Guest Post: Who Destroyed The Middle Class? (Part 1)

Tyler Durden's picture

Submitted by Jim Quinn of The Burning Platform blog,

“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 FergusonPredator 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.


young wage high school earners

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.


college graduate wages

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.


case shiller and snp500

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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ihedgemyhedges's picture

SAY IT AIN'T SO JIM QUINN!!!!  Octomom is in a PORNO????  Yikes.....................nightmares to follow........

Michael's picture

The MSM is one of our enemies. The major weapons they use against us are human interest stories about individuals personal problems. None of which interest me.

IBelieveInMagic's picture

This article still does not accurately portray how we got here and to the the current trends in societal polarization.

The bottom line was the USD reserve currency status gave Americans a huge unfair advantage for the last 40+ years in terms of consumption but the downside was middle and lower class jobs was, gradually and then furiously, thrown under the bus. Without USD reserve status, Americans (and that includes all Americans) would not have enjoyed the consumption binge for the past many years that was extracted from commodity surplus countries that have been forced to trade on our terms. Now the problems (of job loss) has become obvious, we are blaming the elite (we did not complain when we were greedily participating in the consumption binge). Yes, the rich took advantage of the American masses to skim off a greater part of the overall pie (they felt entitled to it as they had snagged the global consumption advantage in favor of the US).

Now we are casting around for scapegoats to blame. Truth is, no one is blameless.

Western's picture

Then how did the elite make off like bandits?

IBelieveInMagic's picture

By snagging a bigger slice of the loot while the masses were revelling in their consumption binge or pacified with entitlement benefits (unsustainable in the long term).

malek's picture

If the masses enjoyed a consumption binge that was extracted from commodity surplus countries, then why are those masses now broke?

I think you can roughly divide the masses in 3 groups:

1. The large group who put their savings into something that turned out to be a Ponzi scheme, with them coming in late. So they lost most or all of their savings.

2. The larger group who joined the same Ponzinomics, but with lent money (mortgages, HELOCs etc.) and now have seriously negative net worth.

3. The largest group who never even tried to "invest"/speculate on anything, but just burned straight through their lent money by consuming.

The few out of the masses who not belong into any of those groups are basically a rounding error...

dolly madison's picture

Now we are casting around for scapegoats to blame. Truth is, no one is blameless.

Truth is plenty are blameless because they didn't know what was going on.  They were born into this system, and didn't question.

oddjob's picture

Apologists are closet enablers with no productive skills to offer.

Michael's picture

The Illuminati can kill however many they think is necessary. And if they kill too many, they know how to make more.

This is how they think.

DoChenRollingBearing's picture

Only a handful of people I know are better off than they were in 2007.

The Octomom, she MIGHT be one of them...

Ben Dover's picture

Actually she's not to get that much for what she does - maybe $50K. And when you figure in that that amount was announced by her lawyer you know she'll get a damned sight less than that.

midtowng's picture

I'm Gen-X. I've had to get very creative to avoid having my net worth hammered.

Thank Gawd I figured out to invest in gold a decade ago.

saunhi's picture

The tipping point was when the New Elite [Union Govt Masses aka the 9%] entered the equation and piled on with the old Elite [the wealthy aka the 1%].

The Pension contract burden for 3-generations of govt masses will reduce the 90% of us to tax slaves.

It is the combined wieght that is back breaking.

Dr. Sandi's picture

This is based on the fairy tale belief that the guvmint will honor THOSE promises for some reason.


IBelieveInMagic's picture

Yes, thank you for coming and participating in the class warfare. Look there goes THEM!

xtop23's picture

I would have said Woodrow Wilson but that's just me.

.... and multiculturalism has enriched our society.

Melting pot remember? Pull your head out of your ass.

Yen Cross's picture

RedueQ     Tyler?  I;m out for a break.  POTUS is afarce!

Caviar Emptor's picture

It's only a problem if America really wants a middle class. It's looking more and more like the answer is No. And that'sperfectly ok: many countries have gotten by while dominated by a small, corrupt elite that "taxes" every business transaction of the peasant class. 

Advice? Consider going to domestic servant school to learn how to serve the rich.  Those jobs won't last forever but at least they come with room and board guaranteed. 


potlatch's picture

A sensible analysis.


I would also note, strictly from a lowered expectations marketing perspective, it can simply be pointed out to people that a shift from a "service economy" to a "servant economy" is all just a matter of fussy semantics anyway, and it's just no biggie/.

