Middle class

US Household Debt Hits Record $13.5 Trillion As Delinquencies Hit 6 Year High

Posted by Lou on November 18, 2018
Posted in: Debt slavery, Economic collapse, Economics, Middle class, student loans, USA. Leave a comment

US household debt hit a new record high, rising by $219 billion (1.6%) to $13.512 trillion in Q3 of 2018, the biggest jump since 2016. Total household debt is now $837 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008.

Source: US Household Debt Hits Record $13.5 Trillion As Delinquencies Hit 6 Year High | Zero Hedge

Total household debt hit a new record high, rising by $219 billion (1.6%) to $13.512 trillion in Q3 of 2018, according to the NY Fed’s latest household debt report, the biggest jump since 2016. It was also the 17th consecutive quarter with an increase in household debt, and the total is now $837 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008. Overall household debt is now 21.2% above the post-financial-crisis trough reached during the second quarter of 2013.

Mortgage balances—the largest component of household debt—rose by $141 billion during the third quarter, to $9.14 trillion. Credit card debt rose by $15 billion to $844 billion; auto loan debt increased by $27 billion in the quarter to $1.265 trillion and student loan debt hit a record high of $1.442 trillion, an increase of $37 billion in Q3.

The sheer impact of the recent trade war has pushed gold beyond its capabilities as a safe-haven asset. The metal has been thrashed in the first half of the year but has rallying potential thanks to number of market factors.

Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $4 billion, to $432 billion. The median credit score of newly originating mortgage borrowers was roughly unchanged, at 760.

Mortgage originations edged up to $445 billion in the second quarter, from $437 billion in the second quarter. Meanwhile, mortgage delinquencies were unchanged improve, with 1.1% of mortgage balances 90 or more days delinquent in the third quarter, same as the second quarter.

Most newly originated mortgages continued went to borrowers with the highest credit scores, with 58% of new mortgages borrowed by consumers with a 760 credit score or higher.

The median credit score of newly originating borrowers was mostly unchanged; the median credit score among newly originating mortgage borrowers was 758, suggesting that with half of all mortgages going to individuals with high credit scores, mortgages remain tight by historical standards. For auto loan originators, the distribution was flat, and individuals with subprime scores received a substantial share of newly originated auto loans.

In what will come as a surprise to nobody, outstanding student loans rose $37BN to a new all time high of $1.44 trillion as of Sept 30. It should also come as no surprise – or maybe it will to the Fed – that student loan delinquencies remain stubbornly above 10%, a level they hit 6 years ago and have failed to move in either direction since…

… while flows of student debt into serious delinquency – of 90 or more days – spiked in Q3, rising to 9.1% in the third quarter from 8.6% in the previous quarter, according to data from the Federal Reserve Bank of New York.

The third quarter marked an unexpected reversal after a period of improvement for student debt, which totaled $1.4 trillion. Such delinquency flows have been rising on auto debt since 2012 and on credit card debt since last year, which has raised a red flag for economists.

Auto loan balances also hit an all time high, as they continued their six-year upward trend, increasing by $9 billion in the quarter, to $1.24 trillion. Meanwhile, credit card balances rose by $14 billion, or 1.7%, after a seasonal decline in the first quarter, to $829 billion.

Despite rising interest rates, credit card delinquency rates eased slightly, with 7.9% of balances 90 or more days delinquent as of June 30, versus 8.0% at March 31. The share of consumers with an account in collections fell 23.4% between the third quarter of 2017 and the second quarter of 2018, from 12.3% to 9.4%, due to changes in reporting requirements of collections agencies.

Auto loan balances also hit an all time high, as they continued their six-year upward trend, increasing by $27 billion in the quarter, to $1.265 trillion. Meanwhile, credit card balances rose by $15 billion to $844 billion. In line with rising interest rates, credit card delinquency rates rose modestly, with 4.9% of balances 90 or more days delinquent as of Sept 30, versus 4.8% in Q2.

