$SPX 666: 15 years later, did the devil win?

We’re not saying Neel Kashkari (current president of the Minneapolis Fed, and former assistant secretary of the Treasury under Hank Paulson) is the devil incarnate or anything like that. But he did play a key role during a devil of a time for the American economy and markets (overseeing TARP in late 2008) – and looking back 15 years to the day – one can’t help but wonder exactly whose hand might have been at work when the post-GFC S&P index finally bottomed at the infamous number of 666 on March 6th, 2009.

Why pick on Neel? Not because it’s all his fault. But because we found a number of quotes from him over the years, talking about his experiences from that time in retrospect (and we credit him for his honesty) that seem to really capture the essence of why we believe the actions taken in 2008-2009 (and then again when we doubled down on them in 2020) have led to the society & culture we have today. Neel (and perhaps you would agree) might have looked at those actions as a “necessary evil” at the time – but we emphasize the “evil” nonetheless (even if the human perpetrators didn’t intend it that way) in a way that has only become more apparent over time.

Neel might have just been an innocent bystander or well-intentioned enabler at best (we won’t bother pondering over the worst) but when you look at the way American values & behaviors have changed over the 15+ years since #QE first began in 2008 (and for all the nominal “growth” in “value” the “markets” have experienced since SPX 666) you can’t help but notice a correlation. The Devil’s work? (or at least the Devil’s market?) We’ll let you decide.

“This is not the time to worry about moral hazard or whether people are incentivized not to work.”

“if our biggest complaint is that some workers and small businesses got help when they didn’t really need it, that would be a wonderful outcome for our country.”

“In 2008, there was great anger across the country because banks had taken risks and Main Street bore the consequences.”

“Americans were angry at the thought of their “irresponsible” neighbors getting a bailout.”

Neel Kashkari


it’s very likely that we’d have to turn to the taxpayers to bail the banks out again, and I don’t think most Americans think that’s acceptable.

It’s in their financial interest and in their shareholders’ interest to grow as large as possible, and unfortunately, the risks are then borne by society.

Neel Kashkari


“The shareholders got bailed out. The boards of directors got bailed out. Management got bailed out. So from their perspective, there was no crisis

Neel Kashkari


“I think the legacy of the financial crisis is the extreme polarization that we are experiencing every day.”

“we violated core American beliefs. We have beliefs in our country that have been passed down from generation to generation. A belief in free markets. If you take a risk you get the upside but you get the downside. That’s been with us for a couple of hundred years and we violated that in ’08. And when you violate the core beliefs of a society I think it leads to great anger.

Neel Kashkari

Whatever you think of Neel, again, it wasn’t all his fault. And we’re not trying to pin the blame on him. We’re not even trying to pin the blame on any human being who lives above ground here on Earth – though we might question the temples at which some of these enablers do their dirty work (and perhaps also their worship?)

Yes, we’re suggesting bigger (and darker) forces at work.

Some even made light of the situation:

“Yes, wouldn’t that be ironic? One hell of a terrible market bottoms at the sign of the Devil. Maybe the apocalypticists are right!”

Alan Brochstein, CFA


While others take a more subtle swipe at some of the parties involved, while avoiding calling them out directly for their “evil” deeds:

“Gains since 666 have been driven in large part by the Fed’s forays into bonds.”

“Will we suffer a catastrophic return to the devil’s number? That depends on the exit from QE.”


Hint: We never exited.


We have a slightly less subtle view:

It’s been quite a run since the March 2009 low of $SPX 666.

Feel like you’ve been running with the bulls? 🐂

Or maybe with someone else? 😈

The “#value” of your portfolio might depend on your #values.

#runningwiththedevil #moralhazard #Fed #QE #ZIRP

Coincidence? We think not.

And for what it’s worth, the results are pretty clear:

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Math is universal. Income thresholds are not.

Oh, the trouble with thresholds. Whether we’re talking tax brackets, or in this case, stimulus checks. It remains to be seen how (or if) things will actually play out with all the various proposals for a “second round” of stimulus in the face of the COVID-19 pandemic, but however unlikely it may be to come to actual fruition, we just had to call out this particular proposal as described by Alison King for NBC10 News in Boston as an example of how “glossing over” the math can lead to, well, “confusing” outcomes…

NBC10 Boston: Markey Joins Sanders and Harris to Call for Plan to Provide Americans With Monthly Income During Crisis


“The Monthly Economic Support Act would provide $2,000 each month to people earning $120,000 or less annually.”

