By James Quinn: “Over the last thirty years, the United States has been taken
over by an amoral financial oligarchy, and the American dream of
opportunity, education, and upward mobility is now largely confined to
the top few percent of the population. Federal policy is increasingly
dictated by the wealthy, by the financial sector, and by powerful
(though sometimes badly mismanaged) industries such as
telecommunications, health care, automobiles, and energy. These policies
are implemented and praised by these groups’ willing servants, namely
the increasingly bought-and-paid-for leadership of America’s political
parties, academia, and lobbying industry.” – Charles Ferguson – Predator Nation
The Federal Reserve released its Survey of Consumer Finances
last week. It’s a fact filled 80 page report they issue every three
years to provide a financial snapshot of American households. As you can
see from the chart above, the impact of the worldwide financial
collapse has been catastrophic to most of the households in the U.S. A
39% decline in median net worth over a three year time frame is almost
incomprehensible. Even worse, the decline has surely continued for the
average American household through 2012 as home prices have continued to
fall. Median family income plunged by 7.7% over a three year time frame
and has not recovered since the collection of this data 18 months ago.
Even more shocking is the fact that median household income was $48,900
in 2001. Families are making 6.3% less today than they were a decade
ago. These figures are adjusted for inflation using the BLS massaged CPI
figures. Anyone not under the influence of psychotic drugs or engaged
as a paid shill for the financial oligarchy knows that inflation is
purposely under reported in order to keep the masses sedated and
pacified. The real decline in median household income is in excess of
20% since 2001.
The destruction of the blue collar jobs has been underway since the
early 1970s. And the relentless decline in real blue collar wages has
followed a bumpy downward path for decades. Sadly, the average person
doesn’t understand the insidious destruction caused to their lives by
the Federal Reserve generated inflation, as they actually believe their
wages today are higher than they were in 1973. The reality is the
oligarchy has used foreign wage differentials and the perceived benefits
of globalization to ship manufacturing and now service jobs to Asia
while using their captured mainstream media to convince the average
American that this has been beneficial to their lives. Using one of
their 15 credit cards to buy cheap foreign goods made by people who took
their jobs was never so easy. I wonder if the benefits of being able
to buy cheap Chinese electronics, toxic dog food, and slave labor
produced igadgets outweighed the $2.3 trillion increase in consumer
debt, 27% decline in real wages, 7 million manufacturing jobs lost since
the mid-1970s, 46 million people on food stamps, $15 trillion increase
in the National Debt since 1978, and a gutted decaying industrial base.
Not only have the oligarchs gutted our industrial base, resulting in
enormous job losses among middle aged industrial workers, but they are
now in the process of impoverishing the youth of this country by sucking
them into crushing college debt with the false promise of decent paying
jobs when they graduate with a degree in feminist studies from the
University of Phoenix. The fabricated mantra that a college education
guarantees a good paying job and a better future is not borne out by the
facts. There are over 4,800 institutions of higher learning in this
country, with only about 50 considered elite. There are another few
hundred top notch institutions, with a few thousand mediocre schools and
hundreds of for profit on-line diploma mills exploiting the easy
Federal government debt to lure millions into their profit scheme of
bilking unemployed naïve middle aged dupes and eventually the American
taxpayer. The average student loan debt per student is $29,000. Student
loan debt outstanding has risen from $200 billion in 2000 to over $1
trillion today. The Federal Government is blowing another bubble. They
are the issuer, regulator and guarantor of these loans. They are making
the loans with teaser rates to the ultimate in subprime borrowers –
students without jobs going for worthless degrees at mediocre schools.
The taxpayer is on the hook for the billions in loses that will surely
follow. The payoff for this quadrupling of debt has been an 8% real
decline in wages for college graduates since 2000. The monetary policies
of the Federal Reserve and bipartisan fiscal policies of our government
have led to this dreadful job market for the middle class.
The mainstream media dutifully reported a few key highlights from the
Federal Reserve report and moved onto more important issues like
Snooki’s pregnancy and the octomom’s new porno gig. We certainly
couldn’t expect business journalists at Bloomberg, CNBC, NYT, or CNN to
actually analyze the data, produce an intelligent dialogue of the
causes, and reach a conclusion that the affluent and influential on Wall
Street and in Washington DC caused the average family in this country
to endure tremendous hardship while the oligarchy plundered and pillaged
the countryside, stuffing their pockets with ill-gotten gains. Each of
the ideological camps within the oligarchy trot out the usual suspects
to blame the other ideological camp, while doing nothing to change the
existing paradigm. Krugman and Carville are assigned the task of blaming
Republican policies and dogma for the demise of the middle class. Obama
and his minions already had their press release prepared, blaming
George Bush and claiming the median family has made tremendous strides
since he assumed command in2009. Mitt Romney (worth $250 million), whose
pocket change exceeds the annual median household income of $45,800,
feels the pain of the average American family and proposes a tax
decrease for billionaires and less overbearing regulation on the
honorable Wall Street banks in order to help the average family. It’s
nothing but Kabuki Theater as the characters play their assigned parts
in this elaborate display. Gary Wills cuts right to the chase:
“Yet while the rest of the populace
was suffering, the rich just got richer. In 2009 and 2010, years in
which millions were unable to find work, the top one percent reaped 93%
of the ‘recovery’ income, and corporations are making more than they
ever did. And the Republicans can still propose even further cuts in the
taxes of ‘job creators’ whose only job creation has been for their own
lawyers and lobbyists.”