Overall, as of September 30, 4.7% of outstanding debt was in some stage of delinquency, an uptick from 4.5% in the second quarter and the largest in 7 years. Of the $638 billion of debt that is delinquent, $415 billion is seriously delinquent (at least 90 days late or “severely derogatory”). This increase was primarily due to the above mentioned increase in the flow into delinquency for student loan balances during the third quarter of 2018. The flow into 90+ day delinquency for credit card balances has been rising for the last year and remained elevated since then compared to its recent history, while the flow into 90+ day delinquency for auto loan balances has been slowly trending upward since 2012. About 215,000 consumers had a bankruptcy notation added to their credit reports in 2018Q3, slightly higher than in the same quarter of last year. New bankruptcy notations have been at historically low levels since 2016.

This quarter, for the first time, the Fed also broke down consumer debt by age group, and found that debt balances remain more concentrated among older borrowers. The shift over the past decade is due to at least three major forces. First, demographics have changed with large cohorts of baby boomers entering into retirement. Second, demand for credit has shifted, along with changing preferences and borrowing needs following the Great Recession. Finally, the supply of credit has changed: mortgage lending has been tight, while auto loans and credit cards have been more widely available.

In addition to an overall increase in the share of debt held by older borrowers, there has been a noticeable shift in the composition of debt held by different age groups. Student and auto loan debt represent the majority of debt for borrowers under thirty, while housing-related debt makes up the vast majority of debt owned by borrowers over sixty.

Confirming what many know, namely that Millennial borrowers are screwed, the Ny Fed writes that older borrowers have longer credit histories with more borrowing experience, as well as higher and typically steadier incomes; “thus, they often have higher credit scores and are safer bets for lenders.” Tighter mortgage underwriting during the years following the Great Recession has limited mortgage borrowing by younger and less creditworthy borrowers; meanwhile, student loan balances – and as most know “student” loans are usually used for anything but tuition – and participation rose dramatically and credit standards loosened for auto loans and credit cards. Consequently, there has been a relative shift toward non-housing balances among younger borrowers, while housing balances moved to the older and more creditworthy borrowers with lower delinquency rates and better performance overall.

And since this is a circular Catch 22, absent an overhaul of how credit is apportioned by age group, Millennials and other young borrowers will keep getting squeezed out of the credit market resulting in a decline in loan demand – and supply – which is slow at first and then very fast.

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Doug Casey Shines A Light On “The Sociopaths In Politics”

Posted by Lou on November 6, 2018
Posted in: Elites, Government, Middle class, Politics, Psychopathology. Leave a comment

“They’re chronic, extremely convincing, and even enthusiastic liars, who often believe their own lies. That means they aren’t easy to spot, because normal people naturally assume another person is telling the truth…”

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There are at least seven characteristics that define a sociopath, although I’m sure the list could be extended:

  1. Sociopaths completely lack a conscience or any capacity for real regret about hurting people. Although they pretend the opposite.
  2. Sociopaths put their own desires and wants on a totally different level from those of other people. Their wants are incommensurate. They truly believe their ends justify their means. Although they pretend the opposite.
  3. Sociopaths consider themselves superior to everyone else, because they aren’t burdened by the emotions and ethics others have – they’re above all that. They’re arrogant. Although they pretend the opposite.
  4. Sociopaths never accept the slightest responsibility for anything that goes wrong, even though they’re responsible for almost everything that goes wrong. You’ll never hear a sincere apology from them.
  5. Sociopaths have a lopsided notion of property rights. What’s theirs is theirs, and what’s yours is theirs too. They therefore defend currency inflation and taxation as good things.
  6. Sociopaths usually pick the wrong target to attack. If they lose their wallet, they kick the dog. If 16 Saudis fly planes into buildings, they attack Afghanistan.
  7. Sociopaths traffic in disturbing news, they love to pass on destructive rumors, and they’ll falsify information to damage others.

They’re chronic, extremely convincing, and even enthusiastic liars, who often believe their own lies. That means they aren’t easy to spot, because normal people naturally assume another person is telling the truth. They rarely have handlebar mustaches or chortle like Snidely Whiplash. Instead, they cultivate a social veneer or a mask of sanity that diverts suspicion. You can rely on them to be “politically correct” in public. How could a congressman or senator who avidly supports charities possibly be a bad guy? How could someone who claims he just wants the U.S. to defend some foreign minority possibly be a warmonger? They’re expert at using facades to disguise reality, and they feel no guilt about it.

