Redefining The Middle Class: It Isn't What You Earn & Owe, It's What You Own That Matters

Tyler Durden's picture

Authored by Charles Hugh-Smith via OfTwoMinds blog,

No wonder the "middle class" has lost political power - it has lost the economic power of the ownership of productive assets.

Longtime correspondent Mark G. observed that the key phrase in yesterday's excellent commentary by correspondent Ron G. is property-owning middle class. Mark wrote: "It appears to me that the income bracket method used today isn't very informative."

Here is Ron's commentary again:

"The American economy and people are not being served by a government that was designed to be a Democratic Republic, whose architecture and balance of power depended on a property-owning middle class to be the countervailing force against Oligarchy; given the irreversible nature of the market and technology that contributed to the decline of the US middle class, (globalization, automation and AI), it is apparent that we will stay on this downward track of the middle class for the immediate future, and therefore more disparity, dispossession, and coercion will be needed to maintain control, and to me this means a future of intimidation, censorship and continued involuntary servitude."

What does property-owning actually mean? to answer that, we have to tease apart earnings, debt and what assets are owned.

The core contradiction in the present-day version of capitalism is between production and consumption: The system must produce goods and services that can be sold at a profit, and there has to be consumers who are able to buy the goods and services.

Over time, the focus in our culture and economy has shifted from production to consumption, and from acquiring capital to credit-funded consumption. The balance between production and consumption is dynamic and can become dangerously asymmetric; if there are only producers and no consumers, the goods and services pile up unsold and enterprises go bankrupt. If there are only consumers and no producers, the system eats its seed corn (capital) and sinks into impoverishment.

As Mark noted, the income of a household reflects very little of this distinction. Many households enjoy incomes above $100,000 annually but they own essentially nothing. By income alone, we categorize the household as "middle class."

But if we consider their total debt load, their ownership of income-producing assets and assets they own free and clear--essentially nothing--then they must be re-categorized as well-paid proletarians.

So what happens when we redefine the qualifications of "middle class" from what you earn and owe to what you own free and clear that generates income? How many American households qualify as "middle class" under this new definition?

Longtime readers know I have addressed the characteristics of the middle class in some depth for many years. For example:

What Does It Take To Be Middle Class? (December 5, 2013)

The Destabilizing Truth: Only the Wealthy Can Afford a Middle Class Lifestyle (May 6, 2014)

Under this new definition, every household one housing-bubble-burst away from the destruction of their home-equity "wealth" isn't really middle class. Neither are households a paycheck or two away from insolvency.

In Endangered Species: The Self-Employed Middle Class (May 2015), I reported on the results of poring over IRS income and deduction data. Of the 141 million taxpayers reporting income, only 7 million earn a middle class income from an enterprise they own (sole proprietorship or professional corporation).

Compare this to what the wealthy own. Note that the bottom 90%'s assets are largely the family home, an asset which is offset by a heavy burden of debt. The wealthy own income-producing assets: business equity, stocks, bonds, trusts and rental real estate.

No wonder the "middle class" has lost political power--it has lost the economic power of the ownership of productive assets, which is the foundation of political power. A class of well-paid proletarians burdened with debt is not middle class --it is a class of debt-serfs who have been persuaded that debt-fueled consumption is wealth because this delusion is politically useful to the self-serving elites who own the wealth and thus the power.

Mark's conclusion is sobering: "With no genuine middle class exerting power we are left merely with competing groups of oligarchs, with both groups recruiting supporters in the plebeian "mob".   This most resembles Rome  when the Republic was breaking down.  I would therefore not rule out civil war, or even a political partition.   Proletarians have much less to lose in such an event than a real middle class."

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VWAndy's picture

 Tools and the skills to use them well. Thats where one needs to be in Bartertown.

meditate_vigorously's picture

Not going to happen in our lifetime. The psychology is a huge barrier. It would either have to be gradual or catastrophic. Catastrophic is unlikely, and if it happened, most of us would be dead (the other reason not in our lifetime - we will likely be dead if it happened).

