, Wolf. No doubt that income inequality has risen substantially and that will surely have detrimental effects on those “left behind” when the next downturn hits.

        That said, the example I gave uses credit scores to include those folks in the calculation. As such, when you look at the graphs of the run up in housing debt then from both a risk profile and absolute amounts (again, especially when adjusted for inflation), the current “bubble” in housing is not as acute as the previous one, even when taking the lower 40% (proxied here by credit score) into consideration.

  7. Laughing Eagled says:

    Again the data given does not reflect the true state of citizens of America.
    Averages are not an acurate reflection of the state of a financial status as Wolf has explained. We need the median rate to really see the true reflection of the state of the Main Street economy and the citizens involved in it.
    Inflation of assets has hidden the true wealth. The Fed only addresses CPI which does not count asset inflation. We are not as wealthy as we think we are. Follow the gold price and one can see how we have lost piurchasing power of the US dollar.

    • Paulo says:

      I think Wolf’s example of the fellow with leveraged properties is a terrible story to behold. And if everyone did this the crashes would be spectacular and the rules would be tightened. It will step on everyone.

      All of us could act this way, but some people like to sleep nights and others want to provide stabilty and security for their loved ones. I have never understood the need for those who need to have bigger mounds of monopoly tokens on a rented/borrowed game. (Keep those renters happy, because it could get ugly in a falling market real quick).

      It’s appears to be one step removed from Bernie Madoff, imho.

      • Ali says:

        Read a few posts at The speculators are ALL doing this, and they’re ALL IN.

    • RD Blakeslee says:

      Trouble is gold’s “true” price cannot be discovered; It is rigged.

      DuckDuckGo (or, if you must, Google) “gold price rigged”.

      Abundant credible evidence is presented there.

      But Ron Paul (authority?) agrees with you that Gold’s price, in spite of its rigging, does indicate trouble for the dollar:

  8. Trinacria says:

    Thanks for the analysis – well done. I believe this engineered recovery is so distorted and perverted on a world wide basis, that we have no real idea until the tide recedes and we have some panics or such. I think of a quote by John Stuart Mill : “panics do not destroy capital—they merely reveal the extent to which it has previously been destroyed by its betrayal in hopelessly unproductive works.” I submit that moral hazard is very high and the resulting hangover will be severe. This has gone on much further – through said engineering – than anyone with half the brain that God gave a goose would have reasonably imagined. Amazing what those charlatans at the central banks have engineered. Beggars and homeless camps will increase dramatically. There can also be safety concerns. So, until the movie plays out we won’t really know. It is a question of when not if. ” When” should have happened by now. The longer is doesn’t, the worse it will be. Sorry to be so cherry, but reality is hard to ignore (especially for one of immigrant roots) even while most of the world seems to live in fantasy land !

  9. ridingthewildhorse says:

    Your podcast reminds of that old saw: Want to know how to make the average person in a bar an instant millionaire? Send in Bill Gates….the point being as my data science teacher used to tell us all the time – averages are useless when analyzing data……

    And I notice you make the same mistake that most economists do – you compare GDP per capita to household income when you should compare GDP per capita to income per capita – there is a BIG difference. Average household income is about $60,000, whereas average income per capita is about $48,000 (median income per capita – a better measure – is only $32,000 – think about that! About 50% of the people working in this country learn less than $32,000 a year!).

    But there seems to be a bigger issue – 20% of the GDP is now based on FIRE, but doesn’t all the gains in that sector of the GDP go to about 10% of people in this country? Does any of that money trickle down to the rest of us? Doesn’t that skew the numbers also?

    It seems to me that there are actually two economies in this country, only linked together by debt. Does it even make sense any more to try an analyze our economy as a single entity any more? Shouldn’t there be two measures now? One set of economic numbers for the top 20% and another set of economic numbers for the rest of us?

    • Wolf Richter says:

      And I notice you make the same mistake that most economists do – you compare GDP per capita to household income when you should compare GDP per capita to income per capita

      Wait… I didn’t use GDP per capita at all. I used “household debt per capita, adjusted for inflation.”

      Better yet, I compared this household-debt per-capita in 2018 to inflation-adjusted household-debt per-capita in 2008.

