The cuts in taxes for the mega-wealthy have led to record wealth inequality and resulted in a huge national deficit. Meanwhile, to make up for the deficit created in part by tax giveaways to one-tenth of one percent of the population, Democrats and Republicans are committed to making draconian budget cuts to vital social services, which target the poor, middle class, elderly and sick, while handing out billions more in corporate welfare annually. (Inequality = Debt = Austerity)
Just as the government has done, to make up for tax revenue lost to the mega-wealthy, Americans have made up for the decline in income by taking on large amounts of debt as well. (Inequality = Debt)
In a severely unequal society, massive debt will always be created, thus forming a vicious cycle of increasing inequality and increasing debt, until the fragmentation of society reaches a breaking point when those in debt cannot afford to pay back their debts without starving to death. (Inequality = Debt = Austerity = Civil Unrest)
The Indebted Citizen
As for statistics on Americans being buried in financial debt: As mentioned before, from 1990 – 2010 costs of living have increased 67%, while wages have stagnated and declined. As the national debt has reached a record $14.6 trillion, total personal debt is now over $16 trillion. Consumer debt is $2.5 trillion. Credit card debt is $805 billion and student debt now exceeds $1 trillion.
Obviously, the more severe your debts are, the more you have to cut back in spending and the less money you have to buy new items. (Debt = Austerity)
Meanwhile, a perfect storm circles overhead as society breaks down and falls into an economic death spiral – health care, food and gas costs are skyrocketing, while income and home values are plummeting. (Inflation + Deflation = Stagflation)
Given these conditions, it is not surprising that over 250 million Americans, another record-breaking number, are currently living paycheck-to-paycheck struggling to make ends meet.
The following charts, from Adviser Perspectives, show the increase in costs of living since 2000:
As you can see, the price of basic necessities are consistently increasing; only clothing (apparel) has declined. The second chart highlights the crucial skyrocketing cost of energy:
The third chart highlights the pernicious skyrocketing cost of education:
The cost of education essentially buries young people in debt they will spend a significant portion of their lives attempting to get out of. Given the increasing costs of living, and the decreasing ability to make an expected income from such an expensive level of education, this young demographic will most likely live an entire life locked into spiraling levels of debt.
When reporting on inflation, the Bureau of Labor Statistics has twice, since 1980, revised its methodology to mask the severity of inflation, similar to how it masks the severity of unemployment. In its Consumer Price Index (CPI), which measures inflation, it has heavily discounted the measurement weight of energy, food and education – three of the most significant costs for most American households.
To understand the significance of its revised methodology, current “official” CPI is at a 3.6 percent annual rate. However, if calculated the way it was before former Federal Reserve Chairman Alan Greenspan altered it in 1980, it would be 11.1 percent, three times worse than officially stated.
So while the government and the Federal Reserve claim that inflation is low, at 3.6 percent over the past year, food prices have increased 39 percent and US gas prices have increased 34 percent over the same time frame.
The increase in gas cost over the past year masks the severity of total gas price inflation, which is currently 125 percent more expensive since December 2008, increasing from $1.67 per gallon to $3.75.
As 90 percent of Americans experience income declines, and the value of the dollar declines, the price of necessities are rising, while the one major asset many Americans have, a house, is also declining in value. Already, thanks to declining home values, 28 percent of US homeowners owe more on their mortgages than their home is currently worth. With 10.4 million American families having lost their homes to foreclosure since 2007, Amherst Securities, a leading broker/dealer focused on mortgage-related investments, estimates that another 10.8 million homes are at risk of default over the next six years. This will obviously continue downward pressure on home values.
Deliberate Systemic Attacks
The dramatic increase in economic inequality and poverty, along with the unprecedented rise in wealth within the top one-tenth of one percent of the population has not happened by mistake. It is the designed result of deliberate governmental and economic policy. It is the result of the richest people in the world, and the “too big to fail” banks, using the campaign finance and lobbying system to buy off politicians who implement policies designed to exploit 99.9 percent of the population for their financial gain. To call what is happening a “financial terrorist attack” on the United States is not using hyperbole; it is the technical term for what is currently occurring.
As Che Guevara, a man who took on the global financial elite, said, “The amount of poverty and suffering required for the emergence of a Rockefeller, and the amount of depravity that the accumulation of a fortune of such magnitude entails, are left out of the picture, and it is not always possible to make the people in general see this.”
The rich have never been richer, while their paid-off politicians make budget cuts for the poor and middle class, and cause the cost of basic necessities to skyrocket.
The unfortunate reality of this crisis is that an economic war has been launched against us.
As a wise old friend once said, “You can’t be neutral on a moving train.”
This post is an adapted excerpt from David DeGraw’s new report on the financial destruction of the United States. The full report can be read here: Analysis of Financial Terrorism in America.