The American addiction
America’s indulgence in cheap consumable goods in the last 35 years (especially the last 25 years) is the biggest and direct cause for today’s generational financial destruction. It is what the Chinese saying goes, “贪小便宜吃大亏”, being greedy for small gains leads to big losses.
From 1990 to 2025, the average worker‘s income in the US has become roughly 2.75x without inflation adjustment, and 1.5x with the official (fake) inflation adjustment. This may sound good, but consider the following reality:
- The average housing price has become 6x,
- higher education 6x,
- medical cost 6x
In essential living terms, today’s young Americans are about twice as poor (or half as rich) as their counterparts in 1990. In most areas, an average young family can no longer afford a home. In some places in California, the housing price has gone up about 10 times in the last 35 years, and young people’s average income has only gone up about two times. Thirty-five years ago, a family that earned $30,000 a year (before tax) could afford a good home in Southern California; today, that family needs to earn $300,000 a year to buy a similar home with the same comfort level. Thirty-five years ago, a $30,000 annual income meant an average household, but today, $300,000 means the top 5%. That’s how much the American dream has deteriorated.
This is generational destruction.
But why haven’t people revolted against it?
But people have not revolted against it. This is partially because of the “frog in gradually warming water” effect, partly because of a lack of education, understanding, and time memory, but more importantly because people have been pacified by cheap consumable stuff (which ironically is at the root of the problem itself), and, increasingly, by being further fed like digital pigs using cheap (almost free) digital feeds such as entertainment and frivolous information.
What has caused it?
But why have those essential costs increased much faster than the so-called inflation?
The answer:
(1) too much money has entered the system; and
(2) uneven inflation: The kind of extra money that entered the system does not just cause inflation; it causes uneven inflation.
There have been multiple causes of the creation of excessive money. But a major one may not be obvious to most people: America’s trade deficit.
This may be counterintuitive because people tend to think that the trade deficit should lead to less money, not more money.
That’s because people confuse money and wealth. Further, people ignore the hidden uneven distribution of both money and wealth.
The trade deficit has two major effects, one direct and one indirect.
The direct impact: countries like China that hold trade surpluses in US dollars buy assets in the US.
Note that the trade surplus is not spent on buying US services and goods (for otherwise, it would not be a trade surplus by definition).
Further, trade surplus held by countries like China goes almost exclusively into buying assets such as stocks and houses, because these funds do not have the knowledge and proximity necessary to make investments into regular business development in the US. And this buying pattern is what causes inflation to be uneven.
The indirect impact: the remaining portion of the trade surplus in US dollars is used to buy the US treasury notes due to the perceived stability and liquidity. This has made the US government’s life easier at any given moment in the past, but it has created a long-term detrimental effect: it has spoiled the US government into becoming addicted to debt. See The DDD (Detrimental Dollar Dominance) Syndrome.
As the asset markets (housing and stocks) become increasingly disconnected from the real economy and “outperform”, more money is drawn to the asset markets, and less goes to the reproductive investments. At the same time, both the politics and economy become more and more dependent on a bloated financial system which has become parasitic, but too symbiotic to be removed, and too big to fall.
A vicious cycle.
The effects
The vicious cycle has caused multiple effects.
The first effect: richer top 20%, poorer 80% majority; and richer old people, poorer young people, and even poorer future people.
The second effect: both the US government and its people have become addicted to debt, an unhealthy drug that is quickly becoming destructive.
The government, businesses, the financial industry, and consumers are all addicted to it.
The addiction weakens the nation and the people. It is what addiction does.
And the above two effects are in a mutual induction relationship.
But both share a common cause: Unearned Benefits, which are particularly potent in causing indulgence and destruction.
When a benefit is too easily made available, it always comes with a hidden cost. The benefit itself does not have to be detrimental. People’s tendency to indulge in quick and easy benefits guarantees that the result will gradually turn bad.
