Our Economies are Richer than Ever — but here’s why You’re No Better Off (and how to fix it)

You don’t need to go that far back to see a time that was honestly easier. Or shall I say, cheaper!

Back in the 80s when my mum was a wee tot, dads would go to work and the mum would stay home and raise the kids. (lol, good luck doing that now with childcare costs going through the roof).

Not only that but they were able to afford 1 basic thing: a house. You didn’t need to be a hotshot banker earning a fat bonus.

40 years ago, you were able to get by without killing yourself and losing too much of your time.

Things weren’t that hard to come by.

Our previous gen didn’t have to give up as much of their time as we have to.

Inflation is the cruellest tax of all because it’s a tax on our most precious asset: time

The more prices rise, the more we’re having to work aka exchanging our time for money.

“Richness” in my mind is about working less to get more.

And our previous gen had that. They worked less and were able to buy more. Their money hadn’t yet been inflated away like ours.

They didn’t have to work 1hr to buy a dozen of eggs. (Eggflation is real: in some states, a dozen of eggs costs $7).

They worked for a few years and were able to buy a roof over their head. Not to mention being able to afford a car as well as vacations!

That was most likely all on 1 salary since loads of women were still stay-at-home.

As time went on our time became harder to come by

Fast forward a few decades and our wages as a multiple of house prices have all but blown through the roof.

Now, we need 8.8 our income to cover the cost of a home.

In plain English, it means you’re gonna have to work 8.8 years — basically a decade — shoveling away 100% of your salary in order to afford a roof over your head.

One that you actually own. Not one where you can get kicked out at any second or be faced with sky-high rent increases.

Buying a house shouldn’t be something only reserved for the richest people!

It’s something everyone deserves to be able to afford.

But with enough grit and determination, you can get on the property ladder quicker than you think.

I know it sounds totally bonkers but that’s where we’re at. It’s now become a luxury to be able to afford a roof over your head.

It’s crazy how many people I know who are in their 40s are still renting. With families.

They just want to be settled and to own this asset that’s now so out of their league.

Their alternative? Move to cheaper areas.

But who wants to live far away from their family & friends? It shouldn’t be this way.

I know people who have moved back in with their parents. Nearly half of all young adults now live at home. Myself included!

It means I’m saving on rent and am able to shovel away some cash for my deposit.

My colleague has had to live in Croydon (renting a 1-bed studio!) since her single salary cannot afford anything else.

Flat-sharing/room-sharing or moving back in with the folks is the only solution. Or moving to a cheaper area which also has its downsides.

Cheap(er) real estate is something we can only dream about

In the 70s, you only needed 4.7X income to buy a house. This has literally doubled. We’re now working twice as long to buy the same thing.

And don’t tell me houses are more efficient, fancier, bigger, better than they were 40 years ago

They’re not!

My parents put aside most of their income for 4 years. They didn’t eat out, didn’t have a TV, didn’t travel much (unless it was via train/coach!) and they didn’t have a car.

Thanks to their frugal habits, they bought an apartment.

Now that’s a dream.

Imagine how much happier we’d be if we didn’t have to work our butts off just to get on that property ladder.

Because, yes, money worries lower our happiness. Fix the money, fix our happiness. To an extent.

No wonder an entire generation is anxious and has lost hope.

When something like a house becomes a prized asset that only the high-earners can afford, you know something, somewhere has gone horribly wrong.

Thanks to greedy bankers inflation is only gonna get worse

High inflation is great for those who own assets. It’s like a magic multiplier.

It boosts the value of your asset without you having to lift a finger.

And if it’s a house then it actually lowers the value of your debt.

Inflation chews away at it without you having to lift a finger. Luxury goods also go up in price — it’s still not enough to turn us away!

Whisky, wine, jewelry, handbags – you name it, have all gone up in price.

Great for the biz and great for the people who own this stuff.

But what about those who own no assets huh?

They’re the ones paying for the inflation tax.

They’re the ones having to work longer, harder all to afford the same stuff.

It’s miserable. Though there’s one asset that can be your lifeboat (but 99.99% of people will be too scared to jump on).

Since covid, the Fed has printed ~$5 trillion. So, 1 in every 5 dollars were created in the past 3 years!

It’s mind-blowing. And these numbers are simply so big we become immune to them.

With QE (money-printing) and low rates not to mention problems on the supply side this filled the fire of inflation.

More money chasing the same amount of goods = higher prices.

It’s econ 101.

Now you can see why low rates and QE are such an addictive drug.

They give us the illusion that we’re rich.

But in reality, they mask the fact that we’re actually all getting poorer in real terms.

With the gigantic size of the budget deficit (when gov spending > tax revs) it means that govs will welcome inflation with open arms.

Inflation is like a magic pill for your debt. It wipes away its value without you having to do anything.

And with the size of our debt, we’re gonna need all the inflation we can get.

Except for the ordinary folk, it’s gonna squeeze them tighter than ever before.

This is why you have to put aside luxury clothes, spend money on stuff that gives you no value, and take on consumer debt (ahem, using those credit cards like no tomorrow).

You have to use your time to buy assets so that those assets give you more time in the future.

You cannot afford to waste your money on depreciating goods (cars!) and designer swag.

Sure, you must always treat yourself (experiences > stuff IMO since you’ll have memories forever) but don’t go overboard.

Being able to delay short-term purchases will save you in the future.

Don’t fall for materialism. There is no end to it. You’ll want more and more and more.

These biz aren’t stupid. They’ve mastered human psychology.

So, yeah, being able to stay at home with your kids while your partner goes to work is a luxury.

Being able to afford your own home (without working your butt off) is a luxury.

Being able to afford a car without having to give up insane amounts of your time is a luxury.

See where I’m going with this?

Things that were once seen as “basics” are now luxuries because our wages are not keeping up with the pace of price increases.

Jamie Dimon reckons our kids will have 3.5-day workweeks thanks to AI making our lives infinitely easier.

But I don’t buy it. I wish it were true. I have a hunch it ain’t.

Did the internet mean we work less? Nah. We’re all working more than ever before.

We just can’t take a break since we’ll break!

Build your assets.

That’s where your energy should be going.

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security or to adopt any such investment strategy. Always do your own research before you commit to any investment.

This article has also been published on my personal website: https://kneadyourdough.uk/