The Mystery of the Missing Middle Class

It is virtually impossible to measure the accumulated wealth of the United States of America. The so called “richest country in the world” is aptly named for its immense natural resources, military assets, financial hegemony, and of course its affluent people. The net wealth is estimated around $130 Trillion which is roughly 8X our annual GDP. This is an incredible feat of human history that has not, and likely will not, be matched by any other nation. Where does this incredible wealth come from, considering the country is less than 250 years old?

It must be the ingenuity, spirit, and workmanship of the American people that created this amount of wealth in so little time. Right? Or is it the capitalistic, business-friendly attitude of our government? Maybe the fairness of our judicial system? The incorruptible financial markets?

All those things sound excellent, but none ring much truth. There is clearly an edge that makes America a richer nation by each individual, and in aggregate compared to the rest of the world. The answer is obvious to me. The one thing that significantly sets us apart from other cultures across history is the good ole American consumption habit.

An economy in its simplest sense is a congregation of buyers and sellers. Our entire nation is bred from birth to be the best buyers on Earth. It doesn’t matter how much we produce; GDP is measured by total spend, and good God, do we spend like drunken sailors. Income is unimportant. Debt is negligible. Fiscal responsibility can go kick rocks. As long as the consumption machine is constantly in 6th gear the American economy is the beacon of hope for the world.

Noone dares question the integrity of American wealth because it is dependent on the confidence of every other nation. The dollar’s reserve currency status is a privilege that we are happy to abuse, and the rest of the global must fall in line as the value of their wealth is measured in those same dollars. It’s all a big Ponzi Scheme backed by nothing but confidence and increasing debts.

Once in 1971, a brave little country in Europe decided to the test America’s self-determined appraisal of wealth. France called out the United States and demanded that their U.S. dollars, which were supposedly fully back by the intrinsic value of gold, be correctly revalued or France would demand compensation by force. France did not believe that the U.S. was rich. They saw the ridiculous spending on various wars in southern Asia and social programs domestically, and they called BS. They were right. France sent a warship to New York City’s to retrieve their gold reserves at the Federal Reserve Bank, and President Nixon had to admit that it wasn’t there.

This proved American financial superiority as fraudulent. Rather than reconciling the value of the dollar to real assets, the U.S. enshrined this fraud as the basis of our monetary system. Henceforth, fiat currency was established, and real money would never see the light of day in the modern economy ever again. The U.S. dollar should have fell into obscurity as a reserve currency, considering it was backed by nothing more than hopes and prayers. Nonetheless the dollar remains the world’s reserve asset because the U.S. still has the power of unrivaled consumption.

It's all a lie truly. The richest country in the world has fake money, fake wealth, faltering productive capacity and yet, a whole lot of nice stuff. We spent our way out of a financial crisis and demanded our economic allies do the same. The debts and deficits were stifled by the unprecedented spending nationally and abroad. We stayed rich and became even richer on the back of synthetic demand and endless money printing. Suffice to say, it worked! But at what cost?

This economic policy artificially enriched the nation at the expense of others. The more we traded our worthless dollars to consume the coveted resources of the world, the wider the wealth gap became. The third world was not left behind, it was stepped on and used as a ladder to achieve the heights of first world status. Everything is relative, when the money is boundless. Socioeconomic disparity is the fault of contrast. The poor get poorer only in comparison to the limitless enrichment of the rich who thrive off inflation.

That’s where we get to the mystery of the missing middle class. Just as nations can spend themselves into prosperity so can the individual. The product of inflation has always been inequality of wealth. In a previous article I described the real measure of our socioeconomic classes. It has nothing to do with income or status, and everything to do with the incorporation of trusts and interest-bearing assets. The rich disappeared into the working class leaving a two-tiered system of the inflaters and the inflated.

Simple example: A trust with $1 million that yields an average 5% annually will accumulate 50 grand every year. Provided the trustees distribute less than that 50K, the trust will always grow. This is how corporations drive shareholder value without making anything. The accumulated wealth derived from irrelevant methods sits in an inflationary environment that constantly expands in value relative to the depreciating currency. The rest of the classes must work for money that perpetually devalues the product of their labor.

There is no more middle class. It’s not missing, it’s dead. There are just varying degrees of consumption. The richest person you know likely has or had a job. They work just like you. The have an income and they have expenses, which for most, are pretty close to same number. It’s never been how much you make but how much you can keep. Our consumption habits keep us jailed in employment as we spend at the same rate that we accumulate.

The meritocracy has created unparalleled equality of opportunity. Virtually anyone can pursue any occupation or build businesses that awards them with varying amounts of income. College degrees are all but guaranteed (financially) by the government and employment is relatively available for any who seek it. The surgeon and the cashier are not so far apart as the higher income is awarded to the harder worker. The initiative was taken by the surgeon, the time was spent in school, the debt accumulated, the mental tole taken. Arguably the hard work was worth it as the high-skilled individual is now a high-income earning individual, and an even higher spending individual. Does the surgeon have a better life? More fulfilling fruit from their labor? A longer and more prosperous livelihood? That’s all dependent on a whole lot of unforeseen motivations and actions. The janitor also works for a living, spends what he makes, and potentially works less hours for the same net wealth. Consumption may look rich, but it does not equate to wealth.

The working class American, no matter his occupation, is in constant battle with entities far better suited for this economic system. Inflation benefits the incorporated at the behest of the administrative body. Government can only redistribute wealth. It cannot create it, so it must take from the productive at the expense of the nonproductive. The corporation and the trustee benefits from the perpetual deficits and money printing of the government. They benefit from the regulations that stifle competition; they profit from the subsidization of certain services; they promote the consolidation of industry; and they literally live off the inflation created by the banks.

It is not to say that any and every American can benefit from the same products and services created by this cohesion of corporation and government. Anyone can incorporate themselves in a trust and invest in inflated assets. But only a select few can do so without working a single hour. This is the true upper class who benefits from the mindless consumption of their fellow Americans and foreign nations. They don’t produce anything. They have no real assets to back their spending, only financial instruments. There is nothing wrong with this lifestyle. They benefit from the same system that was given to us all. Americans are privileged regardless of their socioeconomic level. Even our homeless are fat.

Wealth is quite loosely defined in a fiat system. It’s all relative, and it’s all fake. Everyone looks rich until you ask to see the gold in the vault.