      • ridingthewildhorse says:

        Argh! You are right! I replayed the podcast again. At about 1:10 you were talking about consumer debt as a percentage of GDP and then later you started talking about household debt and I conflated the two……my apologies. I shouldn’t listen to podcasts late at night……

  10. Dave k. says:

    Great report Wolf. I took advantage of these low down mortgage people walking away from investment properties during the last crisis, and will do so again during the next. I can’t believe what people are paying for investment properties….happy with a $100 per door profit. No thanks!

    • Tim L. says:

      I’m a real estate investor and these reports from are invaluable to my research and decision making. My business partner and I decided no long term holds for us in MA as we see other major markets turn down. I know landlords that are selling properties and building cash to buy during the next downturn. My business is strictly doing flips these days – no projects longer than 6 months until we see which way our market is going to go. So far Case-Schiller has us flat for the past three reports. Per Mass Assoc Realtors we are at all time highs for median SFH price in MA at $379,000 in Jan 2019. Jan 2018 it was $367,500. Jan 2015 – as far back as free data goes – we were at $329,700. Something gotta give unless the fed turns on QE again.

  11. Iamafan says:

    Don’t you think there is a problem when reporting most “per capita” numbers? Since this divides total debt by total population then this can easily be skewed by the small part of the population that has gargantuan debts.

    Why should we care much for let’s say the speculators who took on debt to ride the asset bubbles? I really doubt many will cry for them when their balloon deflates.

    The real poor and needy could not afford a balloon to inflate in the first place but they will also get hurt when the bubble bursts because they are the first to lose their jobs. This is why we have or need safety nets in great societies.

  12. Petunia says:

    There’s a huge divide in this country and it’s root is financial. If you skated unscathed through the financial crisis, you really have no idea how it has changed the country. You have no idea how easily you can fall into poverty, no matter how protected you think you are. That’s the divide, those who know and those who don’t.

    I had 40% equity in my home and $100K in the bank before I fell into the financial hole. My husband couldn’t get any work and our home equity vanished quickly with the real estate market. I will never recover from the financial hit. I don’t even want to think about how bad it can get next time.

    I had 40% equity in my home and $100K in the bank before I fell into the financial hole. My husband couldn’t get any work and our home equity vanished quickly with the real estate market. I don’t even want to think about how bad it can get next time.

    I knew that political change would come from the divide. I thought it would be rent control or a larger safety net. Now I it will be much more than that. The old political games no longer work on the 40% who don’t have $400 to cover an emergency. Or on the next 17% who are deemed to be middle class by virtue of having up to $1K in the bank. How can the financial system be solvent on the back of these facts?

    • Petunia says:

      Wolf, please delete this version of the comment with all the booboos.

      • Wolf Richter says:

        I can’t. I dilly-dallied around too long. Now, Paulo already replied to it with a HUGE comment. And RD Blakeslee replied to his. If I delete yours, both comments will just disappear.

        Apologies. I shoulda paid attention :-]

    • Paulo says:

      Plus, when a family is doing everything right according to accepted wisdom, and it goes sideways, then expect some book burnings. Furthermore, when the elected saviours actually put more weight on the scale in their favour, double double watch out.

      I was watching CNN this morning and the ‘experts’ brought up the new budget proposal and whispered about the elephant commonly referred to as ‘entitlements’ in an effort to pre-emptively demonize, I guess. Everyone knows that word is really called Social Security and is also meant to spike the guns of Medicare-for-All for additional 2020 electionering.

      Will the US Baby Boomers go calmly in the night and take it for the team with SS reductions? Or, will they start the downgrade on the younger set we call millenials? I typed in a search on how much money has been ‘borrowed’ from SS. Answer: “They spent every dime. That $2.85 Trillion was “borrowed” by the Federal Government. All that is left is a file cabinet at the Bureau of Public Debt filled with non-negotiable bonds. Congress has borrowed from the Social Security Trust Fund since it began.”

      I then asked is SS pay as you go? Answer: “Social Security is largely a pay-as-you-go program. This means that today’s workers pay Social Security taxes into the program and money flows back out as monthly income to beneficiaries. As a pay-as-you-go system, Social Security differs from company pensions, which are “pre-funded.”

