What Did The “Jobless Recovery” Bring?

Today, after the so-called “jobless recovery”, we can try to see the improvements in people’s standard of living. If there were any such improvements to acually see.

According to a new report, released by the advocacy group Young Invincibles, today’s millenials (the generation of people betweent the ages of 18 and 34) are earning on average 20% less than their baby boomer parents. They also owe more than their parents did at the same stage of their lives.

All figures in the research come from data by the US Federal Reserve, and have been adjusted for inflation (for example, an annual salary of $10,000 US some thirty years ago would equal about $19,500 today). The survey focuses on people who were between the ages of 25 and 34 years in 1989, and the data for the same age group in 2013 (the last year this detaied data is available for).

Considering that, let’s take a look at the nimbers. The average salary for a person with a degree and with student debt in 1989 was $67,880 (adjusted for inflation). In 2013, it was $50,727, or $17,153 less. The average income for a person without a degree in 1989 was $49,024, while today it is $36,523, or $12,500 a year less.

The above concerns annual income, or the salary each of us gets for the work that we do. Now let us look at wealth. Wealth is determined as the difference between what you own and what you owe. That is, if you were to sell evertything that you own today – your home, your car, fruniture, computer, valuables, etc. – and you use that money to pay off your debts – mortgage, car loan, credit cards, credit lines and any other forms of debt you might have, – how much money will you be left with? This is your net wealth (also sometimes called equity). For many, the result can even be negative – they would still have debt left at the end of the day. They would have negative net wealth, also sometimes called negative equity.

The average wealth of a person between the ages of 25 and 34, with a degree and no student debt, in 1989 was $125,572, and 24 years later had fallen to $75,000. The average wealth for those who had a degree with debt, in 1989, was $86,547, while today it is only $6,600 – a whopping decrease of $79,947 (or 92%)! For people without a degree, the average net wealth in 1989 was $16,322, while today it stands at $7,750. Notice two imortant things: First, the enormous decrease in the net wealth of people who had to get student debt in order to get a degree (because of the rising cost of higher education); and, second, the fact that today, a person without a degree has a higher average net wealth than someone who has a degree and student debt!

Another fact worth mentioning is the net wealth for the entire group of people between the ages of 25 and 34, regardless of education. Today, the millenials, on average, have a net worth of only $10,900, compared to $25,035 in 1989 – or a decrease of 56%! Millenials also have significantly lower home ownership rates, and much more college debt than the baby boomers did at the same age.

So, here again, we have to go to what I had been writing about before: We cannot continue to live like it’s still 1989. Too many things have changed. We cannot continue to think that getting a degree – any degree, – will get us, or our children, a better quality of life, a better salary, or will help us build more wealth. It depends – on the subject you want to study, the availability of jobs after graduation, and especially on the amount of debt one has to incur in order to get the degree. Having a better quality if life during tough times is not impossible – with or without a degree, – but it does require a different way of thinking and a different perspective on what’s most important in life!

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Now The Recession is Going Mainstream

In an unexpected statement on January 2, 2017 in front of Global TV’s nightly news cast, “Global National”, professor Ian Lee, MBA director, Sprott School of Business of Ottawa’s Carleton University, simply said: “I could see us [Canada] being in a recession in 2017-2018.” I had to pause for a moment and remind myslef, yet again after last week, that yes, this is, in fact, a mainstream news channel.

The thing about recessions is that you never know you’re in one until you’ve already been in a recession for at least six months. Meaning, the government has to oficially announce two consecutive quarters of negative growth – the definition of a recesion. Canada already had one negative quarter in 2016, with GDP falling by 1.6% in the second quarter, its worst performance since the Great Recession. So, for all we know, we could already be in a recesion, but will only find that out in the second half of this year!

For sure, for many Canadians, it already feels like a recession. People in Ontario have been struggling for months now with high Hydro rates, which, in many areas of the province, have increased by more that 100%! Add to that the new carbon tax, which would increase the price of gas at the pump by 4.3 cents per litre, implemented in the province as of January 1, 2017, and all the negative consequences it will bring – like higer prices of food, clothes, shoes, furniture and everything else that has to be shipped and transported by trucks – which is basically everything that we eat, wear, need and use, – and there isn’t much hope left for the regular people!

