Rome Was Eternal, Until It Wasn't: Imperial Analogs of Decay

The tricky part is distinguishing the critical dependencies--those resources the empire literally cannot do without--from longer-term sources of decay and decline.

In response to my recent post What If There Are No Analogs for 2024?, an astute reader nominated the Roman Empire as a fitting analog. Longtime readers know I've often discussed the complex history of Western Rome's decay and collapse, for example, Why Rome Collapsed: Lessons For the Present (August 11, 2023).

Dozens of other posts on the topic stretch back to 2009: Complacency and The Will To Radical Reform (February 12, 2009)

What conclusions can we draw from recent research and the voluminous work done by previous generations of historians? Our first conclusion is simply to state the obvious: it's complicated. There was no one cause of Western Rome's decay and collapse. A multitude of factors generated feedback loops and responses over hundreds of years, some more successful than others.

Indeed, we cannot help but be struck by how many times impending collapse was staved off by brilliant leadership and policy adjustments.

Our second conclusion is to distinguish between the erosive forces of decay and critical vulnerabilities that can trigger collapse. Many authors have pointed to moral decay and fiscal over-reach as sources of Rome's eventual fall, but there were far more pressing dependencies that created potentially fatal vulnerabilities.

In the case of Western Rome, these included:

1. The depletion of the silver mines in Spain (and the eventual loss of Spain to the Visigoths). Once you run out of hard currency, your free-spending days are over. This dependence on large quantities of hard currency to fund your armed forces is a trigger for collapse.

2. Dependence on revenues from foreign trade with India, Africa and central Asia. Western Rome's income was highly asymmetric, depending heavily on import duties from foreign trade funneling through the Red Sea and the Roman ports in Egypt. Many of Rome's far-flung provinces were net drains on the imperial coffers; rather than generate income, they were costs.

3. Military defeats. In his recent book The fall of the Roman Empire: a new history of Rome and the Barbarians, historian Peter Heather persuasively argues that the Roman Empire was neither on the brink of social or moral collapse, nor fatally weakened by resource depletion. What brought it to an end were the Barbarian invasions from what is now Germany and Eastern Europe, mass tribal movements triggered by the Huns pushing into Europe from the east.

Heather argues Rome's great success eventually led to its undoing, as the small, loosely organized Barbarian tribes learned from the Romans how to form larger, more cohesive and thus more powerful social and military organizations.

We must also note Rome's many defeats at the hands of Attila the Hun. It is not coincidence that Attila died in 453 AD and the Western Roman Empire expired in 476 AD, unable to recover from the losses incurred by the Huns, Visigoths and Vandals.

4. Dependence on wheat from North Africa. Rome depended entirely on the bread-basket of North Africa to feed its populace. Once the Vandals swept through Spain and conquered North Africa, cutting off Rome's supply of wheat, the empire was doomed.

5. Incompetent leadership. Western Rome--and every empire, if we look closely--was critically dependent on competent leadership when faced with existential threats to the Empire's cohesion. We can cite Marcus Aurelius and Constantine as two examples of many.

When the leadership was weak and/or incompetent, defeats and failures piled up and things fell apart.

We must also note the role of the great tidal forces of demographics, disease, climate change, regional rivalries and cultural sclerosis in weakening the empire's ability to respond to polycrisis. The rise of the Barbarian tribes led to Rome's successful melding of diplomacy, bribes and military victories, a strategy mirrored by the Han Dynasty in China at the same time.

(I'll have more to say on the Han Dynasty this weekend for my subscribers.)

Rome successfully Romanized the Barbarian tribes, but made the critical cultural error of dismissing this new cohort of productive Roman citizenry as second-class. Romans who happened to have been born in Gaul (France) or Germany eventually chafed at these institutional biases, and this contributed to their eventual replacement of Italian leadership and its centralized control.

Indeed, the Roman Empire did not disappear in 476 AD as much as break apart into Barbarian-led pieces of what they reckoned was a continuation of the Imperial era. This complex history is ably addressed in the remarkable volume The Inheritance of Rome: Illuminating the Dark Ages 400-1000.

In some ways, the Catholic Church replaced the political-military empire as a centralized authority in western Europe. In the Eastern Roman Empire (the Byzantine Empire) that continued on for another thousand years, the Orthodox Church played a central role in its coherence.

The Antonine Plague of 165 to 180 AD weakened the empire. Generally ascribed to smallpox, the plague killed millions and decimated the Roman military. Rome recovered, but arguably never quite to the same level.

Empires tend to do just fine until climate change disrupts their agriculture and water supplies. Climate change--cooling weather across the prime agricultural regions--weakened both Rome and the Han Dynasty. Historian Kyle Harper describes the gradual and eventually consequential changes in his book The Fate of Rome: Climate, Disease, and the End of an Empire.

The centuries-long rivalry with the Persian Empire also drained the Empire of resources, even as new challenges from Barbarians and Huns demanded increasing military expenditures.

We would be remiss not to include the internal decay wrought by clinging to the alluring fantasy that past success guarantees future success, without any nasty sacrifices by the ruling elites. Historian Michael Grant addressed this in his book The Fall of the Roman Empire:

"Enmeshed in classical history, all he can do is lapse into vague sermonizing, telling the Romans, as many a moralist had told them throughout the centuries, that they must undergo an ethical regeneration and return to the simplicities and self-sacrifices of their ancestors.