      So, with AI, automation, Gobalization, and de-industrialisation, no one can really explain how expectations can be paid for with a shrinking contribution ‘pot’. Although, everyone right now does say how angry they will be if their benefits are cut (because they paid into it their entire working life). Nevertheless, it is a Ponzi scheme and unless it gets fixed it will disappear in a sea of problems.

      Canada, used to have the same problem/issue, but in the 1980s a multi-pronged effort was undertaken to fix our Govt pension plan, CPP. (First of all, people receive about 50% of SS and always have.) The following is from a right wing rag, Globe and Mail.

      Here is the article on how this was accompished.

      “The first step was to ramp up the immigration rate and to give priority to younger independent immigrants rather than older family members. Remember, the CPP was a quasi-Ponzi scheme so an influx of younger immigrants helped to stabilize CPP costs. Canada has had a higher immigration rate ever since the 1980s and this is one reason why that policy has to continue.”

      “The second step was to trim benefits such as CPP disability benefits and the earnings base used to calculate pensions. This measure saved considerable money and since the changes were rather technical, they flew below the radar, thus avoiding a public outcry.”

      “The third step was to get the government out of the business of investing the CPP fund. The CPPIB was created in 1997 as a body that operates at arm’s length from the federal and provincial governments. Its mandate has been, and continues to be, to achieve the best possible return for the fund for a given level of risk. In this regard, it has generally succeeded by investing in large infrastructure projects and private equity around the globe.”

      “The final step was to change the pay-as-you-go funding method. This was the tricky part. Clearly, a contribution rate of 3.6 per cent of pay wasn’t going to be enough but there was no way that Canadians would tolerate the 14.2-per-cent contribution rate that would eventually be needed. The Chief Actuary had determined that gradually raising the contribution rate to 9.9 per cent would stabilize the fund. With 9.9 per cent going in, the CPP assets could continue to grow for decades to come. Anything less and the fund would eventually dry up, while anything more would be unfair to the current generation of contributors. The CPP chief actuary calls this funding formula “steady-state funding.”

      The 9.9-per-cent contribution rate was fully phased in by 2003 and has not increased since then. According to projections carried out by the Office of the Chief Actuary, it would have been sufficient to fund the existing CPP benefits for at least the next 75 years.

      The rate will start to rise again in 2019, but for a different reason. The CPP enhancements that were announced in 2016 will require higher funding. By law those new benefits have to be fully funded so as to avoid passing the costs along to the next generation.

      Apples to apples, in reference to a recent article on indebtedness by countries on WS, I think it is imperative to look at all aspects of financial well being, and not just current balance sheets, personal loan debts, mortgages, etc of citizens. Upon further scrutiny the cleanest shirt in the laundry basket isn’t very clean at all. Adding on to what Petunia says, if 2016 was a shakeup, 2020 or before is going to be head shaker. You can’t solve finacial dilemmas with political jingos and finger pointing. It is going to take a long-term bipartisan approach with the first step in recognizing there is a problem and that it’s everyone’s fault and requirement to solve. Or else….(think Venezuala)

      Is this even possible in the the polarized US? Nobody is even talking with each other these days let alone working on problems. That is why I believe there is going to be a doozy of a collapse sooner than later. I hope I am wrong.


      • RD Blakeslee says:

        Paulo, you are right, I think.

        In the current sociopolitical climate in the U.S., nothing can get through the political deadlock in Washington. Even if it could, the work ethic and mutual agreement between capitalist and worker which is essential to any “real” economic prosperity is largely gone.

        So the Achilles heel of capitalism where it is unbridled, greed, will prevail.

        One can only devise a life “under the radar” as the only realistic personal survival strategy, in the face of this.

        For example, peasant farmers survived the massacres of Stalin better than the Russian elites of that time.

        • kitten lopez says:

          RD: ‘One can only devise a life “under the radar” as the only realistic personal survival strategy, in the face of this.’

          yup, RD. i agree with you straight down the line.

          Petunia’s spot on about how fast this new Dickensian reality can take you over and i don’t see any help in the future from social security or any kind of assistance other than Disability, which people seem to envision like a gleaming city on the hill.

          that’s why i realize it’s up to us ourselves on the low (or partially on the low), and something SOMETHING different interesting and VIABLE has to be crafted tested worked out experimented with.

          i’m just one pipsqueak but i believe in getting the CONVERSATION going amongst ourselves as i no longer believe in society’s or the government’s ability— or more importantly—WILLINGNESS to ameliorate any suffering out here.