What you will not receive from the corporate mouthpieces in the
mainstream media is an explanation of where the money went, who stole it
and why it happened. The theme from the media is the loss in net worth
and decade long decline in household income was unavoidable and due to
circumstances beyond anyone’s control. This is a false storyline
perpetrated by those who have stolen your money. It’s been a bipartisan
screw job and it was initiated by Clinton, Rubin, Gramm and Leach, who
deregulated the banking system in 1999 by repealing the Glass-Steagall
Act, but made it clear the Greenspan Put would always be in place to
protect the banks from their own recklessness, greed and hubris. As a
result, Wall Street could go ahead and take irresponsible financial
system destroying risks in pursuit of vast riches, knowing they could
count on the unlimited checkbook of Uncle Sam if things went south, and
that’s exactly what happened. Heads they won, tails you lost. It’s good
to own the politicians, regulators, and media.
Dude, Where’s My Net Worth?
“Sometime around the year 2010, Xers will hit a hangover mood
like that of the Lost in the early 1930s and the Liberty in the late
1760s: a feeling of personal exhaustion mixed with a new public
seriousness. The members of this forty- and fiftyish generation will fan
out across an unusually wide distribution of personal outcomes,
reminiscent of a night at the bingo table. A few will be wildly
successful, others totally ruined, and the largest number will have lost
a little ground since the days of Boomer midlife.” – Strauss & Howe – Generations – 1991
Neil Howe and Bill Strauss wrote their first generational theory book six years prior to their epic Fourth Turning
prophecy. It appears they nailed it. Generation X households saw their
net worth crushed, with a 54% loss in three years. The Baby Boomer
households also took a beating in this banker engineered financial
collapse. The Silent generation has survived this downturn relatively
unscathed. Most of the Silents traded down from their primary residence
at or near the top of the housing boom. As Neil Howe points out:
“Most sold or annuitized their
financial assets at a much better moment in the history of the Dow. Even
if they didn’t, they are more likely than Boomers or Xers to be getting
retirement checks from defined-benefit corporate or government plans
that are unaffected by the market.”
The Millenials and late Xers did not lose much because they didn’t
have much to lose. Most did not own a house or stocks. As the economy
continues to deteriorate the generational tension builds. The Silents
and Boomers, who vote in large numbers, have not and will not vote for
anyone who attempts to reform our entitlement system and make it
economically viable over the long-term for young people just entering
the job market.
The false storyline about the 2007 through 2010 being an aberration
in the long term path to prosperity for the average American family is
refuted by the following chart.
This chart paints a long-term picture of generational inequality that
has been going on over the last three decades. Over three decades the
Silent generation has seen their median real net worth increase by 133%,
while GenX has seen their median real net worth decrease by 55%
compared to the same age cohort in 1983. Only those 55 and over have
seen a real improvement in their net worth over the last 27 years.
Considering this period encompassed a seventeen year bull market and the
GDP grew from $3.5 trillion to $15.7 trillion, a 450% increase, a few
bucks should have trickled down to the average household. Even on an
inflation adjusted basis, GDP has risen 125% since 1983. Evidently the
economic policies supported by both parties across decades have not
floated all boats – just the yachts. Age is only part of the equation.
Class is the other piece. There is a class war being waged and the
Buffett, Dimon, Blankfein, Romney, Clinton, Koch and the rest of the
ultra-wealthy oligarchs are winning. We are now in the midst of a Fourth Turning and the corrupt, dysfunctional, amoral social order will be swept away before the climax of this Crisis.
“Through the Third Turning and into
the initial stages of the Fourth, the Silent will prosper, Boomers will
cope with declining expectations, and Gen-Xers will get hammered.
Throughout history, we have argued, inequality both by class and by age
reaches its apogee entering the Crisis era. Indeed, part of the
historical purpose of the Crisis is to tear down dysfunctional
institutions, vacate positions of entitlement and privilege, rectify the
inequality, and create a tabula rasa on which the rising generation can
build something new.” – Neil Howe
The reason for the epic collapse of middle class net worth is quite
simple when viewed from a 10,000 foot elevation. The great descent in
net worth was primarily due to the bursting of the Federal Reserve
created real estate bubble. The Case Shiller Home Price Index plunged
28% between 2007 and 2010. The wealth destruction was concentrated among
the working middle class because their homes accounted for the vast
majority of their household net worth. For the wealthy, housing is a
fraction of their vast net worth, while for the lowly poor;
homeownership is now only a dream. Of course, between 2000 and 2007
anyone that could fog a mirror was encouraged by George Bush, Barney
Frank, the National Association of Realtors, Alan Greenspan, and Wall
Street shills to “own” a home. With home prices having fallen an
additional 7% since 2010, the middle class has seen a further decline in
their net worth. Meanwhile, Ben Bernanke’s ZIRP, QE1, QE2, Operation
Twist, and the upcoming “Operation Screw the Middle Class Again” have
succeeded in expanding the net worth of millionaires, billionaires and
the bonuses of Wall Street bankers, while destroying the fragile
finances of little old ladies and middle class risk adverse savers.
Once you dig into the details beneath the thin veneer of Bernaysian
obfuscation, you realize the corporate mainstream media storyline of
middle class decline has a veiled storyline of a powerful, connected 1%,
enriched at the expense of the middle class.
In Part 2 of this three part series I will examine who stole your net
worth and in Part 3 why they stole your net worth. Part 4 will require
pitchforks, torches and a guillotine.
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