There was no room at all, in these ways of thinking, for the novel, apocalyptic situation which had now arisen, a situation which needed solutions as radical as itself. His whole attitude is a complacent acceptance of things as they are, without a single new idea.

This acceptance was accompanied by greatly excessive optimism about the present and future. Even when the end was only sixty years away, and the Empire was already crumbling fast, Rutilius continued to address the spirit of Rome with the same supreme assurance.

This blind adherence to the ideas of the past ranks high among the principal causes of the downfall of Rome. If you were sufficiently lulled by these traditional fictions, there was no call to take any practical first-aid measures at all."

Roman elites in Gaul were still writing letters to one another complaining of the breakdown of everyday life right up until the system collapsed. Their letters complaining of the collapse were never delivered, it seems. Their estates continued to exist for a time at the behest of their new Barbarian overlords, but power shifted away from old elites to new elites.

Lastly, let us note how cycles tend to impact empires. Systems arise due to their superior performance, reach their limits and then become obsolete as new selective pressures are met with half-measures and doing more of what's failed.

There are many Imperial Analogs of Decay. The tricky part is distinguishing the critical dependencies--those resources the empire literally cannot do without--from longer-term sources of decay and decline.

Here is a short list of recommended reading on these topics.

The History of the Decline and Fall of the Roman Empire (abridged)

How Rome Fell: Death of a Superpower

War and Peace and War: The Rise and Fall of Empires

The Great Wave: Price Revolutions and the Rhythm of History

The Upside of Down: Catastrophe, Creativity and the Renewal of Civilization

The Grand Strategy of the Roman Empire: From the First Century CE to the Third

The Roman Empire and the Indian Ocean: Rome's Dealings with the Ancient Kingdoms of India, Africa and Arabia

End Times: Elites, Counter-Elites, and the Path of Political Disintegration

The Collapse of Complex Societies

Overshoot: The Ecological Basis of Revolutionary Change

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Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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What If There Are No Analogs for 2024?

Maybe we'll get 1893, 1929, 1968 and 2008 analogs mixed into a heady cocktail of surprises.

One of the favorite parlor games of financial analysts and seers is to make predictions about what will happen in the coming year based on past analogs such as the presidential election cycle, bond yield inversions, the Federal Reserve cutting interest rates and so on.

Part of the parlor game is to dig up obscure metrics and parse the percentage of the time that the analog worked in the past, a classic confusion of correlation and causation: just because financial condition X occurred when a team from the old AFL wins the Super Bowl doesn't mean the Super Bowl caused financial condition X to occur.

In other words, all analogs are worthless unless the claim is that the current causal conditions are so close to previous causal conditions that the current conditions will generate the same results. This test eliminates correlations that have weak causal links (for example, the presidential election cycle) and focuses our attention on claims of direct causation: for example, the Fed cutting rates will boost stocks because lowering interest rates will crank up sales and profits, which will push corporate equities' valuations higher.

I would argue that current conditions are so extreme that none of the usual analogs will play out as predicted. Consider the state of the banking sector, and the Federal Reserve's unprecedented transfer of tens of billions of dollars to banks keeping reserves at the Fed. A policy of subsidizing banks at such a scale is without precedent.

Next, consider federal debt, which is expanding at rates which are unprecedented in peacetime. Where's the analog for adding trillions in debt as inflation demands elevated bond yields cannot go back down to near-zero? There is none.



How about total debt, public and private? Is there any precedent for geometrically increasing debt as yields rise and remain above the rate of inflation? If so, when?



How about wealth inequality? We have to go back to the Gilded Age and the tumultuous era of the late 19th and early 20th century when violence soared and a bomb went off on Wall Street (1920). Who is drawing analogies to unprecedented levels of wealth and income inequality triggering social disorder on a mass scale?



Where is the analog for extreme partisan divides in the nation? How about 1968, the year of global revolution?

From an informed historical perspective, all the predictions of a steadily rising stock market and improving economy look rather laughable, given the many extremes we conveniently write off as inconsequential. Sure, extremes can become more extreme without the system blowing a gasket, but to predict that extremes will have no consequences because we have safely stable analogs firmly in hand is to tempt fate with excessive hubris.

Maybe we'll get 1893, 1929, 1968 and 2008 analogs mixed into a heady cocktail of surprises.

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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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Everyone Loves a Generous Government Until They Have to Pay For It

Not only does everyone love getting "free money" from the state, they also love hearing the fantasy repeated endlessly that debts are no problem because we will continue to "grow our way out of debt."

Governments, like individuals, can spend liberally with great generosity, or they can be frugal. Everyone receiving government money loves the state's free-spending generosity, as it is "free money" to the recipients.

But there is no such thing as truly "free money," a reality discussed by Niccolo Machiavelli in his classic work on leadership and statecraft, The Prince, published in 1516. In Machiavelli's terminology, leaders could either pursue the positive reputation of being liberal in their spending (not "liberal" in a political sense) or suffer the negative reputation of being mean, i.e. miserly, tight-fisted and frugal.

Machiavelli pointed out that the spending demanded to maintain the reputation for free-spending liberality soon exhausted the funds of the state and required the leader to levy increasingly heavy taxes on the citizenry to pay for the state's largesse.

Once we examine this necessary consequence of liberal spending, it turns out the generous government is anything but generous, as it is eventually forced to impoverish its people to support its spending.