So, let’s do the math. $2,000/month over 12 months would be equal to $24,000/year. An extra $24k/year in your pocket? Not bad! Except, we noticed it would kinda stink for you if you happen to find yourself already in the income bracket between $121k-$143k.

The easy answer for some, at quick glance, would be to say “you’re really complaining about people who already make a six-figure income? They’ll be just fine!! They’re already “rich”!!! (we can debate the definition of “rich” another day…)

Clearly, there were a few “Twitter Users” who missed the point right out of the gate…

OK, we get it, it would only “stink” in very relative terms, sure, and for that reason, if you’re already at $144k+ then even we’ll suggest you should probably just be happy you’re already there.

That said…

In the particular scenario described here, the $120k salary guy nets out with $144k on the year, while the $121k salary guy nets out with – well, $121k. Maybe the second guy should have asked for a $1k pay cut first? (or at least a few more weeks vacation). Silliness.

It’s a fair enough point – no one making that much money should really be “complaining” either way, at least not yet (we’ll see where inflation takes us…) But the point is, thresholds are dangerous because they’re completely arbitrary. And when things are completely arbitrary (or worse, opportunistically targeted at well-connected friends in the case of Wall Street bailouts, or just as opportunistically targeted at impressionable would-be voters of certain political leanings in the case of “stimulus checks for the people”), there’s bound to be #moralhazard somewhere. At the least, we’re once again playing “god” with the very definition of value – and it’s not like you had a say, either way.

Sure, maybe we’re over-emphasizing the plight of the $121k salary guy who ends up with $23k less at the end of the year than his $120k salaried counterpart, because someone (his employer?) had valued his work $1k higher before all the “stimulus” talk started (or maybe he was just a better salary negotiator – and ha, isn’t payback just a bitch for him now…)

The main point here is – we don’t like when people mess with the rules in the middle of the game. The laws of math never actually change, but if we’re going to leverage those laws to help apply the concept of value in human society, we ought to be more careful about how we try to manipulate them.

Full-on #UBI – or the idea of Universal Basic Income that’s been tried in places like Finland and enthusiastically touted by the #YangGang in recent months and years – would actually be more fair if fairness is the goal. No artificial thresholds. Scale from the bottom up. Everyone gets the $2,000 check. Purely progressive. Those with the least need it the most, and therefore each citizen would experience a net-impact that’s consistently proportionate to his.her current economic standing – from the guy who manages to scrounge together $500 a month panhandling on the streets and would stand to see his fortunes rise by 400%, to the one already pulling in a cool million each month (we’re not sure how he’s doing it) and will see his fortunes rise by just a measly 0.2%. The beauty – no flawed human being had to decide where the “thresholds” were. We let the math speak for itself…

And one would think that “letting the math speak for itself” would be a solution that even modern liberals and libertarians can agree on – while perhaps continuing to debate whether the preferred implementation of said solution is via bottom-up inflation (i.e. #UBI) or programmable sound money (i.e. #Bitcoin, #Ethereum) or maybe some weird combination of the two we haven’t entirely thought of yet…

We have quoted “Tweets” from select “Twitter Users” in this story because we thought the views & opinions expressed by those “Twitter Users” were relevant to the topics being discussed in this story. These “Twitter Users” have no affiliation with the Economorals blog, and we make no assumptions about any particular political, religious, or other affiliations of any kind that may or may not be held by any of the “Twitter Users” quoted, nor the specific validity or credibility of what they say. Again, we just thought a few “Twitter Users” had some genuinely interesting words & ideas to share in the context of this story’s main themes, and since they’ve already shared those words & ideas in the public domain, we wanted to share them again here too. Because if there’s one “market” we can all hopefully agree on, it’s the “marketplace of ideas”.

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The kids are angry because they’re not getting “value” – are any of us?

We knew the college kids were angry, but as Bob Van Voris and Janet Lorin described in their recent piece for Bloomberg, we could be in for yet a whole new round of conversations about how we “value” things.

