My Kids and the Coming Economy

A large part of my paternal job is to keep tabs on the world and how it affects my family.  What’s happening and what must I do to adapt?  More importantly, how do I help prepare my children for the world in which they’re going to live?

Parental roles are slowly blending and blurring as fathers take on childcare and mothers expand into the workforce.  But each still has a certain impact upon the kids and for dads, it’s how the child perceives and interacts with the outside world.  Research has shown that it’s a father’s input that helps spur vocabulary and language skills in small children.  When fathers were actively involved, the language skills of a three year-old were higher at a statistically significant level.  More recent research finds that a dad’s horseplay and interaction with the kids encourages exploration and self-confidence; this helps them meet and cope with the larger outside world.  It’s simply part of our job to prepare our children to survive and be productive in the world.

But our times are significantly different than our own parents’ and the economic challenges facing our children will make ours pale in comparison.  If we’re going to prepare them, we have to first get a handle on what they’ll be facing in the future.

Through A Glass, Darkly

Stroll through the internet’s economics offerings and you’ll find the full gamut of opinions on what’s going to happen and unless you live in Chile or Norway, little of it is good.  Views are offered by economists, investment strategists and advisers, pundits and even the odd economic astrologer.  This opinion spectrum ranges from stagflation and economic depression to Japan-style deflation and hyperinflation; to paraphrase one economics blogger, we really have no idea what will happen.

The short-term future is fuzzy at best but statistics and anecdotal evidence make the long-term outcome pretty certain.

  • The quoted unemployment rate (U-3) is stuck persistently at 9.5%+ but the more realistic rate of U-6 is closer to 17%.
  • The gap between the wealthiest Americans – the top 1% of wage-earners – and the rest of the country has widened to a level not seen since the days just prior to the Great Depression.
  • We remain an oil-based economy with an oil-based infrastructure, reliant upon foreign suppliers who often don’t like us and only tolerate us for our military and our currency; unfortunately, you can’t field a military without a viable currency.
  • Precious metals prices – an indicator of fear and instability – are at global 30 year highs as individuals and institutions purchase them to counter the continuing devaluation of the dollar and other fiat currencies.
  • Within the past several weeks, 25 nations have piled into what the Brazilian Finance Minister openly calls a "currency war".  Even Peru bought $12M in order to drive up the dollar versus whatever they call their currency.
  • The US Federal Reserve System will again engage in further quantitative easing, effectively flooding the economy with even more cash and liquidity.
  • The financial markets are largely broken.  The pervasive use of High Frequency Trading has led to a market-wide "flash crash" with multiple smaller flash crashes amongst individual stocks, most notably Apple Computer.
  • Through unfettered lobbying and campaign contributions, the financial system has corrupted the legal/political system to a degree unmatched in our nation’s history.  In 2009, Senator Richard Durbin (IL) told an interviewer that on Capitol Hill, banks "own the place".  The attitude of lenders has become so cavalier regarding such bedrock legal principles of title and property-ownership that in 23 states, large mortgage lenders have suspended foreclosure proceedings when the courts found that cases brought didn’t adhere to basic principles and in some cases, the bank had no actual financial interest in the property.  Additionally, mortgage servicers hired by lenders have been caught presenting counterfeit court summons attesting that foreclosure notices were delivered when they really were not.  Most disturbingly, Reuters news recently reported that advance notes of the Federal Reserve Open Markets Committee meetings are being provided to paying clients by a former Federal Reserve System governor in advance of their release to the general public.
  • Our elected representatives are failing in their most basic duties as they leave for a pre-election recess without having yet passed an actual budget.

Viewing even only this partial statistical and anecdotal evidence, our nation really does sit on the cusp of huge structural challenges that haven’t been faced in generations.

The Long-Term Upshot

Whether it happens hard or easy in the near-term, the long-term outcome for our children is difficult.  There is real risk that the American Middle Class will be largely eliminated as the political and financial elites sacrifice the common good for their own personal power and benefit.  Our children will be marginalized to an underclass forced to subsist in lower-wage jobs with little hope of real prosperity, their earnings spent meeting the debt payments on a societal-wide model based upon the company town model of the 19th/20th century coal fields.  Their freedoms will be likewise jeopardized as those in positions of power continue to consolidate and maintain their grasp on the levers of government, twisting the screws even further as they bleed the future underclass.

So what can any typical father do?  There are no magic tricks to suddenly undo what’s been in the making for decades and it’s doubtful that there will be any call for great acts of heroism or civil disobedience.  The great changes will have to be made at the family level and it’s our job as fathers to expose them to the wider world as we do with our words, language and horseplay.


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