It is the miserly leader and state that is actually generous, for it is the miserly leader / state that places a light burden on the earnings and livelihoods of the citizenry.

As Machiavelli explained, taxes and the inflation that comes with free spending both rob everyone, while the state's generosity is a political process that necessarily distributes the largesse asymmetrically:

If he is wise he ought not to fear the reputation of being mean, for in time he will come to be more considered than if liberal, seeing that with his economy his revenues are enough, that he can defend himself against all attacks, and is able to engage in enterprises without burdening his people; thus it comes to pass that he exercises liberality towards all from whom he does not take, who are numberless, and meanness towards those to whom he does not give, who are few.

The profligate state and leader fail, for their resources are squandered.

We have not seen great things done in our time except by those who have been considered mean; the rest have failed. A prince, therefore, provided that he has not to rob his subjects, that he can defend himself, that he does not become poor and abject, that he is not forced to become rapacious, ought to hold of little account a reputation for being mean, for it is one of those vices which will enable him to govern.

Machiavelli understood that the positive reputation generated by profligacy decays as quickly as solvency. Everyone loves getting "free money" from the state until the bill comes due: the decay of purchasing power (i.e. inflation), higher taxes and fees, and the ever-increasing burdens of interest to be paid on soaring state debts that squeezes out all other spending.

And there is nothing wastes so rapidly as liberality, for even whilst you exercise it you lose the power to do so, and so become either poor or despised, or else, in avoiding poverty, rapacious and hated. And a prince should guard himself, above all things, against being despised and hated; and liberality leads you to both. Therefore it is wiser to have a reputation for meanness which brings reproach without hatred, than to be compelled through seeking a reputation for liberality to incur a name for rapacity which begets reproach with hatred.



Not only does everyone love getting "free money" from the state, they also love hearing the fantasy repeated endlessly that debts are no problem because we will continue to "grow our way out of debt:" in other words, debt will forever remain painless, and so state profligacy can continue forever.

To the degree that "growth" is a function of skyrocketing debt, this fantasy feeds on itself: borrowing and spending soar and so does growth. But as the chart above shows, debt is expanding faster than the real economy. This is known as diminishing returns: to keep the illusion of "growth" alive, the debt dragon must eat its own tail.

Everyone loves a generous government until they have to pay for it--and we all eventually pay for it one way or another.

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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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The Fed's Empire of Speculation and the Echoes of 1929

Speculation has its own expiration dynamics, and they don't depend on us recognizing speculative excess for what it is. They will unravel the excesses regardless of what we think, hope or deny.

The Federal Reserve has so completely normalized speculative excess that these extremes are no longer even recognized as extremes. Rather, they are simply "the way the world works." This Empire of Speculation is complex and plays out on multiple levels.

The primary mechanism is obvious to all: whenever the equity market falters, the Fed unleashes a flood tide of liquidity, i.e. fresh currency, that rushes into the market at the top--corporations, banks and financiers--because the Fed distributes the fresh liquidity solely into the top tier of market players.

The Fed's ability to conjure up liquidity in a variety of ways appears limitless: expand its balance sheet (QE), use the reverse repo market and bank reserves, launch new lending mechanisms, and so on.

The Fed has long relied on useful fictions to mask its agenda. One useful fiction is that the Fed is independent and apolitical. Despite being risibly shopworn, this mirth-inducing fiction is still dutifully trotted out by every Fed chairperson.

Another useful fiction is that the Fed's mandate focuses on promoting stable expansion of the economy, not the equity market. This masks the reality everyone knows and acts on, which is the market isn't a reflection of the economy, it is the economy.

This is why the Fed will pursue ever greater policy extremes to rescue the market from any decline and keep equity markets lofting higher: should the market falter, the economy will quickly follow, as the animal spirits of the market are now the primary engine of expansion.

The Fed's focus on inflating the equity markets entered a new phase of policy extremes in 2008, a phase that continues to this day. The Fed's willingness to "do whatever it takes" time and again has created a feedback loop that has expanded the influence of the market on the economy and the Fed's influence on the market, to the point that the market is now keyed to every Fed utterance and policy tweak.

The market rallies on the expectation of Fed pauses, Fed easing, Fed bank bailouts, and so on: every Fed action sparks a rally because everyone knows there are no limits on what the Fed will do to further inflate the equity market.

Speculative gains are not actually growth in the sense of increasing productivity and wages in the real economy. Much of what passes for "growth" is actually profiteering by corporate monopolies, corporate trickery (stock buybacks, etc.) that boost earnings per share without actually producing more goods, services or productivity, corporations reaping the gains of offshoring production, financiers using the Fed's flood tide of liquidity to skim gains while producing nothing, and so on.

This is not the "growth" generated by the expansion of productivity, it's a phony simulacra of "growth" generated by Fed-liquidity-driven skims and scams. The only possible outcome of this dynamic is the soaring concentration of wealth and income in the hands of those with access to the Fed's flood tide: the already-super-wealthy, which is exactly what has happened.



These dynamics have drawn the entire populace into the Fed's speculative casino. With the real economy's productivity stagnating, the only way to get ahead is to join the crowd in the casino. Everybody's playing, one way or another. In the 1929 analogy, every shoeshine boy and taxi driver was working a hot new speculation. Now it's every Uber jockey and delivery driver.