In this case, it’s the value of that good ol’ college education – you know, the one everyone’s been demanding student loan forgiveness on in recent years as it was.

But, as the kids are debating the “value” of their experiences in the face of the COVID-19 pandemic, let’s not forget, also, that a big part of the reason those tuition bills were able to reach numbers like “$70,000/year” in the first place (all the “value” they were bringing notwithstanding) – well, you guessed it – #moredebt.

Not unlike in the case of the housing market and other types of assets over the past two decades, when monetary policy remains loose, interest rates remain near zero, and #QE rules the day, it’s easy to convince everyone they should take on #moredebt because low interest rates! And “because low interest rates”, the actual price (in theory, the actual value) of the asset, good, or service, can be artificially inflated to no real end (as can the profits that flow to the owners of said assets and those who benefit from the production of said goods & services – whether they be real estate speculators, bailed-out corporations and private equity firms, or tenured college professors & administrators…)

Now, we’re all for profits flowing to those who create genuine value in our economy & society – as best determined by the exchange of value someone is willing to offer for whatever it is they want in return. The problem is, whenever the fuzzy math of #moredebt is involved, that means your values are most likely not being considered… (especially if you were someone who played by the rules, worked hard, saved money, sacrificed time, and hoped to be able to exchange the value of your hard work & sacrifice for something of genuine sound value to you in return…)

Bloomberg: Angry Undergrads Are Suing Colleges for Billions in Refunds


“To justify annual prices that can top $70,000 a year, colleges have long advertised their on-campus experience…”

What students are saying:

“I am missing out on everything that Drexel’s campus has to offer”

“…making claims of “unjust enrichment,” arguing that it’s unfair for the schools to profit from services they didn’t provide.”

“…seeking compensation for what is known as “diminution of value,” or the difference between the worth of an on-campus education and one delivered online.”

What colleges are saying:

“…called the suit against it “misdirected and wholly without merit.”

“…the crisis hasn’t changed the “core value” of its education.”

We’ll anxiously stay tuned to see how this particular series of battles plays out.

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Bad things happen. How we respond makes all the difference.

Pandemics, natural disasters, wars, recessions, depressions… sometimes we can’t easily control those things. Sometimes we have no choice but to simply let them run their course. Sometimes we wouldn’t really want to interfere with their course even if we thought we could.

When it comes to the economy, though, there’s always a choice. In this case, as Bloomberg’s Ben Steverman writes, the choice (or at least the outcome of those choices) is simple – more inequality, or less inequality.

The decisions we make that lead to one outcome or another, even if indirectly, have much to do with the things we value in the first place, or at least, the things those making the decisions happen to value. Are your values aligned with theirs?

Bloomberg: The Pandemic Will Reduce Inequality—or Make It Worse


“The Black Death took a highly stratified medieval society and turned it upside down. With 75 million dead, Europe’s wealthy landowners couldn’t find enough people to tend their fields. When peasants—the essential workers of the day—demanded higher pay, the elites of the 14th century fought back with punitive laws, forced labor, and taxes. Even so, wages for the lowliest workers soared. In rural England, they doubled.”

“For now, the most obvious guide to what comes next isn’t the Black Death, which precipitated the demise of European feudalism, but the Great Recession, which had more or less the opposite effect. In the aftermath of the 2008 financial crisis, inequality soared to heights not seen since the early part of the last century. At first, elites feared that much of their wealth would be wiped out in a globally synchronized market crash, à la 1929. But central banks pumped out trillions of dollars as monetary stimulus, markets recovered, and what followed may have been the best decade in history for the superwealthy.”

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Time to “Go Kondo” on the economy? It might depend who you ask.

It’s a good idea in theory. Few would probably argue with the idea that sometimes it just feels like our world has become needlessly complex – what, with all the technology, “always on” media, political & cultural discord, social tension, and of course things like credit default swaps and collateralized debt obligations. What happened to the simple things that the “everyman” could understand and appreciate?

