The economic downturn that we are currently experiencing is making the last recession look like a Sunday picnic. Yes, 2008 and 2009 were bad, but they weren’t anything like this.
Unprecedented intervention by the Federal Reserve has allowed the rich to get even richer during this crisis, but meanwhile millions upon millions of ordinary Americans are deeply suffering. Unfortunately, what we have gone through so far is just the beginning.
As a child, I was a big fan of Sesame Street, and one of the characters that really stood out to me was Count von Count. I loved the fact that he was always counting things, and that is what I am going to do in this article in order to illustrate how bad economic conditions have now become.
Let’s start with the number 7. According to the Congressional Budget Office, approximately 7 million more Americans would have jobs right now if the COVID pandemic had never happened…
But in fact, what the CBO is projecting is dire: around 7 million people out of work in 2021 whom CBO thought before the pandemic would be working. That’s dire – and a call to immediate action, not calm, not wait-and-see.
So the CBO estimate appears to be off by about 3 million.
Count von Count would not be happy.
Let’s try another number. According to Bloomberg, the number of Americans living in poverty has risen by 8 million during this crisis…
Support is rising among policy makers to address America’s child-poverty crisis, which is getting worse as the pandemic drags on.
More than 8 million Americans — including many children — fell into poverty during the second half of last year, exacerbating the racial and income inequalities that are holding back the U.S. economy.
In this case, I think that this is a reasonable estimate, but that number will inevitably keep growing in the months ahead.
One of the big reasons why it will continue to rise is because hordes of small businesses will be collapsing, and that brings us to our next number.
According to a study that was recently released by the Fed, 9 million small businesses in the U.S. say that they “won’t survive” in 2021 without more government assistance…
Three in ten small businesses — or 9 million out of the estimated 30 million in the United States — fear they won’t survive in the coming year without additional government assistance, according to a survey recently published by the Federal Reserve.
The Small Business Credit Survey, which was conducted last September and October and released last week, showcased the incredible burden the coronavirus pandemic has placed on America’s small businesses, as 88% of the businesses surveyed reported that sales had not yet returned to pre-pandemic levels.
Can you imagine what our country would look like if almost a third of all small businesses permanently disappeared?
If you watched the Super Bowl, you were bombarded with messaging about the plight of our small businesses. We have never seen anything like this before, and that is because our small businesses have never had to face a crisis of this magnitude.
With each passing day, more small businesses are folding, and nothing that the federal government is going to do will completely stop this trend.
Our next number is 10. According to the U.S. Census Bureau, 10 million renters were behind on their rent payments in January, and many more people anticipated not paying rent in February…
An estimated 10 million renters were behind on their rent and at risk of eviction in the middle of January, according to a Census Bureau survey. And an estimated 16 million renters had little to no confidence they could pay rent in February.
This has created extreme financial pain for America’s landlords, and when the rent moratoriums are finally lifted we are going to see the largest tsunami of evictions in all of U.S. history by a very wide margin.
Before I wrap up this article, let me leave you with just one more number. So far in 2021, the number of passengers at U.S. airports is down by more than 60 percent compared to 2019…
Over the past seven days, not quite 707,000 passengers per day on average passed TSA checkpoints at US airports, a measure of how many passengers in the US are flying somewhere. This was down by 61.6% from the same period in 2019, the last full year of the Good Times. At the end of January, the drop from 2019 was over 65%.
I honestly do not know how the airline industry is going to survive this without government help.
Speaking of not surviving, Democrats have introduced a bill in Congress that would essentially deal a death blow to the gig economy…
The legislation at the core of their agenda is the PRO Act, which Democrats just re-introduced with sponsors including Speaker of the House Nancy Pelosi and Senate Majority leader Chuck Schumer. Among many other things, the bill would severely restrict the legal definition of independent contractors in a way that would largely end the gig economy as we know it.
The legislators’ stated intention is to protect workers and bolster their rights under law. Through the reclassification of independent contractors, Democrats hope to force gig economy companies to hire workers as full employees and thus provide them the accompanying salaries and benefits.
If this bill passes, it would absolutely devastate Uber, Lyft, and countless other companies that rely on gig workers.
Basically, millions of jobs would go “poof” with one stroke of Joe Biden’s pen.
