Wednesday, June 16, 2021

The Middle Class Is Doomed

Daniel asked awhile back if I had any good news at the moment. Unfortunately, I'm feeling rather down at the moment. What has me down is two fold. On the one hand, our society has collapsed. Our culture is sick and a critical mass of people have become a destructive cancer. On the other hand, our elites have become rotten with greed. It is no longer enough for them to take enough to get rich beyond the dreams of averice, they are intent on taking everything. That's bad. I'll talk about the culture problem in a few days, right now let's talk about my economic concerns.

The only way to really do this is to do bulletpoints, which may or may not connect into one coherent argument but at least will present a clear picture of what is happening. Let's start with a couple key historical points:
● Revolutions begin not with wealth inequality, as the left contends, but with the rich becoming all powerful. The Russian Revolution, The French Revolution, and I would argue many other uprisings happened when the rich in those societies hoarded wealth and power to such a degree that average people had nothing left.

● Americans once respected the rich even as they envied them. Why? Because men like Ford and Carnegie made their money satisfying the needs and wants of average Americans and made sure those average people had the wealth to buy from them. In other words, to make their boats rise, they wanted to raise the tide for all boats. Everyone benefited. Today, the wealthy become rich by robbing the public. They make their money imposing unneccesary transaction fees, bringing lawsuits which destroy value, and taking from the Treasury. It should have come to no one's surprise that most of the money set aside to keep small businesses alive went to the biggest businesses in the country. It should come to no one's surprise that Goldman Sachs makes billions "arbitraging" stock trades, i.e. extracting bits of profit from other people's transactions without adding a hint of value.

● It is the middle class that drives the world because those are the people with the right values and incentives to be the inventors, creators, and dreamers who build the future. The poor lack the tools. The rich lack the will. But the middle class is dying.

● Historically, the one thing that has protected American families is the growth in value of their homes.
Now, let's talk about what is bothering me:
● The American middle class is dying. Yeah, they are. They look good because they've been buying a lot of stuff on debt, but the middle class is being squeezed. Middle class people pay more in taxes than billionaires. They have nowhere to invest: the stock market is rigged. Hedge funds manipulate stocks on behalf of the rich and famous. Insiders suck up the value of transactions. Mutual funds lie and the FCC lets them. Interest rates prevent savings. Inflation kills money. So what does that leave? Houses... but

● There's a massive problem brewing with houses. The greedy bastards in the investment industry realized home equity is profitable, so they decided to take it. Investment firms have started buying homes. In some markets, they already control up to 24% of the homes sold. They are using sh*tty tactics to overwhelm normal buyers like out bidding them $1 at a time at auctions or buying chunks of homes from developers before they even hit the market. So what? Well, they already control enough houses that they have virtual control over the rental market and have been able to raise rents far beyond market levels. Essentially, they are monopolizing rents. This means renters pay far more than they should which strips young people of the savings they need to eventually buy a home, which prevents them from getting the only asset Americans can trust in to build wealth. Even if people have money, buying homes is becoming much harder because an average person cannot compete with a trillion dollar company willing to overpay to get the property. See, they can overpay, you can't, because you can't get financing if you overpay. You also can't recover the overpayment by overcharing for rent as they can.

No home, no equity, no wealth.

But you already have a home and you don't plan to move (ever?). So how can this hurt you? Well, you know what renters are like, right? Do you want half the homes on your street to become rental units? I didn't think so. Just wait until they own most homes.

Then there's this. This is just a suspicion at this point, but an informed one. What happens when Goldman Sachs owns 75% of the homes in your neighborhood? Do you think they will just let their investment ride or do you think they might have a plan to improve it? What can they do? What do you think will happen when the people who own 75% of the homes in the city start asking that neighborhoods be rezoned to let them turn old homes, like your neighbors', into luxury condos or strip malls? The Supreme Court has already said the city can even take your home to let Goldman Sach do it. This worries me greatly.

● Then there's the jobs issue.

● For two decades now, corporate America has sought to import foreign workers. Under the guise of filling jobs Americans supposedly won't do, they've tried to replace union workers with cheap foreign welders. Truckers with Mexican truckers. They've tried to import foreign engineers to Silicon Valley even as American engineers get laid off. They did the same with bankers in New York. What they can't bring in, they farmed out... outsourcing. These are jobs average people could live on, and they are being taken from Americans.

● The minimum wage went up, but did that help or hurt? I was talking to a liberal black woman from the Northwest recently who swore she will never vote for another minimum wage hike. "Everything I buy got more expensive to pay these people, but I never got a raise to offset that. I worked hard to get above minimum wage levels and now I feel like I'm poorer." She's not wrong. Wages have been so stagnant compared to true inflation that most people are now struggling. Raising minimum wage did not help those people. In fact, try this. Did you know in most places, minimum wage is around $12-$15 an hour already? What's your hourly rate by comparison? How old are you and how long have you been working? Do you think you should be that close to the bottom with that experience?