The problem is, like most things in life, once you start to peel it back, you realize even “simplicity” might not be so simple. Why? Because we don’t all value the same things. For some, eliminating “stuff” and creating a more “Zen” like atmosphere at home might fit the bill. For others, it might be the choice between “having it all” (i.e. career, family, friends) vs. having to pick and choose in order to focus on one direction at the expense of another. For yet others, it could be a simple case of better time management. And for some, literally, it would be the seemingly simple question of “why can’t everyone else just agree with me and live the way I think they should? Then everything would be just fine.” (we’ll digress on that point).

Simplicity might be in the eye of the beholder. What if I wanted to keep all my stuff, but “Kondo” all the moral hazard in our system that makes it harder for responsible savers & investors to buy the stuff they want via the fruits of their hard work and prudent risk-taking?

What if the simple ability to open & operate a small business in my preferred small town so I could serve the local population with the simple goods & services they want is all I aspired to do in order to live out my values? And what if I had played by all the rules, worked hard “roughing it” at jobs I didn’t particularly care for along the way, sacrificed the expensive, exotic vacations and debt-fueled purchases of big homes and cars, all so I could save up enough money to buy myself that independent lifestyle using the simple math of profit/loss and price/earnings? (well, as long as these guys didn’t show up first…)

Never mind all the complexity associated with trying to “value” an asset in the first place in this crazy Fed-manipulated age we live in, but as a small business owner, imagine trying to navigate the process of getting a PPP loan while you’re at it? Probably not the definition of simplicity.

Nonetheless, the below is a good, relevant piece written by @andreaskluth via Bloomberg Opinion. As you read through, think about whether your economic system is “sparking joy” for you.

Bloomberg Opinion: This Pandemic Is an Opportunity For Radical Simplification


“A reset to what? My guess is that it’ll amount to a great simplification. A simplification of our lives, priorities, schedules, memberships, finances, relationships and maybe even world views. But also a simplification of our societies. That’s because one of the side effects of Covid-19 is to expose the accumulation over decades — at least in the wealthy West — of untenable complexity in the individual, political and economic spheres of life. “

“The proof includes the stunning success of somebody like Marie Kondo, a Japanese lifestyle guru who promises to help unclutter your home.  In practice, Kondo wants you to look at all your stuff and keep asking: “Does it spark joy?” Usually, the answer is no, and out it goes. “

“Collapse isn’t necessarily as scary as it sounds, by the way. It’s merely a society’s rapid and involuntary simplification. “

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Risk/Reward: Is “living” enough of a reward?

Most people will probably have a pretty visceral reaction, one way or the other, to stories like this one. Read below, and you’ll probably come to a pretty quick conclusion that Lt. Gov. Dan Patrick of Texas is either one of two things:

  • A “noble patriot” who would give his life for the liberty he holds so dear, and wants to see passed on to his children, grandchildren
  • The worst kind of “greedy capitalist pig” who probably holds shares in the businesses he’s hoping to have “get back to work”.

Being a politician, we can probably assume the answer isn’t fully one or the other, but rather, whichever constituency he happens to be playing to at the moment. In reality, the answer is also probably not so clear, but regardless of Mr. Patrick’s particular intentions, we thought this story was especially provocative and relevant to everything we talk about on this blog.

There are risks and rewards in life – and certainly, in theory, in a capitalist system. How you view those risks depends heavily on how you value the rewards, and how you value the rewards – well, it’s complicated (we think so, anyway).

Take your own view – but understand why the question is important in the first place. Whether Dan Patrick is really willing to die – we’ll reserve judgement for now.

Fort Worth Star-Telegram: ‘More important things than living,’ Texas’ Dan Patrick says in coronavirus interview


“Patrick recounted the numbers of COVID-19 related deaths in Texas — 495 as of Monday night. He stressed that “every life is valuable” but compared them to the state’s population of 29 million people. “But 500 people out of 29 million and we’re locked down, and we’re crushing the average worker. We’re crushing small business. We’re crushing the markets. We’re crushing this country”

“And what I said when I was with you that night, there are more important things than living. And that’s saving this country for my children, and my grandchildren and saving this country for all of us. And I don’t want to die, nobody wants to die, but man, we got to take some risks and get back in the game, and get this country back up and running.”