Political elites are primarily, and sometimes exclusively, composed of sociopaths. It’s not just that they aren’t normal human beings. They’re barely even human, a separate subspecies, differentiated by their psychological qualities. A normal human can mate with them spiritually and psychologically about as fruitfully as a modern human could mate physically with a Neanderthal; it can be done, but the results will be problematical.

It’s a serious problem when a society becomes highly politicized, as is now the case in the U.S. and Europe. In normal times, a sociopath stays under the radar. Perhaps he’ll commit a common crime when he thinks he can get away with it, but social mores keep him reined in. However, once the government changes its emphasis from protecting citizens from force to initiating force with laws and taxes, those social mores break down. Peer pressure, social approbation, and moral opprobrium, the forces that keep a healthy society orderly, are replaced by regulations enforced by cops and funded by taxes. Sociopaths sense this, start coming out of the woodwork, and are drawn to the State and its bureaucracies and regulatory agencies, where they can get licensed and paid to do what they’ve always wanted to do.

It’s very simple, really. There are two ways people can relate to each other: Voluntarily or coercively. The government is pure coercion, and sociopaths are drawn to its power and force.

The majority of Americans will accept the situation for two reasons: One, Americans no longer have a philosophical anchor to keep them from being washed up onto the rocks. They no longer have any real core beliefs, and most of their opinions – e.g., “We need national health care,” “Our brave troops should fight evil over there so we don’t have to fight it over here,” “The rich should pay their fair share” – are just reactive and comforting catch phrases. The whole point of spin doctors is to produce comforting sound bites that elude testing against reality. And, two, Americans have become very pampered and comfortable. They’re a nation of overfed losers, mooches, and coasters who like the status quo without wondering how long it can possibly last.

It’s nonsensical to blather about the Land of the Free and Home of the Brave when reality TV and Walmart riots are much closer to the truth. The rot originates with the majority of Americans, of course. Political candidates spend millions to take their pulse in surveys and polls, and then just regurgitate what the public wants to hear. Once a country buys into the idea that a privileged lifestyle is everyone’s minimum due, that country is on the decline. Lobbying and taxation are replacing production and innovation as the national modus vivendi, but parasites can’t sustain prosperity. The wealth that took centuries to produce is not inexhaustible.

All political candidates decry the upper classes, say they love what’s left of the middle class, and want to shower more goodies on the proletariat.

People generally fall into an economic class because of their psychology and their values. Each of the three classes has a characteristic psychological profile.

For the lower class, it’s apathy. They have nothing, they’re ground down, and they don’t really care. They’re not in the game, and they aren’t going to do anything; they’re resigned to their fate.

For the upper class, it’s greed and arrogance. They have everything, and they think they deserve it – whether they do or not.

The middle class, at least in today’s world, is run by fear. Fear that they’re only a paycheck away from falling into the lower class. Fear that they can’t pay their debts or borrow more. Fear that they don’t have a realistic prospect of improving themselves.

The problem is that fear is a negative, dangerous, and potentially explosive emotion. It can easily morph into anger and violence. Exactly where it will lead is unpredictable, but it’s not a good place. One thing that exacerbates the situation is that all three classes now rely on the government, albeit in different ways. Bankruptcy of the government will affect them all drastically.

With sociopaths in charge, we could very well see the Milgram experiment reenacted on a national scale. In the experiment, you may recall, researchers asked members of the public to torture subjects (who, unbeknownst to the people being recruited, were paid actors) with electric shocks, all the way up to what they believed were lethal doses. Most of them did as asked, after being assured that it was “all right” and “necessary” by men in authority. The men in authority today are mostly sociopaths.

WHAT TO DO

One practical issue worth thinking about is how you, as someone with libertarian values, will manage in a future increasingly controlled by sociopaths. My guess is poorly, unless you take action to insulate yourself. That’s because of the way nature programs almost all creatures. They all share an imperative: Survive! People obviously want to do that as individuals. And as families. In fact, they want all the groups that they’re members of to survive, simply because (everything else being equal) it should help them to survive as individuals. So individual Marines want the Marine Corps to survive. Individual Rotarians want the Rotary Club to prosper. Individual Catholics leap to the defense of the Church of Rome.

