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Guest Post: Why We're Stuck with a Bubble Economy
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Inflating serial asset bubbles is no substitute for rising real incomes.
Why are we stuck with an economy that only generates serial credit/asset bubbles that crash with catastrophic consequences? The answer is actually fairly straightforward. Let's start with the ideal conditions for an economy that depends on consumer spending.
1. Rising real income, i.e. after adjusting for inflation/currency depreciation, wages/salaries have more purchasing power every year.
2. An expanding pool of new households, i.e. young people who move away from home or graduate from college, get a job and start their own household. New households buy homes, vehicles, furniture, appliances, kitchenware, tools, etc., driving consumption far more than established households.
Neither of these conditions apply to today's economy. Income for the bottom 90% has been stagnant for forty years, and has declined 7% in real terms since 2000.
This stagnation is not the "new normal": the new normal is much worse, as labor's share of the national income has fallen off a cliff:
Household formation has also stagnated. That spike circa 2004-07 was caused by the housing bubble, which created new jobs and collateral that could be leveraged into new home purchases.
Since 2008, the Federal Reserve has bought $3.2 trillion in mortgages and Treasury bonds, and the Federal government has borrowed and blown $7 trillion in deficit spending. That $10 trillion in stimulus (not counting $16 trillion in Fed loans to banks and trillions more in other loans/subsidies), household formation has only recovered to the sub-1 million a year level.
In an economy of 316 million people, that isn't enough to generate "growth" in a $16 trillion economy.
With these organic sources of growth moribund or declining, the Fed and Federal government have resorted to other ways of stimulating more borrowing and spending, the sources of leveraged, high-risk "growth":
1. Lower interest rates so stagnant income can leverage more debt (and thus more spending)
2. Generate asset bubbles in stocks and housing that boost "the wealth effect," i.e. the emotional sense of being wealthier as a result of one's assets rising sharply in value, and the collateral available to support more debt.
If a house rises by $100,000 in value in a few short years, the owner has $100,000 more collateral to support new debt. The gargantuan expansion of home equity lines of credit (HELOCs) as the housing bubble expanded was the goal of the status quo, as asset bubbles create collateral that supports new borrowing and spending.
Now that interest rates are near-zero and mortgage rates are rising from historic lows, there is no more juice to be squeezed from low rates.
As for asset bubbles, they always burst, destroying collateral and rendering borrowers and lenders alike insolvent.
Without organic demand from rising real income and new households with good-paying jobs and low levels of debt, the consumer-debt based economy stagnates.This has left the economy dependent on serial asset bubbles that create phantom collateral that can support new debt, albeit temporarily.
Inflating serial asset bubbles is no substitute for rising real incomes and new households that aren't burdened with high levels of debt from student loans.
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Be postive, at least during this dark age, the internet will help the robber barrons self-identify. Until then the capital and resource mis-allocation and mal-investment continues...
the crashes come from the realization it's a PONZI only to forget that it's a PONZI, rinse and repeat, because they can
This is how to reset a Sears Elite dishwasher. Wonder if it works for PM's and Ponzi derivative bubbles?
1. press heat wash, normal wash
2. repeat
3. press cancel
4. close the door
5. repeat steps 1-4
6. Your investments are now reset
Charles Hugh Smith says:
When will the central bankers realize that this bubble wealth is just TEMPORARY ... and the wealth is destroyed when the bubble pops. Why is this very basic concept so difficult for bubble-frenzied central bankers to grasp?
So as income is distributed between labour and capital… why is capital getting a bigger share of income?
Is globalisation providing surplus labour?
Is productivity flat or falling?
The problem here is that unless labour gets a bigger piece of the income pie, soon there will be no demand for the economy to service.
Capitalists get rich by paying their workers higher and higher wages and allowing them to demand more and more goods and services creating more opportunities for the capitalists to supply. As soon as the system attempts to limit what it is willing to pay for labour the whole expansion from productivity feedback grinds to a halt.