As we may soon rediscover, there is a limit on Fed policy extremes in support of ever-higher equities: inflation. The more liquidity the Fed pumps into unproductive speculation, the more it stokes inflation, which is driven by expanding the flood tide of currency and credit without actually boosting productivity.

Global scarcities, either contrived or the result of depletion, are another source of inflation the Fed can't control. A third source of inflation is investment that is required by factors other than boosting productivity, such as pollution remediation, reshoring of production, etc.

All three of these sources of inflation manifested in the 1970s, as I have often explained. Now they're manifesting again.

Denial doesn't negate system dynamics or history, but denial does offer the false solace of comforting illusions. And so speculators are piling in on the Pavlovian expectations that the Fed will push interest rates back to near-zero and continue to find new ways to unleash new flood tides of liquidity: Dow 100,000, indeed.

Except this time around, inflation will bite the Fed's head off and swallow it whole. And since we as a nation have compensated for stagnant productivity by borrowing tens of trillions of dollars in public and private debt, the Volcker Fed's policy of jacking rates high enough to suppress the expansion of currency will crush debtors large and small like cockroaches.

Economists love to discuss "Fed policy errors" in the 1920s, but they rarely mention the dominance of massively excessive debt and speculation, excesses that had to be unwound one way or another. Absent policies designed to deflate these unproductive excesses slowly, a stock market crash and tsunami of defaults were the only mechanisms available to mitigate the excesses.

Feeding speculative manias and relying on their permanent expansion as the foundation of economic "growth" is folly, and the only possible outcome is the unraveling of the Empire of Speculation.

The echoes of 1929 abound, but nobody's paying attention because speculative extremes have been normalized by 15 years of Fed policies. What speculative excess? This is just normal market functioning: the Fed hints at easing and the market soars to new highs.

The 1970s offers a roadmap of how belief in the omnipotence of the Fed and the permanence of Bull Markets fades. Every rally is assumed to be a new Bull Market, and it takes repeated losses to empty out the casino.



All speculation is inherently unproductive, and we've persuaded ourselves that getting rich from speculation is an excellent substitute for increasing productivity. But this is mere rationalization, a self-serving comforting illusion that is bound to unravel, either slowly or in a spectacularly unexpected fashion.

Unfortunately, we can't act on what we no longer even recognize. Speculation has its own expiration dynamics, and they don't depend on us recognizing speculative excess for what it is. They will unravel the excesses regardless of what we think, hope or deny.

---

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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Could America Have a French-Style Revolution?

Combine all these factors and the result is a potentially volatile mixture awaiting a catalyst.

In the past, I reckoned the odds of America experiencing a revolution akin to France 1789 were low due to the different political, economic and cultural conditions present then and now, but recently I've considered the possibility that America's extremes of wealth, income and power inequality are a powder keg awaiting ignition.

By French-Style Revolution I don't mean a violent overthrow of the ruling elite as much as a tumultuous reset of how resources and power are distributed. Systems become vulnerable to such resets when they become highly asymmetrical in how they distribute resources and power, and rigid in their defense of the extreme inequality of the distribution.

The fundamental source of democracy's stability is the dynamic competition of various interests and the dynamic equilibrium of the three branches of the state each balancing the others by restraining the dominance of any one branch or interest.

But extremes of inequality undermine this stability, as the wealthiest elites now bring such a preponderance of wealth to bear that each of the three branches of the state are now beholden to the interests of the few, leaving little recourse to the many.

When the agenda and narratives have been shaped by the wealthiest elites' foundations, think tanks, corporate PR and lobbyists, then electing different representatives has little effect on the power structure.

The masses can still influence cultural / social policies by voting in a liberal or conservative slate, but the distribution of wealth, power and resources remains unchanged.

As wealth and power are concentrated into ever fewer hands, the mythology of broad-based access to prosperity has vastly expanded the pool of second-tier elites who feel entitled (via implicit promises made by the system) to their fair share of income, wealth and power--financial security and political agency, i.e. a say in public decisions.

These second-tier elites are primarily university graduates and the offspring of upper-middle class households who have been led to expect a secure slot in the upper reaches of the economy or state is a birthright gained by their education and class.

That there are no longer enough slots for this class means those left out constitute the raw material of a potently dissatisfied and potentially angry political class. Historian Peter Turchin presents this as the result of the overproduction of elites, a dynamic he has traced back to previous eras of tumultuous upheaval.

Another common factor driving the masses to revolt is when the essentials of life are no longer affordable or available in sufficient quantity. Historian David Hackett Fischer has documented the perilous impact of inflation, i.e. the collapse of the purchasing power of wages.

Yet another potentially explosive factor is the supreme confidence of the wealthiest elites that the system they rule could ever turn against them or crumble beneath their feet--in a word, a hubris as extreme as their wealth and power. The resignation of the masses and the ease of distracting them with ginned-up controversies and crises and consumerist novelties has fed elite confidence that their supremacy is unassailable.

This hubris leads to the elite becoming tone-deaf to their own excesses and the instability their excesses are generating within the system, an instability that's currently hidden beneath the resignation and distraction of the masses and the mute frustration of the second-tier elites facing lifetimes of insecurity.

Another factor is the promises made by the state generations ago can no longer be met without creating new money on a scale that guarantees destabilizing inflation. This new money is issued as Treasury bonds which are purchased for income by the wealthy, further exacerbating wealth and income inequality.