That’s why individual Germans during World War II were, as has been asserted, “willing executioners” – they were supporting the Reich for the same reasons the Marines, the Rotarians, and the Catholics support their groups. Except more so, because the Reich was under attack from all sides. So, of course, they followed orders and turned in the neighbors who seemed less than enthusiastic. Failing to support the Reich, even if they knew it had some rather unsavory aspects, seemed an invitation to invading armies to come and rape their daughters, steal their property, and probably kill them. So, of course, the Germans closed ranks around their leaders, even though everyone at the top was a sociopath. You can expect Americans to do the same.

Americans have done so before, when the country was far less degraded. During the War Between the States, even saying something against the war was a criminal offense. The same was true during World War I. In World War II, the Japanese were all put in concentration camps on groundless, racially based suspicions of disloyalty. During the early years of the Cold War, McCarthyism was rampant. The examples are legion among humans, and the U.S. was never an exception. It’s even true among chickens. If a bird has a feather out of place, the others will peck at it, eventually killing it. That out-of-place feather is deemed a badge of otherness announcing that its owner isn’t part of the group. Chicken Autre must die.

Libertarians, who tend to be more intelligent, better informed, and very definitely more independent than average, are going to be in a touchy situation as the crisis deepens. Most aren’t going to buy into the groupthink that inevitably accompanies war and other major crises. As such, they’ll be seen as unreliable, even traitors. As Bush said, “If you’re not with us, you’re against us.” And, he might have added, “The Constitution be damned.” But, of course, that document is no longer even given lip service; it’s now a completely dead letter.

It’s very hard for an individualist to keep his mouth shut when he sees these things going on. But he’d better keep quiet, as even H.L. Mencken wisely did during both world wars. In today’s world, just keeping quiet won’t be enough; the national security state has an extensive, and growing, file on everybody. They believe they know exactly what your beliefs, desires, fears, and associations are, or may be. What we’re now facing is likely to be more dangerous than past crises. If you’re wise, you’ll relocate someplace where you’re something of an outsider and, by virtue of that fact, are allowed a measure of eccentric opinion. That’s why I spend an increasing amount of time in Latin America. In truth, however, security is going to be hard to find anywhere in the years to come. The most you can hope for is to tilt the odds in your favor.

The best way to do that is by diversifying your assets internationally. Allocating your wealth into real assets. Linking up with sound, like-minded people who share your values. And staying alert for the high-potential speculations that inevitably arise during chaotic times.

62 Percent Of All U.S. Jobs Do Not Pay Enough To Support A Middle Class Life

Posted by Lou on November 5, 2018
Posted in: Economic collapse, Economics, Homelessness, Labor, Middle class, Wealth inequality. Leave a comment
“…and I discovered that 50 percent of all American workers make less than $30,533 a year.  But that is just above poverty level.  In fact, the federal poverty level for a family of five is currently $29,420.  Most families are just barely scraping by from month to month, and most U.S. workers are just one major setback away from falling out of the middle class.”
With permission from
endoftheamericandream.com
by
Oct 20, 2018

We just got more evidence that the middle class in America is rapidly disappearing.  According to a shocking new study that was just released, 62 percent of all jobs in the United States do not pay enough to support a middle class life.  That means that “the American Dream” is truly out of reach for most of the country at this point.  Today, Americans are working harder than ever but the cost of living continues to rise much faster than our paychecks are increasing.  Earlier this month, I went and looked at the latest numbers from the Social Security Administration, and I discovered that 50 percent of all American workers make less than $30,533 a year.  But that is just above poverty level.  In fact, the federal poverty level for a family of five is currently $29,420.  Most families are just barely scraping by from month to month, and most U.S. workers are just one major setback away from falling out of the middle class.

It wasn’t always this way.  At one time, America had the strongest and most vibrant middle class in the history of the world.  But now this latest study has discovered that “it’s only 38 percent of people who get the middle class life or better”…

When wages are weighed against the cost of living in the largest 204 metropolitan regions across the nation, 62 percent of jobs don’t pay enough for a dual-income household with children to meet the definition of ‘middle class,’ according to a new ‘Opportunity Index‘ developed by Third Way, a Washington D.C.-based think tank.

‘We were shocked to find out it’s only 38 percent of people who get the middle class life or better,’ said Ryan Bhandari, a policy advisor for Third Way, in an interview with DailyMail.com.

It is no wonder why so many people are shopping at Wal-Mart and the Dollar Tree these days.

