America's middle class is disappearing.
A lifestyle sustained for 30 years by rising debt is dissolving as the credit dries up.
US census figures indicate climbing out of the pit will be hard. Middle incomes are lower, in real terms, than in 1999. The median income, static for a decade, fell by 4.2% once the crisis hit. Since December 2007 more than six million Americans have been pushed below the official poverty line. This sudden collapse in lifestyle will have economic and psychological impacts long after the crisis is over. Since the 1980s US growth has been driven by the spending power of the salaried workforce, and the consumer has been the dynamo of global growth. To get things back the way they were, the US has to create nine million jobs, plug the gap in disposable incomes and reopen the personal credit system to the millions excluded from it. Judged against that, the Obama fiscal stimulus has failed. The credit system, having created the crisis, compounds the agony: ‘payday loan’ stores are doing brisk business; so are credit reference agencies. Unable to borrow or earn, a whole generation is being denied the American lifestyle. Meanwhile, some states have begun a race to the bottom: slashing welfare, labour regulations and local taxes to attract investment.
High-wage companies relocate to low-wage states, and foreign investment flows to the towns where labour costs are lowest. Those states are being transformed by the arrival of low-waged Hispanic migrants even as the rightwing politicians who support the economics rail against the demographics. As a result, median incomes in the south are, on average, $8,000 lower than in the northeast and poverty rates are higher than anywhere else in the US – as are the racial and religious tensions.
The truth is that Americans have been living a middle-class lifestyle on working-class wages, and bridging the gap with credit – and it's over.
by Paul Mason
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
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