According to the Bureau of Labor Statistics, more than 50 million Americans are currently employed by the gig economy. It is great to want those workers to have higher pay and more benefits, but if those companies go out of existence there won’t be any jobs at all.
These are very dark times for the U.S. economy, and the outlook for the future is exceedingly bleak.
However, in the short-term economic conditions should stabilize somewhat thanks to the huge stimulus payments that the government will be sending out.
But that bubble of hope will be very brief, and everyone should be able to see that much more pain is on the horizon.
***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***
About the Author: My name is Michael Snyder and my brand new book entitled “Lost Prophecies Of The Future Of America” is now available on Amazon.com. In addition to my new book, I have written four others that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing the books you help to support the work that my wife and I are doing, and by giving it to others you help to multiply the impact that we are having on people all over the globe. I have published thousands of articles on The Economic Collapse Blog, End Of The American Dream, and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial, or health decisions. I encourage you to follow me on social media on Facebook, Twitter, and Parler, and anyway that you can share these articles with others is a great help. During these very challenging times, people will need hope more than ever before, and it is our goal to share the gospel of Jesus Christ with as many people as we possibly can.
This news could give you a reason to stay up at night. Joe Biden’s administration is getting more aggressive against China. Biden has unveiled a Pentagon “China task force” to deal with the “challenges” China poses.
As the Asian nation has over one billion in population, a war with the CCP would end badly for the United States. Anyone with two brain cells to rub together knows that a war with China is already all but lost. Maybe everyone except Joe Biden. Because he’s flexing muscle he doesn’t have toward the Chinese. Biden has launched a military task force to assess US policy toward Beijing, vowing to confront the “China challenge” as he continues his predecessor’s naval deployments in the country’s backyard, according to numerous reports.
In a move that amounts to ramping up military aggression dramatically, Biden announced the new task force during a Pentagon visit on Wednesday, his first to the department, declaring that his administration would “meet the growing challenges posed by China to keep peace and defend our interests.” This decision has nothing to do with “peace.”
With @POTUS‘ remarks today, DOD announces a new China Task Force to review all U.S. policy toward China and how “we will meet the China challenge” and “win the competition in the future.”
Anytime the government talks about peace, you’d be wise to prepare for war.
Led by Eli Ratner, who serves as special assistant on China to Defense Secretary Lloyd Austin, the task force will be composed of 15 civilian and uniformed defense officials and will deliver its findings to Austin within four months, according to a Pentagon fact sheet, which dubbed the project a “sprint effort.” The panel is not expected to produce a publicly available report, however -RT
Biden also said he would not “hesitate to use force,” against China.
Biden’s first major foreign policy address took a combative stance toward Beijing, which he dubbed America’s “most serious competitor” while echoing rhetoric reminiscent of Trump’s on China’s alleged “economic abuses” and “attack” on intellectual property. In announcing the China task force on Wednesday, the president went even further in his vows to confront Beijing, warning that he would “never hesitate to use force,” though nonetheless said military action should be a “last resort.” -RT
If this escalates, this will be the final nail in the coffin of this country. Wake up. These people (all ruling classes ad elitists) want war. But they won’t be fighting it. They want money, but they won’t be earning it. They want power, and they will be taking it from us by force.
Remain vigilant. Things seem to be coalescing behind the scenes. Put two and two together and use your discernment to come up with the answers, because we know we won’t get them anywhere else.
A new poll has found that the vaccine propaganda is failing. Even with all of the censorship and propaganda designed to brainwash the public into getting this vaccine, about one-third of Americans remain skeptical.
The poll from the Associated Press–NORC Center for Public Affairs Research found that while 67% of Americans plan to get vaccinated or have already done so, 15% are certain they won’t and 17% say probably not. Many expressed doubts about the vaccine’s safety and effectiveness.
But we have nothing to fear, right? The mainstream media and the ruling class say this vaccine is our ticket to return to normalcy. Or is it?
Even if you get the vaccine, the ruling class demands that you don the ritualistic shame muzzle to show your compliance to the New World Order. No wonder people are losing trust in rulers.
Dr. Anthony Fauci, the government’s leading infectious-disease scientist, has repeatedly admitted to lying and moving the goalposts in order to push the vaccine agenda.
He has consistently lied to the American public about herd immunity and has admitted such. Media outlets claim that somewhere between 70% and 85% of the U.S. population needs to get inoculated to “stop the scourge” that has killed close to 470,000 Americans.