Capitalism needs to distribute an equal share of income gains to both capital and labour, otherwise any expansion will grind to a halt as there is no new demand. Or worse new demand will be fuelled by credit expansion.
Housing, like most manufactured products, should depreciate, in the natural order of things.
That simple realization would solve a few problems.
For the rest, we need rope.
That's true of a house, but what about land?
When you buy a house you also buy a location.
If more jobs come to your neighbourhood then your location becomes more valuable.
Residential land values are tied to the proximity of economic activity.
If inflation is taken into account then over the long haul houses do depreciate.
That's great, but as between capital and labor, the bubble building and bursting is inevitable. When confronted with every other market participant racing to the bottom, you have no choice with your capital. Further, even if labor is successful in collective bargaining, this process only sows the seeds of its own demise. In the end, both sides view their contributions as the most valuable and the truth is somewhere in between... somewhere external third parties are not fit to decide on their behalves.
The boom/bust cycle serves its own purposes... you're trying to solve a problem that others want to have... others with a bit more power.
Exactly! We are watching Fascism expand right in front of us. The only rent is by granting monopoly -- there is an elite and everybody else. This isn't America anymore folks!!!
"When will the central bankers realize that this bubble wealth is just TEMPORARY ... and the wealth is destroyed when the bubble pops. Why is this very basic concept so difficult for bubble-frenzied central bankers to grasp?"
The Central Bankers know it already.
Alan Greenspan wrote in 1967 that 1920's FED policy lead into the Great Depression. Greenspan doubled down on 1920's FED policy
Krugman noted that Greenspan needed a housing bubble to recover the economy from the 2001 recession. A housing bubble followed.
In the midst of the housing bubble, Greenspan said housing was just frothy. Recently, Greenspan admitted that "we knew it was a bubble all along."
Bernanke wrote in 1988, that QE does not work. QE followed the burst housing bubble.
Really? You mean you don't understand this this result is the one they planned all along?
Its the 90% wealth that is destroyed. Not "the Cabal" wealth. They made the wealth, right? From thin air. They got the money first and spent it on assets and then eventually we (the 90%) get some of it, now greatly devalued in the form of inflation. The corporations hide it the best they can in repackaged products and the goverment agencies hid it the best they can with "data". The media chimes that all is well and the CFR and others like them arrange for anyone who denies or "reports" the scheme to become "the enemy".
Did I get that even close?
Yes, but labor's share hasn't been this low since the 1780's. The outcome will be no different this time around.
hedge accordingly.
Indeed. It makes me sometimes wonder whether the government is working for the people or working for the banks.
You are the last one still wondering. Everyone else stopped wondering years ago.
thats 'cos he is stuck on zero and can't get over all the zeros that keep mounting up...unbelievable stack of zeros! Quadrillionsofem
may i suggest a name change? http://youtu.be/_Y3rYS6BspU
"Indeed. It makes me sometimes wonder whether the government is working for the people or working for the banks."
Let George Carlin explain it to you as he explained it to me.
http://www.youtube.com/watch?v=acLW1vFO-2Q
Read DEAN HENDERSON then one may stop wondering!
Part One of a Five-part series
The Four Horsemen of Banking (Bank of America, JP Morgan Chase, Citigroup and Wells Fargo) own the Four Horsemen of Oil (Exxon Mobil, Royal Dutch/Shell, BP and Chevron Texaco); in tandem with Deutsche Bank, BNP, Barclays and other European old money behemoths. But their monopoly over the global economy does not end at the edge of the oil patch.
According to company 10K filings to the SEC, the Four Horsemen of Banking are among the top ten stock holders of virtually every Fortune 500 corporation.[1]
So who then are the stockholders in these money center banks?
This information is guarded much more closely. My queries to bank regulatory agencies regarding stock ownership in the top 25 US bank holding companies were given Freedom of Information Act status, before being denied on “national security” grounds. This is rather ironic, since many of the bank’s stockholders reside in Europe.