VWAndy's picture

 Anything is possible. That stall thing is starting to gain traction. People used to laugh at the idea. Now not so much. You have to admit it would be interesting to see who can do and who cannot do.

ParkAveFlasher's picture

Stocks bring income?  Since when?

VWAndy's picture

 My stocks of tools have.

 edit  Most of my tools paid for themselves over time.

Antifaschistische's picture

Note to Middle America:   If you just put 10% down on your 1,100 sq ft $584,000 home outside of DONT OWN IT!!   It doesn't count on "things you own"

idontcare's picture

There are 1,100 sq ft homes near Oakland for under $1 million? Who knew?

NoPension's picture

I am running out of room for tools. I'm 54.... and have a network of friends and relatives that keep downsizing or dying. I'm the guy they all think to call to give all the tools to. I can't say no.
One rather well off friend just sold his 3 million 10,000 sq ft home, and now rents an 850 sq ft apartment. The sawzall had $200 worth of blades in the box. The 1" hammer least $300 in bits. I've already got 2 or 3 of each!
My wife is fucked if I go first. She looks at the shop and just sees a bunch of junk.

VWAndy's picture

 How much for the hammer drillset? My boy is looking for one. For real.

VWAndy's picture

 If the good guys win. You will be the man.

Golden Showers's picture

Don't talk like that.

For a year and a half I waited to buy a harbor freight 20 ton shop press to do my rear axle bearings on an old SR5.

If you want to be a tool box it's good. Really good. But i don't feel sorry for you. It sounds like you need a friend. Why do you want that shit anyhow? You are not responsible for your siblings who can't do shit without your stuff. And don't put it on your wife. That is bullshit. Total bullshit.

Perhaps she is waiting for you to knock off and she'll open a garage.

I know a mechaninc who's 67 and he flips cars like pancakes at IHOP. Get them in and get them out.

Lending tools is cool. Paying for blades and bits is stupid. Why not consider not buying shit you don't need and giving your better half the time of day?

Otherwise, don't. Please don't tell me your bullshit sob story becaue you can't stop buying shit you don't need. Friend.

Billy the Poet's picture

But that wasn't his story at all.

idontcare's picture

If she doesn't want the tools, this gal will take them.  You can never have enough tools.

Helix6's picture

Dividend-bearing stocks.  Any other kind is speculation.

hedgeless_horseman's picture


We have livestock that bears more livestock. When an animal reproduces it essentially doubles its value, and can do so every year. Folks think cowboys are stupid.

Golden Showers's picture

No, dude. Folks think cowboys are stupid because of Garth Brooks.

I don't even be sucking balls like cowboys when Garth comes to town like you ball licking faggots eat up the Garth cock sandwich.

Don't even start with me. I milk a goat every 12 hours on time. If you think I want another goat, keep it up.

Billy the Poet's picture

Yeah, but what do you do with all those bears?

SWRichmond's picture

Well we dont own anything, not even ourselves, we only rent from the government(s).

If I have to pay a tax in order to keep it, it's not mine.

Citxmech's picture

Exactly.  If it can be repossessed/taken for lack of payments due, you don't own it.

VWAndy's picture

 Taking the working folks tools is one of them things ya prolly dont want to try. Its not going to work out well for anyone.

Mr. Universe's picture

I don't think it works out for any but those who hold the leash on assets and the lawmakers to protect them.

The wealthy own income-producing assets: business equity, stocks, bonds, trusts and rental real estate.

think about what these assets are,

1. business equity, a reflection of hard work for the smaller business man. The goal is to sell out to a corporation before you die to avoid the death taxes. However your own labor to produce something of value is honest labor, but you don't own that, the .gov thinks a % belongs to them

2. Stocks, a fantasy sham that should be illegal except for perhaps 100 shares in one company, the person-hood of the coporatocracy is a driving force to a total lack of accountability.

3. Bonds, another rent seeking sham that produces nothing

4. Trusts, no production other than usury.

5. Rental Real Estate, more usury.

This is all a function of those who set the whole system up, guess Juo that was.


GunnerySgtHartman's picture

And this is why governments are loathe to eliminate property taxes!

