The Idea of America

Versus the reality for America's struggling middle class

(Source: Getty Images)

Bill Bonner, reckoning today from Youghal, Ireland...

Today, before the clouds gather, we bring a bit of Irish sunshine. 

The flowers, having cowered under rocks, and hidden in nooks and crannies for many dreary months, peek out in April.  

Hesitantly, at first, as if fearing they may be mocked for their bright colors…then, flamboyantly, they burst forth. All of a sudden, they are everywhere.

(Source: Bill)

Like an Irish sunbather, they take advantage of every ray of sunshine; it might be their last for the year.

Azaleas, rhododendrons (the locals say ‘rhodydendron’), lilacs, clematis, foxgloves, apple, cherry—and dozens of species we don’t recognize…some delicate…some robust…some wild, some carefully planted and protected – all are blooming at once.

The sun sparkles on the river…it glistens on the damp leaves and wet grass…it warms up the whole earth…to a high yesterday of 61 degrees Fahrenheit.

Oh nature! You are setting us up.  

Toil and Sweat

But let us return to our grim enterprise. A brief resume:

The US government now spends $1 - $2 trillion more per year than it raises in taxes. Where will the money come from? 

It won’t come from the rich; their taxes are more likely to be cut than raised. And if the US borrows by selling bonds, someone will have to pay the lenders back (they won’t pay themselves back).

The money can’t come from the poor either. They don’t have any money, that’s what makes them poor.

Who does that leave? Yes…the long-suffering middle classes – the people who toil and sweat, bus and tote, and sell their time, hour by hour.

Of course, there’s nothing controversial about that. The rich have their lobbyists and loopholes. The poor have their handouts. Who’s left to pay the bills?

Nor is it controversial that inflation squeezes the middle classes especially tightly, between the rock of rising prices and the hard place of falling real incomes.

The part of our suggestion that is hard to swallow is the megapolitical part – that the middle classes are targeted, not just to raise money…but for destruction.  

No, no…of course, the powers-that-be don’t sit around coming up with plans to intentionally, expressly crush the backbone families of the USA. Instead, like everyone else, they respond to the incentives and penalties inherent in the system itself. They are prisoners of megapolitics too.

One Nation, Under Debt

Karl Marx was not wrong about everything; a certain amount of ‘class struggle’ is inevitable. But he saw the working classes as the ultimate victors. He was wrong about that. What the rich lack in manpower they more than compensate in cunning. Using their control of the money, the working man has been held in check for half a century. And now, the elites are desperate to raise the ‘debt ceiling,’ so they can bury him in debt.  

One way or another – probably via inflation – the middle classes will pay the soaring ‘national’ debt. And seduced by artificially low interest rates, they will have their own debts to pay too.

Here’s a report from CNBC (Joel mentioned this yesterday):

Consumer debt passes $17 trillion for the first time despite slide in mortgage demand

The total for borrowing across all categories hit $17.05 trillion, an increase of nearly $150 billion, or 0.9% during the January-to-March period, the New York Federal Reserve reported Monday. That took total indebtedness up about $2.9 trillion from the pre-Covid period ended in 2019.     

…higher rates helped push total mortgage debt to $12.04 trillion, up 0.1 percentage point from the fourth quarter.

Delinquency rates for all debt increased, up 0.6 percentage point for credit cards to 6.5% and 0.2 percentage point for auto loans to 6.9%. Total delinquency rates moved up 0.2 percentage point to 3%, the highest since the third quarter of 2020.     

Student loan debt edged higher to $1.6 trillion and auto loans nudged up as well to $1.56 trillion.     

Time is Money

Our calculations, provided on Tuesday, showed the typical working man worse off today than he was 50 years ago. Time is what he has to offer. And it takes more of it today for him to buy his two major assets – a house and a car – than it did in 1973.  

How did this happen? Progress is supposed to make time more valuable. That’s the idea of productivity; you get more out of each hour of work. So, the things you produce get cheaper and better.  

And just look around. Rich countries are those with high wages. Time is money; money is time. People in prosperous countries earn a lot per hour. People in poor countries earn very little. Gross wages in Switzerland are nearly $50 per hour. In Uzbekistan they are less than $2.

As inflation destroys the value of money, so does it destroy time…and the people who sell theirs by the hour. In Zimbabwe, Venezuela, Argentina – the inflation rate goes up…the middle classes disappear. They flee…or they go broke.

Will that happen in the US? We don’t know. We can’t predict the future. 

The ‘Idea of America’ is that ‘The People’ –  independent, middle class families – rule. But the logic of megapolitics is relentless. The feds want money. They must take it from the middle classes. More importantly, the elite wants power. That too, must be taken away from the very people the politicians claim to represent  – ‘The People.’ 

Regards,

Bill Bonner