  13. Petunia says:

    There’s a huge divide in this country and it’s root is financial. If you skated unscathed through the financial crisis, you really have no idea how it has changed the country. You have no idea how easily you can fall into poverty, no matter how protected you think you are. That’s the divide, those who know and those who don’t.

    I had 40% equity in my home and $100K in the bank before I fell into the financial hole. My husband couldn’t get any work and our home equity vanished quickly with the real estate market. I will never recover from the financial hit. I don’t even want to think about how bad it can get next time.

    I knew that political change would come from the divide. I thought it would be rent control or a larger safety net. Now I know it will be much more than that. The old political games no longer work on the 40% who don’t have $400 to cover an emergency. Or on the next 17% who are deemed to be middle class by virtue of having up to $1K in the bank. How can the financial system be solvent on the back of these facts?

    • Petunia says:


      I’m replying here because this is the better version of my comment.

      There’s a bill in congress to sort of protect Social Security called the Social Security 2100 Act. It’s not great but a step in the right direction. Lower income beneficiaries would get bumped up 3% in benefits and the cap on contributions would be lifted, every worker pays on every dime. The high wage earners would get more too but capped. The real problem is that they want to raise the retirement age to 70 and that is just unrealistic for people that actually work a physical job, or are already in poor health. They would let you retire early at 62 by cutting your retirement even more than they do now.

      I think this bill is being ignored by the media because they are “caring” but only as much as their donors allow. The bill needs attention and can be tweaked to something better. Readers support it if you can, suggest improvements if you can, and let them know you want positive change.

      • Kent says:

        I don’t want to sound like a crazy here (though maybe I am). But I just don’t get the whole SS going bankrupt craze. What does that even mean?

        Older folks pretty much have accumulated the stuff they need. They’re on a break and replace budget now. There biggest spending issue is healthcare, which is a whole different issue.

        Are we saying that as a nation, we can’t produce enough food for the young and the elderly at the same time? Or enough diapers? How about tires for their cars?

        Suppose we just printed the difference without raising taxes or selling bonds? So that every old person got the SS payments they expected. Would the expectation be that we would get roaring inflation? Why? Because they ate potatoes instead of cat food? Because they could keep better tires on their cars? Have we become that unproductive as a nation? We don’t have enough people to work a second shift?

        Crazy talk, I know. Sorry. Of course we don’t have enough money and there is no way, and I mean no way, of getting more.

    • kitten lopez says:

      your testimonies are always so powerful and shocking, who could care about typos? it’d be like proofreading a note of secrets of the universe written in blood and put into a bottle that made its way to you thousands of miles.

      • Petunia says:


        I never know how to respond to your kind thoughtful comments. You make me feel less deplorable and irredeemable, despite the low bank balance and fico score.

        • kitten lopez says:

          wow, i’m glad i caught this from you. as part of my own personal return to the 1980s i waited too long to update my system and now it’s running like it was built in the ’80s and thus i can’t get notifications on replies here (i can’t even get into my email right now and i suddenly… don’t CARE).

          Petunia this wrenched my heart and since it’s After Hours and there are enough new articles above i’m gonna spread out and write you back below because what you had the guts to write out is EVERYTHING…

          more later below (i’m gonna write now but it takes awhile)…


  14. Paperboy says:


    Any chance you will start uploading these to a podcast channel? I like to listen to your report in the car and cannot do so unless I keep the app open. Youtube is notorious for not allowing you to open up other apps (like Waze for navigation) and listen to the audio file at the same time.

    Uploading these iTunes via a podcast channel would solve this and allow subscribers to stay up to date. You may even find a greater listener following if you start to trend on the homepage. Just a thought, either way thank you for the great content!

  15. economicminor says:

    I have read that the percentage of people who are renters has increased dramatically since the financial crisis.. These people have as much going out each month as those who make payments on their own debts.. Difference is they are paying off someone else’s debt. YET they don’t show up in the debt columns.

    Rents have inflated a lot and these numbers aren’t reflected in Wolf’s piece. Just another reason to be aware and wary.. Many people are financially worse off even though their debts haven’t gone up substantially.

