Speculative bubbles are pushing the U.S. middle-class to the brink of financial ruin, as the cost of living continues to soar, wages have been on a persistent downfall, and debt just keeps on accumulating throughout the current economic recession. Over the past year, more than 8 million middle-class workers have fallen straight into poverty, and the situation will likely be aggravated in 2021 due to the coming burst of several asset bubbles that have been fueled by the unprecedented monetary response to the health crisis. Added together, living expenses skyrocketed almost 400 percent, but wages only increased by 29 percent. That is to say, as the backbone of the American society continues to collapse and significantly lose its purchasing power, experts are warning that we’re about to face a dramatic systemic breakdown that will trigger much more social tensions and widespread civil disorder over the next chapters of the U.S. economic downturn. That’s what we’re going to analyze in this video.
The American dream is being removed from the reach of millions of U.S. families, while others that spent years building up their wealth have seen their entire emergency savings and retirement accounts being completely wiped out in a short few months. According to Bloomberg data, after the sanitary outbreak exploded, approximately 8.1 million middle-class workers who faced temporary or permanent lay-offs have fallen straight into poverty last year due to the extraordinary financial strains they were suddenly forced to face. Evidently, the health crisis has accelerated the erosion of our finances, but to truly understand the collapse of the American middle-class, we have to analyze some fundamentals.
As the financial and economic analyst, Charles Hugh Smith has described: “as the household’s ownership of these assets that yield unearned income rises, so does their income and wealth. These increase the financial security of the household and build a nest egg that can be passed down to the next generation, improving their security via inheritance of income-producing assets,” explained Smith.
For instance, when you buy a house, a mortgage is borrowed against future earnings and you’ll pay the debt you created over the course of several years without compromising your credit. However, the current recession has forced workers in the middle-tier segment to accumulate enormous amounts of debt. Which means, in face of our broken economy, the middle-class is losing its ability to generate future earnings, and, therefore, it is losing the primary feature that defines it as “middle-class”. Essentially, that is occurring because wages aren’t keeping up with rising living expenses.
According to a recent report, over the past decade, workers’ deductibles increased by 176%, while coinsurance rose 67%, workers’ total cost-share went up by 54%, health costs rose 49%, as well as costs paid by insurance, which climbed 49%. Added together, the relative spike in living expenses jumped 395%, while wages only rose by 29%. That jeopardizes workers’ ability to save money and invest in assets, as basic costs are taking up bigger chunks of the monthly middle-class paycheck.
What is happening right now is a phenomenon Smith called the “decapitalization of the middle class,” which implies that the huge debt load workers were forced to take to maintain their life-styles is prompting the “decay of the ladder of social mobility which enabled tens of millions of workers to transform their wages into productive capital via saving and investment in their own human capital, their own enterprises and assets that earn income,” says the analyst.
The speculative bubbles formed throughout the current crisis have put many assets out of reach of the bottom 90%, which of course includes the middle class. The median price of a house in 1996 was $135,000, already 3.8 times the national median household income. Now, the housing bubble has expanded so ruthlessly that the median home price is ranging at $542,000 in the simplest of locations. In metro areas that figure easily exceeds 1 million dollars. In the time span of a year, the Fed managed to send housing prices up by 17 percent due to the excessive liquidity injections. And that value will continue to rise as the U.S. housing inventory is at record-lows.
For that very reason, it won’t take long until middle-class workers realize they have been impoverished by the ongoing monetary policies, and when that happens we can expect to see an upsurge of social conflicts and civil disorder that will trigger a massive systemic breakdown. Once our population awakens to the fact they have been purposely pushed to the brink of financial ruin as our government deliberately decided to prioritize corporate profits instead of saving our business, our jobs, and our wealth, our country will never be the same.