Something Went Wrong on the Way to the Future

By Bill Bonner on November 11, 2015

NORMANDY, France – U.S. stocks showed little interest in moving either up or down yesterday.

So they just sat tight.

As we keep saying, you can get any opinion you want. The problem is you can also get any fact you want…

Lies and Misunderstandings

Yesterday, our friend and economist Pierre Lemieux challenged the numbers in Monday’s Diary on the U.S. manufacturing recession:

You write, ‘In real terms, the typical man of working age in the U.S. earns less today than he did in 1975 – 40 years ago.’

Where did you get this data?

Even the notably unreliable data of the Census Bureau on median family income are not that dark.

All data I know show that, in the U.S., real incomes have grown over the last 40 years. I am sure it is the same in Europe. Some prices have increased, like home prices, relative to other prices, and it is quite certainly more difficult to buy a house now than back then.

Most other things are easier to afford – including for the typical worker. This is confirmed by casual observation: Look at their cars, their TV sets, their boats, their vacations, their appliances, their restaurants (not to speak of computers).

Look at their children’s cars, iPhones, shoes, etc. Indeed, look at their hunting or hiking boots with Thinsulate and Gore-Tex!

In general, we have little confidence in numbers or statistics. Except in the world of science, where they mean something precise, they are mostly lies and misunderstandings.

Many of them are plain wrong. Many are pure inventions.

We don’t trust them – especially our own.

You’d think it would be a fairly simple matter to tell if wages, after you account for inflation, have gone up. But it’s not.

You can begin with the raw data. Then you need to adjust it for inflation… which is where the trouble comes in.

How much is a 1975 dollar worth today?

Real Earnings

We don’t want to mislead readers with faulty numbers, so we put the issue to our research team.

“The data supports us,” says Bonner & Partners researcher Nick Rokke. “Real income for men was higher throughout the 1970s.”

The data from the Census Bureau has the average American working man’s income, in 2012 dollars, at about $37,000 in 1972 – its highest level of the decade. Today, it is close to $34,000.

We also have the news of lower incomes reported as “fact” in theNew York Times on October 22, 2012:

[T]he real earnings of the median male have actually declined by 19% since 1970. This means that the median man in 2010 earned as much as the median man did in 1964 – nearly a half-century ago.

Men with less education face an even bleaker picture; earnings for the median man with a high school diploma and no further schooling fell by 41% from 1970 to 2010.

But wait. It’s not that simple. Pierre again:

The data makes (a bit) more sense for males. But, as I suspected, the figures come from unreliable Census Bureau data.

The Census Bureau gets it from its Current Population Survey, which amounts to asking people what they earn. This data is inconsistent with NIPA (National Income and Product Accounts) data, which contains multiple cross-checks (total income must be equal to total expenditure and to total value added).

Note also that the Census data do not include in-kind transfers (such as food stamps, Medicaid, and employee benefits)…

Right. Add in the free company T-shirts and state welfare handouts, and you seem to have a working man who is better off.

But he can’t be much better off.

Just taking the unvarnished numbers, the average working stiff in 1975 earned $8,853 (in 1975 dollars). Now, he earns $36,302.

Ford introduced its F-150 in 1975. We weren’t able to find an exact price, but it appears to have been sold at about $5,000. Today, an F-150 SuperCab sells for about $28,000.

The average new home sold for $39,000 in 1975. Today, it sells for $364,100. In very raw terms, if a man wanted to buy a house and a car in 1975 he had to work just under five years to pay for them.

If he wants a house and a car today, he has to work almost 11 years…

Happier, Healthier, Richer?

Whoa! This makes it sound like his real income has been cut in half.

Of course, it’s never that simple. He gets more house and more car for his money today.

Still, the remarkable thing is that we are doing this calculation at all. We shouldn’t be wondering about it. It should be obvious that we are all far better off today than we were a half-century ago.

This should have been the easiest period in human history in which to make financial progress.

Never before had there been so many inventors and entrepreneurs. Never before had they so much accumulated science and capital to work with. Never before had there been so many people making things… and so many consumers with money in their pockets to buy them.

And never before were there so many earnest lawmakers, PhD economists, curious researchers, diligent policymakers, and nonprofit-employed do-gooders – millions of people all doing their level best to make us happier, healthier, and richer!