A Lunatic's picture

My Dad made $12/hr back in the early 1970's running a skidder for a logging operation. That job today pays about the same wage +/- a few benny bucks. He was pissed about the low wages back then....................

Bananamerican's picture

he shoulda run a skimmer, like Lloyd

Spastica Rex's picture

I'm encouraging my son to be the first in four generations not to go to college. He's 16 and learning welding this summer in a vocational program - he loves it. He's also reading James Joyce.

DaveyJones's picture

Makes sense. A lot of crap will need repair

Tijuana Donkey Show's picture

Chinese crap. The Chinese can't make good metal to save their lives, per chairman Mao. People fear China, I don't. They will all die of cancer in 10 years from how they wasted their country for bullshit. America is in trouble, but the Chinese are FUCKED.

dolly madison's picture

Yeah, before 2007 I was all for my kids going to college, but I am not so sure anymore. Between the loans making them debt slaves and the pollution exposure from living in cities to get those kind of jobs making them sick.  I'm just not sure it is the right thing anymore.

GlobalCtzn's picture

Excellent advice Rex. Add travel outside of the U.S. for some extended period into his education mix and he will benefit greatly from the mind-expanding experience. My two cents.............

Miffed Microbiologist's picture

When our girls were 14 and 17 my husband and I took them to Paris for 2 weeks. We had "how the world really works" day. We went to Verseille and walked around the obscenely opulent palace and grounds including Marie Antoinette's "play peasant " town. Then we went to the catacombs and saw the infinite rooms of piles of bones which we strode through for hours. They saw the reality of history no classroom could ever provide on the historical life of rich and poor. Over dinner we discussed the French revolution and the horrors the poor suffered, the reign of terror and how late in the revolution many thousands of innocents were killed during France's great reset. Many today have forgot these lessons and I fear the future. Too bad more Americans haven't traveled and witnessed life outside their limited spheres.


sethstorm's picture

Or consider taking up an outsize competency in firearms and other weapons via the military for the purpose of becoming a professional assassin.



Conrad Murray's picture

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 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

Are you voting D or R? Kill yourself.

Vote with a bullet or vote with your feet; everything else is masturbation.

Michael's picture

The mainstream media is a major enemy of the people.
They touted all the trade agreements as being good for us.
Ron Paul will abolish all trade agreements. That will truely be good for the middle class.

toady's picture

What ever happened to Ron?

I must have missed it when he dropped out...

Dr. Sandi's picture

Mr. Paul is no longer a threat to Mitt Robot's presidential bid. So there's no need to feature Ron in stories slanted to make him look clownish or senile. His 15 minutes ended when they no longer needed to smear him.

Michael's picture

And that's when the MSM's ratings took a nose dive. LOL.

flattrader's picture

>>>...make him look clownish or senile...<<<

Make him???  He did a good enough job on his own.

A Christian Reconstructionist nutcase masquerading as a Libertarain...

flattrader's picture

Ron's collecting Social Security checks...really.

Conrad Murray's picture

Eliminating the DC/NY Axis of Evil, by any means necessary, is essential to rekindling the fire of economic growth that supports and advances not only the middle class, but all classes.

Here's to complete and total worldwide economic awakening...


WhoMe's picture

Looks like the CFTC is thinking of reigning in High Frequency Trading?





illyia's picture


Dr. Sandi's picture

Yeah, the CFTC is gonna get one of those black boxes for themselves, then make it illegal.

uno's picture

obviously gonna benefit the Squid and the Morgue since they control the CFTC

mcguire's picture

it must be understood that class warfare is a means to an end... the oligarchy will continue after the revolution, and be more powerful than ever.. they /want/ a revolution, it is their goal!  thesis, antithesis, synthesis.  

Hulk's picture

Great job Jim...

earleflorida's picture

2nd that 

bravo mr. quinn

Caviar Emptor's picture

Biflation will simply eat away at middle class wealth, status and political power. It's snowballing now and the downward spiral is accelerating. The bottom is falling out as those in the lower middle class will increasingly be out on the streets panhandling. It's already visible in NYC.

 Biflation will simply price the middle class out of the economy 

Animal Cracker's picture

It is truly disgusting when my degree in Lesbian Architecture can't even get me a middle class job anymore. Thank God for EBT cards and OWS.

shovelhead's picture

But you still know how to build a dike and they can't take that away from you.

Consider going back to school for a degree in ethnic pandering.

bigwavedave's picture

-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.


Bollocks. It's all about COLA