For many Americans, those are the literally the only places they can afford to shop.

When I was growing up, it seemed like literally everyone else around me was “middle class”, but now those days are long gone.  Here is a breakdown of some more of the numbers from this latest study…

  • 30 percent of jobs are “hardship jobs,” meaning they don’t allow a single adult to make ends meet.
  • 32 percent are “living wage” jobs, enough to get by but not to take vacations, save for retirement or live in a moderately priced home.
  • 23 percent are middle-class jobs, allowing for dining out, modest vacations and putting some money away for retirement.
  • 15 percent are “professional jobs,” paving the way for a more comfortable life that includes more elaborate vacations and entertainment and a more expensive home.

It sure must be nice to be in that top 15 percent.

And the definition of a “middle class income” changes based on where you live.  As the study noted, it is much cheaper to live a middle class lifestyle in the middle of the country than it is to do so on the west coast.  The following comes from the Daily Mail…

For example, a worker in San Francisco – one of the most expensive housing markets in the country – must make a minimum of $82,142 to achieve a middle class lifestyle.

By comparison, workers in Cedar Rapids, Iowa can achieve middle class status in a job paying $40,046 or more per year.

So many of us have run ourselves ragged doing the things that we were “supposed” to do, and we assumed that a middle class life would be the reward at the end of the trail.

Unfortunately, that reward has never materialized for millions of hard working Americans.  USA Today profiled one of those deeply frustrated workers in a recent article…

Esther Akutekha, who lives in Brooklyn, New York, has a good job as a public relations specialist that pays more than $50,000 a year.

But because of the $1,440 a month rent on her studio apartment in the Prospect-Lefferts Gardens neighborhood, she never takes vacations, dines out just once a month and scrapes together dinner leftovers for lunch the next day.

Can you identify with Esther?

I sure can.

It can be soul crushing to work as hard as you can only to realize that your goals are now farther away than ever.  At this point, Esther is not even sure that she will ever be able to afford to have children…

“I’m frustrated with the fact that I’m not going to be able to save anything because my rent is so high,” says Akutekha, who says she’s 30ish. “I don’t even know if I can afford” to have children.

We have been told that the economy has been “booming” in recent years, but the truth is that it has only been booming for people at the very top of the pyramid.

For most Americans it is as if the last recession never ended, and things just seem to keep getting worse…

“There’s an opportunity crisis in the country,” says Jim Kessler, vice president of policy for Third Way and editor of the report. “It explains some of the economic uneasiness and, frankly, the political uneasiness” even amid the most robust U.S. economy and labor market since before the Great Recession of 2007 to 2009. But is the economy robust? Or are we being fed a line by the mainstream media? The middle class is not thriving, and increased regulations and higher taxes make it difficult for people to branch out on their own and create their own business.

We definitely need to make it much, much easier for people to start small businesses, and this is something that I have written about extensively.  Small business creation has traditionally been one of the primary vehicles for upward mobility in our nation, but right now the rate of small business creation is hovering near all-time lows.  We desperately need to get that turned around if we ever want to have any hope of restoring vitality to our middle class.

If we continue on the path that we are on, we are going to continue to get the same results.  Tonight, more than half a million Americans are homeless, and the ranks of the poor are growing with each passing day.

America needs a strong middle class, but currently our middle class is disintegrating at a startling pace.

If we are not able to reverse this trend, what is the future going to look like for our society?

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

Middle Class Destroyed: 50 Percent Of All American Workers Make Less Than $30,533 A Year

Posted by Lou on October 23, 2018
Posted in: Economic collapse, Economics, Housing, Middle class, Poverty, Wealth inequality. 1 Comment

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With permission from

The middle class in America has been declining for decades, and we continue to get even more evidence of the catastrophic damage that has already been done.  According to the Social Security Administration, the median yearly wage in the United States is just $30,533 at this point.  That means 50 percent of all American workers make at least that much per year, but that also means that 50 percent of all American workers make that much or less per year.  When you divide $30,533 by 12, you get a median monthly wage of just over $2,500.  But of course nobody can provide a middle class standard of living for a family of four for just $2,500 a month, and we will discuss this further below.  So in most households at least two people are working, and in many cases multiple jobs are being taken on by a single individual in a desperate attempt to make ends meet.  The American people are working harder than ever, and yet the middle class just continues to erode.