One important repository for the wealth of the global oligarchy that owns these bank holding companies is US Trust Corporation - founded in 1853 and now owned by Bank of America. A recent US Trust Corporate Director and Honorary Trustee was Walter Rothschild. Other directors included Daniel Davison of JP Morgan Chase, Richard Tucker of Exxon Mobil, Daniel Roberts of Citigroup and Marshall Schwartz of Morgan Stanley. [2]
[...]
LEFT HOOK by Dean Henderson
Note: The Four Horsemen just reminds me of the statue of the Horse of the Apocalypse or the Pale Horse of Death in the Denver International Airport - see http://www.alternativereality.org/denver-airport http://www.bibliotecapleyades.net/sociopolitica/esp_sociopol_denver05.htmYes, ponzi rinse and repeat because they can is right, as the Fed realize 40% of the economy is Wall Street, so they set them up by inflating bubbles so the well to do and well connected to the knowledge of when these bubbles are going to burst can make huge profits on the average person investing via their IRA or Keogh. So not only does the average joe six pack get screwed by paying most of the taxes out of their wages, but they also get screwed from bursting bubbles because they have no idea when they will burst or why. The middle at this point continues to give it up for a few percentile at the top to keep this lie of an economy moving forward.
However, the next step down which will be known as the Super Great Recession, the middle folks footing the bill for these artifical bubbles will be even less capable of being the patsies and thus the bubbles will take more time to inflate and rise to lower heights.
Oh, for crying out loud! We don't need stupid graphs and statistics and hyperbole. It's pretty simple -
1. Repeal the 16th amendment, let people keep the fruit of their labor.
2. Repeal the Federal Reserve Act, stop the monopoly on money creation by private banking interests who rob by inflation.
3. Emigrate to Chile or Shanghai depending on whether you want to eat chile con carne or Shag a lag Hong hai.
Until 'they' (WE!) actually repeal them, the Fed is simply catering to the "Get rich quick" vulture culture of its audience, with its Ctrl-P function.
The honest "Work ethic" now seems like just another Relic of our Barbaric past. Just like honest money. /s
Dark Age 2.0...Now with less plague!
Define robber baron.
1. Free markets
2. Sound money
3. Rule of law
Without all three you have corruption and decay. Today we have not even one of three.
Free markets and sound money can also give you Dickensian England. Perhaps it's not so simple.
Here is an interesting glimpse into the baroque social decay of America, in case you are tired of reading about wealthy elites, and want to be depressed about their end results:
http://www.theatlantic.com/national/archive/2013/12/the-vigilante-of-cla...
NB. these people are all white (it's not race) and it's a rural-small town environment (it's not cities) and the roots of the decay much precede the current president. But not the long process of which Obama is just the latest servant.
England had and has a very rigid class society. In England, the class system had the power to keep working classes in their position.
The class system in America was somewhat more upwardly mobile. This may account for some the issues in Dickinsonian England.
Also it was a transitional economy. People were moving from farm to factory at an astounding rate. Most felt dependable work and a paycheck were a move up from tenant farming. More people moved from extreme poverty to working class and the industrial revolution gave them an opportunity for a somewhat better life. The rigid class system created a ceiling that was impossible to overcome. Funny you don't hear that many Dickinson stories from the US.
Gag. Go read some history before pontificating. Start by reading about the enclosure movement. The poor of Jolly ol' England did not all voluntarily go to the cities to better themselves. Funny how people invent false history out of thin air to justify their ideologies.
As for your second point about Dickens in America -- go read the link I posted. Patrick Drum vs. Oliver Twist, which is the jucier tale, tell me then. Funny that it's not funny at all.
so the answer is to raise minimum salary rates accross the board in every corporate that shows its labour costs have fallen off the cliff!
In this Internet and Computer age it should be very easy for the IRS/FED/SEC/ POTUS to identify all corporates who fall into that category and to push their minimum wages up to back on the cliff.
In fact I suggest they write a song entitled "Back on the Cliff" like "YMCA" or "Back to back with twerky Miley's butt"
Hey presto, the Fordian meme lives again and Lone Ranger Obammy can sing "yes we can"...instead of "yes we scan, scam and dronegangbang Afghan".
