The Unraveling of the US Middle Class Is Monetary and Corporate
By Staff News & Analysis - January 20, 2015

Middle class decline looms over final years of Obama presidency … Barack Obama enters the final two years of his presidency with a blemish on his legacy that looks impossible to erase: the decline of the middle class he has promised to rescue. – Reuters

Dominant Social Theme: Barack must try harder.

Free-Market Analysis: The West's economic system, we know now, regularly strips people of wealth. Monopoly central banks debase the currency via money printing and large corporations make entrepreneurialism difficult.

If Obama wanted to revive the middle class in the US, he would have to change fundamental parts of the system. But he hasn't, and thus the decline of the US middle class has continued.

Here's more:

The revival of middle-class jobs has been one of Obama's mantras since he took office in 2009 fighting the worst economic crisis in generations … Obama's administration can take credit for stabilizing the U.S. economy, which is growing again and last year added jobs at the fastest clip since 1999.

But for the middle class the scars of the recession still run deep. Federal Reserve survey data show families in the middle fifth of the income scale now earn less and their net worth is lower than when Obama took office.

In the six years through 2013, over the recession and recovery that have spanned Obama's tenure, jobs have been added at the top and bottom of the wage scale, a Reuters analysis of labor statistics shows. In the middle, the economy has shed positions – whether in traditional trades like machining or electrical work, white-collar jobs in human resources, or technical ones like computer operators.

The trend is in plain sight in Dalton, Georgia, a manufacturing hub 90 miles (145 km)north of Atlanta. Massive factories that made it "the carpet capital of the world," were slammed by the collapse of the housing bubble. During the recession, with machines idle, they began investing heavily in new technology and are now laying plans to restore some lost jobs.

But the new positions are more skewed to the high and low end, and there will be fewer of them per dollar of output than before the recession, said Brian Anderson, president of the Greater Dalton Chamber of Commerce.

"We can produce a whole lot of new carpet with not a lot more people," Anderson said. Companies have spent between $1.5 and $2 billion on retooling and innovation, reducing demand for labor, while higher than average regional unemployment continued to hold down wages, he said.

We can see from the above that reasons for Obama's failure may have to do with structural changes in the US economy. The idea, apparently, is that technology is disenfranchising middle-rank workers, though employment for high-end and low-end workers may expand.

We have a good deal of difficulty believing this, however. As pointed out above, the economic difficulties in the US are structural and have little to do with advancing technology and everything to do with regulatory and monetary measures that are endlessly distortive and dis-incentivize workers and entrepreneurs alike.

The idea of blaming unemployment on advancing technology is an old one and is intended, from what we can tell, to shift the blame from the public sector to the private sector. Given Obama's abysmal jobs record, the meme of technology-as-job-killer is being rolled out once again. This ensures the real culprits are not blamed.

The article therefore provides us with a kind of revisionist history of Obama's efforts to revive the economy. It points out that the Fed's Janet Yellen, "has put money in almost all Americans' pockets with near zero interest rates that have held down mortgage payments, allowed companies to reinvest, and boosted job creation."

In fact, rock-bottom interest rates didn't much benefit the middle class because that class was struggling to survive. Rates matter if someone intends to consume something. But the US middle class in aggregate was far from considering consumer purchases during the Great Recession.

The Fed's Survey of Consumer Finances shows how uneven the distribution of that stimulus has been. Between 2010 and 2013, as recovery took hold and stock markets soared, the average net worth of families in the top 40 percent of income earners grew. For all others average net worth shrank, declining 19 percent for the middle fifth.

This is the expected result if one understands that "pushing on a string" is improbable during asset deflations. People are just trying to hang on. They're not interested in spending, even if they are being enticed with credit.

Over the six years through 2013, the middle fifth's average annual family earnings fell to $47,243 from $53,008 while their average net worth dropped to $170,066 from $236,525.

Obama "had a good start in ending the recession and a good start to recovery and then we were knocked off that trajectory," said Josh Bivens, an economist with the Economic Policy Institute, a left-leaning think tank that advocates higher minimum wages and other policies to boost incomes.

Bivens blamed the end of stimulus programs and a standoff in Congress over the federal debt ceiling that curbed government spending for the loss of initial momentum.

To a degree the administration has also been a captive of broad technological and global trends. Automation and the offshoring of manufacturing and service jobs continue to transform industries and communities such as Dalton.

