The Long Way Home 10.21.22

There are three online journalists that I read all the time.

Heather Cox Richardson is a professor of history at Boston College. She writes Letters from an American. Six days a week she produces an email that considers the day's events and puts them in the context of history--recent and past. It is a dose of sanity that reminds me that the notion we, as a people, were once living in political harmony, and we all were achieving the American Dream, is a myth. 

Aaron “Minnesota” Brown is an Iron Ranger, journalist, author, and community college instructor. He’s a brilliant writer and his weekly blog often gives a historical perspective on the life and politics of northeastern Minnesota. Plus he inspires me to be a better writer and person.

Ben Sprague is a community banker and local government official in Maine. His weekly email that arrives each Sunday tackles everything from inflation and mortgage rates to major financial trends, global and domestic. His recent newsletter about mortgage rates and wealth disparity sets me off today.

Faithful readers may recall that prior to establishing an Employee Stock Ownership Trust for our company I heard the statement that the concentration of capital in America, in the late 1980s, was more severe than the same indicator in pre-revolutionary Russia. More than 40 years later, that concentration has worsened.

Ben’s newsletter reports that 10% of Americans own 89% of publicly traded stocks and bonds. Yet every major news outlet, television, and radio, breathlessly reports the results of the major stock market indexes each day as if those have any impact on our daily life of we, the 90% who are lightly invested, if at all, in the stock markets.

He also reports that in 2020 the average CEO was paid 351 times the compensation of the median (half below, half above) worker. In the glorious and harmonious (tongue-in-cheek) days of 1965, the average CEO took home just 21 times the median worker.

These two trends are significant if you want to understand the current political situation in our country as Ben Sprague and I want to.

In this newsletter, Ben also addressed the current housing situation. 

In December 2020, the long-term mortgage rate was 2.66%. It was somewhere between 3% and 4% until 2022 which helped feed a red-hot real estate market. Then the Fed decided to raise interest rates to cool the housing market and combat the subsequent inflation. 

At the end of 2021, the 30-year fixed rate was 3.11% and it is now pushing 7%, more than double. To put that in perspective, Ben writes that the median home price in Maine is $350,000, similar to the median home price here in Cook County. 

The principal and interest payment on that median-priced home at 3% interest are $1,476. With interest rates at 7%, that same monthly payment of $1,476 would only be able to afford a home valued at $222,000. In less than a year, the average homebuyer in Maine (and everywhere else) has lost 36% of purchasing power.

So the capital disparity worsens.