My 21+ year old grandson has never had a job and loves entitlements. He is a C- student with no major living away on student aid, food stamps and Obama care. He says there are many groups that teach students how to "milk the system" by getting free ipads/phones/internet/food. He is typical of many young males who have been pampered and taught they are special, entitled and need to pursue their immediate passions w/o any cares. His backup plan is to move back home and continue to sleep till noon, play violet video games and sex while his Mom works 2 part time jobs w/o any benefits. Welcome to America.
How many times this month are you going to post the exact same thing in every ZH article? I'm pretty sure we got it the first time you posted this over a week ago.
Until his 21-yr grandson also has 21-yr old grandson
Maybe we can help them both. Here is my idea. Tell the lad to start a blog called "My Grandpa's a Sphincter" (www.mygrandpas-a-sphincter.com) where he can blog about every time you get on his back and interrupt his gaming or sex. You can give him lots of material. Perhaps the blog will become popular and he will become famous among his generation (an audience for which advertisers will pay a lot of money). If the kid is too lazy, the old guy might have to write it himself, and then be sure to exclude grandson from his will.
don't worry grandma, your grandson is being groomed to become a professional bullet stopper for .Gov Inc when the time comes. He just needs more direction, hopefully he doesn't look muslim in any way.
Don't worry, TPTB are cooking up a war for young unmotivated males. There will be plenty of opportunity for him to pull his head out of his ass or become cannon fodder. My guess is that he is not a minority, because if he were, being a "C" student would make him eligible for all kinds of scholarships from Uncle Sugar.
Same as it ever was...
NSA spying on gamers............roll the mutherfuckin.........
"In 2007, as the NSA and other intelligence agencies were beginning to explore virtual games, NSA officials met with the chief technology officer for the manufacturer of Second Life, the San Francisco-based Linden Lab.
Fearing that terrorist or criminal networks could use the games to communicate secretly, move money or plot attacks, the documents show, intelligence operatives have entered terrain populated by digital avatars that include elves, gnomes and supermodels.
Read more: http://voiceofrussia.com/news/2013_12_09/NSA-spied-in-World-of-Warcraft-and-Second-Life-online-games-1620/
Is there a point to your posting this same story ad nauseam? Of the eight comments you've posted so far this month, seven of them have been your stupid grandson story.
http://www.zerohedge.com/search/user_comments?name=tempo
Seriously, WTF?
4 years 11 weeks this troll has been on ZH, dropping little wisps of divide and conquer missives, same as it ever was
It appears ZH is using old sock puppet accounts to generate some clicks and comments on the threads.
Seems like he would have been turfed long ago for spamming.
Grandma Tempo has trouble remembering how old her grandson is.
3 posts he's 21+
2 posts he's 20
1 post he's 20+
must be shitizen under another nem name.
I was wondering when they would provide something like this functionality. But the comments retrieved only go back the the beginning of October?
The grandparent calling the grandson, why not call the parent of the grandson THAT YOU REARED! That you set such a fine example for your child to follow and then teach the grandson. AMAZING!
The grandson, like many of the parents are stuffed because the grandparent chose to chase after what they believed on the promises of the politicians and bankers and look what you got? GOT TO ADMIT MY PARENT HAS HAD THIS THROWN AT THEM I CANNOT CHANGE THE POLICY THEY AND THEIR PARENTS PUT IN PLACE. I CAN HOWEVER OBJECT TO ALL THE LIES AND DECEIT THEY TRY TO FEED ME!
So if you don't like it then look in the mirror, it should be yourself you should criticise and condemn that years ago you VOTED FOR THOSE THAT CARRIED OUT THE POLICIES and did not consider future consequences.
To be honest the grandson (and I got those aged relatives too god help them) may as well enjoy what he has right now because for the next few decades if the system does not fall apart through policies set way before his time come to fruition he is not going to wind up with much else.
SAD HUH!