    • Petunia says:

      My landlord is banking money on my rent and the rent is still cheaper than what I paid in Florida 3 years ago. We arbitraged the rent in Florida by moving.

  16. davefairtex says:

    This is more important than many realize. I’ve heard people say “consumers benefit from globalization since prices of imported goods are lower.” My question: “which consumers are you talking about?”

    There are always winners and losers in this economy-game. The top 20% benefit from globalization, while a large number of others suffer – because their wages fall by more than the prices of what they buy drops.

    This dramatically divergent experience by the two groups is completely hidden by “the average.”

    “On average, consumers benefit.”

    The “Trump phenomenon” is all about winners and losers. If America were represented by the averages, we’d be saluting President Hillary right now.

    • kitten lopez says:


      ‘ I’ve heard people say “consumers benefit from globalization since prices of imported goods are lower.” My question: “which consumers are you talking about?” ‘

      that neo-liberal argument around here is total bunk now. but these are the same people who touted globalization because country boundaries are meaningless to them but not us small fries. it was cheaper for THEM; not us plebs. we’re food or fuel.

      i was one of the few in SF who felt for the white guys in the middle of the country–young and old—for being bypassed over and over again and expected to take it on the chin in perpetuity.

      reading Postman and Boorstin got me to see how they feed us back who we’re SUPPOSED to “side” with in the polls, they tell us who we are and we feel like “oh! there we are!”

      these false choices need to be discarded so we can see what’s what underneath.

      i feel this as a colored girl and there WERE black men who voted for Trump. and why should they vote for “hillary”? really? i’m tired of being told who i am and what my “interests” are supposed to be, as if they are DIFFERENT from these guys wearing MAGA hats in the midwest. nah. i FEEL their pain and it’s atrocious how they’ve got us at each others’ throats when it really is all about class and yeah… BOUNDARIES.

      we cannot compete on a global housing market or with wages in Vietnam.

      but this country is not about taking care of its own and it never was, really. they use that “it’s not a bug it’s a feature” cliche all the time and it’s TRUE about this country..this WORLD.

      i feel manipulated to fear or hate certain populations like they’re doing with the Chinese or Indians right now (Wolf it’s already happening here in banks apparently), and i won’t touch the Israeli thing but that’s even making me blue. but i’m tired of feeling like a distracted pavlovian pawn expected to fear/hate the enemy du jour for america.

      it’s too SMALL. all the targets goals and ideas we are given. i don’t know about some of you millennials out there, but i feel young and horrified like i just got here, too (“millennial” is also more marketing B.S…. even old formerly middle class white boomers are still speechless, not realizing america would or COULD do this to them, either… see the old RV set working on their feet fulfilling seasonal orders at amazon or driving their cars like taxi etc).

      so before i interrupted myself i was asking the rhetorical question: don’t you “millennials” feel TIRED of feeling HELPLESS???

  17. kitten lopez says:


    KL: “I never know how to respond to your kind thoughtful comments. You make me feel less deplorable and irredeemable, despite the low bank balance and fico score.”

    Petunia that knocked the air out of me because we really do need a revolution of values if you can even think that. of ALL people to feel low and powerlessly out of THIS game, you’re the LAST person we can afford to have feeling that way and staying out of the game. i come from superheroes so i know of what i speak when i say that you’re a powerful and fighting archetype of a fierce and true love goddess to me. the truth you say the slips of things you say about how you love your husband and how you see the match of REALITY soooo damn fast, AND still you insist on your rhinestone flip flops? Queen!

    but i must admit that i do know exactly what you mean because i thought the same thing and thus i “died” as i was back in 2011 when everything finally went totally tits up for me in everything. i was never employable so i had to be self employed so i was working all the time becasue that’s just how it is. i stopped living and having a full life when it finally went tits up and i knew i had no understanding of this new hyper narcisstic branding world i suddenly didn’t care about living and as my past suicidal adventures hadn’t taken me out like i’d assumed they would when i was younger, i had no plans for making it to middle age with nothing in america.

    it was James who had to retrain me that just because i was born i get to live as myself. that it is not only MORE THAN ENOUGH, it is everything, actually. and he wouldn’t put it this way because he’s a heathen, but it’s against god. against NATURE.

