by Gary Christenson, Deviant Investor:
Much of our financial world functions as a “Rob from the Middle Class” economy. The system robs from the middle class and poor via “money printing” and inflation of the currency supply!
The rich get richer and the poor get poorer.
Little benefit comes from complaining about the process or fighting it. Understand the process, work around it, and use it constructively.
Explaining Our Rob from the Middle Class Economy:
Governments, individuals, pension funds and corporations are increasingly financialized and dependent upon debt, central bank interventions and currency devaluations. Wages are less relevant in a financialized economy because wages rise slowly while debt, currency in circulation, and paper financial assets increase rapidly.
Caution: Those rapidly rising stock prices can reverse even more rapidly.
The Fed has your back if you are a member of the political and financial elite. The top few percent earn far more because of central bank “stimulus,” currency printing that levitates stock and bond markets and huge contracts from federal and state governments. This trend toward increasing the income and wealth of the financial elite has accelerated since 1980, as shown below.
If you earn wages paid in debt based fiat dollars you know your expenses have increased more rapidly than your wages. Your purchasing power decreases because fiat currency units are devalued by the massive government and central bank “printing” of those currencies. Every newly created dollar (euro, pound, yen) devalues all existing currency units. Most prices rise but hourly wages stagnate.
How can we measure these trends? (All data from the St. Louis Federal Reserve unless specified otherwise.)
Graph the ratio of M3 (a measure of currency in circulation) to average hourly wages. The graph below shows M3 has grown more rapidly than hourly wages in the past 40 years. The extra currency in circulation has created higher pricesfor consumers and financial assets.
Total Debt Securities in the U.S.:
Graph the ratio of total debt securities as reported by the St. Louis Fed to hourly wages. The graph shows total debt has risen more rapidly than wages, even though wages are somewhat higher than three decades ago. Negative consequences occur, except for the financial elite, from “out-of-control” government spending, corporate buy backs with inexpensive debt, student loans, sub-prime auto loans and more.
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