From our perspective, the above is beside the point. It certainly wasn't a lack of government spending that kept the economy wobbly. Nor was it technological innovation.

The sickness of the West is a monetary one and a corporate one. So long as corporations and central banks have powers enforced by the state itself, there is little chance that the larger marketplace can rebound in a truly healthy way.

In tonight's State of the Union Speech, Obama will call for higher taxes that would fund new programs for working classes. But such programs and tax fiddling does not address the real issue which is one of constant asset-inflation leading to tremendous credit collapses.

Monetary and corporate issues must be addressed first and foremost. Tax and regulatory issues are important, too, but the main issue is the ongoing implosion of prosperity generated by an increasingly destructive business cycle.

After Thoughts

Obama has not done on a bad job with the economy because of entrenched economic difficulties that are very difficult to root out. He has done a bad job with the economy because he has failed to reveal the truth of its sickness. At least that would have been a start.

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  • Bruce C

    Who in the world thinks that Obama wants to help the US economy or the middle class?, and who thinks he would know what should be done even if he did? He clearly has a “sixth sense” for subversive Marxist policies that undermine the culture but that doesn’t mean he knows how to implement the opposite. In any event, he and the vermin in his administration (and the Congress too, let’s face it) certainly doesn’t want to change anything along the lines of what the DB is describing. The government is never going to “fix” itself, it feeds off of central banking and corporatism.

    • Bolt Upright

      I wonder what the Liberal human, a genetically identified species of human, thought they were going to get from a bona fide Choom gang leader? A leader that is a symptom of a country whose “fabric” has holes.

      • Tom kauser

        Too much ROMNEY-cain

      • Bruce C

        I don’t know how serious you are about that, but it is in fact a postulate among anthropologists – that approximately 30% of the population are genetically prone to “liberal” ideas. “Predators” v. “Producers” as Bill Ross would say.

        • Libertatis

          I used to think Michael Savage was using hyperbole when he said that “liberalism is a mental disease.”

          I’ve come to understand and agree; I see now that among the average “liberal” or “progressive” minions, it’s a derangement of thinking. Having worked with several liberals on software projects–they’re rare in the upper echelons of programming though–I’ve observed a chronic lack of foresight among them.

          While anecdotal it’s underlined a point that’s puzzled me for years; how, when faced with incontrovertible truths, can they be so utterly obstinate in their idiocy?

          Yet time after time, I observe them making the same mistakes in programming they make in understanding politics. A Pollyanna-like naivete, a sort of blind obliviousness that’s maddening enough on a project….but fatal politically.

          At the upper reaches of liberal-dom, though, it’s clear to me they know precisely what they are doing, and they are not afflicted. They’re authoritarian control freaks who feed off the disabled minions and use them very cynically.

          • Bruce C

            I know what you mean.

          • Bolt Upright

            …you’ve named several other symptoms of the Liberal species of human….for me, once I rationalized the Liberal human cannot help but behave as they do…I’m not talking pity them….it eliminated the emotion of getting pissed at them. Rationalizing their condition has open my mind on how to deal with them.


            While living in “la la ” land ,liberals, also lack a key ingredient called logic..

        • Bolt Upright

          Dead serious. Thanks to the Liberal Scientist’s, that were trying to figure out why the “Liberal ideology” is so much better,….(narcissism is one symptom of the Liberal condition), finding the gene.

    • Earn nest

      He has suggested worker’s QE in the form of $1000/person to distort the economy and buy votes. Bush tried something similar at the end of his term as the recession was getting under way.

      • Tom kauser

        It has become the go too move for several presidents so far! The Federal Reserve has got our money and is paying a third party to hold it(the bank). It is using this to wage war around the world and also to make movies about it to entertain and influence your children.
        the meme that the Fed (economy) has run dry of funds and needs to exploit other areas to make up the difference is also being used to perfection. Social security is allowed to run dry because the Fed uses the interest generated from the bonds to pay ITS PRIVATE OWNERS in Europe and not your mom or pops in retirement?
        It takes no class just arse to work for the FED

    • Tom kauser

      Everything is bad bad I tell living in river city! It doesn’t just live on corporatism it is the pinnacle of the ISM?
      A government of mercantilst trying to fix its self with democracy?
      WHERE you going to migrate too?

      • Bruce C

        Some say Columbia, but I say proof read your comments first. Smiley face (don’t know how to do that.)