So what you going to do about it? Blame the grandson is easy when you should be hammering the polticians and bankers that made the promises to you and THEY STILL ARE! You have not learned anything then? So you woke up to the fact, besides economic we have a social problem also.
So get a job, move out of your mom's basement and get a life. Like every other generation for the last 500 years.
This sounds like complete BS.
The tale of woe regarding the slothy granson at least has to be written so the story is fresh each time. What's the latest video he's watching? Is he pursuing women on the internet? Come on, at least make it interesting if we have read about his life. Is he pushing his mom to get a 3rd job so he can go to Hawaii on vacation? Spice it up even if it's fiction.
Bascially after 9/11, gov't leaned on real estate to provide the economic growth, a flawed strategy. Why real estate? It was easy and they had no real alternatives given the lack of innovation in the economy. I dont consider non-productive applications as innovation. Always trying to avoid a recession when it can create a more solid base in which to build from.
Why real estate? Simple, the bank and bankers (who own your representation), control every aspect of this "market".
Using your logic, why didnt they do it long before this?
They did. Home ownership has come in for subsidy after subsidy since the depression.
Ah someone gets it. Now just look at the rest of the shit show that was put in place by FDR and Hoover and you will pinpoint the moment at which this country went to hell in a handbasket after getting the ever so important assist from THE OTHER WARMONDERGING RACIST SHITBAG THAT GOT US INTO A FUCKING WORLD WAR Woodrow Wilson.
And for those who need to be reminded what "assist" I'm talking 'bout that would be the 16th amendment and The Fed.
Everything after those events has been just the TPTB turning the screws on the serfs.
And unitl ALL of it is repealed, killed, and buried so deep in the ground that it can never see the light of day ever again, NOTHING will change.
"Inflating serial asset bubbles is no substitute for rising real incomes."
Correct but thats the only substitute to deflation, left for Fed
More on the same
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/14/this-graph-is-the-best-argument-for-raising-the-minimum-wage/
Theory #4
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/05/is-inequality-bad-for-economic-growth/
I don't think arguing for an increase in the minimum wages is the same as describing how impactful declining real wages are to an economy.
Having a minimum wage law is akin to claiming that Gov't can create jobs. If that's true, then we shouldn't we all just work for the Gov't?
I want to know what the Matrix is. Unfortunately, no one was able to show me the Matrix. I had to see it for myself. I'm not going to claim that you'll need to dodge bullets like the minimum wage "law"(an illusion, created for your mind). I'm saying that when you're ready, you won't need to.
I believe that any person that really thinks about it introspectively for a bit, will realize there is no such thing as a "minimum wage". At least not outside of a Gov't gun being pointed at you holding you hostage.
Asset bubbles are easier to generate than jobs and positive cash flows and improved profit margins. Asset bubbles by pass the real market and simply require manipulation of the stock and housing markets.
And we will be stuck with this sick paradigm shift for as long as odious debt sits on the books of banks and like the boot of a thug across the throat of the man who is increasingly finding himself on the street.
The AMaZiNg AMZN!
Watch it levitate to P/E of 1400!
Nope, no bubble here. Nothing to see, move along.
Even if you like your kindle ( no one does ) ,
you can't keep your kindle, because every electronic POS is obsolete by by time you get it home and set up.
Kindles rock!
You must be one of those Apple muppets.
Seems like Bernanke, Yellen and the rest of the Fed memebrs want to surpass the DOT COM PE levels. Those levels were higher.
There were so many vapor companies with no earnings.
Super-size the DOT COM and crash afterwards. Because it's all finite.
I know I've said it on here about a dozen times before, but is it too much to label axis on a graphs?
Household formation: What does that left side mean? Raw number? In thousands (I assume but can't be sure)? Per month? Per year (again, assumption)? Is it seasonally adjusted? None can be sure.
Congrats on the other two being labeled, although one of them is straight from the Fed.
[Well that's it, the one complaint I'll allow myself for the week]
Thanks, W74.
I often think that the authors that get posted at ZH have so little respect for the audience (as in that said authors assume the audience here are just a gaggle of slack jawed muppets whose only play in life is to pose as "hipster-investors") that taking the time to set up the graph or specify units on the X/Y axes is like throwing pearls before swine.