More recently, he said the spread of more contagious variants of the virus increases the need for more people to get their shots — and quickly, whether those shots will work or not. What’s important here, is the fear and belief in centralized commands and authority. Once the slaves start to see what’s really going on, Fauci will be one of the first they demonize.
Nearly 33 million Americans, or about 10% of the population, have received at least one dose of the mRNA COVID-19 vaccine, and 9.8 million have been fully vaccinated, according to the Centers for Disease Control and Prevention.
Honestly, I gave Americans too much credit. Those numbers are much higher than I assumed they would ever be. It is stunning how many slaves will simply line up and do what they are told.
Robert F. Kennedy Jr. has been banned and removed from Facebook’s Instagram platform over “debunked vaccine claims.” RFK Jr. has been an outspoken critic of vaccines, and one thing the New World Order needs a fully vaccinated public incapable of thinking for themselves.
Facebook has taken down the Instagram page of former president John F. Kennedy’s nephew – a prominent vaccine critic with 800,000 subscribers. The tech giant has recently stepped up its offensive on what it deems Covid-19 disinformation, according to a report by RT.
Facebook has confirmed they censored RFK Jr. for disagreeing with them and the ruling class. “We removed this account for repeatedly sharing debunked claims about the coronavirus or vaccines,” Facebook said, confirming the deletion of his hugely popular page. Hopefully, people will begin to wake up in mass numbers and much more quickly than they have been to what’s really going on.
Kennedy Jr. has drawn stark criticism for his anti-vaccine stance from the mainstream media, with CNN’s Jake Tapper labeling him a “menace” for calling Dr. Anthony Fauci a “very sinister guy who has turned” America over to “Big Pharma.”
Kennedy has been a long-time outspoken vaccine critic. But more than ever, the ruling class and elitists are desperate to silence dissent in any and all forms and keep information from the public that could help advance a free society.
If people do not share in the elitists’ visions for the totalitarian enslavement of humanity, they will be silenced.
The major problem here is one we should all be able to see. One of their own (a member of the establishment ruling class), Dr. Anthony Fauci has admitted to flat out lying about herd immunity and delivering misinformation to the public to push the vaccine agenda. So, as long as the misinformation is helping the slave state to advance, it’s fine.
The removal of Kennedy’s account comes as Facebook has taken its clampdown on coronavirus-related claims that do not align with the World Health Organization (WHO) and other health authorities’ recommendations up several notches.
“Threats to freedom of speech, writing, and action, though often trivial in isolation, are cumulative in their effect and, unless checked, lead to a general disrespect for the rights of the citizen.”
~ George Orwell
In early December I asked Jim Grant how to reconcile exuberant financial markets with the economic reality that reads like dystopian fiction. He responded,
I’m not sure there’s much distinction. To me, the current form of dystopia is the bubble form. So I think this is the year of the dystopian bubble.
The opening pages of the new decade feel like we’re living through a combination of George Orwell’s 1984 and Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds. On the day the 2020 election results were to be certified in the Senate, a mob from the losing side surrounded and actually breached the Capitol. The outgoing president was accused of inciting a riot, threatened with impeachment, and banned for life on Twitter. Despite the chaos, stocks shrugged it all off and rallied to new highs.
The following weekend cover of Barron’s, “The Case for Optimism,” captured the manic side of the dystopian bubble perfectly. Its editorial staff sees a silver lining in practically every cloud:
[T]his is a market determined to march higher, and it’s not about to be derailed—even by historic mayhem in the nation’s capital. Stocks are rallying on the trillions of dollars in stimulus that may only be accelerated under the new administration. A chaotic political season is winding down, while the economy is gearing up for a postpandemic reopening.
Investors need to keep their eyes forward and look ahead to a Joe Biden presidency: to more-predictable domestic policies, smoother trade relations, and additional efforts to revive the economy. Now might not be a good time to own anything defensive.
Still, Barron’s acknowledges a new set of political risks:
That’s not to say that a Washington controlled by the Democrats…will be entirely friendly to investors. The Democratic agenda includes corporate and individual tax increases, heightened regulatory oversight, and such ambitious social and economic policies as a Green New Deal, health-care reform, and student-loan forgiveness.
With bigger government on the way, what could possibly go wrong?
