Zbigniew Piekarski on Poverty in affluence
"The market is not an invention of capitalism. It has existed for centuries. It is an invention of civilization." - Mikhail Gorbachev
Most people now agree that central planning doesn't work, yet they expect that their central banks, which are in fact central planners, will have more success than other forms of central planning.
Fiat money, or paper money, is legal tender because the government says it is. It is not backed by a commodity, nor does it have a special reserve. It is merely a promise to pay. The main advantage of fiat money is that you are able to print as much of it as you like.
Since the Eighth Century in China, hundreds of fiat-money monetary systems have been attempted and have failed 100 percent of the time. The main reason they fail is because whenever bankers and/or politicians are left in charge of the integrity of fiat money, the temptation to manipulate that money has been so overwhelming that none of them has been able to resist it. In every case, they have driven the purchasing power of the fiat money down to its cost of production, which is nearly zero.
Until 1971 there was some protection as the U.S. dollar was pegged to the price of gold and all other currencies derived their value from it. Once this was abandoned under Nixon, the Fed became the lender of last resort and began to control the world economy by the extension of credit.
Throughout history, easy money has always led to asset bubbles. Once these bubbles are pricked and the gullible are bankrupted, the respective governments demand increased tribute from their subjects in order to bolster their depleted coffers. But this time it's different. The asset bubbles still exist yet the casualties are mounting, and from the most unexpected quarter.
The Two Income Trap, by Harvard Law School professor Elisabeth Warren and Amelia Warren Tyagi (Basic Books, 2003) explains, "why middle-class mothers and fathers are going broke." According to Elisabeth Warren:
"The [American] families in the worst financial trouble are not the usual suspects. They are not the very young, tempted by the freedom of their first credit cards. They are not the elderly, trapped by failing bodies and declining savings accounts. And they are not a random assortment - who lack self-control to keep their spending in check. Rather, the people who consistently rank in the worst financial trouble are united by one surprising characteristic. They are parents with children at home. Having a child is now the single best predictor that a woman will end up in financial collapse.
"Our study showed that [in the USA] married couples with children are more than twice as likely to file for bankruptcy as their childless counterparts. A divorced woman raising a youngster is nearly three times more likely to file for bankruptcy than her single friend who has never had children.
"Over the past generation, the signs of middle-class distress have continued to grow, in good times and in bad, in recessions and in booms. If those trends persist, more than five million [U.S.] families with children will file for bankruptcy by the end of this decade. This would mean that across the country nearly one in seven families with children will have declared itself flat broke, losers in the great American economic game.
"Bankruptcy has become deeply entrenched in American life. This year [2003], more people will end up bankrupt than will suffer a heart attack. More adults will file for bankruptcy than will be diagnosed with cancer. More people will file for bankruptcy than will graduate from college. And, in an era when traditionalists decry the demise of the institution of marriage, Americans will file more petitions for bankruptcy than for divorce."
According to the authors, it is not over-consumption that is driving many middle-class families into bankruptcy, but the lack of a safety net. Middle-class families don't qualify for all kinds of programs that are available to the poor. Moreover, the family safety net no longer exists for the modern two-earner couple, which, as Warren says, makes them, "actually more vulnerable than the traditional single-breadwinner family."
A generation ago, the typical family consisted of the father, being responsible for the economic health of the family, while the mother fulfilled roles such as homemaker or helpmate. The mother's role was, in the words of the authors, one of a, "careful guardian of what her husband brought home," and, "if her husband was laid off, fired, or otherwise left without a pay-check, the stay-at-home mother didn't simply stand helplessly on the sidelines as her family toppled off an economic cliff; she looked for a job to make up some of that lost income. Similarly, if her husband had a heart attack and was expected to stay home for a while, she could find work and add a new source of income to help the family stay afloat financially. A stay-at-home mother served as the family's ultimate insurance against unemployment or disability- insurance that had a very real economic value even when it wasn't drawn on."
The problem with the two-income family is that it doesn't plan its financial commitments geared to a single income by saving the extra income that is derived by the mother. According to Warren, "millions of two-income families used that second income to purchase opportunities for their children - a home in a safe neighborhood with good schools, a comprehensive health insurance policy, two reliable cars, preschool, and college tuition. They made long-term commitments to ongoing expenses - and they counted on both incomes to make ends meet."
So, when one of the members of a two-income family loses his or her job, the safety net (the mother entering the workforce) that was available to the single-breadwinner family, is no longer available. And once the combined income of the two-income family collapses as a result of one member losing his or her job, "the modern couple doesn't have a prayer of making ends meet."
The high and continuously rising cost of living in the western industrialized countries has created 'poverty in affluence' whereby a large number of middle- and even upper-middle-class families have very little left by the time they have paid for their mortgages, taxes, insurance premiums, food, children's education and sperm donor clinics for lesbian couples and single women. What happens once the asset bubbles are pricked?
