Once again, America is on the fast track to becoming a feudal society. A society in which there are two classes - the landlord and the tenant. The shareholder and the worker. The same wretched society in which our founding fathers fought to escape 250 years ago. The sad thing is it’s happening right in front of our own eyes as the stock market is up nearly +40% since mid-March while the economy has spiraled down to levels not seen since the Great Depression. There are over 40,000,000 Americans unemployed and last week the stock market printed a new all-time high. A society of have and have-nots. We all feel this happening but most of us don’t understand how or why.
America’s wealth and income inequality gap have substantially widened since the Great Recession in 2009. More people are unable to afford their deemed 'necessities' for living and thus the working and middle class share of debt has since exploded while the middle-class share of income has been reduced by a third. The middle class has been trading more debt for less income for the past decade and continues to do so at an alarming rate. If only our expectations adjusted at the same rate our income declined, we might not have ended up where we are today, trading status for freedom.
In 1970 the middle class’s share of income was 62% of the total pie. Now it is down to 43%, while the upper class's share has risen from 28% to 48%. The lower class is virtually unchanged, falling from 10% to 9%, meaning the upper class stole 20% of the middle class income over the past 40-50 years. While the middle and lower class had their share of debt rise, so too did the upper class. The difference between the two is the middle class has been using debt to maintain their status or previous lifestyle and the upper class has been using debt (or as they call it ‘cheap money’) as leverage to buy discounted assets. I wrote all about this debt dichotomy when I said there was a recession coming. So “they” bought appreciating assets to offset debt and the middle class bought depreciating brand-new hunks of steel we all need to have - vehicles of our own demise.
“Think what you do when you run in debt; you give to another power over your liberty.” - Benjamin Franklin
The middle class is deteriorating and is now on a path for certain death amongst the Millennial generation, the most indebted generation of all time. Congrats guys - we did it. If you know anything about our story you know we had over $50,000 in debt, consisting of mostly student debt, which we paid off in under a year and a half. So fellow millennials, don't expect too much sympathy here. Yes, we got dealt a bad hand by having to sign up for $10,000s of student loan debt at 18 but if we stop drinking and eating away all of our discretionary income every weekend having #experiences, and instead pay off that stifling 7% student debt we can take back our freedom. We can create our own middle class. Experiences > Things means actual experiences. Not eating at the same restaurant every month exploring some new item on the menu. How we create a new middle class is less bar money and more freedom bucks. Buy things that appreciate. Create. Consume less.
The recent rise of “The Shareholder Class” is the very definition of taking ownership. Buying shares in a publicly-traded company means you are an owner of a company, albeit a very small owner. Publicly traded companies have a newfound affinity for trading debt, ahem cheap money, for buying back shares of their corporation. This works because when you reduce the number of slices in a pizza, your slice becomes worth more - a win-win for everyone who has a slice. In this case, the pizza is the company and the slices are shares of stock. The key here is you have to be involved by owning a slice. Especially now since the Federal Reserve has more interest in bailing out publicly traded companies using your taxpayer money than they do in bailing out Main Street Americans. Corporate socialism is our sad, new reality but it isn't going anywhere.
Now for some, once they understand what is happening on this level they get all up in arms and demand America goes back to the gold standard or declare we need to embrace socialism. Buying gold now in the short run (>1 year) isn’t a bad investment at all but going back to the gold standard will never happen. Over the long run, pet rocks (precious metals) don’t appreciate, especially looking at a time period as promising as the next 5+ years once we’re done with this recession. As for socialism, our whole series is centered around our pursuit of freedom so I’d hope you understand where we stand on that. Either way in both cases we’re focusing on things we have zero control over. How can we change modern monetary theory? How can we change our oligarch-centered democracy by demanding socialism? I believe we can’t, at least not anytime soon. What can I say, I’m a poker player. Betting against the house isn’t something I believe in. Blaming the dealer for the hands we've been dealt with doesn't result in actual growth. Looking back on our past decisions does. Taking ownership and admitting we played our hand horribly is how change actually happens.
“The history book on the shelf, is always repeating itself.” - the always insightful ABBA
How we fight feudalization is how we fought against it in 1776. By embracing minimalism, self-reliance, and ownership. All the things we have 100% control over - how we spend our freedom bucks. We vote with our dollars. Demanding change from our fearless leaders will result in nothing but empty promises and a subtle playing on our heartstrings. A middle class won’t just magically re-appear, we the people must create it. In today’s world, freedom isn’t simply handed to you, you have to take it. Own it or keep betting against the house. I know where I’ll be placing my bets.