“Financial nihilism” – the idea that cost of living is strangling most Americans; that upward mobility opportunity is out of reach for increasingly more people; that the American Dream is mostly a thing of the past; and that median home prices divided by median income is at a completely untenable level.
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Given how much discussion this concept sparked and how deeply it resonated with folks, this month we will unpack Financial Nihilism in more detail. To begin, it is not my term. Credit belongs to Demetri Kofinas, the host of the Hidden Forces podcast. He first introduced the concept at least 2 ½ years ago. Financial Nihilism goes hand in hand with Populism – a political approach that strives to appeal to ordinary people who feel that their concerns are disregarded by established elite groups. Populism is a topic I’ve discussed numerous times here in the past, perhaps most pointedly in my February 2021 monthly about Gamestop. The underlying drivers of Financial Nihilism and Populism are the same – this system is not working for me, so I want to try something very different (e.g., buy SHIB or vote for Trump).
How would you go about characterizing the drivers of Financial Nihilism? As previously mentioned, the chart of median home prices to median household income is the single most emblematic symbol of Financial Nihilism in my opinion.
You can see Boomers (and GenX) bought all the houses at about 4.5x annual income. Then subprime lending fueled the housing bubble and the bubble collapsed. Not long thereafter, Millennials entered the workforce and got to the point where they could start buying houses at ~5.5x annual income. Then Covid happened, the Fed printed $6 trillion, and now houses are 7.5x annual income, much higher than even the peak of the housing bubble. Simply out of reach for many millions of Americans under 40. The numbers just don’t add up.
We can drill down into this real estate situation further. Shown below is the share of total real estate value by generation in the US-
From 1989 to 2023, the total value of US real estate held by households went from $7tn to $45tn, nearly a 7x increase. In 2020, when the youngest Millennial turned 25, Millennials held 13% of total real estate value. In 2005, when the youngest GenX turned 25, their share of housing wealth was 17%. And in 1989, when the youngest Boomer turned 25, they already had 33% of total real estate value. Kind of a raw deal for the current generation of young folks, right?
King continues with a long collection of graphs on the inequality of wealth across generations and leads into a description of the motives behind the rise of online gambling, meme stocks, and cryptocurrency: Gen X and Millennials see the writing on the wall and are gambling—in various forms—because the game is rigged against them.
Financial nihilism goes hand in hand with populist politics — or what I call ‘bottom left’ and ‘bottom right’ political orientation — as King points out. Bottomers, for example, believe the system is rigged and that nearly all institutions — political, educational, financial, religious — are corrupt, and the elite that dominate society don’t give a damn about anything but their own self-interest.
Bottom lefters may agree with many left-wing positions but are just as likely to buck other progressive positions, such as a strong antipathy to immigration. To left-wing progressives, they may seem right-wing, but it’s just their populist nihilism shining through.
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Introduction: My name is Edmund Hettinger DC, I am a adventurous, colorful, gifted, determined, precious, open, colorful person who loves writing and wants to share my knowledge and understanding with you.
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