In Newfoundland and Labrador, the provincial government is hiking its income tax rates – for the second time in six months! It is the only province increasing income tax for people in all tax brackets, hitting especially hard low-income families and the middle class.

In Alberta, in addition to the stagnation that started about two years ago, and the highest unemployment rate since the 1980s, a new carbon tax comes in effect. It will also affect the price of gas, which will, in turn, lead to an increase in the price of everything else.

Add all that to Canada’s Food Price Report, published by researchers at Dalhousie University in Halifax about a month ago, which found that the average Canadian family will pay about $420 more for food in 2017, and things only start to look even more gloomy. This represents an average increase in food prices of 3% to 5%, with the highest increases forecast for meats, fish and vegetables – up to 6%. The main concerns of the report were changing weather patterns, the falling Canadian dollar, and – you guessed it – the new carbon pricing implemented by the federal Liberal government.

We are all looking to a future of rising inflation, depreciating currency, and a falling standard of living. The middle class is being wiped out. People are strugling to make ends meet. The debt to income levels of Canadians rose – from 165% in the first quarter of 2016, to 168% in the second quarter. But it is possible to have a relatively good quality of life even during tough times. We do need to change our way of thinking, and the way we live, but it is possible. This is my experience, as someone who has actually lived through an economic crash and 1080% hyperinflation, and is also the reason why I wrote “Survivng Tough Times” – to share my story, and the way we lived through the crisis.

Economic Crisis Goes Mainstream

In an unusual move, the Bank of Canada issued this week a warning to Canadians on the issue of their indebtedness. In a video entitled “The risk of household financial stress and a sharp correction in house prices”, the Senior Policy Advisor of the Bank, Joshua Slive, talks about the risks highly indebted households are facing in the case of an economic crisis and a correction of property prices.

According to Mr Slive, the large Canadian banks will be able to handle even a large drop in property prices. He does not specify, what he means by “a large drop” – 10 %, 20 %, or more? It is also interesting that, while he is worried about indebted Canadians, he does not worry about the banks that loaned them the money. It is enough to take one look at the Italian banks, in order to see what hapens when a large number of people and businesses default on their loans. Italian banks are dealing with a total of €360 billion of nonperforming loans, which is causing significant instability in the banking sector, to the extend that the third largest Italian bank, Banca Monte dei Paschi di Siena, had to be nationalized by the Italian government, in a last-ditch effort to save it. As Forbes’ John Mauldin writes: “Estimates are that Italian banks may need €40 billion just to remain solvent.” This is what happens when a large percentage of businesses and individuals stop paying their debts.

In yet another surprising article, the Canadian Broadcasting Corporation published the opinion of Scott Reid, who served as Director of Communications to the former Canadian prime minister Paul Martin. In his article, Mr Reid mentions “Four reasons to despair about 2017”. And, while one might not agree with each and every one of his points of view, the mere fact that an article called “Think 2016 was bad? 2017 will be worse” was published by a mainstream media organization shows the changing point of view of people. It is becoming more and more difficult – after Brexit, Trump and the Italian referendum, among others, – for media to ignore the dissatisfaction of ordinary people and the hopelessness of many young Canadians.

Canadians are dissatisfied with the reality of low-paying, part-time, precarious employment. One way to deal with this is having as little debt as possible, and trying to be as self-sustainable as possible. Having lived through tough times, I realized that surviving is not always about how much you make, it is about how much you spend and how much you owe. It can make the difference between living, relatively good, through the difficult periods, or struggling and even losing everything.

A New Way of Thinking

A new way of thinking about the uncertain future includes many aspects – from the way we live our lives, through how much we spend, to how much debt we carry, and even what education we, or our chidren, should get.

Let’s start in this blog post with the issue of education. It used to be that, getting a post-secondary degree – any degree – meant having significantly better chances for a stable, well-payed job. This notion came, at least in part, from the previous industrial revolutions, which replaced primarily low-skilled factory workers with machines, whereas white collar jobs were not affected as much by automation. Unfortunately, this is no longer the case.