“Patrick, who recently turned 70, was referring to his comments nearly a month before when he suggested in an interview with Carlson that as a senior citizen he would be willing to risk his life “in exchange for keeping the America that all America loves for your children and grandchildren.”

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Millennials about to get first (or second?) taste of “moral hazard” in the housing market?

In some ways, it’s not unlike what transpired a decade ago in the wake of the 2008 financial crisis – prospective homebuyers, let’s say, the more “prudent” among us (whether early millennials or otherwise), frustrated by the unsustainable and seemingly irresponsible run-up in prices during the prior “bubble” years (roughly from 2003-2007) felt their time had, perhaps, finally come.

The prudent savers would finally be rewarded with opportunities to buy homes at lower prices and and reap the rewards of their sacrifice and eschewing of the “buy now or be priced out forever” mindset that had previously dominated, with all its “no money down” mortgages and “stated income” (read: no job needed) loans that had kept the party going for too long.

Even if this “inevitable decline” came at the unfortunate misfortune of those who had been duped into jumping on the “housing prices never go down” mania at it’s peak (admittedly, for every knowing “speculator” there were some who genuinely had no idea what they were getting into), it’s the way markets are supposed to work, after all – buy low, sell high; responsible savers get rewarded while irresponsible debtors get punished; the good old laws of supply & demand, finally returning to earth. As far as moral hazard goes, there’s a little on both ends of the spectrum, to be sure, but if we’re all playing by the same rules, it’s hard to argue how this should all end up, right? What’s fair is fair, no? Not so fast.

Sure, we’ve all heard the stories of the unfortunate souls who did actually lose their homes during this post-crash period, and the resulting drop in prices that occurred in some markets more so than others. We feel for those people because we don’t advocate for people getting thrown out on the street under any circumstances, really. But, the post-crash story that gets less mainstream attention is how inconsistent that outcome really was – and how many more people, for better or worse, actually got to live “mortgage free” for years in their over-leveraged homes while banks held back on foreclosures to keep supply off the market, thereby keeping prices artificially inflated, and thereby denying those “prudent savers” their opportunity to get in the game, make good on their sacrifices, and help return the market to a more sound, stable footing. No, the Fed ensured that scenario would not have an opportunity to fully play out as it stepped in with the ensuing decade’s worth of #QE and #ZIRP to ensure markets would stay inflated, and only those existing owners of assets (and in the case of those over-levered housing speculators from the 2000s, whether they ever really had any right to own their assets in the first place) would be made whole, first and foremost, while the relative value of the savings of those who “sat on the sidelines” would be devalued.

Related reads:

Imagine if baseball worked like monetary policy? (from 2017)

10 things I might have done differently if I knew paying my mortgage would become optional (from 2017)

For some “prudent” millennials with sufficient savings, over the most recent decade of the 2010s, they finally had to bite the bullet and “buy in” at whatever price the “market” was being propped up at. Life goes on, and eventually, we all need a place to live, right? In this case, they at least had to bring a down payment to the table, and prove they had the income to support the debt. In this case, at least the math made some sense – at least according to the formulas of #QE #ZIRP era math. Whether these “prudent” buyers were actually getting a good deal for their years worth of hard work & sacrifice – well, that still remains to be seen.

Enter COVID-19 and the 2020 “everything” market crash. History will eventually tell us how this all plays out, but there’s bound to be moral hazard somewhere. Will the “first wave” of “prudent” millennial buyers be made to look like fools for having capitulated and bought homes during the 2010s era of Fed-driven asset inflation if the market is actually allowed to bottom out in the 2020s after all? Or will a “second wave” of millennial buyers experience the same lesson the first-wave buyers did – that saving & waiting is its own kind of fool’s game?

Either way, it’s bound to be lesson in not-so-market economics. Exactly who the winners & losers will be in this case remains to be seen, but if we had to venture a guess, we assume no one will be playing by the rules.

In the meantime, some sentiment from a certain cadre of millennials for whom, we assume, homeownership is not yet a thing:

CCN: Housing Market Supply Shock Blindsides Crash-Crazed Millennials


CCN: These Entitled Millennials Are Cheering for a Housing Market Crash


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Emptiness into Fullness – a timely Easter metaphor?