    • CactusPatch

      The current situation is a horribly lethal mixture. On one side you have the Crony Capitalists and on the other the revolutionaries. Currently, they are working together to destroy the working middle class, the bastion of civil liberties. Once the middle has been destroyed, there will be a showdown between the two criminal classes. In 1971 a book called “None Dare Call it Conspiracy” was published. As I recall it predicts in the end the revolutionaries will turn on the international business community and devour them. Time will tell.

  • Of course the destruction of the middle class is not limited to economic despair. The very fabric of the culture is being destroyed both here and in Europe. The cultural traditions in place for generations are being subverted, undermined, and eliminated. Apparently the grand purpose is to have a (reduced) population of mindless, obedient, materialistic consumers across the globe with no self respect and no culture at all, other than that provided to us by mainstream media, cell phones, and the like. If you can call that a culture.

    • Bolt Upright

      “Dreamers are the future”. They’ll ameliorate the fabric. Fabric that is at least as delightful as the fabric of countries they abandoned.

    • CactusPatch

      It is a cultural revolution on a grand scale. The first wave of the revolution rolled in during the 1960’s. Since then, it has continued to roll in wave after wave. Who could believe a people would voluntarily abandon an extremely successful culture for slavery? Kruschev was right, the West has been buried by the revolutionaries without ever a shot being fire.

  • Danny B

    I found something strange that I previously didn’t know about; “Even this corner of the market has been impacted by the Chicago Mercantile Exchange (CME) offering discounts for central banks to trade futures. You can’t make this stuff up.
    The Central Bank Incentive Program (CBIP) allows Central Banks to receive discounted fees for their proprietary trading of CME Group products.”
    The article has a lot of good info about HFT.

  • Tom kauser

    I find it humorous that a people hell bent on freedom and individuality would fall for this elementary meme of all memes. THERE IS NO MIDDLE CLASS!
    Its a media generated meme to make you feel uncomfortable and jealous that your identity is under attack? When in fact there can be only two permanent class HAVES AND HAVENOTS? That middle one is were most fall too and the rest try to scrape out from under? Its too fluid and temporary to hang ones hat on. Its a goal for the 99% and a nitemare for the rest!

    • One way of looking at it, thanks …

    • CactusPatch

      I can’t follow the logic in your assertion. With most states there is a gradient from top to bottom. What scientific studies support your assertion that no such gradient exists in the distribution of wealth? It sounds like a warmed over call for the proletariat to rise up against the bourgeoisie, which I believe to be Obama’s ultimate intention.

      • Tom kauser

        I need the gradient to tell me where the parties at and not where the middle starts. I don’t need a permanent since of belonging I just need another trade idea that wont be crowded when I get there

      • Tom kauser

        the ultimate intention of the President is to bask in the glory of future recognition of saving the system

  • littlebit43

    The ones who are really hurt are us old farts who are on a fixed income. Where we are headed there will be no middle class. There will be the have’s and the have-not’s. Contrary to the hype being put out I think this is the Obama plan.

    • agstr1

      We then get ready for the last alternative, war……

  • Praetor

    Well, Obama’s been “tell-en” lies his whole life, why stop now. Come on, if their taking money from the rich to give to the poor, how is it the rich are getting richer, and the poor are still “sit-en” around drinking. For this guy (Obama) to say he’s going to steal (sorry, tax) from the rich to give to the middle class, just means, the rich are going to get richer and the middle class is going to be “sit-en” around drinking. That makes me think of the stories of the old Soviet Union, you know the ones of the people sitting around in the factories drinking Vodka, because there was no incentive to do a dam thing. Well what happened, they got feed-up with drinking and over threw the commie government. The people running the United States government are the biggest fools on this planet, at this time in history, and Obama is the Commander and Chief of all fools. There will be no rebound, we haven’t even hit the bottom. Good luck (U.S.A.)(U.S.A.)(U.S.A.) with this bunch of thief’s. Keep living the dream America, because that’s all you got!!

    • WinChll

      Keep living the dream America,….

      Recently stumbled upon this site with the following “history” :

      “In 1914, the thirty-fourth year of its publication, The Anglo-Israel Almanac listed details of a large number of Kingdom Identity Groups operating independently throughout the Britannic Isles and in the Overseas Dominions of Australia, New Zealand, South Africa, Canada and in the United States of America.”