According to a much discussed research by Oxford University, about 47% of jobs in developed countries, and up to 85% of jobs in developing countries, are threatened by automaion and robotization. The following are some of the jobs most likely to be affected by robotization during the next 10 to 20 years:

  1. Loan officers

  2. Receptionsts

  3. Paralegals and legal assistants

  4. Retail salespersons

  5. Taxi drivers

  6. Security guards

  7. Cooks, fast food

  8. Bartenders

  9. Personal financial advisers

  10. Reporters and correspondents

  11. Musicians and singers

  12. Lawyers

And the list goes on, including a total of 700 jobs and their risk of being replaced by a robot.

Did you notice all the jobs that require post-secondary, even university, education? Jobs like paralegals, loan officers and personal financial advisers, reporters and even lawyers? Most of those used to be good, well-payed jobs that people would work for their entire lives, providing for their families. These were also jobs that offered good working conditions, benefits and a pension. Well, not any more. And this is what’s different today, compared to the last industrial revolution.

Paralegals and legal advisers are already being replaced by websites such as “Rocket Lawyer” that offer free legal services in numerous countries. The job of lawyers themselves is getting replaced by computer programs capable of “reading” through enormous amounts of legal documents, in a fraction of the time this would take even a team of legal assistants or lawyers, and for a fraction of the cost. This means less work for lawyers, and more competition for the contracs available.

The job of reporters is also being done by computer software, even today (AP’s ‘robot journalists’ are writing their own stories now). And computer programs do not need sick days, vacations, benefits or a pension. This is the second wave to hit journalists and correspondents – the first one being the ongoing digitalization of newspapers and, for many, – their going out of print.

These changes are happening right before our eyes – it’s enough to go to a grocery store and see all the electronic self-serve cashier machines that were nowhere to be seen only a decade ago, replacing cashier jobs; or to visit a fast food restaurant, and take a look at all the electronic self-order machines. Yet, for some reason, most people still continue to think about life and education in the exact same way they did during the 1970s and 1980s! They still encourage their children to get a degree – any degree, at any cost, – believeing that this is the only way to get a good, well-payed job. And, as their children so often realize upon graduation, this is no loger the case.

So, before you decide on whether college and university education is good for you, or for your children, please consider first the amount of debt you will incur in the process, the chances of getting a job after graduation, and what salary that job will offer. Will you be able to live with what you have left after paying for your student debts? How long will it take you to pay off your debt – if you have a stable job, which, unfortunately, is rarely the case these days, when precarious working conditions are more often the norm. And think if it is really worth it to put so much time, efforts and money into something that might not bring you a better job or better working conditions than, say, a skilled worker.

Think twice about each and every decision you make – like, for example, is it worth it, in the long term, to pay thousands upon thousands of dollars for music lessons for your children, when one philharmonic orchestra, after another, after another are either imposing pay cuts on their musicians, or simply firing them and closing. And even a job at a philharmonic orchestra is not easy to get! If, however, you want to do this because you believe that music skills and literacy are important, that’s something else.

It is possible to have a relatively good quality of life even in our uncertain times, but the way to achieve that today, more often than not, is not the same as it was only 20-30 years ago. Times are changing, fast, and we need to keep up with them and to adapt to the changes around us in order to survive, or risk jobless indebtedness.

A Return to Blogging

It has been a while since my last blog post, and a lot has happened since then. While I have been vlogging regularly on my YouTube channel, the backyard harvest season, and back-to-school period, have taken most of my time. With winter already coming, I would like to get back to sharing my thoughts on my blog as well.

In November, in a result that surprised the world, the US elected a new president. An election result resembling the Brexit vote, the discontent of the people and their desire for change. Just days ago, a similar outcome of the Italian constitutional referendum – backlash against the status quo. It reminded me of the way people in post-comunist Eastern Europe were looking for change in the perpetual economic crisis we were living in.

The election results, time after time, showed also the way ordinary people see the world we’re living in – the “jobless recovery”, the fake unemployment statistics, the rising prices of goods and services, the decreasing quality of life. This is what people hope will change.

Personally, I did not support either Mrs Clinton or Mr Trump. It is a fact that, no matter who got elected, the situation the US would still be the same – the US national debt would still stand (as of November 11, 2016) at $19.86 trillion, there would still be more than 94,609,000 people ‘not in the labor force’, and the labor force participation rate, at 62.8%, would still have been at near-historic lows.