The power elite are incapable of demanding sacrifices of the wealthy as the prime directive of the status quo is to defend the current asymmetry of wealth and power. This undermines the collective consensus needed to take the collective action needed to reset the system.

Combine all these factors and the result is a potentially volatile mixture awaiting a catalyst. The confidence of the status quo that it is essentially omnipotent (the Federal Reserve will always save us, etc.) and eternal is itself a factor in the mix.

The key factor is the rigidity or flexibility of the power structure. If the structure is incapable of resetting to a more flexible, symmetric distribution of power as resources, it will come apart as pressures mount.

---

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Irony Alert: The American Dream Is Only Affordable Overseas

This is not to suggest living/working overseas is a panacea or easy--it isn't.

There is an inescapable irony in The American Dream no longer being affordable in America for the majority of Americans. Definitions vary, of course, but The American Dream typically includes being able to obtain higher education, a home, a family, a family enterprise and some measure of ownership of assets that provide financial security, on wages / salaries that are within reach of the bottom 80% of workers.

Put another way: if The American Dream is only affordable to those earning $250,000 a year and up or those who inherit family wealth, it isn't The American Dream. The American Dream is defined as starting with nothing but ambition and a willingness to work hard and save money and acquire all of the good things listed above without borrowing a small fortune for each one.

It seems taboo to say this, but The American Dream implicitly includes a goal of no debt: no student loan debt, no home mortgage, no medical debt, no debt at all: assets are owned free and clear, and college is paid out of earnings or student loans are paid off in the first few years of full-time work.

Anything less isn't The American Dream, it's a debt-dependent facsimile, a travesty of a mockery of a sham of The American Dream.

The other irony is The American Dream is still affordable overseas in what is generally referred to as developing economies or the Global South, where as a general rule, dollars go a lot farther than they do in the U.S.

Richard Bonugli and I discuss the advantages and challenges of living and working overseas in our podcast the Opportunities in Living Overseas (31:26 min).

This isn't necessarily an all-or-nothing option; many people maintain a place in the U.S. and work/live overseas for periods of time and then return home. Others are digital nomads who move from nation to nation, continuing to work remotely.

Let's start with the barriers and challenges. While the vast expansion of global travel has fostered cosmopolitan zones in most large cities where English is in common use, smaller cities and rural areas are not so easy to navigate without some local language. Yes, digital smartphone tools offer instant translation, but this only goes so far in terms of learning different cultures, adapting to a new set of expectations, etc.

Moving overseas with children and elderly parents offer obvious additional challenges: finding schools, senior care, etc. It can strain relationships, as one partner may love it all and the other longs to return home.

As the global order changes, social and political instability is on the rise. Things can get dicey very quickly, and those without local family connections may find their exposure to all sorts of unexpected risks has increased geometrically.

Learning how a new culture works is not easy, especially for those who mistake the Americanized cosmopolitan zones as representative of the entire culture. Buying a house in rural Japan for the often-referenced low price ($100, etc.) entails far more than plopping down a Benjamin and moving your stuff in. The odds of the elderly locals speaking English is low, and there is more to restoring the house than newcomers might imagine.

On the advantage side of the ledger, there are career opportunities, affordable rent and healthcare and adventure. We have 20-something friends who say they can't afford healthcare in the U.S. so they are forced to live somewhere where it is affordable, for example, Thailand.



For those with globally in-demand skills, the barriers to international work are lower now than they were in generations past. As correspondent Eric C. recently observed: "Nowadays is the greatest time in the history of the world for the high-earning, educated, individual person. If they have money or a valuable skill, they can go wherever they want and sexism, racism, nationalism, will not stop them. That is a triumph of the individual."

The developing world's hunger for infrastructure improvements offers opportunities, and there may also be an openness to new enterprises that has been worn thin in many of the developed economies.

This is not to suggest living/working overseas is a panacea or easy--it isn't. But with the cost of living so high in the developed economies, it's one option for those willing to invest in researching possibilities, accepting risks and exploring cultures quite different than that of the U.S.

the Opportunities in Living Overseas (31:26 min)

---

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $1/month patron of my work via patreon.com.

Subscribe to my Substack for free

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We Feel Poorer Because We Are Poorer: Here's Proof

Measured by the purchasing power of our wages/work, we're definitively poorer, as it takes far more hours of work now to pay rent.

Let's not over-complicate what's straightforward: we're becoming more prosperous when our wages / labor buy more goods and services, most especially the essentials of life: shelter, food, energy, utilities, transportation, higher education, healthcare and childcare. If the money we have left after paying for essentials buys more discretionary goods and services, we're getting a lagniappe of prosperity.

If the non-discretionary essentials are consuming a greater percentage of our earned income, we're becoming less prosperous, i.e. we're poorer. Those tasked with persuading us that gradual impoverishment is actually soaring prosperity have near-infinite statistical means to obscure this straightforward measure of prosperity: the purchasing power of labor / earnings.

If our hours of work buy less non-discretionary goods and services, we're getting poorer.

That software, TVs and airline fares are cheaper is meaningless because they are occasional discretionary purchases that make up a tiny slice of total cost-of-living expenditures. The status quo cheerleaders in the Ministry of Truth ignore the $5,000 annual cost increases in essentials while trumpeting the $100 decline in occasional discretionary purchases.