The deeper we dig into the numbers provided by the Social Security Administration, the more depressing they become.  Here are just a few examples from their official website…

-34 percent of all American workers made less than $20,000 last year.

-48 percent of all American workers made less than $30,000 last year.

-59 percent of all American workers made less than $40,000 last year.

-68 percent of all American workers made less than $50,000 last year.

At this moment, the federal poverty level for a family of five is $29,420, and yet about half the workers in the entire country don’t even make that much on a yearly basis.

So can someone please explain to me again why people are saying that the economy is “doing well”?

Many will point to how well the stock market has been doing, but the stock market has not been an accurate barometer for the overall economy in a very, very long time.

And the stock market has already fallen nearly 1,500 points since the beginning of the month.  The bull market appears to be over and the bears are licking their chops.

No matter who has been in the White House, and no matter which political party has controlled Congress, the U.S. middle class has been systematically eviscerated year after year.  Many that used to be thriving may still even call themselves “middle class”, but that doesn’t make it true.

You would think that someone making “the median income” in a country as wealthy as the United States would be doing quite well.  But the truth is that $2,500 a month won’t get you very far these days.

First of all, your family is going to need somewhere to live.  Especially on the east and west coasts, it is really hard to find something habitable for under $1,000 a month in 2018.  If you live in the middle of the country or in a rural area, housing prices are significantly cheaper.  But for the vast majority of us, let’s assume a minimum of $1,000 a month for housing costs.

Secondly, you will also need to pay your utility bills and other home-related expenses.  These costs include power, water, phone, television, Internet, etc.  I will be extremely conservative and estimate that this total will be about $300 a month.

Thirdly, each income earner will need a vehicle in order to get to work.  In this example we will assume one income earner and a car payment of just $200 a month.

So now we are already up to $1,500 a month.  The money is running out fast.

Next, insurance bills will have to be paid.  Health insurance premiums have gotten ridiculously expensive in recent years, and many family plans are now well over $1,000 a month.  But for this example let’s assume a health insurance payment of just $450 a month and a car insurance payment of just $50 a month.

Of course your family will have to eat, and I don’t know anyone that can feed a family of four for just $500 a month, but let’s go with that number.

So now we have already spent the entire $2,500, and we don’t have a single penny left over for anything else.

But wait, we didn’t even account for taxes yet.  When you deduct taxes, our fictional family of four is well into the red every month and will need plenty of government assistance.

This is life in America today, and it isn’t pretty.

In his most recent article, Charles Hugh Smith estimated that an income of at least $106,000 is required to maintain a middle class lifestyle in America today.  That estimate may be a bit high, but not by too much.

Yes, there is a very limited sliver of the population that has been doing well in recent years, but most of the country continues to barely scrape by from month to month.  Out in California, Silicon Valley has generated quite a few millionaires, but the state also has the highest poverty in the entire nation.  For every Silicon Valley millionaire, there are thousands upon thousands of poor people living in towns such as Huron, California…

Nearly 40 percent of Huron residents — and almost half of all children — live below the poverty line, according to the U.S. Census Bureau. That’s more than double the statewide rate of 19 percent reported last month, which is the highest in the U.S. The national average is 12.3 percent.

“We’re in the Appalachians of the West,” Mayor Rey Leon said. “I don’t think enough urgency is being taken to resolve a problem that has existed for way too long.”

Multiple families and boarders pack rundown homes, only about a quarter of residents have high school diplomas and most lack adequate health care in an area plagued with diabetes and high asthma rates in one the nation’s most polluted air basins.

One recent study found that the gap between the wealthy and the poor is the largest that it has been since the 1920s, and America’s once thriving middle class is evaporating right in front of our eyes.