Human Energy is priced below the cost of mining it, so there is need to invent illusions of wealth by proxy. The fruit of crony capitalism is eaten by the feudal landed ones and the carbinieri; such fascism is state control of business by regulations that prevent the unannointed masses from unco-opted power. The end of the recovery from WW2 began with the neo-fascism known as Reaganism.
I have to say this has gone on wayyyyyyyyy longer than I imagined! - ergo my imagination is poor!
There is a part of me that takes my hat off to TPTB - their ability to create a stock bubble of the back of a stock bubble and a ditto for housing is amazing.
In my mind a measure of the power of PR and style over substance
You nailed it. Who'd have ever thunk it? I surely didn't, and now I am double pissed. Got out of stocks etc at the peak in 2007 for the right reason, but have stayed out, apparently for the wrong reason. The only consolation I have is that maybe, just maybe, if I can hang onto my assets there may come a time when there is a re entry point. But I now think it will have to ba a fairly brutal process before there is an honest reset. Blood and gunfire in the streets? DHS/TSA etc sure act/prepare like they think so.
I got out too, in 2007, just before everything started to tumble. WIll I get back in? that's the million dollar question, because I'm a subscriber to the hot stove theory -- you get burned once and you may not want to touch it again. And even though it 'looks' okay, if I were to jump back in, I know I could guarantee losing even more than what I lost before. Look at the big crash in 1929 through 1933 -- the market did drop, but it went down in waves, because people had that hope that the market would go back up. Our gummint came to the rescue a little early by inflaitng the markets and inflating the value of market assets. Those with their 401ks and pension funds in the market may see tons of money at retirement. The problem though, is that if enough start heading for the exits, look out, there's nothing to support the markets at that point. Ultimately, I play the waiting game. put away welath in meaningful hard assets, and wait out the market bubble.
I got out too, in 2007, just before everything started to tumble. WIll I get back in? that's the million dollar question, because I'm a subscriber to the hot stove theory -- you get burned once and you may not want to touch it again. And even though it 'looks' okay, if I were to jump back in, I know I could guarantee losing even more than what I lost before. Look at the big crash in 1929 through 1933 -- the market did drop, but it went down in waves, because people had that hope that the market would go back up. Our gummint came to the rescue a little early by inflaitng the markets and inflating the value of market assets. Those with their 401ks and pension funds in the market may see tons of money at retirement. The problem though, is that if enough start heading for the exits, look out, there's nothing to support the markets at that point. Ultimately, I play the waiting game. put away welath in meaningful hard assets, and wait out the market bubble.
"I got out too, in 2007, just before everything started to tumble."
"I know I could guarantee losing even more than what I lost before"
The author misses perhaps the greatest bailout of all - the totally corrupt and artificial suspension/forfeiture of creative destruction.
The rich and incorporated lost big (literally) and a huge piece of that pie should have been available to the markets - those without... DENIED!!
Only history can tell, but this era may be defined as the greatest theft in the history of mankind.
by whom for whom?
We see who the winners are : those who sang "creative destruction" ad nauseam and who thrived on twisting the necks of those others, the sheeple, who were innocent; when they the scammers had to be saved by TARP, ZIRP, QE infinity.
We are still saving the fortunes of the same lot whose net income goes up every day as the QE pumps assets and banks where THEIR fortunes are.
So...whose side r u on?
Creative destruction of TBTF? Hmmm, they were the very ones who sang in its name! All the way up the beanstalk. Those who say one thing and do another thing; and we have to tell the difference between slogns and hokum pokum.
Slogans are not enuff we have to understand the historical thread of ACTS and facts.
He's talking about the scammers who got bailed out with TARP, etc. etc.
He's talking about the people who bought McMansions and got bailed out of those too while the guy who saved for a home, put a down payment on it and paid his debts got nothing, and yet paid to bail out others.
