This a very good article on the reprocessing of the middle class ( Low paying jobs are here to stay). The only problem with the article and most articles that deal with this subject matter is that they fail to point out why this has occurred and what can be done to change the circumstances. Journalists no longer exist as they are merely pawns for the power structure. They evade the truth and provide merely fragments of information. They write about the effects, but exclude the cause and radical solutions needed to change the course. Those that do attempt to write the truth are cast out to the blogosphere perimeter which of course is blasted by the mainstream media as biased and unreliable babble.
The other side of Acts 1 through 3, where the average American citizen began to load up on debt and credit to be able to live the middle class American Dream, is the rise of the financial industry. An excellent movie to watch that does “Act 4” much more justice is Inside Job (Movie). If you have cable and Encore, it is available now. When Ronald Reagan deregulated the financial sector and the following presidents continued to open the gates, the financial sector growth exploded. Banks were allowed to merge and become large. Investment banks went public such that the money in their coffers was no longer limited to partners money and freed them of risk (now they have other people’s money to play with). Big funds went towards lobbying for further deregulation. Ex-bankers and investment bankers took key positions in the Federal Reserve and within presidential administrations. Credit cards, home equity lines, car loans, banking fees, home loans, 401k’s, IRA’s, securities purchases, stock options — the flood gates were opened wide.
The sector as a percent of GDP tripled and profits began to represent one-third of the total profits generated by the american economy. The financial sector was generally making money off money which most would classify as a Ponzi-scheme. The fallout was clear, from the Savings and Loan crisis when tax payers lost $124 billion, to the DOT COM internet bubble, to Enron and other corporate frauds aided by the investment community, to the housing scam. These scams sucked immense wealth away from the average american citizen and gutted many industries.
But the money created on money didn’t just disappear. The money gains on money went to those on top in the financial industry. Bonuses on annual results sky-rocketed on Wall Street and within banks. Those in the financial sector began to become extraordinarily wealthy while the average american citizen loaded up on debt and experienced stagnant wages. This same trend continues today unabated despite the debacles which have occurred since financial deregulation. And one cannot just look at the financial sector for an explanation of the reprocessing of the middle class. One also must take a look at what is going on with corporate america. Wall Street and the executives of larger U.S. corporations have the same agenda.
Corporate profits in american companies have grown consistently over the decades to reach record levels, yet the average american worker isn’t participating in those profit gains. The goal of large corporations is to maximize profits and returns for Wall Street investors. As such, the average american worker is viewed as an expense and is therefore expendable relative to the goal of the firm. Those executives that either squeeze the most out of remaining american employees (for productivity) or source cheaper labor abroad, are rewarded handsomely via stock options and bonuses. Wall Street and executive leaders of big U.S. corporations are on the same page and both participate in the immense personal gains in wealth.
The largest increases in compensation for corporate executives has come in the form of stock options. Once stock options became a key means to pay corporate executives, the goals of Wall Street and big business became aligned. Long-term strategic growth became less important than meeting the short-term expectations of Wall Street analysts. The executive that could beat Wall Street expectations in the short-term made him or herself very wealthy in addition to Wall Street bankers and big hedge funds.
This link between executives and Wall Street (stock option compensation) led to debacles like Enron and it continues today via the legalized fraudulent Initial Public Offering (IPO) process. Billionaires are minted in a matter of years simply because they are loaded up with a huge number of private shares that they can dump after a short lock-up period post public offering. And Wall Street gets rich on public offerings, both through underwriting and the creation of bubbles like the DOT COM debacle, the housing scam and related fancy investment instruments, and now the social networking bubble with Facebook and Twitter as the show pieces. Recent cases in point include Google and Facebook. The amount of money concentrated between five people who founded these companies equates to approximately $80 billion dollars based on their private shares received prior to going public. Are five men really worth that much money? I don’t think so. Remember, money does not grow, it is simply accumulated by those that can siphon huge amounts away from the average person. There is no win-win situation at this point, there is only win or lose.
The second act of reprocessing the middle class begins after college. Our “middle class” young people, now shackled with over twenty grand in debt from college loans, feel “fortunate” to land a job paying thirty to fifty grand a year. Others that aren’t so lucky have to take part-time jobs or jobs well below their potential. It is at this point that the vultures begin to circle and prey on humanity’s greatest weakness — you can have it all now and pay for it later in small incremental payments known as interest. There aren’t any animate creatures on earth with enough discipline to forgo a meal offered today rather than wait until tomorrow. The human creation of debt and credit was a very costly invention to the majority and it preys upon a fundamental weakness in our genetic make up.
Those young people fresh out of college that want and are enticed to live the middle class American Dream immediately begin to load themselves up with things and more debt. The first big purchase is a car with low-interest payments. The second big purchase is a house or a condo where the government actually throws out carrots via mortgage payment tax breaks. Along with the house and car comes additional expenses including insurance, maintenance, gas, furniture, big screen TV’s, fancy phones, cable and the internet. The other costs of living like groceries, health insurance, heat, and entertainment further eat into the young person’s meagre annual salary. Keep in mind prices for goods and services in the United States aren’t in decline — inflation especially on gas and groceries is on the rise.