Your vacation cost you 100 more hours of work, but you save $50 on airfare, so it all evens out. Um, no. The only metric that is an accurate measure of prosperity and impoverishment is the purchasing power of your labor / earnings. Everything else is noise designed to obscure inconvenient reality.

Not surprisingly, it's difficult to get accurate data on past real-world costs of essentials. What we hope to find is the actual prices paid in previous years and the median wages paid at the same time.

This data gives us an accurate measure of purchasing power: how many hours of work did it take to pay rent, pay healthcare insurance, buy a used car, etc. This is the kind of table we hope to find: rents paid in Hawaii by decade.

Since I lived in Honolulu, the home of the majority of the state's population, and actively sought rental housing in the 1970s, I have knowledge of actual rents, and can attest these numbers are in the ballpark for one-bedroom apartments.



But what we often get is data that's been adjusted and is difficult to align with real-world costs. Here is the Federal Reserve database (FRED) chart of consumer price index for urban rents of primary residences, which includes everything from a shabby studio to a sprawling single-family dwelling. That range makes it less useful than specific numbers for specific classes of rentals.



The data isn't actual rents paid; it's an index that's arbitrarily set to 100 in summer of 1983. So if your rent was $500 a month in 1983, the equivalent rent today is 4X or $2,000. Additionally, data can be scarce, as in this chart of rents in the high-cost San Francisco Bay Area, where I also sought rental housing, so I know actual rent costs from the 1980s on.



Fortunately, there's a simple chart of median weekly earnings for full-time workers from the first quarter of 1979 to the third quarter of 2023. Now we can make very simple calculations of purchasing power: how many hours of median-wage work does it take to pay typical market-rate rent? To keep it simple, let's use total earnings before taxes and deductions.

In 1978, I was earning $300/week as a young construction worker, somewhat above the median wage of $232/week. I rented a small, shabby studio for $135/month, well below the average rent of $250/month for a one-bedroom apartment. The market included a wide range of rental options, a big difference from most markets now, in which there are few low-rent options even in not-so-great parts of town.

It took 18 hours of work to pay my rent for the month-- 2.25 days. If I'd paid the average rent of $250/month, it wuld have taken 33 hours of work, or about 4 days to pay rent. If I'd earned the median wage and paid the average rent, it would have taken 43 hours or about a week's earning to pay the rent.



In 1987 in the high-cost S.F. Bay Area, my wage had dropped to around the median and I was paying $550/month for a one-bedroom apartment, about $100/month below market. It took 55 hours of work to pay the rent, or about 7 days of work.

Let's stop for a moment and ask where in the urban U.S. can a 22-year old worker making a bit more than median wage pay the monthly rent with 2.25 days of work? In today's economy, my wages in 1978 would translate into about $1,400 per week ($35/hour), and so my studio apartment's rent would be 2.25 X my daily wage of $280 or $630/month.

I submit there are few urban areas in the U.S. where young workers with average skills and experience can earn $35/hour and rent a studio apartment for $630/month. What we find instead are rents in places like the S.F. Bay Area that average $2,400/month for one-bedroom apartments, so those earning the median weekly wage of $1,120 must devote 2.15 weeks of their earnings to pay rent--11 days of work, more than half their earnings.

This is almost triple the days of work needed to pay rent with a median wage in the 1970s, and 60% more than the days of work needed to pay rent in the 1980s and 1990s in two of the most expensive urban areas of the nation.

Measured by the purchasing power of our wages/work, we're definitively poorer, as it takes far more hours of work now to pay rent. If you need more evidence, consider the cost of decent (no deductable) healthcare insurance. In 1986, I paid $50/month each for my young, single employees, about 5.5 hours of the median wage.

Now the equivalent insurance costs a minimum of $350/month, or 12.5 hours of median-wage work--more than double the hours needed in the 1980s. I could go on, but isn't rent and healthcare insurance enough to prove that the vast majority of wage earners are far poorer now than they were two generations ago?

Over time, the decline in the purchasing power of our wages has stripped away hundreds of thousands of dollars of value over a lifetime of work. Rents that now require twice as many hours as they did 40 years ago mean we've lost $1,000 a month of purchasing power. Sorry, pundits, saving $20 on a low-quality toy or $100 on a low-quality TV or $100 on airfare doesn't offset $100,000 lost each decade in the purchasing power of work/wages.

Let's not overlook the fact that the median wage is skewed by high-wage workers. Tens of millions of workers earn far less than $1,120/week for full-time work.

Yes, the top 5% (which includes all the economists and pundits claiming we're all doing great) that collects almost 25% of all income are doing just fine, as their incomes have more than kept up with the staggering declines in purchasing power. The next 5% collect 15% of all income, so they're doing fine, too.

The rest of us--not so much. The bottom 80% of us earn less than half of all income. Factor in the dramatic loss of purchasing power, and we're much poorer.

---

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $1/month patron of my work via patreon.com.

Subscribe to my Substack for free

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Never Mind Bogus Measures of Inflation--Purchasing Power Is What Counts, and It's Decaying

If your earnings rose by 34% from January 2020 to October 2023, congratulations, the purchasing power of your labor kept pace with higher costs.

Official measures of inflation are a long-running tragi-comedy: comedic in the transparency of the distortions, and tragic in the consequences: what will you believe is true--the statistics or your lying eyes?