The trade war: inevitability and lies
The deficit-driven model is not sustainable. Unless the US has become so addicted that all it can do is collapse without even putting up a final fight, a trade war is inevitable.
But a trade war alone doesn’t really address the root of the problem, which is both moral and structural, while the trade war is only a reactionary political move.
The irony is that the Trump administration must tell lies to Americans in order to gain public support for the trade war, because Americans do not want to really hear and face the truth, a typical reaction and attitude of a drug addict.
One big lie that flies right in the face of Americans now is this: the trade war, even with tariffs as high as 200%, is not going to cause the price to rise.
But the honest truth is that when a tariff is as high as 50% or above, the prices of the imported goods will definitely go up. However, it’s going to be okay.
First, the prices of the cheap stuff have to rise before people can afford a home again. This is therapy. Not destruction.
Second, although tariffs are going to cause the prices of the imported goods to go up, it is not going to cause significant overall inflation. This is because the most essential items in the US economy are not imported, including energy, food, and services.
Tariffs might affect home construction costs because of the imported materials, but the price of the imported construction materials accounts for only a small portion of the overall home price. As mentioned above, the biggest factor that has caused the home prices to increase much faster than GDP in the past several decades is due to uneven inflation caused by excessive money unevenly drawn to assets like houses. The cost of the imported construction materials would also have an impact, but is much less significant. Had it not been the case, the cheaper construction materials imported from China would have caused the US home prices to fall.
Nevertheless, Americans should toughen up a little bit to consume less stuff like clothing, home decorations, and toys. It’s all in a connected scheme. It’s part of the therapy. The government and media should tell people the truth and encourage people to become a bit more disciplined to face a slightly tougher reality.
Instead, the Trump administration and its pundits argue that “price will not rise” to soothe Americans.
The government reasons that the last time the tariff was at 10%, the price barely went up, because most of that increase was absorbed by the foreign supplier and the US distributors and retailers, and therefore, the same is going to happen regardless of how high the tariffs are.
The data they use is mostly true, but the extrapolation to much higher tariffs only shows that they either intentionally lie or don’t understand these things at a very concrete business level, much less macroeconomics. A 10% tariff could be absorbed by the supplier, distributed, and retailers because it is within their profit margin. Once the tariff goes beyond 25%, the profit margin will be largely exhausted even after making very hard stretches. The rest will have to be absorbed by the consumers. No supplier, distributor, or retailer can sell at a loss for a prolonged period of time.
I don’t like tariffs, but I’m not against them in principle. When a nation faces a destructive imbalance in trade, raising tariffs becomes a necessary bitter medicine. But the patient must face the truth and must resolve to go through some tough therapy to expect some healing.
The trade war and the Devil’s destructive scissors
The trade war is another illustration of the Devil’s destructive scissors as described in “The Cosmic Information System: Across-Realm Battle for Truth“.
Americans are misled into believing that tariffs against China will save the US economy, but the reality is that the US can only save itself from this problem when its people become less indulgent, more disciplined, and more efficient.
Meanwhile, the Chinese are misled into believing that as long as they work harder under the banner of nationalism, they will be a happy people, but the reality is that without the liberty to pursue truth and spiritual freedom, one cannot be truly happy.
The destructive scissors continue to cut.
In the US, more indulgence in fake freedom is encouraged (often even required), now with “persuasion” by fear of an authoritarian society, as pictured by another country.
In China, authoritative mind control is making a full-scale comeback, now with “persuasion” by the problems of the exorbitant fake freedom manifest in the developed world, especially in America and Europe.
All these developments are manipulated by the Devil’s hands, which operate a pair of scissors. The Devil uses lies, not only spiritually but also socially and economically. That makes the scissors more potent.
China is likely to go much further in the direction of making a stronger nation by sacrificing human values.
The US is likely to go much further in the direction of becoming a weaker nation by worshiping individualism and humanism.
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