The marketing and advertising blitz permeating from the television, mobile phone, radio, and the internet, combined with the easy access to credit cards and more debt, encourages and enables the young person to acquire even more things than he or she may or may not know they want or need. Beautiful woman, handsome men, our Hollywood heroes and sports icons, all used as bait to round-up the school of fish. The concept of saving or waiting to acquire things is a foreign concept. The American youth isn’t brought up Asia style. The culture defined by the capitalistic machinery is one that is based not only on consumption, but instant consumption. Live for the day and pay the price tomorrow. Some of the youth, either through good parenting or common sense, avoid these traps, but the vast majority go for the bait and get hooked. What else could have driven the American economy in the last two decades — manufacturing? No, the only thing truly driving the United States economy in the last two decades is the easy access to credit and debt.
The repercussions from the few siphoning away money from the majority of United States citizens begins to hit home with the young population as they enter college and then graduate. Fresh out of the domestic womb, we load up our young people with thousands of dollars in debt via college loans. The offspring of the few that have successfully siphoned away chunks of the community pie have little to worry about since their parents can afford ivy league costs. And connections will be available upon graduation for that six figure job on Wall Street or in the venture capital world, but the story is quite different for the vast majority. Our young people graduate with over twenty grand in debt and then have to find a job on their own. Good luck.
Worse yet, college tuition is skyrocketing and interest rates on student loans are rising. The cost of college is outpacing working parent’s stagnant wages. State governments can’t afford to subsidize public undergraduate education so the cost burden is shifted to the parents and students. Federal student loan interest rates are expected to rise from 3.4% to 6.8% — the Federal Government certainly can’t lend our young people money at low rates any longer since they have gone to the well far too often in the last decade. So there you have it young people and future of America. Welcome to the real world. I hope you enjoyed your youth. If you want to live the middle class dream, get used to the idea of loading up on debt to get a thin slice of stale pie, with interest due upon consumption.
Given I have firsthand experience of the reprocessing (term borrowed from my beloved brother known as Dragonstrand) of the middle class, I figured this post might carry some weight when taking into account the status quo for the vast majority of American citizens. In a nutshell, I went from making at my peak $180,000 with bonus, to a three-year period of unemployment or no full-time job, to recently taking a night shift job making $11 dollars an hour with a huge corporation. I still have two years of federal taxes to pay and over ten grand in credit card debt to pay off. I have a few personal reasons for my predicament, but nothing that would realistically prevent me from landing a decent job at a decent wage relative to my experience and education. I don’t really have any other options available. I have tried to pull myself up and applied to over a thousand white-collar professional jobs during that three-year period, but I couldn’t secure a job offer despite over a decade of solid work experience and higher education from well-known undergraduate and graduate institutions.
The middle and upper middle class in America has been downsized and is being “reprocessed”. To understand this phenomena one must agree to a fundamental principle. Wealth, as measured by money, does not grow for the money supply in theory is constant. Sure, those in charge of the money supply can print more money, but that simply waters down its assumed value and purchase power. As such, wealth is merely lost by one and gained by another. There is only one pie to cut up and serve.
In the United States, the few have mastered the art of accumulating and taking more and more and more money away from the many. No other developed nation has such an enormous gap between those few that have most and those many that have little. The art the few have mastered to siphon money away from the majority centers on a multi-pronged strategy and a closely knit group in powerful positions in banking, Wall Street, venture capital, huge multinational corporations, media (advertising and marketing), and government (controlled by lobbyists and big campaign donors).
The only problem with their strategy is eventually the many have little left for the few to take and the well runs dry. And when the well runs dry they have to figure out how to appease or deceive the mob to avoid a rebellion before they take their winnings and leave the country. Currently, the power structure is employing delay tactics to avoid the inevitable – a revolution. The game can best be described as kick the can. Obama, a man of change, says the right things, but his actions are merely status quo. And the republican presidential front-runner wants to return to the Reagan era where the wolves were set free. The truth of the matter is that there is no way out given the current power structure. Politics and your vote isn’t going to create any change to the fascist power complex.
My next several posts will summarize the multi-pronged strategy used by the few to siphon away money from the many. Much of this has been discussed in this blog via previous posts, but I feel now is the time to re-iterate and summarize. The upcoming election between a republican presidential candidate and Obama is all smoke and mirrors. The game ahead of us is quite simply a game of kick the can. We have reached the stage of no way out unless we are willing as a majority to make bold moves. All that is really needed is an enlightened sense of what is and what will be if we do not act. I am the farthest thing from a protestor or revolutionary and I have a son I dearly love, but if there is a movement with intelligent momentum, I would be willing to put all that matters in this one life on the line for the many that are yet to come.