Source – mybudget360.com
– “…The biggest scam of the century revolves around the massive growth in debt…Americans have been put into a sleepwalking state where they were drunk on debt induced spending while slowly and surely our manufacturing base was removed from the country…Banks and Wall Street have not cut back and have gone the opposite direction by giving out record bonuses to their small circle of cronies. The bailouts were a large protection of the entrenched corporatocracy”
How In 40 Years Americans Shifted From A Sustainable Middle Class To A Perpetual Cycle Of Debt Serfdom
The biggest scam of the century is making a full conclusion with this deep recession. What made America the envy of the entire world, a strong and vibrant middle class, is being quickly dismantled so the new order of corporate raiders can siphon off life support from the productive economy. Nothing highlights this grand robbery more so than the current situation of our country. For eight straight months foreclosure filings have hit 300,000 or more yet banks on Wall Street are gearing up for record yearend bonuses for a job well done. The average American is seeing the culmination of 40 years of systematic leeching by the corporatocracy that culminated in the largest transfer of wealth in modern history. A bloodless coup that cemented the true nature of our current economic system.
People wonder why I focus so much on the middle class of America. This is what has been the fundamental difference between our country and other economic systems. A vibrant middle class that provided adequate housing, a decent education, and a road to sustainable wealth. This was built on the backs of a productive economy. But over the last 40 years we have seen much of the true wealth shift to Wall Street and the financial sector and that has largely eroded the value of what it means to be middle class. The new system is designed for the few and by the few. The new financial regulation being touted as the most sweeping since the Great Depression is woefully weak. Yet this is merely a reflection of the power of the corporatocracy. We really have the best government money can buy.
Critics always point to the rising household wages since the 1970s. Yet there is a big problem with this argument since this has occurred with the growth of the two income household:
If we factor out men from the data, the average American male is now making $800 less in inflation adjusted terms than his counterpart in 1970. So even though income for households has gone up the data is misleading. Americans now have a harder time keeping the pillars of middle class life intact. If we had to sum it up it would probably be:
-A good home to raise a family
-Access to a good education
-A decent retirement
The above is still accessible but it has become harder to maintain. A solid pension and healthcare used to be provided to workers by companies. That is now gone. Income is only one side of the equation of course. Where do people now spend their money? If we look at the data closely Americans now spend less in clothing, food, and appliances than their 1970s comparison group. This has much to do with cheap goods from abroad and more competition globally. So this is good right? It is but these are more of the smaller line item purchases that Americans make. The biggest purchases include housing and this is a cost that has gone up exponentially:
Housing has gone up 100% in terms of cost for the typical family. Health insurance is now up 103%. Childcare, a more daily need for two income households, has gone up as well since Americans many times need two incomes merely to break into the more elusive middle class. The items that have fallen are largely adjustable and elastic substitutes. For example, you can have macaroni and cheese instead of a steak. Everyone needs shelter whether they buy or rent.
The gigantic housing bubble has only pushed the tide out further to reveal the disappearing middle class. If we break down the data further from a study examining the middle class we find that fixed costs are now through the roof. What is more troubling is that even with two incomes, the ability to sustain a middle class lifestyle has actually gone backwards:
There is also more volatility on income security. Wall Street and the corporatocracy are running the biggest hypocrisy show in the world. Middle class families are having to adjust to the new economic reality by filing for bankruptcies, losing homes in foreclosure, and getting gouged with credit cards. Yet banks and Wall Street have not cut back and have gone the opposite direction by giving out record bonuses to their small circle of cronies. The bailouts were a large protection of the entrenched corporatocracy.
The biggest scam of the century revolves around the massive growth in debt. Let us chart this back to the 1970s:
The U.S. Treasury and Federal Reserve disconnected the U.S. dollar from any semblance of reality back in the 1970s. Since that time, Americans have been put into a sleepwalking state where they were drunk on debt induced spending while slowly and surely our manufacturing base was removed from the country. The above chart hit a climax when household debt actually surpassed annual GDP in this decade. In other words, we spent way more than we earned and nothing that operates under that system can survive for any length of time.