Speaking to a (literally) empty congregation at St. Patrick’s Cathedral in New York City (but virtually streamed), Cardinal Timothy Dolan earlier today gave his annual Easter Sermon.

Drawing a metaphor between the “empty tomb” that was found by Mary Magdelene that morning and the “fullness of Christ” it allowed to emerge, and the feeling of “emptiness” we feel on this particular Easter Sunday vs. the “fullness” that Easter normally represents, Cardinal Dolan may have hit on a profound point that’s even more relevant to the moment than even he might have intended.

In other words, it’s the idea that “emptiness” might lead to “fullness” if we turn away from what has gone empty – whether it be Jesus’ dead body in the tomb, or the daily activities of our lives in the age of COVID19 (i.e. going out to eat, commuting to the office, taking that ride to the mall, taking that vacation, buying that new car, buying that second house, going to that cocktail party) – and instead, use the opportunity to fill ourselves with a new, perhaps better, sense of purpose and renewal. What may have once filled our lives with “purpose” (or at least filled the time) might well be dead (at least for now) but will we bother to take the opportunity to re-evaluate if we were filling it with the right things in the first place?

Well, we know the Federal Reserve for one hasn’t been thinking that way, for any “dead bodies” (at least the well-connected ones) always manage to be kept alive through bailouts and QE, even if just as zombies, before they ever have a chance to actually die. Therefore, much like the “market” itself, true renewal is never allowed to actually happen. A seemingly eternal cycle of propping up the dead bodies, and crowding out the new ideas and investment, has been the rule of our era.

That said, if we want to learn from the lesson of Easter – a pivotal point in history, that led to the branching off of what would become the world’s largest religion (whatever you think of the institution itself, think about the millions who follow it, and for a reason) – we might take a moment to think if this could be a turning point for our economy and society. At least, it might be a moment to take a critical look at our economic system – is it truly serving the needs, wants, morals, values of its people? Or are Jay Powell, Steve Mnuchin (and the likes of Janet Yellen, Ben Bernanke, Tim Geithner, Hank Paulson, Alan Greenspan, etc… before them), along with all the connected Wall Street insiders & lobbyists, playing the modern-day role of Pontius Pilate & the Romans in a world that’s thirsting for a better way forward?

There’s been a palpable feeling of emptiness out there, especially since 2008, when it comes to our current system of money & finance. Perhaps this Easter Sunday might mark the subtle beginning of a new way of thinking that, hundreds of years from now, we might look back on and celebrate as “year zero” of a more enlightened existence.

Hope & faith.

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Fiscal irresponsibility: If no one notices the problem, is it really a problem?

It’s a legitimate question, at this point. Time will tell if the math ultimately gives out, or if the “dismal science” of economics can continue to live up to its name in defying expectations.

Maybe it’s just another example of economic moral relativity?

If you strive to live in a world where individual responsibility is a virtue, then we might just have a problem here, folks.

If not, then who are we to judge? Only history will be able to do that.

American Institute for Economic Research: A Fate Worse than Hyperinflation


“…easy money generates risk free profits for banks and growing federal deficits. Worst of all, the public is unaware.”

“The political system has developed a formula over the last decade that has only pushed in the direction of further fiscal irresponsibility. Fiscal expansion is not followed by higher taxes or a period of fiscal constraint. It is supported by a central bank that has become increasingly effective at hiding the detrimental effects of this policy.

The pain that will accompany a shift toward responsible behavior, whether adopted voluntarily or involuntarily in the case of a day of reckoning, is only increasing.”

“A lack of awareness of the dangers faced in this game by both the public and by politicians leaves the audience of public opinion in a collective yawn in response to discussion of fiscal responsibility.”

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Maybe those old savers were on to something?

To be fair to the young adults, our policies, what with QE, ZIRP, NIRP, no-money-down-mortgages, asset price inflation, bailouts, soaring college costs, identity politics, everyones-entitled-to-a-free-lunch (but especially Wall Street), etc… kind of made debt seem “cool” over the past few decades. Wonder where they got it from? At least they’re starting to question it now…

NY Times: Young Adults, Burdened With Debt, Are Now Facing an Economic Crisis


“You compare it to the older generations — they worked up and saved money,”