Making America Great Again
During the first presidential debate in September 2016, citizen Donald Trump trashed the 7.5-year Obama-Bernanke-Yellen bull market, calling it “a big, fat, ugly bubble.” The Fed’s balance sheet has since expanded 63 percent, the national debt has grown 41 percent (tacking on $8 trillion), and the budget deficit multiplied 5.5 times. Meanwhile, US stocks, as measured by the S&P 500, have percolated another 80 percent.
Former President Trump may or may not suffer from a narcissistic personality disorder, but he clearly doesn’t lack confidence. One of the symptoms of NPD is grandiosity; “Make America Great Again” was always a delusion.
While the incoming administration promises to “build back better,” a betting man should expect more of the same; in fact, much more of the same.
Filling the Political Swamp
American politics has been a quasi-one-party system at least since the days of Camelot (1960 election of JFK), with Democrats pushing the envelope toward big government and Republicans offering little principled resistance while providing the illusion of healthy debate, acclimating themselves to the political swamp in the process. The two-party system officially died in 1964 when Barry Goldwater was defeated in a landslide by Lyndon Baines Johnson. Goldwater was the last of a dying breed cast in the mold of the Old Right: an anti–New Dealer with a Cold Warrior streak, a classical liberal who called himself a conservative.
Richard Nixon was the first in a long line of establishment Republicans. While ending the Vietnam War, his administration consolidated the gains of LBJ’s Great Society programs, created the EPA (Environmental Protection Agency), OSHA (Occupational Safety and Health Administration), and ERISA (Employee Retirement Income Security Act), declared wars on cancer, drugs, and inflation, and on August 15, 1971, severed the last ties of gold to the US dollar. The Watergate scandal ended Nixon’s political career, but it was Goldwater’s threat to back the impeachment process that sealed his fate.
The upward march of statism has continued unabated with some brief pauses to catch our breath: Ronald Reagan was a throwback to Goldwater and Trump perhaps a less couth version of Reagan, each a watered-down version of his predecessor. Neither was willing or able to stem the tide of debt, deficits, and money printing.
Say what you will about Trump, as Lew Rockwell remarked after his improbable 2016 election victory, his most endearing quality is that “all the right people hate him.” The political left and establishment right are giddy over his defeat and both want to drive a stake through his heart and the populist movement he represents.
The 2020 election formalizes the transition to one-party rule in the United States.
The Pursuit of Truth
“A society becomes totalitarian when its structure becomes flagrantly artificial: that is, when its ruling class has lost its function but succeeds in clinging to power by force or fraud.”
~ George Orwell
All (or nearly all) politicians lie, but those on the left take the art form to a new level. To understand why requires examining the mind of the progressive.
After the Capitol breach on January 6, a progressive on Facebook said of conservatives, “We’re going to drag them into the 21st-century kicking and screaming if we have to.” The Left envisions a socialist utopia, the inevitable slope of human progress. Their role is to bring this about by any means necessary…and to run things, of course. Truth is a fuzzy concept, only to be bent and twisted to serve the state. Justice does not apply to the individual, but instead becomes an arbitrary concept used to advance the state under cover of the “common good” or “social justice.”
Progressives tend to deny objective truth yet hold the belief that central planners know what’s best for the rest of us. But how can they know without the existence of truth? Orwell referred to such holding of two contradictory ideas at the same time as “doublethink.” Another example is the notion that political power ought to be concentrated and wealth dispersed. Democracy is yet a third example: the people are seen as ignorant rubes but can be relied on to choose omniscient and caring rulers. Democracy was as feared as monarchy by the founders, another reason why the Left is tearing down statues and obliterating history.
Capitol Breach
“The people will believe what the media tell them they believe.”
~ George Orwell
What exactly happened in Washington, DC on January 6?
Whenever a major event like this takes place that attracts national attention, I go through a process: What can be proven with minimal effort and a high degree of certainty? What is highly suspicious, but harder to prove? Who benefits? Who is willing to bend the truth to promote their agenda? (The study of history follows a similar process.)
Did President Trump incite a riot? This should be the easiest question to answer, yet received the least scrutiny. The media simply repeated the accusation over and over with little evidence until it became accepted as truth.