This has infuriated many since they thought they were part of the new economy but in reality, they were merely treading water until Wall Street and the banks had to hunker down and protect their small inner circle. Why else is the stock market up 60 percent since the March lows? Let us look at some data since March and see how well Americans have been doing:
March 2009 unemployment rate: 8.5%
December 2009 unemployment rate: 10%
The unemployment rate shot up from 8.5% to 10% in this time and consumer credit has been contracting at a record pace. At the same time, banking profits are going sky high. Take a look at some of the big banking names:
The corporatocracy seems to be doing well in this climate even though the middle class American lifestyle is being dismantled piece by painful piece. Not only is this happening but Americans now have a new line item and that is to fund the bail outs. This is happening through more clandestine channels like destroying the value of the U.S. dollar by printing inordinate amounts of money so banks can keep on giving record bonuses. The financial sector is a blood sucking vampire that is draining the real economy of its life. Why do we even need it at the current size? All mortgages are now backed by the U.S. government through the GSEs or FHA insured loans. Credit card debt and access is shrinking. Banks have curtailed lending to small business. What is the financial sector doing to justify their current profits? Pure and simple speculation on the taxpayer dime. This isn’t capitalism as Adam Smith envisioned. This is a system called a corporatocracy where the main goal is protecting the too big to fail and allowing everyone else to fail.
The average American has every right to be furious at what is occurring. The next generation might have it worse than the last. Not since the Great Depression has this occurred. Some might say that this was destined to happen. That is the storyline the corporatocracy would want you to believe so popular anger can be quelled. Yet this was a deliberate stealing from the American people. Many of these Wall Street elites have no allegiance to the country. They put money in secured tax havens in other countries and hide their money in multiple places avoiding taxes from a country that allows them to run their scam. They have allegiance to only one and that is money. They don’t care about the productive economy of the U.S. Lobbying with their fleet of lawyers is simply another business expense. And here we are, 40 years later with a disappearing middle class, booming financial stocks, millions of foreclosures, and weak financial regulation. Nothing can be clearer than where the power has shifted.
How Average Americans are Lured into Debt Servitude by Promises of Mega Wealth
Many Americans are not buying the recent stock market rally. This is being reflected in multiple polls showing negative attitudes towards the economy and Wall Street. Wall Street is so disconnected from the average American that they fail to see the 27 million unemployed and underemployed Americans that now have a harder time believing the gospel of financial engineering prosperity. Americans have a reason to be dubious regarding the recovery because jobs are the main push for most Americans. A recent study shows that over 70 percent of Americans derive their monthly income from an actual W-2 job. In other words, working is the prime mover and source of their income. Yet the financial elite have very little understanding of this concept. Why? 42 percent of financial wealth is controlled by the top 1 percent. We would need to go back to the Great Depression to see such lopsided data.
Many Americans are still struggling at the depths of this recession. We have 37 million Americans on food stamps and many wait until midnight of the last day of the month so checks can clear to buy food at Wal-Mart. Do you think these people are starring at the stock market? The overall data is much worse:
If we break the data down further we will find that 93 percent of all financial wealth is controlled by the top 10 percent of the country. That is why these people are cheering their one cent share increase while layoffs keep on improving the bottom line. But what bottom line are we talking about here? The Wall Street crowd would like you to believe that all is now good that the stock market has rallied 60+ percent. Of course they are happy because they control most of this wealth. Yet the typical American still has negative views on the economy because they actually have to work to earn a living:
The above daily poll asks Americans about their view on the health of the economy. Only 13 percent believe the economy is good or excellent. Funny how that correlates with the top 10 percent who control 93 percent of wealth. Many Americans were sold the illusion of the bubble. They were sold on the idea that their homes were worth so much more than they really were. And many used this phony wealth effect to go out and spend beyond their means. They started spending as if they were part of this elite 10 percent crowd. But once the tide rolled out, it was clear they were not. And the horribly built bailouts demonstrate who is controlling our political system. This was not the rule of a capitalist system but a corporate run government.