For Canada, these same numbers are: National debt of $633.7 billion (as of December 6, 2016), number of people ‘not in the labor force’ for 2015 was more than 10,000,000, and the labor force participation rate was at 65.8%.

The new reality of part-time, low-paying jobs and temporary work, is where people want to see change. They want to have better jobs, higher salaries, job security, benefits and pensions. This is the reason for the frustration expressed by Canadians during a young workers’ summit last month when, during a meeting with the Prime Minister Justin Trudeau, young people turned their backs on him, in order to show the Prime Minister how they feel he has turned his back on them. It was also their reaction to the remarks, a few days earlier, of the federal finance minster, Bill Morneau, that people should get accustomed to precarious working conditions – meaning multiple careers, part-time and/ or temporary work, with no benefits or pension, often times at a low or minimum wage. He simply told them to get used to ‘the new normal’, the new reality we’re living in.

Unfortunately, Mr Morneau is right: “high employee turnover and short-term contract work will continue in young (and not so young) people’s lives”, and there really isn’t much that he, or Mr Trump in the US, can do about it. At the very least, he is honest about it.

We have a number of different processes, all hapenning simultaneously, and all of them leading to the same result – more part-time jobs, less jobs available, and lower salaries. Some of the more important of these processes are: globalization, automation and robotisation, and an aging baby boomer population that will need more healthcare, pensions, etc.

In my next articles, I will try to go into more details about each and every one of these processes. I will also start laying out some simple steps that could help with the rising cost of food, living more frugally, and having a (relatively) good quality of life despite the changes that we are witnessing all around us. We need to change our way of life, and our way of thinking, in order to survive this “new normal”, survive these tough times we are facing.

And, while we are hoping that the government will, in fact, think about  ‘How do we train and retrain people as they move from job to job to job?’, and that the government will also provide the help promised by Mr Morneau as he said that “we need a way to help people through their career … something that will soften that blow”, in addition to all of that, we still need to find ways to help ourselves too.

Financial Turmoil in Europe

Over the pond, in Europe, things are not looking too good. The Brexit referendum seems to have unleashed a whole host of problems in an already unstable financial environment.

In Britain, Mark Carney, Governor of the Bank of England, gave a speech on Tuesday – his third since the referendum, – trying to reasure investors, yet again, that he will do everything that is necessary to stimulate the economy. Among the measures he had already promised to implement is an additional cut to the already low interest rate of the Bank of England, currently standing at 0.5%. The latest measure he introduced: the release of £150 billion for loans, available for households and businesses.

Despite all measures introduced by Mr Carney, the British pound is still at a historic low, the shares of British banks have fallen by a whopping 20%, and business investors are desperately trying to withdraw any and all investments they hold in British property funds – so much so that three of the most important such funds have already halted trading and have barred investors from withdrawing their cash! But do not worry, everything is under control – whatever had not already been fixed by money printing, cheap loans and low interest rates (already at zero in many countries around the world), will most certainly be fixed by a lot more money printing, cheap loans and negative interest rates, right?

European stock markets rallied on Thursday after three consecutive days of falling. They were led by companies such as Danone, which announced a major acquisition. As a result of the announced merger, worth $12.5 billion, Danon’s stock price jumped by 7% today alone. This is one of the reasons stock markets around the world have not fallen as much – mergers, acquisitions and stock buy-backs.

According to TheStreet.com, the reason for today’s rally in European stocks were the minutes of the Federal Reserve June meeting, released yesterday. The same website, in a different article, blamed the same Fed minutes for the fall of the stockmarkets in Asia. No comment needed.

Bank stocks throughout Europe, however, continue to fall, showing the main reason for concern – overleveraged banks.

Among the most important concerns is the precarious situation of the Italian banks. The values of Italian bank stocks have been plumetting for the better part of this year. Italian banks are holding enormous amounts of bad debts – non-performing loans amount to a total of about $350 billion dollars. Among fears of bank runs, bailouts and downgrades, the bad loans in Italy are about 17% of all loans – three times higher than the bad loans in the US that started the subprime mortgage crisis and the Great Recession. Italy has the third largest economy in Europe, the eight largest in the world. An Italian banking crisis will have a ripple effect aroud the world.