We could have made much different choices as a society, but we didn’t, and now we are going to have a great price to pay for our foolishness…

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

Three Cheers for the Decline of the Middle Class

Posted by Lou on September 19, 2018
Posted in: Economic collapse, Economics, Fossil fuels, Global uprising, Marxism, Middle class, Political science, Poverty. 1 Comment

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http://www.counterpunch.org

With permission from

by Chris Wright

September 19, 2018

I realize how callous the title of this article sounds. The decline of the middle class, which in recent years has been the subject of innumerable articles, books, and movies, entails a terrible increase in human suffering. The descent of millions of families into relative poverty is beyond appalling, not something to be celebrated. However, the perverse Marxist in me feels obliged to complicate the narrative of unmitigated catastrophe that dominates all journalism and scholarship on the subject. The fact is that “progress,” like God, works in mysterious ways, paradoxical, inhuman, “dialectically contradictory” ways. And the contemporary decline of the West’s middle class may end up advancing, indirectly, the banner of humanity that the Left has carried forward since the seventeenth century.

The point isn’t a very deep one. Consider the gravest threat that life on Earth faces today: global warming. This threat cannot be adequately confronted in the framework of capitalism, which indeed is responsible for it; it demands a systemic socio-politico-economic revolution, a social transformation that systematically elevates human needs above capital’s needs. The most realistic way to address the crisis is for governments to nationalize the fossil fuel industry and shift resources toward renewable energy, which should be produced and distributed through publicly owned utilities. And this is only the beginning. There have to be international reforestation and afforestation programs, for instance, and massive deployment of carbon sequestration methods and technologies. The very dynamics of the political economy have to be altered.

How can society ever get to this point? Evidently only through upheavals so painful that it becomes clear there is no other option. Revolutionary change on such a scale happens only by means of unprecedented crisis, which is to say social discontent so extreme that half-measures are cast aside as pitifully inadequate. As long as a large middle class exists to serve as a bulwark of social stability and relatively conservative politics, the requisite crisis will not happen. Society has to polarize between a tiny minority of ultra-rich and a huge majority of unprotected, insecure, ecologically vulnerable, politically desperate people whose violent discontent propels the “revolution” forward. Systems have to be radically disrupted, on a scale greater than during even the Great Depression, which led to the welfare state. If history has taught us anything, it’s that the middle class is an effective barricade against revolution.

We might also reflect that, climatically speaking, the best thing that can happen in the short term is a global economic depression. Carbon emissions in the U.S. dropped by 11% between 2007 and 2013, mostly because of the Great Recession. A deeper economic collapse would have an even more positive effect, quite apart from the contributions it would make to the sort of systemic breakdown that would facilitate radical change.

Karl Marx recognized that class polarization and economic crisis present unique opportunities for systemic disruption, opportunities that activists must seize. That’s the imperative, after all: to disrupt the smooth functioning of powerful institutions, and to create new institutions in their place. The more polarization, the more opportunities there are for revolutionaries. There are also more dangers, as we’re seeing by the rise of the far-right across Europe and the U.S. But these dangers aren’t necessarily insurmountable, if only the Left can get its act together and organize the drifting masses.

Millions of people are out there waiting to be organized. We can only hope that by the time of the next economic crash, the Left will be ready to seize the initiative.

More articles by:Chris Wright

Chris Wright has a Ph.D. in U.S. history from the University of Illinois at Chicago, and is the author of Notes of an Underground Humanist, Worker Cooperatives and Revolution: History and Possibilities in the United States, and Finding Our Compass: Reflections on a World in Crisis. His website is www.wrightswriting.com.

The Long Death Of America’s Middle Class

Posted by Lou on May 22, 2018
Posted in: Economic collapse, Economics, Middle class, Politics, Poverty, USA, Wealth inequality. Leave a comment

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In America, what separates the “haves” and the “have nots” has never been wider. It’s a genuine crisis. And yet, few people know why this is happening…

The American middle class is dying.

In 2015, it dipped below 50% of the population for the first time since data collection started on the issue. It’s now an official minority group.

Meanwhile, nearly half of Americans don’t have enough money to cover a surprise $400 expense. Many are living paycheck to paycheck, with little to no cushion. And US homes are less affordable than they’ve been in decades—possibly ever.

I’ll tell you why this is happening and how to secure your spot among the “haves” in a moment. But first, let’s take a look at the America that was.

The Largest Middle Class in World History

The late 1950s was the golden age of America’s middle class.

This isn’t nostalgia talking. The US really did have robust Main Streets and thriving small businesses.

Back then, the US produced three-quarters of the world’s cars and airplanes. Americans produced most of the world’s steel and built the majority of the world’s skyscrapers.