Most people now agree that central planning doesn't work, yet they expect that their central banks, which are in fact central planners, will have more success than other forms of central planning.
Fiat money, or paper money, is legal tender because the government says it is. It is not backed by a commodity, nor does it have a special reserve. It is merely a promise to pay. The main advantage of fiat money is that you are able to print as much of it as you like.
Since the Eighth Century in China, hundreds of fiat-money monetary systems have been attempted and have failed 100 percent of the time. The main reason they fail is because whenever bankers and/or politicians are left in charge of the integrity of fiat money, the temptation to manipulate that money has been so overwhelming that none of them has been able to resist it. In every case, they have driven the purchasing power of the fiat money down to its cost of production, which is nearly zero.
Until 1971 there was some protection as the U.S. dollar was pegged to the price of gold and all other currencies derived their value from it. Once this was abandoned under Nixon, the Fed became the lender of last resort and began to control the world economy by the extension of credit.
Throughout history, easy money has always led to asset bubbles. Once these bubbles are pricked and the gullible are bankrupted, the respective governments demand increased tribute from their subjects in order to bolster their depleted coffers. But this time it's different. The asset bubbles still exist yet the casualties are mounting, and from the most unexpected quarter.
The Two Income Trap, by Harvard Law School professor Elisabeth Warren and Amelia Warren Tyagi (Basic Books, 2003) explains, "why middle-class mothers and fathers are going broke." According to Elisabeth Warren:
"The [American] families in the worst financial trouble are not the usual suspects. They are not the very young, tempted by the freedom of their first credit cards. They are not the elderly, trapped by failing bodies and declining savings accounts. And they are not a random assortment - who lack self-control to keep their spending in check. Rather, the people who consistently rank in the worst financial trouble are united by one surprising characteristic. They are parents with children at home. Having a child is now the single best predictor that a woman will end up in financial collapse.
"Our study showed that [in the USA] married couples with children are more than twice as likely to file for bankruptcy as their childless counterparts. A divorced woman raising a youngster is nearly three times more likely to file for bankruptcy than her single friend who has never had children.
"Over the past generation, the signs of middle-class distress have continued to grow, in good times and in bad, in recessions and in booms. If those trends persist, more than five million [U.S.] families with children will file for bankruptcy by the end of this decade. This would mean that across the country nearly one in seven families with children will have declared itself flat broke, losers in the great American economic game.
"Bankruptcy has become deeply entrenched in American life. This year [2003], more people will end up bankrupt than will suffer a heart attack. More adults will file for bankruptcy than will be diagnosed with cancer. More people will file for bankruptcy than will graduate from college. And, in an era when traditionalists decry the demise of the institution of marriage, Americans will file more petitions for bankruptcy than for divorce."
According to the authors, it is not over-consumption that is driving many middle-class families into bankruptcy, but the lack of a safety net. Middle-class families don't qualify for all kinds of programs that are available to the poor. Moreover, the family safety net no longer exists for the modern two-earner couple, which, as Warren says, makes them, "actually more vulnerable than the traditional single-breadwinner family."
A generation ago, the typical family consisted of the father, being responsible for the economic health of the family, while the mother fulfilled roles such as homemaker or helpmate. The mother's role was, in the words of the authors, one of a, "careful guardian of what her husband brought home," and, "if her husband was laid off, fired, or otherwise left without a pay-check, the stay-at-home mother didn't simply stand helplessly on the sidelines as her family toppled off an economic cliff; she looked for a job to make up some of that lost income. Similarly, if her husband had a heart attack and was expected to stay home for a while, she could find work and add a new source of income to help the family stay afloat financially. A stay-at-home mother served as the family's ultimate insurance against unemployment or disability- insurance that had a very real economic value even when it wasn't drawn on."
The problem with the two-income family is that it doesn't plan its financial commitments geared to a single income by saving the extra income that is derived by the mother. According to Warren, "millions of two-income families used that second income to purchase opportunities for their children - a home in a safe neighborhood with good schools, a comprehensive health insurance policy, two reliable cars, preschool, and college tuition. They made long-term commitments to ongoing expenses - and they counted on both incomes to make ends meet."
So, when one of the members of a two-income family loses his or her job, the safety net (the mother entering the workforce) that was available to the single-breadwinner family, is no longer available. And once the combined income of the two-income family collapses as a result of one member losing his or her job, "the modern couple doesn't have a prayer of making ends meet."
The high and continuously rising cost of living in the western industrialized countries has created 'poverty in affluence' whereby a large number of middle- and even upper-middle-class families have very little left by the time they have paid for their mortgages, taxes, insurance premiums, food, children's education and sperm donor clinics for lesbian couples and single women. What happens once the asset bubbles are pricked?
