The American middle class is dying.
In 2015, it dipped below 50% of the population for the first time since data collection started on the issue. It’s now an official minority group.
Meanwhile, nearly half of Americans don’t have enough money to cover a surprise $400 expense. Many are living paycheck to paycheck, with little to no cushion. And US homes are less affordable than they’ve been in decades—possibly ever.
I’ll tell you why this is happening and how to secure your spot among the “haves” in a moment. But first, let’s take a look at the America that was.
The Largest Middle Class in World History
The late 1950s was the golden age of America’s middle class.
This isn’t nostalgia talking. The US really did have robust Main Streets and thriving small businesses.
Back then, the US produced three-quarters of the world’s cars and airplanes. Americans produced most of the world’s steel and built the majority of the world’s skyscrapers.
Plus, the US stock market held the bulk of the world’s total stock market capitalization.
All this productivity gave the average American an unusually high standard of living.
Around then, a husband could support his family on an average income. He and his wife likely owned their own home, as well as their car. They had multiple children—and didn’t think much of the cost of having more. Plus, they had money to save.
The Bleak Situation Today
Compare that to the average family today. Both spouses likely have to work—whether they want to or not—just to afford the same basic lifestyle.
Plus, it now costs well over $200,000 to raise a child, on average. And that doesn’t even include college costs. Back in 1960, it cost roughly $25,000.
This hefty price tag is one of the main reasons middle-class families are having fewer children… or none at all.
In short, the average American’s standard of living has taken a huge hit over the past generation or so.
For example, consider a typical high school teacher’s financial situation.
In 1959, the median annual salary for a US high school teacher was $5,276, according to the Department of Labor. Meanwhile, the median US home value was $9,627, according to the US Census Bureau.
That means a teacher made enough money each year to cover over half of the price of a middle-class home. Or 55%, to be exact.
Take a minute and think… How does your annual income compare to the price of your home? I’d bet many people make far less than 55%.
Today, the median purchase price of a US home is $241,700. To maintain the 1959 income-to-home price ratio, a high school teacher would need to make $132,935 annually.
Of course, the average high school teacher doesn’t make nearly that much. Not even close. He or she makes around $48,290—not even enough to cover 20% of the median home price.
It All Went Downhill in the ’70s
The high school teacher’s predicament is only one example of a broader trend. In fact, circumstances are actually worse than it lets on.
As you can see in the chart below, the median income-to-home price ratio is just a hair above 20% now. That’s a historical low. And a far cry from the 58% peak it hit in the late 1950s.
Notice that the downtrend starts in the 1970s. More on that shortly…
Clearly, home prices have risen much faster than income levels since 1970.
Of course, Americans haven’t stopped buying homes. They’ve just gone deeper and deeper into debt to do it.
That debt has helped hide the slump in the average person’s standard of living.
Cars are another large expense for Americans. Debt has helped camouflage a big price increase there, too.
Americans are now over $1.1 trillion in auto debt. This figure has skyrocketed 2,954% since 1971.
Americans have also racked up more than $1 trillion in credit card debt. This debt explosion also started in the early 1970s. Credit card debt is up 14,281% since 1971.
The Work-Wage Divide
So why are Americans going deeper and deeper into debt?
It’s simple: The cost of living for the average middle-class family has risen dramatically faster than its income.
Since 1971, there’s been a dramatic—and growing—split between work and wages. As the next chart shows, the average person’s real wages have more or less stagnated since the early 1970s.
With higher expenses and stagnating wages, people have made up the difference with debt.
What Happened in 1971?
It’s no coincidence that things started to go downhill for the middle class in the early 1970s. August 15, 1971, to be exact.
This is the date President Nixon killed the last remnants of the gold standard.
Since then, the dollar has been a pure fiat currency. This allows the Fed to print as many dollars as it pleases. And—without the gold standard to hold it in check—it does precisely that.
The US money supply has exploded 2,075% since 1971.
There’s an important lesson here: The Federal Reserve is the mortal enemy of the common man.
The Four Tenets of Lasting Wealth
Eventually, I think this trend will lead to a genuine crisis. And it won’t be pretty.
In the meantime, a perfect storm of economic pressures will further hollow out the middle class. Tens of millions of Americans will be kicked down the ladder.
As Doug Casey puts it:
Most middle-class people will end up joining either the upper or lower classes—mostly the lower—and that’ll be a moral disaster for the country.
If you want to firmly establish yourself in the world of the “rich,” I recommend…
Owning hard assets like physical gold, silver, and certain real estate.
Owning the highest-quality, elite businesses. Think businesses with attractive dividend yields—even better if you buy these standouts at bargain prices.
Holding some speculative investments. They can leapfrog your wealth. Think transformative technologies like cryptocurrency and blockchain, the booming cannabis industry, and natural resource stocks.
Protecting what you’ve earned from taxation, inflation, and other forms of confiscation by internationalizing your assets. This reduces the threat any one particular government poses to your wealth.
These are the four tenets of lasting wealth. They’re time-tested strategies. And they work.
Editor, The Casey Report
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