    this needn’t be as long as i’d assumed because i KNOW that you actually do understand what i mean because
    how can you who loves your husband and your son so deeply, how can you not see how this system… it’s all DESIGNED to be this way so that our self-contempt at not being millionaires keeps us insatiably preoccupied with hating ourselves eachother and competing improving struggling clawing manipulating, and much money and distraction and power grabs are made on this endless pit of perceived “deficiencies” from the superheroes we need to step up and change things in a real and tangible way on the GROUND.

    and you’re not alone at not ever knowing how to respond to me. i used to try and hide how i was because i thought i was evil for scaring people away from me all my life. they never knew how to categorize me or go off-road and have even a real and true conversation.

    but now with the magic phones it’s worse way worse, and now that i’m no longer buffered by many artists and freaks around me, i am right up against “regular people” for the first time truly in my my life. and as an artist, now that i’ve quit the hustle, my art is no longer mere distraction or entertainment and it’s actually NEEDED in real life by just listening or paying attention to someone’s eyes or listening to what they’re saying without distraction.

    but people themselves no longer feel like they are simply enough as they are and it’s the root of all the stuff the crap the reason we’re all on Wolfstreet. yeah, it’s a money site but now for real… money has become EVERYTHING. nothing is sacred. not even ourselves each other and that is tragic. but by design. as an artist who loved advertising and scoffed at the anti-tv assholes as i loved it ALL, i’m horrified at how i thought i was a hip outsider but i imbibed the messages as obediently as anyone. i was no rebel! silly me. ha.

    reading the late Boorstin’s “THE IMAGE” and even Postman’s “AMUSING OURSELVES TO DEATH” has really sharpened this realization so much more BECAUSE Boorstin’s book was written in ’61, i’m angry that this has been out there all along and i did not know.

    it’s all by’s in the language.

    like from here on out, i’m never gonna say or write “millennial” regarding the little ones ever again. i FEEL in my body how it makes me dislike them like they are caricature monsters when they are of us, they are all of our CHILDREN and when i merely THINK of them as “the little ones” my entire world view/perspective changes and i feel properly defiant. like i said my mom’s reaction to my bad girl truths made me a little bent and twisted like i get off and am PROUD of defying authority.

    “millennial” is dismissive of them and makes them media “things” to count and dissect and market to and exploit. and this way of speaking to distance is part of our problem with the screens and TV making us ready for the hell of these magic phones.

    but Petunia, I NEED YOU. i have so so few women i can admire anymore. yeah, yeah, women are cool. but women with this diabolical #metoo movement is just a powerplay land grab to me. it’s a lynch mob. and if you truly love your sons brothers husbands and the men in your life, you cannot just watch them become terrified into submission. they are us! this neutering of men also neuters women like you and me, Petunia. it’s a set of outgoing CREATIVE straight truth-talking traits tendencies natures and behaviors that are being vilified as well. and i know you know this.

    i am now in the audience as an artist and i must applaud the real bad asses and love them strong so that YOU can re-emerge anew. i’m trying to put forth new visions as an artist so they catch like fire. when strong people with heart dare to not hate themselves and love as a verb, things get very interesting.

    love as a verb is often just LISTENING and looking into someone’s eyes when they’re used to speaking in 280 characters before people lose interest.

    but Petunia, you and i BOTH know how powerful you’d be if you admitted what a trap the FICO values are to all on earth–animate and inanimate– and turned that firece brilliance outward to build something more new humane and SMART, whether it’s underground, alongside, above..whatever. i cannot afford to have you quiet. it’s a true waste of brilliant new resources we can use NOW.

    and i’m not talking any existent “-ism.” i don’t KNOW anything. just that the mindset that got us here ain’t gonna get us OUT.


    • 91B20 1stCav (AUS) says:

      Kitten-bless your heart and very glad to see you back, here. Guerilla war has its romantic aspects, but being in it against the zeitgeist you so have so elegantly presented, the struggle will be long, and as you have also presented, no less dirty and miserable as a straight-up fight. As a boomer who hit this stuff emerging from the national wreckage of the Cold/Viet Nam wars, the endless challenge, never easy, is to find ways to not play the effing game. Strength to you, to us all, and may we all find a better day…(I’m sure you’ve read Veblen, Toffler and MacLuhan, but if you need some more license numbers lit by the taillamps of that very big truck, there they are…).

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