Re: A synthesis and articulation of the Middle Class from the examination of a bifurcated society. For the purposes of this article, the term “Middle Class” will be left as an abstraction to be defined by the body of the commentary. To this end, the poor and working poor will be defined as a family of 4 earning less than $24,000 a year, or less, and the wealthy earning $250,000 per year, or more. These are generally accepted parameters used by the US government in statistical analysis and quibbling about these definitions should not greatly affect the course of the discussion as it proceeds as a logical exploration, not a statistical one.
What has brought these thoughts forward is the ongoing, separate discussions of inflated valuations in healthcare, educational expenses and energy. When I’ve had the rare opportunity to hear all three subjects raised at the same time, the argument is made that these are all areas in which there is direct governmental activity and the spiraling costs are a result of interference in the actions of the markets. The argument I will propose is a much simpler version of governmental oversight, currency manipulation.
As the growth of GDP, and hiring, slows and stock market values begin to teeter, there is already a welling call for additional quantitative easing by the Federal Reserve. Fed intervention is always a blunt instrument, that damages as much as it helps, but the more precise actions of Keynesian counter-cyclical spending, by the government, can not pass through the legislative bodies. As a result, it falls to the Fed, as the instrument of last resort, to prop-up valuations with a devalued currency. The benefits of these actions are largely psychological and ceremonial: the markets stabilize but the valuations, while equivalent numerically, are, in fact, not equal because they are expressed in devalued dollars. This reality, of perceived value verses actual value, is never expressed, as it is a poison to the market.
As much as the failure of the Congress in the “Debt-ceiling” debate, continued quantitative easing signals a dysfunctional government without a comprehensive grasp on reality. Whether expressed or not, S&P must have seen this as well and factored it into their criteria on the downgrade.
Where the reaction to these actions become most glaringly apparent is the steady decline in buying power per $1US. While appearing to be subject to great inflation, healthcare, education and energy are merely constant valuations in a deflationary economy, deflated largely through the devaluation of dollars.
While certainly, at least, inconvenient to the wealthy, this is devastating to the poor-unless they have access to a governmental program for assistance. The middle-class have neither the access to help nor the ability to absorb these higher valuations. They, alone, are left without resource.
This is the shrinking middle-class: not just in the numbers falling into the category of working poor but those whose income has actually deflated while remaining equivalent. The actions taken to the benefit of either end of the economic spectrum always effect the center, not just in taxation but, more importantly, in the support of constant valuations in a depression.
A depression? But isn’t GDP growing? Factor in the effects of trillions of dollars in low-interest loans AND quantitative easing: removing those from the equation reveals the US economy has never stopped deflating-as most evident in housing valuations which effect, again, the middle-class most profoundly.
While I was in favor of the original round of quantitative easing, to stabilize the stock market, the second round was merely a re-inflating mechanism for them without any real market support. If a QE III is initiated, without a corresponding, and commensurate, fiscal stimulus the middle-class may cease to exist.
And they won’t even know it.
What has brought these thoughts forward is the ongoing, separate discussions of inflated valuations in healthcare, educational expenses and energy. When I’ve had the rare opportunity to hear all three subjects raised at the same time, the argument is made that these are all areas in which there is direct governmental activity and the spiraling costs are a result of interference in the actions of the markets. The argument I will propose is a much simpler version of governmental oversight, currency manipulation.
As the growth of GDP, and hiring, slows and stock market values begin to teeter, there is already a welling call for additional quantitative easing by the Federal Reserve. Fed intervention is always a blunt instrument, that damages as much as it helps, but the more precise actions of Keynesian counter-cyclical spending, by the government, can not pass through the legislative bodies. As a result, it falls to the Fed, as the instrument of last resort, to prop-up valuations with a devalued currency. The benefits of these actions are largely psychological and ceremonial: the markets stabilize but the valuations, while equivalent numerically, are, in fact, not equal because they are expressed in devalued dollars. This reality, of perceived value verses actual value, is never expressed, as it is a poison to the market.
As much as the failure of the Congress in the “Debt-ceiling” debate, continued quantitative easing signals a dysfunctional government without a comprehensive grasp on reality. Whether expressed or not, S&P must have seen this as well and factored it into their criteria on the downgrade.
Where the reaction to these actions become most glaringly apparent is the steady decline in buying power per $1US. While appearing to be subject to great inflation, healthcare, education and energy are merely constant valuations in a deflationary economy, deflated largely through the devaluation of dollars.
While certainly, at least, inconvenient to the wealthy, this is devastating to the poor-unless they have access to a governmental program for assistance. The middle-class have neither the access to help nor the ability to absorb these higher valuations. They, alone, are left without resource.
This is the shrinking middle-class: not just in the numbers falling into the category of working poor but those whose income has actually deflated while remaining equivalent. The actions taken to the benefit of either end of the economic spectrum always effect the center, not just in taxation but, more importantly, in the support of constant valuations in a depression.
A depression? But isn’t GDP growing? Factor in the effects of trillions of dollars in low-interest loans AND quantitative easing: removing those from the equation reveals the US economy has never stopped deflating-as most evident in housing valuations which effect, again, the middle-class most profoundly.
While I was in favor of the original round of quantitative easing, to stabilize the stock market, the second round was merely a re-inflating mechanism for them without any real market support. If a QE III is initiated, without a corresponding, and commensurate, fiscal stimulus the middle-class may cease to exist.
And they won’t even know it.
