What’s Killing The Middle Class? (Part 2)
by Charles Hugh-Smith via OfTwoMinds blog,
ZeroHedge.com
May 9, 2017
The Powers That Be are perfectly fine with your transition to proletarian debt-serf.
Yesterday we covered the usual suspects in the decline of the middle class as a financial-political bulwark against oligarchy / dominance of rentier elites: globalization, automation and the asymmetric distribution of rewards favoring the few over the many.
Today, let’s cover the politically explosive systemic dynamics behind the erosion of middle class income, wealth and political influence.
1. I hope you won’t be too shocked that the core dynamic driving middle class decline is the way we create and distribute money, i.e. central-planning by central banks. As I have explained many times, those closest to the central bank money spigots can borrow essentially unlimited sums at near-zero interest rates.
Those with unlimited credit lines at low rates of interest have an unbeatable advantage over everyone else, i.e. the middle class. Those with access to nearly-free money can outbid everyone else for productive assets, driving up the price of these assets and making them unaffordable to all who have to pay market interest rates.
Central banks have lowered interest rates to near-zero, gutting the interest income of regular savers, i.e. the middle class. Financiers don’t need to earn interest on savings; they leverage their credit lines to buy apartment complexes, corporate bonds, etc.
Interest income matters to the middle class, which has to avoid risky financial leverage lest the household wealth vanish in another 2008-09 Global Financial Meltdown. By lowering the cost of money to private-sector banks (1% or less), central banks effectively transferred billions of dollars in interest income from the middle class to the Too Big To Fail money-center banks.
Meanwhile, asset prices has skyrocketed, pricing out most of the middle class and impoverishing those who do buy at nosebleed valuations. Nothing says “debt-serf” quit like $100,000+ student loans and a $300,000 mortgage.
2. The federal government (the state) now funds and enforces rentier-cartels that have pushed the cost of healthcare and education through the roof. This is why I call our economy a state-cartel system: the state defends cartels against competition, and the cartels can charge prices far above what an open market would support.
As household earnings have stagnated for decades, the cost of healthcare and higher education have soared as these cartels jack up prices with state approval. In effect, healthcare and higher education are extensions of the central state, as the central state funds, manages and enforces the cartels’ power and pricing. The losers are the customers, who must pay the price or forego a college diploma, healthcare, etc.
The Rest…HERE