The basic gimmick of distortion is to underweight whatever is eating away at the purchasing power of earnings and highlight the trivial items that are getting cheaper due to declines in quality and globalization. So your rent went up by $200 a month, or $2,400 a year, but since TVs dropped $40 and toys dropped $20, inflation is only 3%. So stop feeling poorer, everything's great! Inflation is dropping!

You see the problem: the scale of spending on essentials such as shelter, healthcare, childcare, etc. is far greater than the trivial "lower in price" items. If 95% of your essential spending is rising in cost, trivial declines in the 5% of discretionary spending do not offset the gargantuan declines in purchasing power.

The chart below reflects this distortion. Essential expenses that cost thousands of dollars annually consume far more of our earnings now, and these vast declines in the purchasing power of earnings are not offset by the occasional purchase of cheaper TVs.

The only accurate measure of increasing or decreasing costs is purchasing power: how many hours of work does it take to pay housing, taxes, college tuition, healthcare, childcare, etc., then and now. The official measures of inflation use gimmicks to distort the staggering drop in purchasing power by claiming the quality of stuff has increased by extraordinary leaps and bounds. So the fact that cars have rear cameras offsets the fact that it takes far more hours of labor to buy a car now than it did a few decades ago.



Measuring purchasing power eliminates these distortions, which is why nobody measures purchasing power: once we calculate costs in terms of hours worked, we recognize that a much larger percentage of our labor / earnings is devoted to paying for essentials. Simply put, we're getting less value for our labor.

Pundits tend to overlook the fundamental sources of declining purchasing power. These include:

1. Decay of gains reaped from globalization. Stripped of corporate PR, globalization is the ruthless exploitation of as-yet unexploited pools of cheap labor and resources. This exploitation yields enormous gains at first and then these gains decay as wages rise and the easy-to-get resources are depleted.

The dependence on foreign sources for essentials has also been revealed as a national security threat, and so the catch-phrase is "de-risking," which means developing multiple sources of essentials.

2. Capital demanding higher returns due to soaring global risks. In the conventional view, the Federal Reserve chair waves a magic wand and lowers interest rates at will. It's not quite that simple. All new debt--for example, Treasury bonds--must be purchased by capital, and if risks are rising, capital demands a risk premium to offset the known unknowns and the unknown unknowns, both of which are proliferating rapidly.

If capital is no longer willing to accept low yields, yields have to rise regardless of central bank policy, and this drags interest rates higher. Yes, central banks can create currency out of thin air and use this free money to buy Treasury bonds, but ballooning the money supply has its own consequences:

3. Increasing the money supply to maintain a sclerotic, unproductive status quo generates a decline in the purchasing power of currency. Throwing trillions of new units of currency around doesn't magically mean production of goods and services increase, or the quality and quantity of items increase. It just diminishes the value of existing units of currency.

4. Global scarcities crimp supply, pushing up costs. Humans have a very high opinion of themselves, but fundamentally we're like rabbits (or rats, if you prefer) let loose on an island without predators. Like rabbits, we proliferate and consume more per rabbit until the resources have been consumed. Then we wonder why scarcities arise. But AI, blah-blah-blah. AI can't restore depleted soil or reverse droughts.

5. Soaring entitlements must be paid for with higher taxes. Promises made decades ago in different conditions require ever greater resources must be skimmed by governments. Creating money out of thin air isn't a solution (see #3 above) and so the government must collect a greater share of income and wealth. The more taxes we pay, the less we have left to spend on essentials and discretionary purchases.

This is a global dynamic. Global entitlements and debt are both soaring.



If your earnings rose by 34% from January 2020 to October 2023, congratulations, the purchasing power of your labor kept pace with higher costs. All of us who aren't earning 34% more since January 2020 have lost ground, i.e. purchasing power: it now takes more hours of work to buy groceries and everything else we need.



The official measure of inflation since January 2020 is up 19%. Whether that actually maps the decline in our purchasing power can be massaged--stop believing your lying eyes!--but what can't be massaged away is the reality that costs are rising for structural reasons that aren't going away.

---

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $1/month patron of my work via patreon.com.

Subscribe to my Substack for free

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Thank you, Larry D. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your steadfast support and readership.		Thank you, Hector G. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Thank you, Steven P. ($50), for your wondrously generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Glenn W. ($50), for your superbly generous contribution to this site -- I am greatly honored by your support and readership.

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What Happens When Millions of Renters Can No Longer Afford High Rents and Move Back Home?

What's no longer affordable is eventually jettisoned, including high-rent homes and apartments.

Recency bias can stretch back 40 years. It's been over 40 years since the U.S. experienced a deep recession (what I call a "real recession") which is characterized by elevated inflation, interest rates, yields, unemployment, defaults and bankruptcies, none of which can be reversed with air-drops of "free money" because higher inflation, rates and yields all limit central bank money-printing and fiscal "free money" via deficit spending.

Without air-drops of trillions of dollars in "free money", the accumulated excesses of the economy have to sort themselves out the hard way via defaults, bankruptcies, insolvencies, layoffs, tightening credit and reduced spending / consumption.

The last time this burn-off of excesses could no longer be pushed forward occurred in 1980-82, the deepest downturn since the Great Depression in the 1930s.