Just think about the bailouts and which companies were saved. We ended up bailing out the worst performing and troubled companies thus keeping alive companies that should have completely failed. Did we bail out Google? Proctor and Gamble? Of course not. These companies actually produce something that people want. Banks and especially the Wall Street kind merely keep that 42 percent happy by making sure their stock values stay high so they can keep on making money while the average Americans is sold up the river.
Yet many were brought into the easy money fold by going into massive amounts of debt. And who has most of the debt? That is right, the average American:
The bottom 90 percent have been saddled with 73 percent of all debt. In other words much of their so-called wealth is connected to debt. Debt is slavery for many especially with egregious credit card companies taking people out with absurd credit card tricks and scams. Yet the corporate propaganda machine is strong and mighty. Have you ever received an inheritance? A large one? Probably not because only 1.6% of all Americans receive an inheritance larger than $100,000. If this is the case, why in the world do politicians worry so much about the tax impacts of this? Because they want to keep the corporatocracy alive and well so their spawn can get a piece of their pie. They give the illusion to average Americans that if you only work hard enough you too can join this elusive club of cronies. The data shows otherwise.
But if we start looking at investment assets, the true wealth in the country, we start realizing why Wall Street is all giddy about the recent stock market government induced rally:
Of investment assets 90 percent of Americans own 12.2 percent. The rest goes to the top 10 percent. Welcome to the new serfdom. The bailouts that went out to the filthy rich were more about protecting their tiny corner of the world than actually making the economy better. That is why it is interesting to see companies fire people and Wall Street cheer for the increase in earnings per share. Good for the few at the expense of the many. Yet the propaganda out of Wall Street and our government is what is good for Wall Street is good for you. Just like that 1.6% inheritance issue, the vast majority of Americans won’t deal with that and their primary concern is simply a job. A job that has provided stagnant wages for a decade while the ultra wealth get richer and richer in a phony form of corporate socialism.
If you break down the data you realize that most Americans don’t have time to speculate in stock markets:
Only 34% of U.S. households make more than $65,000 per year. What is that after taxes? Let us use a state like California for example:
Now if we breakdown this data further you will realize that most of the money is consumed by cost of living necessities, not Wall Street speculation. Just to show this example let us look at a family budget for someone in California making $100,000:
Notice after running the budget we are in the hole for $1,000? That is because of many costs that typical families have. We can debate the merits of where they are spending money but the point is this; are these people really making beaucoup money from the stock market? They are putting away $12,000 a year into their 401k. As we have now found out, 8 percent a year is never guaranteed in the stock market although the corporate powers would like you to believe that so they can have other suckers to unload stocks onto.
“Yet the median household income in the U.S. is $50,000 and not $100,000. They have even less to invest.”
They are more concerned on working to have a paycheck to pay for necessities. They are more concerned about paying their house off by the time they retire and hopefully, have a little bit of retirement funds coming in. The sad fact is most Americans rely on Social Security when they retire. All those ads of unlimited golf and daily trips to Tahiti are propaganda of how Wall Street lives and they want to sell you the sizzle, and clearly not the steak. They live their lives paper pushing and sucking the life out of the productive part of our economy. The average American should now realize this since this financial crisis was primarily caused by them. They are now on a massive campaign to blame Americans for this. This is hypocrisy to the next level. Many Americans have paid for their mistake by losing their home through foreclosure. We have 300,000 foreclosure filings a month. Many have taken a hit to their overall stock portfolio (if they have one). Yet the corporate cronies have protected their horrible economy crushing debts at the taxpayer expense. Unlike you, many hold bonds on the companies and not common stock like many Americans. Bondholders have been protected at all costs during this crisis. Goldman Sachs through AIG received 100 cents on the dollar for their horrible bets. The banks have unlimited back stops thanks to taxpayers. This is how the top 1 percent rule the new feudal state.
Welcome to the 2010 serfdom. Time to wake up and restructure the system. Many people are starting to wake up to this massive scam.