The economy is shaky. Inflation is at record levels, mortgage payments have trebled year on year, and the stock market is stuttering and spluttering as earnings results underwhelm.
Americans’ faith in institutions is at an all time low and this is a breeding ground for fear.
There are Survivalists, stocking up on canned goods and ammunition to weather the coming Armageddon, Preppers, high wealth individuals buying space in bunkers with private security firms, and Evangelicals, praying for it to wipe us sinners off the face of the earth so whoever can come back and start again.
There is also the rest of us, of course, and this being America, there are plenty looking to get rich out of our fear that Big Government, Big Banks and Big Money are about to royally let us and our financial futures down.
So, what does any patriotic red-blooded, thin-walleted, debt-laden American do?
Find a YouTube channel telling how you can be a millionaire in 10 years or less.
There have been Ponzi-shyster schemes like this for decades on both sides of the pond.
Opting out of your rock-solid company pension to chase imaginary wealth in complex stocks and derivatives, jacking in your solid if boring office job to join the ranks of commission only pension and insurance sales folks on the promise of mega money and a Porsche in the driveway next year, or simply adding your name to the bottom rung of a pyramid of people pledging to send $20 to everyone on a mailing list in the false expectation that somehow that money will be returned exponentially.
These false promises have always preyed on the ill-informed and desperate.
When COVID hit and everyone was sat at home worrying, these ‘self-made millionaire’ videos really started to boom. They clustered together around a concept called F.I.R.E – Financial Independence Retire Early. It took off and became the hot topic on the US financial planning circuit.
Generally, the formula for these videos is consistent. A pretty girl or a well-toned fellow would bound onto your screen, eager to tell you how they went from $0 to financial independence and retired in 10 years.
Oozing snake oil, these young entrepreneurs challenge their own lack of authenticity with opening lines like “Why if it’s so easy, isn’t everyone doing it?” – before proffering that it’s simply because they haven’t followed the 5 or 7 or 10 simple steps he or she is about to reveal if you watch this video.
At this point, the video generally switches to an ad for some financial services firm, tech start up or bitcoin exchange. Then it comes back to our caring sharing wealth maker who tells us step one to endless riches starts with “smashing the like button and subscribing so you don’t miss any future updates”.
For those looking for money making ideas, that is where most people should probably turn off the video.
The YouTube algorithm which rewards these young get-rich-quick-kids is all they really need. If the video racks up a couple of million views which is easy to do when people are desperate to find ways to make money, they get a regular cheque from sponsors and advertisers. Make a series of 10 or 20 videos on the same theme and you have indeed probably turned $0 into a handsome lump sum.
Sadly, it seems, there are plenty of people following their simplistic, unregulated advice, which largely consists of cancelling your Netflix account and buying Dodgecoin instead.
From my very unscientific research, it seems the majority of people flocking to the FIRE movement fit a certain profile. They already live in some rural or ex-suburbia part of a flyover state, are white, male, work from home, practice extreme frugality, and are probably in software sales or such.
From their videos they come across as probably ‘economic libertarians’, at that end of the political spectrum which distrusts everything and everyone. They are rich in conspiracy theories, sometimes dipping into antisemitic tropes, and have a belief there is a secret organization of grey men in grey suits who are determined to take your wealth away any day now. They also have a passion for crypto-currency as some way of not having to deal with rational economics.
Worrying as all that first appears, it is fuelled by some pretty horrific facts and stats for Americans as they approach their autumn days.
Recent research shared on CNBC revealed some 40 percent of middle-class Americans are at risk of poverty in retirement, due to depressed earnings and asset values and soaring health-care costs. Unpaid medical bills are the number one cause of bankruptcy in the US.
24% of working Americans have no retirement plan – that doesn’t mean they haven’t got a document mapping it out – it means they have no savings to replace their pay checks when they retire.
And today, more than half of working Americans are relying on Social Security for their retirement. Currently Social Security payments hover around 40% of the average salary so some dramatic reductions in wealth are expected.
As a consequence, nearly three-quarters of workers now plan to work past the retirement age of 67 – look out for septuagenarian firefighters, teachers and nurses in a town near you!
Against this backdrop, it isn’t hard to see how the promise of getting to Financial Independence Retire Early is attractive.
The politicians are aware of the risks.
Earlier this year they passed the SECURE 2.0 ACT, a raft of measures which are intended to make retirement more sustainable in the future.
There are plenty of complex elements but compulsory enrolment of employees in a 401K pension-style plan, with a rising compulsory contribution, will dramatically change the fortunes for many of today’s underfunded workers.
Equally, allowing older workers to shovel huge sums of their income into their 401K as pre-tax contribution will help those approaching the end of their working career to catch up, and pushing the minimum age at which you must start withdrawing your savings or cashing your pension to 75 years, affords the investments a better chance at the miracle of compound growth.
America is for entrepreneurs. It loves a rags-to-riches story and it is exceptionally keen on ‘get rich quick’ schemes – but gambling with your pension is a young man’s game – because when it goes wrong, as it will, you’ve still got time to crawl back to the mainstream and start rebuilding.
Hey on the bright side – you get your Netflix account back!