Few remember the 1980-82 recession and even fewer think a recurrence is even possible. The dead-wood of excesses never get burned off, they just pile higher with each central bank-fiscal bailout / "free money" air-drop.

Recessions which burn off excesses act as catalysts for profound social, financial and economic shifts. Up until the recession, everyone assumes the current situation is permanent and forever. This is the equivalent of assuming a forest piled high with deadwood will never catch fire.

By way of example, consider that the relatively mild dot-com implosion recession of 2000-02 led to 100,000 residents of the San Francisco Bay Area moving away to lower-cost climes because once the layoffs swept through the dot-com bloat, people could not longer afford the high rents and cost of living.

The situation now is far more precarious due to the spread of high rents from a few urban areas to virtually the entire nation. As a percentage of net income, the cost of living is far higher than it was in 2000. Given the nonsensical manner that official inflation is calculated (owners equivalent rent, etc.), statistics are untrustworthy measures. An apples-to-apples comparison of purchasing power of wages (i.e. what percentage of wages are required to pay rent, taxes, insurance, transportation, childcare, food, etc.) is the only accurate measure of the true impact of the soaring cost of living.

The consensus holds that soaring rents are the result of housing shortages. In other words, the demand for housing is so strong that landlords can charge a premium.

So what happens to the strong demand for rentals and the resulting high rents if millions of renters vacate their apartments and move in with other single households? This is precisely what happens in a recession in which millions lose their jobs (or have to take lower income work) and can no longer afford stratospheric rents.

The facts suggest that instead of a housing shortage, we have an enormous quantity of housing that is currently occupied by a single person--housing that could easily accommodate more occupants per unit.

To sketch out how this scenario could play out, let's start with some basic facts about America's housing stock, the age of the occupants and the number of single-person households. As shown on this chart courtesy of the Federal Reserve, there are 145 million housing units in the U.S.--85 million owner-occupied homes and condos, 44 million rented houses and apartments, and 16 million unoccupied dwellings, of which 7+ million are 2nd homes / vacation homes. The remaining 9 million unoccupied homes may be in the process of being sold or held off the market for various reasons, or they're abandoned or no longer livable due to obsolescence / decay.

Some might be in areas with poor employment options and so the demand is so low that vacancies abound.



Next, let's look at home ownership and one-person households. According to the Census Bureau, "There were 37.9 million one-person households, 29% of all U.S. households in 2022. In 1960, single-person households represented only 13% of all households." (There are about 132 million households in the U.S.)

The Census Bureau also reported that 46.4% of U.S. adults are single--that's 117.6 million unmarried Americans, "nearly every other adult aged 18 and over. This includes those who are divorced or widowed as well as those who have never married."

About 11% of these one-person households are 65 years of age or older, or about 14.65 million people.



As you might imagine, homeownership is skewed to the older population, as is ownership of homes without mortgages, i.e. homes owned free and clear.

According to How the Demographics Are Shaping the Housing Market, older Americans own almost 90% of all housing: The Silent Generation (78 and older) own 11.3%, Boomers (ages 59 to 77) own 43.5% and Gen X (ages 43 to 58) owns 32.5%. Some break the Boomers into Boomers I (ages 69-77) and Boomers II (ages 59-68).

We can thus project that a substantial percentage of individuals age 65 and older who are living alone own their own homes. It required a much more modest down payment and percentage of net income two or three generations ago to buy a home, and so it's to be expected that home ownership is heavily skewed to older cohorts who were able to buy homes with median incomes--something that is no longer possible for younger generations.

There are also millions of renters who live alone, some percentage of which might be persuaded to accept a roommate if their income/finances deteriorate. Of the 38 million single-person households, how many would welcome another occupant? Retirees with limited income might welcome paying boarders, and single elderly might offer free housing to younger family members in exchange for help around the house.

How many Boomers and Gen X homeowners would accept an adult child or grandchild moving home if financial conditions preclude any other option? Anecdotally, I see grandparents hosting a grandchild and her daughter, and I hear accounts of an elderly parent deeding their home to the adult child who moves back home and cares for the parent.

It is well within the realm of possibility that 10% of the roughly 40 million single-person households could vacate their rentals and move in with another single or into a large empty-nest home owned by parents are grandparents should conditions change and high rents are no longer affordable. That would leave about 10% of the rental housing unoccupied.

Although few believe it is even in the realm of possibility, in an extended downturn, 8 million renters could vacate now-unaffordable rentals for far more affordable living spaces in other dwellings. As the saying goes, necessity is the mother of invention, which in the case of unaffordable rents in a recession, we can modify to necessity is the mother of radically downsizing expenses by any means available.

Rents tend to be as stubborn as human nature. Landlords tend to believe the highest rent ever received is the "fair price," and the majority will cling to this fantasy long past the point at which a rational assessment of market conditions would suggest a 25% reduction in asking rent would be the bare minimum to snare a tenant for the vacant flat.

If the 2000-02 recession is any guide, tenants will cling on to their over-priced flats as long as possible, hoping for a job offer that never transpires. The unemployment checks aren't enough, temp gigs dry up, savings run out and the inability to continue paying sky-high rent finally forces a move.

No one remembers what happens in a deep, prolonged recession, and we're long overdue to find out what happens. What's no longer affordable is eventually jettisoned, including high-rent homes and apartments.

---

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $1/month patron of my work via patreon.com.

Subscribe to my Substack for free

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