In the initial rush to judgment, how many people actually took the time to listen to Trump’s speech? Ann Althouse, an emerita professor of University of Wisconsin Law School, read the full transcript and listed the seven most violence-inciting statements. Ranked #1:
Together we are determined to defend and preserve government of the people, by the people and for the people.
Trump mentioned the Capitol just three times in a speech that lasted an hour and thirteen minutes, including:
I know that everyone here will soon be marching over to the Capitol building to peacefully and patriotically make your voices heard.
Is this why Trump’s allegedly incendiary tweets were so quickly erased? Once the Capitol trespassers went home, why not put the incriminating evidence back up for all to see?
Other questions are more difficult to answer with hard proof. Was the election stolen? Was the Capitol breach a false flag operation? There is plenty of evidence in support, but the left media has no interest in following leads that don’t fit their narrative. Standard practice is to either dismiss promoters of such theories as conspiracy nuts or repeat the lie that the claims have been disproven.
During his speech at The Ellipse in DC, Trump spent a good half hour going over his allegations of election fraud and unlawful behavior from states in their rush to set up mail-in voting. My father is a constitutional expert (five years a regular on a weekly radio show on the subject). After countless hours of research, he felt the Trump legal team had a strong case, especially regarding Pennsylvania Act 77’s conflict with the Pennsylvania Constitution.
These claims never saw the light of day, consumed by the political swamp. If the Democrats were so certain there was no impropriety, why not give Trump’s baseless charges a hearing? The last opportunity for Republicans to air their grievances was at the election certification on January 6, conveniently interrupted by the mayhem in the Capitol that day.
“Applying the classic legal question ‘cui bono?’ (‘who benefits?’), it is clear that Democrats, anti-Trump establishment Republicans, the leftist media, and TDS-sufferers all are victorious,” observed Lew Rockwell.
Projection
In The Road Less Traveled, author Scott Peck claimed that mental illness consists of “an interlocking system of lies we have been told and lies we have told ourselves.” As those on the political left become further empowered and unhinged from reality, they increasingly make Freudian slips, accidentally revealing their methods and intentions. After the events of January 6, president-elect Biden accused Trump’s acolytes of the Big Lie over election fraud, even citing Nazi propagandist Joseph Goebbels. “The degree to which [a lie] becomes corrosive is in direct proportion to the number of people who say it,” Biden explained.
Psychological projection is the Big Reveal.
Big Brother
“We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.”
~ Eric Schmidt, Google CEO, 2001–11
In the lead-up to the election, Facebook and Twitter censored conservative users, forcing them to leave in droves for alternative platforms like Parler. According to CNN Business, “The platform became the most downloaded app on the weekend of November 8—the day major media outlets called the election for Joe Biden.” A month later Parler had 2.3 million active users which exploded to 15 million after the Capitol breach. (Twitter reported 187 million daily active users as of September 30.)
Twitter initially put Trump’s account in the penalty box for twelve hours but two days later banned him permanently. That weekend brought a wave of purges from social media companies in which Twitter suspended seventy thousand “far-right” accounts. Parler shot to #1 in Apple’s App Store on Saturday but by Sunday evening had been kicked off the Apple and Android (owned by Google) platforms. Meanwhile, Amazon suspended its cloud hosting services, effectively turning out the lights.
“Don’t Be Evil”
How did Silicon Valley, which was largely apolitical and libertarian-leaning during the personal computer and networking waves of the 1980s and 1990s, become a virtual appendage of the surveillance state in a single generation?
From the turn of the millennium, the internet has been an incredibly disruptive force, replacing the old personal computer-centric tech trees with aggressive young saplings in online search, e-commerce, social media, cloud computing, etc. The new generation of founders leaned much further to the left and became fabulously wealthy, especially during the liquidity-driven bull market of the past twelve years.
Envy was also a factor. Microsoft had been relentlessly accused by competitors of acting “unfairly” and being a monopolist, leading to a landmark antitrust case in 1998 brought by the Department of Justice. Bill Gates quickly learned that sending an army of lobbyists to Washington, DC was well worth the investment. Today, Big Tech is a major contributor to political campaigns (overwhelmingly funding Democrats).
A third factor was the war on terror, whose fuse was lit on September 11, 2001. According to Ron Paul,
“Big Tech” long ago partnered with the Obama/Biden/Clinton State Department to lend their tools to US “soft power” goals overseas. Whether it was ongoing regime change attempts against Iran, the 2009 coup in Honduras, the disastrous US-led coup in Ukraine, “Arab Spring,” the destruction of Syria and Libya, and so many more, the big US tech firms were happy to partner up with the State Department and US intelligence to provide the tools to empower those the US wanted to seize power and to silence those out of favor.
