Despite the problems in housing, most Americans are feeling pretty fat and sassy. Living standards – at least, by the standard measures – have soared in the last 30 years. In 1950, the average new house had only 1,100 square feet of space. Now, the average is about 2,400 – even though families are much smaller.
Back in the ’50s, the typical family had one car. Now, driveways are full of them. And, of course, there are Jacuzzis, air-conditioning, big-screen TVs and all the other paraphernalia of modern life.
From the Eisenhower years to the Bush years, however, the U.S. economy was maturing. In the ’50s, manufacturing profits were half the nation’s total. Americans made things and sold them to foreigners. This left us with money to spend, to lend, to save...or to invest. Typically, we saved nearly 10% of what we earned in the Eisenhower/Kennedy era.
But then came a New Era. The government spent too much in the ’60s...and rather than own up and make good, the Nixon Administration defaulted. "The dollar is our currency, but your problem," said Treasury Secretary John Connolly in a moment of spellbinding honesty. Then, in 1972, the U.S. trade deficit stood at $3 billion. Now, the trade deficit is nearly $3 billion every day!
It did not pay to save dollars in the ’70s. Inflation rose to 12% and made them worth less and less. In a way, this was the lesson Americans most wanted to learn. They didn’t want to save anyway...they wanted to spend. Gradually, the economy shifted from one in which people made things at a profit to one in which they bought things at a loss. Households turned their attention to how to consume what they had never earned. And business turned its attention to how make money by selling to people who didn’t have any money. The economy itself shifted to one based on manufacturing to one that emphasized marketing...and then finance. Factories rusted. But shopping malls and housing development proliferated.
In 1967, Henry Kaufman was made a full partner at Solomon Bros. in New York. His compensation: $25,000 a year.
Forty years later, the average hedge fund manager is taking home nearly $24,000 PER WEEK.
Meanwhile, the average U.S. weekly pay is only $841 – a figure that is about the same, in real terms, as the average 30 years ago.