  • Joelg

    “…the economic difficulties in the US are structural and have little to do with advancing technology and everything to do with regulatory and monetary measures that are endlessly distortive and dis-incentivize workers and entrepreneurs alike…” DB

    You capture the essence of the problem right there, DB: Structural and Regulatory. As to the shrinking middle class, that is exactly what is wanted in a socialist state: A proletariat (working class) and your Supreme Command (FED, Politburo, political elite, etc.). From a Hilary or Obama socialist perspective this is all going according to plan. As the ruling elite, they rake in power and wealth, and set the agenda: e.g. Equality meme – fight Inequality using “affirmative action” type schemes and now taxation as a behavior modification and leveling tool (mission creep, as IRS goes beyond raising revenue into enforcing socialist mission). In the Democratic Party Socialist vision, below the Ruling Elite That Guides Society, the rest of society evens out at the bottom with complete equality (in a George Orwell, Animal Farm sense). There is no room for much of a middle class in a socialist society, expect for a small class of essential professionals. QE and Fed are part of the team on this.

    The middle class is a phenomena made possible by capitalism and the merchant class (creators of the limited liability corporation that is demonized relentlessly by the socialists, OWS and others for globalization and its perceived excesses). Capitalism creates freedom, and eschews the restraints and Lack of Freedom Inherent in Feudalism and Socialism. The Ruling Elite in Socialism or Feudalism has more power and control without a middle class; they want a system with themselves at the top as Rulers, a minimal number of technocrats and engineers to run things, and complete equality, mendacity and mediocrity in a completely equal working class (serfs, peasants). The Worker’s Paradise. When Hilary campaigned for the losing Senate candidate in Kentucky and said that the private sector does not create jobs, only the government creates job, she was stating the credo of the Socialist Ruling Elite and their many followers (perhaps majority in USA?). Freedom is hated in the USA, considered the enemy. That is the real bottom line. OWS, the LLC haters, Socialists and Big Government fans are united and outnumber the merchant class and believers in freedom. That is why we have the Structural and Regulatory problems –the people want it; it is Populist and Progressive.

    • WinChll

      As you so well articulated, this ideology fits in well with sustainable development (Agenda 21) signed as a soft treaty by Republican George H. W. Bush and implemented thru backdoor regulations by subsequent administrations. In fact Obama has designated 2 million more acres under protection as “conservation land”. But one must wonder if this land grab has more to do with collateralizing debt than preserving “wilderness” as announced during the Reagan Administration:

      Obama’s land grab:

    • Gil G

      Nope the managerial middle class is a Socialist artefact. There are only two classes in a Capitalist society: the productive class and the unproductive class. With the productive class should become rich while the unproductive should become poor.
      Besides what count as “middle” class? Middle of what?

  • DB: “… such programs and tax fiddling does not address the real issue which is one of constant asset-inflation leading to tremendous credit collapses.”

    BISCHOFF: Asset-inflation, really…..??? All I can see is asset-deflation……..airlines, automobile companies, railroads…..all capital heavy companies going down the tube……. You call this asset-inflation….??? Maybe you are confusing capital assets with real estate. Driving up “prices” through speculation in the real estate market, where supply is perfectly inelastic, is not asset-inflation.


    Cloward and Piven, Saul Alinsky and all of ojama’s up-bringing was Marxist communist based. Overwhelm the system . Eliminate the middle class , Gain total control of their Health and you will destroy the American dream . Looking for a “Sh#thole to dictate to will be your ulterior motive the end result.

  • any-mouse

    Obama is just a red herring–he never meant to do anything for the 99%. It is a proven axiom that 70% of jobs come from small business which is financed from Local/regional Banks and Credit Unions. He followed the orders of his Big Bank Council on Foreign Relations bosses along with the Fed [which is owned by the same] and transferred all the money to the Big Banks and thus the wealthy elite 1%. As Henry Ford once said, if the average American could understand how this country is run financially–there would be a revolution tomorrow….Behind every great fortune is a great crime–and this is it…

  • CactusPatch

    Watch what someone does, not what they say. Obama has systematically implemented policies to destroy the middle class, not the least of which being his so-called “signature health care policy, the Affordable Health Care Act.” At heart, Obama is a Marxist revolutionary intent on destroying America as we have known it. If he has to work with the Crony Capitalist to achieve those ends, so be it.