In short, US government elites have been partnering with “Big Tech” overseas for years to decide who has the right to speak and who must be silenced. What has changed now is that this deployment of “soft power” in the service of Washington’s hard power has come home to roost.
Big Trees Fall Hard
Will the technology forest rejuvenate itself as it has so many times in the past? Jeff Deist, president of the Mises Institute, sees green shoots:
The underlying ideology, the impulse towards freedom which includes free communications and speech, is not so easily quashed. And for that reason, I’m actually quite optimistic about a highly decentralized future where we don’t have these huge gatekeepers like Google search, or Amazon Web Services, or Facebook and Twitter and Instagram as the only big 800 lb. gorillas in social media.
The business models of the tech giants could be in for a rude awakening. Huge swaths depend on trust, especially social media and cloud services. If censorship and cancel culture intensify, privacy will become a growing issue!
As a Big Tech contact tells me, the free market is already working to solve this problem:
Tim Berners Lee [known as the inventor of the World Wide Web] is well on his way to creating a Facebook called MeWe that is social media with paywall communities, no bots, no censorship other than by a channel owner. Dave Rubin has his own version called Locals.com that is backed by Peter Thiel protégé and Palantir CEO Joe Lonsdale. Tulsi Gabbard just announced a channel, joining Andy Ngo, Scott Adams and WalkAway star Karlyn Borysenko.
Talent will increasingly leave the rotting mature trees for vibrant saplings that offer creative freedom and opportunity:
I think there will be a financial price to pay for Twitter and Facebook if these alt platforms can keep a connection open. Already the CEO of Gab said that he had thousands of Silicon Valley insiders from high level executives to engineering talent contacting him asking him for a position. Gab is not reliant on any of the big cloud providers.
If high profile engineers and business people in Big Tech companies see this as the final straw then there will be internal pressure on those companies. It could be in the form of open dissent as pressure to reform or just silently leaving for a non-woke company.
I think there is a lot of pent up frustration at the wokesters who have ruled the roost for the past 12 years and we may see a talent drain which some smart and wealthy financiers will see as an opportunity to make a move and seize market share or start some cool new thing. This is the early innings of a shift that may turn out to be a second chance for those of us who have spent the past 10–12 years suffocating in the wokester’s soft tyranny of many software companies.
Promoting the state’s false narratives can be quite destructive to a company’s brand. College and professional sports in the US learned that lesson the hard way as they backed the BLM movement last year, only to see ratings plummet. “Get woke, go broke” has become a rallying cry of departing fans.
As I wrote last November, “Nature works against bigness. Species exhaust food sources, monopolies invite competition, empires spread themselves thin.” Big Tech appears to be destroying itself from within, a victim of its own hubris and toxic culture. Worse, it has tied its fortunes to the most termite-infested sequoia in the forest: the state.
By Hatchet, Axe, and Saw
Do the tech behemoths need to be regulated or broken up? Many think so, notably many who lack faith in markets.
According to Eric Savitz, who writes the Tech Trader column for Barron’s, “president-elect Biden, like Trump, has called for the elimination of Section 230 [the clause in the Communications Decency Act of 1996 which provides immunity from third-party content for website publishers].”
This would have a chilling effect on protected speech online and build a protective moat around the tech giants by drowning their upstart competitors in red tape and potential legal liability.
Interventions will only impede the market. As intellectual property lawyer Stephan Kinsella warns, “The only just solution is to shame them and build alternatives.”
Conclusion
So far, investors are unfazed by the growing number of black swans lining up against Big Tech. Since the Capitol breach, Twitter’s stock has taken a 10 percent haircut, while Facebook has rallied. With $3.7 trillion in market cap at stake at Facebook, Twitter, Amazon, and Google (10 percent of the S&P 500), could a lurch to the political left unwittingly pop the everything bubble?
As Charles Mackay so wisely stated 180 years ago,
Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.
The middle class has already collapsed, but thanks to debt and bubbles, this reality has been temporarily cloaked.