Plus, the US stock market held the bulk of the world’s total stock market capitalization.

All this productivity gave the average American an unusually high standard of living.

Around then, a husband could support his family on an average income. He and his wife likely owned their own home, as well as their car. They had multiple children—and didn’t think much of the cost of having more. Plus, they had money to save.

The Bleak Situation Today

Compare that to the average family today. Both spouses likely have to work—whether they want to or not—just to afford the same basic lifestyle.

Plus, it now costs well over $200,000 to raise a child, on average. And that doesn’t even include college costs. Back in 1960, it cost roughly $25,000.

This hefty price tag is one of the main reasons middle-class families are having fewer children… or none at all.

In short, the average American’s standard of living has taken a huge hit over the past generation or so.

For example, consider a typical high school teacher’s financial situation.

In 1959, the median annual salary for a US high school teacher was $5,276, according to the Department of Labor. Meanwhile, the median US home value was $9,627, according to the US Census Bureau.

That means a teacher made enough money each year to cover over half of the price of a middle-class home. Or 55%, to be exact.

Take a minute and think… How does your annual income compare to the price of your home? I’d bet many people make far less than 55%.

Today, the median purchase price of a US home is $241,700. To maintain the 1959 income-to-home price ratio, a high school teacher would need to make $132,935 annually.

Of course, the average high school teacher doesn’t make nearly that much. Not even close. He or she makes around $48,290—just enough to cover 36% of the median home price.

It All Went Downhill in the ’70s

The high school teacher’s predicament is only one example of a broader trend. In fact, circumstances are actually worse than it lets on.

As you can see in the chart below, the median income-to-home price ratio is just a hair above 20% now. That’s a historical low. And a far cry from the 58% peak it hit in the late 1950s.

Notice that the downtrend starts in the 1970s. More on that shortly…

Clearly, home prices have risen much faster than income levels since 1970.

Of course, Americans haven’t stopped buying homes. They’ve just gone deeper and deeper into debt to do it.

That debt has helped hide the slump in the average person’s standard of living.

Cars are another large expense for Americans. Debt has helped camouflage a big price increase there, too.

Americans are now over $1.1 trillion in auto debt. This figure has skyrocketed 2,954% since 1971.

Americans have also racked up more than $1 trillion in credit card debt. This debt explosion also started in the early 1970s. Credit card debt is up 14,281% since 1971.

The Work-Wage Divide

So why are Americans going deeper and deeper into debt?

It’s simple: The cost of living for the average middle-class family has risen dramatically faster than its income.

Since 1971, there’s been a dramatic—and growing—split between work and wages. As the next chart shows, the average person’s real wages have more or less stagnated since the early 1970s.

With higher expenses and stagnating wages, people have made up the difference with debt.

What Happened in 1971?

It’s no coincidence that things started to go downhill for the middle class in the early 1970s. August 15, 1971, to be exact.

This is the date President Nixon killed the last remnants of the gold standard.

Since then, the dollar has been a pure fiat currency. This allows the Fed to print as many dollars as it pleases. And—without the gold standard to hold it in check—it does precisely that.

The US money supply has exploded 2,075% since 1971.

There’s an important lesson here: The Federal Reserve is the mortal enemy of the common man.

The Four Tenets of Lasting Wealth

Eventually, I think this trend will lead to a genuine crisis. And it won’t be pretty.

In the meantime, a perfect storm of economic pressures will further hollow out the middle class. Tens of millions of Americans will be kicked down the ladder.

As Doug Casey puts it:

Most middle-class people will end up joining either the upper or lower classes—mostly the lower—and that’ll be a moral disaster for the country.

If you want to firmly establish yourself in the world of the “rich,” I recommend…

  1. Owning hard assets like physical gold, silver, and certain real estate.
  2. Owning the highest-quality, elite businesses. Think businesses with attractive dividend yields—even better if you buy these standouts at bargain prices.
  3. Holding some speculative investments. They can leapfrog your wealth. Think transformative technologies like cryptocurrency and blockchain, the booming cannabis industry, and natural resource stocks.
  4. Protecting what you’ve earned from taxation, inflation, and other forms of confiscation by internationalizing your assets. This reduces the threat any one particular government poses to your wealth.

These are the four tenets of lasting wealth. They’re time-tested strategies. And they work.