The Federal Reserve Has Done A Great Job Destroying The Middle Class

[DamianTV]

https://www.zerohedge.com/news/2018-04-18/federal-reserve-has-done-great-job-destroying-middle-class

Authored by Tom Lewis via GoldTelegraph.com,

The Federal Reserve has been determined to create “Wealth Effects” throughout the economy since 2008, which has left the majority of Main Street on the sidelines.

The Fed’s objective was to make American households feel wealthier by pushing up the valuations of stocks and bonds. However, this paper wealth mentality has worked beautifully for Wall Street and the 1% but has destroyed much of the middle class as wealth inequality continues to skyrocket.

In fact, former Federal Reserve Chairman Alan Greenspan has gone on record to warn of a massive bond and stock bubble thanks to historic low-interest rates. I guess, the idea of rising paper wealth to drive a wave of renewed borrowing and spending hasn’t quite worked out as planned.

Sadly, as the below chart points out most households have been squeezed as the majority of the wealth created has only gone to the top 5% of households earning in excess of $200,00 annually, meanwhile the bottom 95% have suffered.

We used to live in a time where making a six-figure paycheck was a lot of money, but parts of the United States are simply unaffordable for most of middle America. In San Francisco, you have to earn as much as $110,040 to be even considered in the top 50% of earners, according to U.S Census figures.

It is evident that these “Wealth Effects” that the central bankers have been chasing does not drive inflation-adjusted wages of the bottom 95% which has stagnated for decades. It merely accelerates purchasing power decay where the 1% get the wealth first, and it then trickles down to the rest of the economy. The experiment of prolonged zero interest rates has destroyed savers and rewarded reckless spenders who have helped push household debt to unprecedented levels.

Unfortunately, the 2008 Band-Aid is going to be ripped off at some point which will further alienate the middle class and drive wealth and income inequality even further.

Wealth Effect = Total Bust

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Full article at link at top. Reference links in article underlined.

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The Fed apologists ought to be in shortly to tell us how wrong we all are and how wonderful the system works for everyone at the bottom.

 

[acptulsa]

Should have attached a poll:

o The Fed did it by accident.

o The Fed did it on purpose.

 

[ILUVRP]

looking at the last chart , i have always thought that reagan / kudlow / laffer in the early 80's with their trickle down bs started the downfall of the middle class .

it will only get worse and the middle class can not be saved .

 

[Krugminator2]

looking at the last chart , i have always thought that reagan / kudlow / laffer in the early 80's with their trickle down bs started the downfall of the middle class .

it will only get worse and the middle class can not be saved .

Trickle down is a made up term that has nothing to do with the ideas they presented to cut taxes. Trickle down never existed.

The top marginal tax rate was 70% when Reagan made the major tax cut. How does cutting the top rate hurt the middle class?

 

[ILUVRP]

just look at every chart you can find about the middle class declining , it always starts around 1980-85 .

 

[Krugminator2]

just look at every chart you can find about the middle class declining , it always starts around 1980-85 .

Most charts don't show that let alone every chart. It started in the early to mid 70s. You could just easily say it started in the 1990s. You only say it started in the early 80s because of your anti-capitalist bias.

And why is a shrinking middle class a bad thing? It isn't shrinking because low income earners are earning less. It is shrinking because there are more people who are high income earners.

 

[DamianTV]

just look at every chart you can find about the middle class declining , it always starts around 1980-85 .

Right after Nixon "temporarily" suspended the convertibility of cash to gold, and we ended up with the Petro Dollar, hmm...

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Most charts don't show that let alone every chart. It started in the early to mid 70s. You could just easily say it started in the 1990s. You only say it started in the early 80s because of your anti-capitalist bias.

And why is a shrinking middle class a bad thing? It isn't shrinking because low income earners are earning less. It is shrinking because there are more people who are high income earners.

It is said that the Rich represent the past of our country, the economic opportunities that existed in the past. The Middle Class represents the Future of a country, based on the economic opportunities that exist currently.

If we have no Middle Class today, there will be less Rich in the future. A few of the rich will be even richer, but the opportunity to ever get to that level no longer exists. Since the rich are supported by the existence of a Middle Class, eventually even the rich will fall as well.

 

[econ4every1]

Trickle down is a made up term that has nothing to do with the ideas they presented to cut taxes. Trickle down never existed.

The top marginal tax rate was 70% when Reagan made the major tax cut. How does cutting the top rate hurt the middle class?

The belief that if investor class had more money they would invest it back into their businesses and things that encouraged productivity. Good for everyone, right? No so much.

The reality is that the investor class used that money to grow their wealth in unproductive finance, speculation and rent schemes. Companies cut spending on plant and equipment and training and focused more on stock buybacks as a way to maintain share earnings. Combine the increasing wealth into the hands of the few with the power of computing and utilization of social sciences in marketing, advertising and now data mining, the wealthy are getting wealthier but are delivering less in terms of real productivity.

The class of people with exorbitant wealth has increased, while the wealth at the bottom has decreased. This leads to more idle money spent representing the very wealthy and their interests.

 

[Krugminator2]

The belief that if investor class had more money they would invest it back into their businesses and things that encouraged productivity. Good for everyone, right? No so much.

The reality is that the investor class used that money to grow their wealth in unproductive finance, speculation and rent schemes. Companies cut spending on plant and equipment and training and focused more on stock buybacks as a way to maintain share earnings. Combine the increasing wealth into the hands of the few with the power of computing and utilization of social sciences in marketing, advertising and now data mining, the wealthy are getting wealthier but are delivering less in terms of real productivity.

The class of people with exorbitant wealth has increased, while the wealth at the bottom has decreased. This leads to more idle money spent representing the very wealthy and their interests.

We live in the future. We can look back and see what happened. The second longest expansion in history happened under Reagan. The Clinton years were basically a continuation of Reagan. You had a 20 year surge in prosperity.

Maybe wealth inequality was lower the 20 years prior to Reagan. Multi decade stagnation with a breakeven stock market will do that.

Why is finance unproductive? Why is growing wealth with speculation bad? Why is marketing bad? Why is representing the wealthy's interests bad? Those all seem like good things to me. The last thing is the Piketty argument that wealth inequality is bad because wealthy will have more influence with the government. Sounds good to me. The average wealthy person is far more fiscally conservative than the average voter. I'm glad Charles Koch and his organization has outsized influence. Better him than the average moron watching the Kardashians. Even George Soros is much more sane the average than the average liberal.