If this is not enough, Deutsche Bank also seems to be in trouble. The bank’s stock fell to a record low, and traders are already betting on another major plunge in the bank’s value. A week ago, even the International Monetary Fund warned about Deutsche Bank being the riskiest of all “too big to fail” banks, as most exposed to derivatives and currently trading on the markets far below what it is supposedly worth – significantly lower than other major banks aroud the world.

And even the big banks in the US now agree that there may be trouble ahead – three of them, including Goldman Sachs, are recomending that investors stay away from the stock market. And this is only the beginning, a few facts out of a myriad more, all of them “symptoms” of what is to come.

Endless QE in Europe!

In an interview with France 24 English today, the former president of the European Central Bank and current member of the Board of Directors of the Bank for International Settlements, Jean-Claude Trichet, tried to offer hope with regard of the consequences of Brexit (Former ECB chief says UK ‘shot itself in the foot’ with Brexit). Mr Trichet had been ranked by Newsweek as one of the five most powerful people today.

While Trichet tried to do his best in order to calm down people’s worries, he could not avoid mentioning the fact that he expected volatility to persist on the financial markets. He did not, however, want to specify, how long he expected this volatility to last.

Another interesting thing that Mr Trichet mentioned was the fact that the Europen Central Bank still had means of stimulating the economy, namely, providing unlimited liquidity to all banks in the Eurozone. Read that as “endless money printing”. He also talked about quantitative easing, or QE. QE usually means that the central bank is buying financial assets, such as debt (e.g., mortgage debt, car loans, etc.) and bonds, from financial institutions.

So, basically, Jean-Claude Trichet is sending a message to the markets not to worry, that the European Central Bank will keep printing money, and buying debt, meaning that said banks can keep making reckless decisions, without any consequences. And, if the worst was to happen, the European Union, has legalized, as of January 1 of this year, bail-ins. This literally means that those who keep their money in the banks, as well as the owners of bank stock and/or bonds, will pay for the bank’s recklessness in the case of need. This law has already been implemented, and not even in the poorest memebers of the EU, but in Austria, of all places, where the senior bondholders of the HETA ASSET RESOLUTION AG had to pay for the $8.5 billion hole in the balance sheet of the failed bank. Their bond holdings were reduced by a whopping 54%, and the most they can expect to recieve for their investment would be €0.46 for each euro they were owed, and even that won’t happen before the year 2020.

As I had mentioned in my previous blog posts, we are hearing more and more warnings about the volatility of the world economy and the financial markets. And even though Jean-Claude Trichet’s interview was intended to calm down the spirits and worries of the every day person, it still did not sound “calming” at all.

More Warnings About the State of the Economy

The scepticism that I expressed in my last post, entitled “Brexit!!! The Beginning of the End for the European Union”, seems to be getting more and more widespread. Just yesterday, we heard from George Soros, and he is not optimistic about the future.

Speaking in front of the European Parliament in Brussels, Soros said that the decision of the British people to leave the European Union has “unleashed” a financial crisis resembling the one in 2008, which put the beginning of what we now refer to as “The Great Recession”. (Soros says Brexit has ‘unleashed’ a financial-markets crisis) The billionaire investor had been bearish on the world economy for some time now, warning about the dangers ahead on a few occasions, most recently in January of this year.

George Soros is far from being the only one concerned about what lies ahead. We have already heard warnings on the state of the global economy – from the International Monetary Fund, through Mark Faber, to a group of 10 economists, laureats of the Nobel prize in economics, who wrote a letter to the British newspaper The Guradian, trying to warn about the economic consequences of Brexit.

In my book, I write about the “symptoms” that we can see all around us, showing us the state of the economy. It is easy for each of us to notice the rising food prices, difficulties in the housing market, the unemployment, and so on. Observing these factors, as a doctor examining his patient, we can notice the “symptoms” of the overall health of the economy. And, from what I have been seeing, and having already lived through a hyperinflationary crisis, things are not looking good. The financial system had been volatile for a while now, and, despite the recent rebound in the stock markets, the overall trend – both for the financial markets and for the economy, – seems to be a downward one.