What collapsed the middle class? In many ways the answer echoes an Agatha Christie mystery: rather than there being one guilty party, a number of suspects participated in the collapse of the middle class.
Can we consolidate these dynamics into a few core causal factors? I’ve made the case in the past few posts that yes, we can: many of these causes are part of a single dynamic, the decapitalization of the middle class and 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.
The second primary dynamic is the substitution of debt and speculation for earned income and productive capital. As the purchasing power of the bottom 90%’s wages declines, the status quo has substituted debt for income and speculation for investing in productive capital.
This dynamic incentivizes debt, speculation, and consumption rather than producing, savings and investments in human and productive capital. The source of this incentive structure is the maximization of corporate profits earned by banks loaning money to the middle class and by selling the middle class on superfluous consumption being the signifier of “success” rather than production being the signifier of “success”.
In reality, what counts is agency (control of one’s life, having a voice in governance) and ownership of productive capital. Becoming a debt-serf to buy more stuff and grab a few chips in the speculative casino sacrifices both agency and the acquisition of productive capital. But this sacrifice is oh-so profitable to the financier purveyors of debt and speculative gambles in the casino.
The third dynamic is globalization, and specifically the tyranny of global markets. Global banks and corporations are ideally placed to profit from the arbitrage of labor, environmental regulations, currencies, corruption (dear in some places, cheap in others), and the price of debt and risk.
Wage-earners have no such leverage. In effect, all the risks of competition are eliminated for corporate monopolies and cartels while the risks are transferred to workers who face a global race to the bottom in wages, opportunity and income security.
The fourth dynamic is speculative bubbles put many assets out of reach of the bottom 90% who have only their wages and savings. The winners in speculative bubbles are those fortunate enough to have bought homes, bonds, rental properties, land, etc. decades ago when a house could be had for three times median income and bonds paid solid, above-inflation returns.
The bottom 90% attempting to find productive assets at affordable prices now are out of luck. Consider a 900 square foot home built in 1916 in the desirable San Francisco Bay Area community of Albany, CA. The house sold for $135,000 in 1996, 3.8 times the national median household income.
Then Housing Bubble #1 boosted the value to $542,000 in 2004, 12.2 times the national median household income. Housing Bubble #2 has pushed the value to slightly over $1 million, 14.5 times the national median household income. Only those inheriting wealth (or who chose wealthy parents), those earning over $250,000 annually or speculators who just scored big gains in bitcoin or GameStop could afford this very small, modest house.
That’s what speculative bubbles do to the middle class: they leave them behind forever. Those who bought 25 years ago entered the top 10% in wealth due to the bubblicious increase in the value of their home. A few winners in the casino who sold at the top might have edged into the top 10%, but the vast majority of gamblers in the casino cannot compete with the insiders, manipulators, and pros, so they lose ground. This is why the bottom 90% collect an insignificant 3% of all income from capital.
These four primary dynamics manifest in the following ways. Each one helps generate a two-tier Neofeudal Economy of a Financial Aristocracy and its top 9.9% technocrat class who own virtually all the productive capital and the bottom 90%, a disenfranchised ALICE (assets limited, income constrained, employed) workforce.
1. The shifting of pension and healthcare costs and risks from the state and employers to employees. (see chart below)
2. The decline of safe, secure high-yielding investments as central banks have driven savers into risky, crash-prone speculative assets such as stocks and junk bonds.
4. The inexorable rise in big-ticket costs: higher education, healthcare, and housing. Even as wages stagnate, these costs continue rising, claiming an ever-larger share of household incomes, leaving less to save/invest.
5. The transition from a stable economy with predictable returns to a financialized boom-and-bust economy that wipes out middle-class wealth in the inevitable busts but does not rebuild it in the booms.
6. The regulatory and administrative barriers to self-employment, forcing most of the workforce into wage-slavery and/or dependence on the state. Endangered Species: The Self-Employed Middle Class (May 2015).
7. The rising exposure of the U.S. workforce to highly educated, lower-cost competing workforces in a globalized economy.
8. The decline of labor’s share of the U.S. economy: the slice of the pie distributed to earned income has been declining for decades.
9. The share of the earned-income slice going to the top 5% is rising.
The middle class has already collapsed, but thanks to debt and bubbles, this reality has been temporarily cloaked. All bubbles pop and all excessive debt ends in default. When these inevitably occur, the reality can no longer be hidden.
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