Creative Destruction is the tearing down of the old because of the excesses while newer and more nimble market participants cleaned the clocks of the old sluggish behemoths.
TPTB have a vested interest in keeping the status quo. To them losing a quarter is like getting a pitchfork in the belly. I'm in favor of the pitchfork.
Tell me about it. I saved and saved for a home. I came to the point where I could put 20, 40, 50, 60% down in many cases and still have half of what I saved. Could I get a loan? Nope. Were there foreclosures that little people like me could buy? Nope. Did I have zero debts? Yep, that probably hurt me more than helped. Rent for the past 3 years has killed me and I'm actually farther from my goal instead of at it and ahead. And then people wonder why a pissed off vet is ready to start slaughtering bankers and their (all too deserving) families. They ruined mine, so why not?
I got it I got it, let's just borrow our way out of this! If you can
borrow what you owe you can pay it off no sweat? Even some dude with a beard said it on TV.
+1 for the Lol, "If you can borrow what you owe..."
Operative word there being, "If".
Is that like taking my Visa to pay off my Mastercard? The dude with the beard was right. That's always worked for me! Every time I have payed off my Visa with my Mastercard, I borrowed my way out of debt!
Oh, wait a second...
But since we have a money out of thin air machine called The Federal Reserve it's more like, wait some years, then wait some more years.
The real question though is, when I say that "we" have a Federal Reserve System, who exactly is "we"?
As Tonto said to the Lone Ranger, "What you mean 'we', paleface?"
As Tonto said to the Lone Ranger, "What you mean 'we', paleface?"
I agree with this analysis but I think more needs to be said.
This is just a glimpse into our self imposed BEGAR THY NEIGBHOR economic “system”
I wish the author could have drawn additional lines connecting stagnant/declining aggregate wages to Asset Inflation/Housing Price inflation to increased borrowing to eventual decline in real consumer purchasing power.
Wages are naturally driven down by excess labor. Tell me you folks understand this?!
Owners/investors reap the profits of low wages to, in turn, plunk them down wherever they can earn more profit.
But this shift of wealth from the worker to the owners has a “shelf life”, a “sell by date” at which point the accumulated wealth has to be plowed back into the system to revitalize the worker-consumers.
We know this! Consumption stalls due to low pay leading to a decline in production and further cuts in production and employment/pay. Investors come to see no future profit to be made in actual production ventures so they choose real estate and asset speculation gambles to generate new wealth. Our Federal Reserve also sees it this way and is doing its darndest to postpone the inevitable time at which point the starved consumer class give up the ghost.
Meanwhile, workers pursue HELOC loans (made easier by Fed policy) and other lines of credit. They work maximal hours and they neglect their families in a bid to just maintain parity with the overall declining “middle-class” life style. The worker's children, our future leaders, find that society has withdrawn support from their educational systems, has loaded them with student debt, has escalated the price of a home to unreachable levels all the while undercutting job-pay through the free flow of immigrants/H1b Visa holders.
People, this is what is called “The Crisis of Capitalism”. Inevitably, wage declines lead to a very very wealthy investor class and a very poor working class (workers including professionals down to shop keepers down to bus-boys).
Is the day of reckoning coming fast? You bet it is. Will GOLD save your skin? Not likely but if it gives you comfort, go for it. Meanwhile, why can’t we recognize the inherent self destructive nature of this capitalism and embrace the needed wealth redistribution mechanisms that cause the least hardship, unfairness, and blood shed?
Some variety of democratic socialism is inevitable…don’t fight it. The cycle I outline above isn’t worth fighting for.
Well said.
"Meanwhile, why can’t we recognize the inherent self destructive nature of this capitalism and embrace the needed wealth redistribution mechanisms that cause the least hardship, unfairness, and blood shed?"
There will be no solution until the markets cause the pain we are due for. I wish it was otherwise as well. There is a happy medium where most people can earn above living wages and business owners can prosper as well. Unfortunately it is going to take an almost complete wipe out for the consensus to turn properly. When it does I don't think you will want to be one of those people responsible for putting us in this situation.