Brexit!!! The Beginning of the End for the European Union

On June 23, 2016, the people of Great Britain shocked the world – contrary to all polls, they voted to leave the European Union. They were only the first of many countries to talk about leaving the EU, the first to do a referendum on the issue, but many more are already stating – mere hours after the results of the referendum were known – that they will follow in Britain’s footsteps.

Among the first was France, with Marine Le Pen, leader of the French National Front (Front National), saying that now it is France’s turn. She talked about the four fundamental freedoms that have been usurped by the European Union, that France needs to restore – monetary and budgetary souvereignty; economic, territorial and legislative souvereignty. Marine Le Pen stated that the UK had started a movement that will not stop. She was joined by many other political leaders from other European countries, including Hollamd, Denmark, Germany, Hungary and Italy, among others.

The effect on the stock markets around the world was swift – Japan’s Nikkei plunged by 7.9%, South Korea’s stock market fell by 4%, markets all around Europe moved to the downside – from France (down 273 points, or 6.24%), through Germany (-699 points, 6.82%), to Switzerland (down 2.6%). In fact, the British stock market’s loss was lower (3.15%) than the French stock market. Among the reasons for this: the fall of the British pound (the biggest one-day fall in more than 30 years), which is beneficial for British manufacturing; and the concerns of French manufacturers exporting to Britain (many of the French car manufacturers, such as Renault, for example, sell as mich as 20% of their vehichles in Great Britain – a trade that will now have to be renegotiated).

The North American stock markets were not spared as well – Dow Jones lost more than 610 points (3.39%), NASDAQ fell by 202 points, the Canadian stock market, the TSX, shed 239 points (-1.69%), and Canadian bond yields had their biggest fall in history.

The total losses on the world stock markets today, in one day only, were worth more than $2.08 trillion. That’s trillion with a “T”.

It is dificult to foresee the long-term consequences of the Brexit for both the European Union and the world stock markets. From what we have seen so far, however, there is little hope for improvement.

Will Your Job be Taken by a Robot?

Only a decade ago, most of us never thought we would see this in our lifetime, but here it is: According to a new study out last week, 42% of Canadian jobs will be automated in the next 10 to 20 years (42% of Canadian jobs at high risk of being affected by automation, new study suggests). We are facing the next “industrial” revolution – or maybe we should call “the rise of the machines”?

In an economy with more than 10 million “discouraged workers”, the last thing we needed is happening all around us. Companies – from Apple, which is working on automation in order to have its cell phones produced by robots, all the way to McDonald’s, planning on replacing workers with robots, – are all looking into this, or even already doing it! After all, robots do not demand minimum wages, or better working conditions. They do not need days off, vacations, sick days, benefits, insurance or pensions. Heck, if machines are manufacturing something, they do not even need to have the lights on – I have personally heard witness testimonies of entire factories with machines working in the dark, to save on electricity!

Automation also provides a way for companies to decrease their expenditures and deal with rising food prices and inflation.

According to the most recent study by the Brookfield Institute for Innovation + Entrepreneurship at Toronto’s Ryerson University, the following jobs are at giher risk of being automated in the near future: retail salesperson, administrative assistant, food counter attendant (think about the McDonald’s example above), cashier (consider the self checkout machines available in most large grocery and department stores), transport truck driver. Now, entire automated convenience stores are starting to appear all over the world!

So what are we to do in this case? What if in an already difficult economic situation, finding a job – just any job, in order to make ends meet, – is becoming nearly impossible?

Many would suggest that we all get a better education, and live the “life of the mind”. Some would say more engineers, programmers and robotics specialist will be needed. While that may be the case, it is a matter of fact that, first, not each and every person is cut out to be an engineer, or even to go to college; and, second, even if that was the case – there would only be so many jobs for people inventing, building, programming and fixing the machines and robots that will replace some of the most basic jobs that anyone – even people without a high school diploma – can do! When we even have machines building and producing other machines (Robot ‘mother’ builds babies that can evolve on their own), then what are all the rest of humanity to do?

This is one of many reasons why I tend to always repeat, how important it is to have as little debt as possible, and be as independant of the system as you can be! As I write in my book, every little thing that makes you more self-sustainable will help! Always evaluate your situation and check, what is best for yourself and your family!