● At least the minimum wage people are doing well, right? Hardly. Here are some annoucements from corporate America (all given with tremendous enthusiasm) which should scare the hell out of you:
● McDonalds and Subway are introducing automated voice ordering screens. Computers pretending to be human. My bank already does this in their drive throughs. No humans needed. Dominos is proudly touting their trial of driverless delivery using a technology called Nuro. Chick-fil-A is testing Nuro as well. That's the end of pizza delivery guys and Uber-eats. It will also extend, soon enough, to truckers... one of the last lower-class quality jobs. White Castle is testing a robot cook named "Flippy." Between those three, fast food and delivered food will soon be personless. Darden (Olive Garden, Red Lobster and many more) is using at-table computers to eliminate the need for waitstaff. That's the end of teenage jobs and that all-important first step on the ladder for uneducated people needing to enter the work force. Don't think any of this will stop there either.
There's more, but this is enough to really trouble me. Think of a world where there are no entry level jobs because they are handled by robots. There are no high end jobs because they are farmed out to foreigners, even imported foreigners. There is nowhere to invest money except homes and you can't buy a home. Your rent is ridiculously high. Your neighborhood is being sold to This is our greedy elite not just trying to get avericely rich, it is them trying to take every single penny they can and crushing you in the process.

And I think it's coming soon.

I think we are looking at a crisis. I really am. Yet, no one seems willing to deal with it. Some are happy because they've been benefitting so far and the bad stuff is happening to the other guys. Liberals are blind to this because they like the "inclusive" politics of these people. Conservatives wrongly see this as the market at work.

Honestly, I am worried.


tryanmax said...

Andrew, I can’t even imagine what’s you’re holding back, because right here, you’ve hit on almost everything that is weighing on my mind. For all their handwringing over inequality, Democrats and the left are more than happy to keep driving it. I’m afraid my thoughts are going to be as scattershot as yours.
The housing thing especially has grabbed my attention. I am deeply concerned by the number of people ostensibly on the right saying, “So what? How does a company owning houses hurt you more than people owning those houses?” You laid the answer out brilliantly. (I think) I got lucky; I bought a house when the market was bottomed out. But although I could sit back and bless my good fortune, I’ve got to worry about how this affects everyone (and not just my kids).
Not long ago, I saw someone write “stop defending current existing market distortions as though they were the free market.” That means more today than it did even a few years ago. It’s like no matter how many slippery slopes we go down, some people still refuse to believe they’re possible.
Just today I saw a headline on Bloomberg, an opinion piece titled, “America should become a nation of renters.” The justification was that the things that made houses a stable investment are going away. Well, no foolin’! I refer back to everything you wrote about monopolistic rent. And, of course, there will be ripple effects. You can’t buy that plot of land on the edge of town. It’s already been sold to a developer building rental homes. Maybe you can put a bid in on that cottage outside the city limits. At least you only risk being outbid by another human. But forget about some dream of small-town revitalization. The ones that are hanging on are ahead of the suburbs when it comes to single-family rentals.
One thing most people don’t recognize is that many union job wages are directly tied to the minimum wage. That means, when the minimum goes up, everyone up the chain gets a raise, too. Economists who should know better will defend minimum wage increased on the grounds that it takes awhile for the effect to filter through, thus softening the blow. Uh, no. It happens immediately.
As to what happens when the middle class is squeeze out, I don’t see any good direction. Best case scenario, things start falling off the backs of trucks and everybody knows a guy. Worst case scenario, young bucks with no other route to gain social status will start taking well-regulated militias very seriously.

ArgentGale said...

Grim stuff indeed, Andrew, and if even you're feeling like this, well... Still, it's hard to argue any of those points. Good observation indeed on the revolutions, and also worrisome considering those were all socialist ones and I'm afraid any backlash from the corporate abuses we're seeing is going to make socialism a lot more marketable to the average person, especially in light of the right pretty much abandoning education and culture. The right being hopelessly stupid because muh principles (hope you don't mind me linking this one, too, Mr. Todd of Mischief) isn't very reassuring either.

Good observations on the rich, too. The only extremely rich man I can think of offhand that's generally well-liked is Elon Musk, who definitely has the whole real life Tony Stark thing going, to borrow an observation from a friend. Looking at some of the others, though, especially the Tech Lords? I don't know of many people more widely loathed than Mark Zuckerberg and I think the only thing keeping Jack Dorsey from matching those numbers is Twitter being a small platform with a loud voice. Gates has never been liked and while Bezos did come up with something useful with Amazon it's gone from 800-lb gorilla to full-blown T-Rex at this point and his conduct isn't winning him any friends - most comparisons between him and Lex Luthor aren't done in good fun these days.