Something seems to have gone wrong on the way to the future…

Regards,

Signature

Bill

Further Reading: To sign up for Bill’s monthly publication, The Bill Bonner Letter, follow this link. If you’re already a subscriber,read on here to learn more about the benefits of a Lifetime membership.

tech-insight

[Editor’s Note: We’ll soon be launching a new investment advisory, Exponential Tech Investor, to help you profit from game-changing innovations. Below, editor Jeff Brown identifies an exciting area of breakthrough technology.]

“Quantifying” ourselves has become a movement. Starting slowly and quietly in the latter part of the last decade, the trend of people acquiring data on all aspects of their lives – with Fitbits and iWatches and other kinds of “wearables” – is now everywhere.

The purpose is to quantify one’s self. And in so doing, people can take a data-driven approach to improving their lives.

The market for fitness-related wearables will easily top $1 billion this year. You may be familiar with popular brands such as Fitbit (NYSE:FIT) or Jawbone (private). Their products can do things like continuously take your heart rate, track workouts and calories burned, monitor the quality of your sleep, and even set alarms.

This is just the beginning, however. I am tracking two private companies that are advancing wearables to the next generation of functionality.

Vital Connect has developed a series of biosensors that can be used for cardiac monitoring, clinical trials, and post-discharge monitoring.

Screen Shot 2015-11-11 at 12.34.33 PM

Quanttus is focused on clinical-grade vital sign monitoring of things like sleep, dehydration, blood pressure, diabetes, and inactivity.

Even Google (NASDAQ:GOOG) is working on advanced wearable technology. In early 2014, it announced that it was developing a “smart” contact lens. This wearable for your eye contains a tiny wireless chip and a glucose sensor that have the ability to transmit blood sugar levels to a smartphone.

These wearable technologies will be part of a massive revolution in health care that will improve the quality of health information and diagnostics. They’ll also lower costs exponentially.

Most importantly, though, these technologies will save countless lives by providing early diagnosis of potentially life-threatening conditions.

P.S. If you want to be among the first to learn about my top picks for breakthrough tech stocks on the verge of exponential gains, follow this link.


Featured Reads

U.S. Companies Now Have Double Their Pre-Crisis Debt Levels
Thanks to seven years of ultra-low interest rates, U.S. companies have gorged themselves on debt. This has left them carrying more debt than in over a decade… and it could trigger the next major financial crisis.

Where Washington Sends $6 Billion in Foreign-Military Aid Each Year
Ever wonder where your tax dollars went? This infographic shows where Washington chose to send almost $6 billion in military aid last year. Two countries at the top of the list: Israel and Egypt…

Three Reasons Why It’s Easier to Make Money in Bonds than in Stocks
Few people can stay wealthy unless they know at least something about bonds. Discover why it’s vastly easier to make a lot of money in bonds than it is in stocks.


Mailbag

Yesterday’s issue on top Obama economist Larry Summers got a huge response from readers…

But before we get to that… Do you feel better off than you did in the 1970s? Are you happier, healthier, and richer? Or do you feel “progress” has worked in reverse?

Bill and the team would love to hear your story. Write us at [email protected].

Now, back to Mr. Summers…

I split a gut reading your “review” of Larry Summers’ column.

In the end, I couldn’t tell what you had more contempt for – his utter confusion or his god-like view of himself.

– Dave H.

Larry Summers is a mess. You have hit a homerun with your insights. In a future post you might go into some of his former mistakes and misstatements, miscalculations, etc.

– Russ T.

Being from Harvard answers all questions about Larry Summers.

However, he does seem to be at the head of his class. Doesn’t have a clue to the real world. What a waste of time spent gaining that sort of education. He had to be much smarter before he started.

MIT does turn out some good engineers!

– Lonzo T.

Oh my gosh… Is Larry Summers trying to humor us?

I’ve never read such moronic and vainglorious claptrap. Sadly, the powers that be kneel at his omniscient altar.

Yes, he’s trying to humor us… but the joke’s on us.

Keep up the good work, Larry… when the reset button is finally pushed, you and your ilk will be first to be eaten.

– Steve M.


In Case You Missed It…

Yesterday evening, we ran a Special Edition of the Diary titled “This Will Be the Greatest Legal Transfer of Wealth in History.”

It was written by colleague Porter Stansberry, founder of Stansberry Research.

And tonight at 8 p.m. Eastern Time, Porter and his team delve deeper in that topic with a free webinar – “The Largest LEGAL Transfer of Wealth in U.S. History.”

There are still a few hours left to register. So don’t miss your chance… sign up here.