Hongcha's picture

21 sheep up-arrowed that one.

scrappy's picture

You sir, WIn the ZH Comment of the Day Award!

Servant King Intro: Confusion Programs 1 of 9

Servant King Intro- Unraveled Programs: 1 of 14


The death cult corpse trick you by BONDING YOU.

They do it by CONTRACT, the key is your CONSENT. Do not consent to criminals.

From 14th Century Latin bond
and 14th Century English bond meaning "a
serf or slave by binding agreement/covenant". A
deliberate and cruel corruption of the pre 12th
Century English word bonda and Old Norse bondi
meaning "free-born farmer". By the 16th Century, the
word also acquired the meaning "An agreed
obligation/oath to pay a DEBT or to perform a CONTRACT".
The key operating factor is CONSENT.
Once an indivividual gives their content, they are
"bonded" (slaves) to that obligation and subject to


From 14th Century Latin bondagium meaning
"conditions of a bonded serf or slave". As a BOND is a
legally binding agreement of service/slavery, it must
contain at least one condition. The accumulative
conditions are bondage. The sexual sado-masochism
sense of this word is first recorded in 1966.

HRClinton's picture

FYI, there are no property taxes in Israel, KSA and the Gulf States.

So you do own the property, if you own it there. 

Who do you blame for that? The person in the mirror?

Offthebeach's picture

From Plymouth Plantion to Nation Plantation.   

Just extrapolate from Native American reservation, or Ghetto Housing and then buff it up a bit cause Whitey will mow the company lawn.


The Sheeple sleep.  They are cattle.  

blue51's picture

White Lawn Jockeys , coming soon .

MalteseFalcon's picture

I see white lawn jockeys a lot.

No need to despair.

I invite you to join me in participating in the "Black Lawn Jockey Project".

Take a can of black spray paint in your car, and when you see a white lawn jockey, stop and spray paint the jockey's face the appropriate shade of black.

There's picture

I've said that for years.

meditate_vigorously's picture

The most disturbing part to me is the deposits ratio and % of assets as housing.

Deposit ratio adds validity to the assertion that the closer to the money supply source, the richer you are and the less reason to have deposits and other conclusions could be inferred.

The housing ratio shows me that we are all being scammed by the green people. Asset is high for a variety of reasons, and I will try to avoid causality on these points.

Higher ratio of wealth in house means less to invest into productive assets
It also means it is a good way to harvest wealth through mortgage interests and taxation
So, there are many interests that want high cost of housing, but they are all those interests are controlled by the green people.

Rainman's picture

A seven figure net worth should make you solidly middle class...for now

Mr. Universe's picture

A seven figure net worth places you in the top 7 percent of all households in the USA. I guess the other 90%+ are just SOL.

Houses Depreciate's picture

Housing never defined "middle class". Housing represents crushing levels of debt and poverty.

BigFatUglyBubble's picture

Max Keiser has been doing good podcasts on this topic.

yrad's picture

So, I'm broke. Got it.

Houses Depreciate's picture

Falling prices my good friend.... falling prices.

Non-Corporate Entity's picture

The new middle class are the sports stars and celebrities earnings bracket. The lower middle class and lower class are the ones who patronize these people. The upper class keeps the muppet show running.

Deep Snorkeler's picture

The Middle Class is Fundamental to Democracy

A large and growing middle class.

An alert, active middle class.

A highly educated middle class.

A propertied middle class.

A middle class that believes the game is fair.

A middle class with expectations of progress and improvement.

HuskerGirl's picture

Agreed.  But it's been a long time since we've had this middle class.  Which probably answers the question of why our democracy (or republic) is crumbling.  

Hongcha's picture

Sounds like Beijing, Shanghai and Hong Kong :)

Ghordius's picture

now this is the very best short "like the decline of the Roman Republic" article I have read
my compliments

Ghordius's picture

a small thing: a proletarian, properly speaking has/had assets. his children, who support/will support him

Cordeezy's picture

$100,000 + today is nothing when you have $1,200 a month in rent, $600 in car payments (two car families)  $500 in school loans, $800 a month in child care for one child.  The money goes fast !