If it feels like your hard-earned income does not go as far as it used to, you’re right! As Mish and Doug Short document, real weekly wages in the US have declined below $677 from $825 in 1973. This is not a misprint or an accident.
I agree with Mish’s causes for this THEFT – the Fed, fractional reserve lending, and government bureaucrats that are more concerned with their own jobs, perks and power. Nixon closing the gold window, removing the constraint on debt creation, was icing on the cake.
There is one more important cause that should not be ignored. Every one of us who has chosen to simply follow the trend or stick our heads in the sand also bears responsibility for permitting our so-called representatives from running roughshod over our rights and sensibilities. As Ben Franklin said, we’ve got a Republic, if we can keep it.
Since the predictable economic decline from declining wages and increased govt debt can only spiral downward, govt’s will dig in their heels even deeper and continue with their desperate attacks on our freedoms and wallets to protect their own jobs, perks, and power.
If you think that our current crop of politicians are going to magically fix this situation, you are going to be more than sadly disappointed. History provides a recipe of solutions … and failures. Guaranteed failure and economic collapse will be served, if we permit more govt as the solution. All you have to do is look at what’s happened over the last year to get a glimpse of what’s headed our way, if we stay on the current path:
– Unprecedented NSA spying on US citizens has continued. The latest encroachment on our Rights was just disclosed by Snowdon, called RAMPART-A, which shows international collaboration to suck up everything on everyone in the world (now do you know why the $1.5 billion mega-data center (PRISM) in Utah needed to be so big?). The purpose is not about tracking terrorists, but finding money and the people that oppose govt abuses. What they fail to grasp is the debilitating impact this abuse is having on the capital needed for growth.
– Govt’s are beginning to reduce the time banks accounts can sit idle before they can confiscate it. Australia has reduced the time to three years and Greece has reduced the time to one year. Think about this… I f you have a savings account that you have not touched for a year, the govt can simply take it.
– Obama has quietly signed Executive Orders that gives Homeland Security the ability to control and shut down the nation’s communications systems upon the President’s request, and gives the military authority to act against citizens to control civil unrest (ignoring the long-standing Posse Comitatus Act), which is coming when pension funds and retirement accounts start vaporizing or taking haircuts.
– FATCA (Foreign Account Tax Compliance Act), with its relentless hunt for cash, is driving the needed capital for growth further underground and under mattresses.
– After Cyprus’ banks confiscated customers deposits, UK and Italian banks are now limiting how much customers can withdraw, and US banks have begun restricting their customers’ international wire transfers.
– The declining world economy is expanding the sovereign debt crisis beyond Greece and the other PIIGS to Argentina, which is about a month away from defaulting. Austria, the source of the sovereign debt crisis that led to the Great Depression, has just declared it never guaranteed its debt, and France announced that 60% of their debt is illegal.
– The German central bank and IMF are proposing “wealth taxes”, and capital controls to lock money in the failing banking system.
– The US Consumer Financial Protection Bureau has proposed “helping” Americans manage their IRA accounts, and the President has set up a special program for Americans to loan their retirement savings directly to the government (i.e. My RA). Govt leaders will sacrifice the pensions of public employees and come after private pensions and retirement accounts before they ever look in the mirror and reform.
– Taxes and fees imposed by govt’s at all levels will rise as the economy turns down again, starting in 2016. One simple example is to look no further than the increase in the car registration fees and traffic fines after the 2008 collapse. When tax receipts decline for the govt, instead of downsizing like the rest of us, they simply take from the rest of us.
– The entire purpose of the govt’s bailout after the implosion of the bank-created subprime Ponzi was to bail out the banks. The trillions that have been pumped into the banks via TARP, QE1, QE2, QE3, etc., at the expense of the 99.9%, has only made the US Zombie Banks more catatonic. Over the last six years the six largest US banks have gotten 37% larger, accounting for 67% of all banks assets, while the number of small and mid-size banks continue to go under. In fact, since 1985, 10,000 banks have simply vanished.
– The most troubling fact that proves the govt and Fed have done nothing to fix the underlying problem (beyond driving the employment population ratio to a 30-yr low), is the fact that the big banks are more leveraged now than in 2007. The TBTF banks are leveraged 30 to 35 times the size of their capital of total OTC derivative exposure, and four of the largest TBTF banks have well over $40 TRILLION in derivatives exposure, EACH. To put this insane number in perspective, the US GDP is around $17 trillion.
Ronald Reagan was right about at least one thing – govt is the problem, always has been, and always will be. It’s just human nature and the “invisible hand” – all individuals pursuing their own self-interest. The problem with govt is that unless the people constrain it, their absolute power will corrupt it absolutely – which is exactly what we’ve seen happen since the popping of the dot.com bubble. Instead of allowing the natural process of capitalism to work, purging the excess debt and leverage from the system, politicians were more concerned with their jobs, perks and power, and started doubling down, adding increasing amounts of debt to fill the voids from deleveraging.
The Fed has kept rates near zero for over five years, and because they plan to keep them there until at least 2016 several central banks have been moving money out of bonds and into equities to get a better return. Pension funds that are dependent on 8% average returns will also be increasing their allocations into equities, and the fed has a plan to encourage the bond selling. These capital flows, coupled with the funds fleeing troubled parts of the world and defaulting countries like Argentina, will continue to drive asset prices higher. Of course, none of this will do anything for real wages, except drive them lower, as companies can cheaply finance robots and software to replace workers.
There is a solution, but it requires getting rid of the career politician. Europe is proof that this will not happen without a revolution. Draghi has now come out and said point blank that EU countries need to surrender their sovereignty to save the euro (full teranscript here). In reality, the only thing Draghi is trying to save is his own ass and all the politicians in Brussels that would lose their jobs if the euro collapsed.
In the US, the challenge is similar. If there is to be any chance of reforming all that is wrong with our govt, we can either implement term limits, with a maximum of two years, or our Representative form of Govt that pretends to be a Democracy should be replaced by a Direct Democracy. The alternatives are much, much worse, with a revolution resulting due to the eventual collapse of purchasing power.