I can't leave Trump out of this either since as divisive as he is the people who love him still do and still see him as one of the only people willing to fight for them. I can't help but wonder how much of this he saw from his own business dealings and how much that motivated his run. It does explain more of why the - damn, I wish there was a better word to describe these litterbox scrapings than this - elites turned on him so hard. Apostates tend to draw more hate than infidels, after all.

On the other observations, especially on the housing issue, all depressing but true. Good of you to bring up the middleman economy issue, too. You're the only one I've ever seen talk about it, which is a shame and probably a big part of why things are so screwed up.

On housing, I suppose I'm fortunate to have a completely paid off house, though it's not much of one and definitely won't do if I end up adding a wife and kids to the mix (which feels more possible now than it did before, and yet there's the mess we're talking about here). That article scared the hell out of me when you first brought it up with Jon because of those considerations as well as the fact that moving actually became viable for me until the beer virus brain diarrhea hit. Considering I'd have to take my cats with me, this...isn't good at all. And taking homes to satisfy these companies? Do they want more Marvin Heemeyers when people have nothing to lose anymore? That job stuff is disturbing, too, especially in light of how out of hand credentialism has gotten.

Stop defending market distortions as though they were the free market indeed, tryanmax... Shame that you, Andrew, and maybe a few others are just voices in the wilderness at this point. It almost feels surreal how people are just carrying on like normal, completely unaware of these coming nightmares. Heh, wonder how much we can thank Big Tech and their information control for that. Anyway, looking forward probably isn't the right phrase for it, but I'm interested in seeing your upcoming culture article. That bunker in the ass-end of Wyoming is sounding better and better but unfortunately I'd have to rent it from WESAYSO Corporation these days. Damn.

AndrewPrice said...

tryanmax, I couldn't agree more. A couple thoughts:

You said: “stop defending current existing market distortions as though they were the free market.” This is so, so, so true. I've argued with so many conservatives/libertarians who say that they don't want to tell people what they can or can't do even as they see the disaster coming. The problem is, these things are not the result of good market dynamics, they are usually the result of misuse of regulation or exploitation of monopoly power. I can't tell you how often conservatives mistake blatant monopolists, socialists and thieves for capitalists. In fact, all these companies scream about free markets and competition as a shield to hide what they really are doing.

Here you have already unnaturally massive players use their political connections, an army of lawyers to warp the legal system, and sheer force of economic power to exploit consumers and home owners using tactics that have nothing to do with market dynamics. They are in fact market distortions. And the end result will be the raping of the American public.


You said, "I saw a headline on Bloomberg titled, “America should become a nation of renters.”" This is the most despicable aspect of all of this to me. When these people strike, they put out a massive barrage of "news" articles and commercials and an army of analysts to try to sell the idea that what they are doing is for the good of the public. And, gosh, maybe you're all just better off getting raped. You see this at every turn. Dangerous products, fraudulent lending practices, traitorous loyalties, criminal practices... here come the commercials wrapping the company in the flag of virtue and the analysts to explain that only crazies think there was anything wrong. Even when you get someone fighting, it's usually the Democrats fighting the wrong parts for the exactly wrong reason or flat out doing the opposite of what they promised -- like turning their too big to fail solution into a feeding frenzy on smaller banks.

AndrewPrice said...

Daniel, Historically, all revolutions are socialist. Getting to capitalism takes intellect, not anger, and anger causes revolutions. Moreover, in this case, the elites who are bringing this themselves on are hiding behind the cloak of faux capitalism, which will make anti-capitalism the cause of the revolution.

On the rich... Ironically, the ones you mention actually produced things of value. Sometimes destructive, but still things of value. For every one of them, there are 5,000 who made their billions suing companies out of existence, through mergers and acquisitions, or getting the government to hand them money.

"You're the only one I've ever seen talk about it"... I think the problem is that the talking class really aren't very knowledgeable. They learn the propaganda that both sides spew, they learn how to spin anything to fit that propaganda, and then that's all they do. The idea of actually thinking deeper never occurs to them, and even if it did, they wouldn't understand. The public then gets fooled into a Pavlovian response by repetition. Rather than seeing what is really going on, both sides look for the instant narrative which they mistake for the "real" truth. They even sell the idea that conformity is independent thinking.

Simply put, no one is thinking. Those that are talking even less so. And even if someone is thinking, the public has been taught to see them as crazy.

AndrewPrice said...

As an aside, here's an article saying that rents are at an all-time high in the US. LINK

Imagine that.

ArgentGale said...

Depressing but I can't argue any of that, and it sounds like the left has already won. Be seeing all of you in the gulag once the revolution comes, then.

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