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Why We're Doomed: The point is the present system cannot endure
Of Two Minds ^ | 08/31/2017 | Charles Hugh Smith

Posted on 09/01/2017 8:44:20 AM PDT by SeekAndFind

Authored by Charles Hugh Smith via OfTwoMinds blog,

The point is the present system cannot endure.

Despite all the happy talk about "recovery" and higher growth, wages have gone nowhere since 2000--and for the bottom 20% of workers, they've gone nowhere since the 1970s.

Gross domestic product (GDP) has risen smartly since 2000, but the share of GDP going to wages and salaries has plummeted: this is simply an extension of a 47-year downtrend.

Last month I posted one reason Why We're Doomed: Our Economy's Toxic Inequality (August 16, 2017). The second half of why we're doomed is stagnant wages. Why do stagnating wages for the bottom 95% doom our status quo? As I noted yesterday in Why Wages Have Lost Ground in the 21st Century, our system requires ever-higher household incomes to function--not just in the top 5%, but in the top 80%.

Our federal social programs--Social Security, Medicare and Medicaid--are pay-as-you-go: all the expenditures this year are paid by taxes collected this year. As I have detailed many times, the so-called "Trust Funds" are fictions; when Social Security runs a deficit, the difference between receipts and expenses are filled by selling Treasury bonds in the open market--the exact same mechanism ther government uses to fund any other deficit.

The demographics of the nation have changed in the past two generations. The Baby Boom is retiring en masse, expanding the number of beneficiaries of these programs, while the number of full-time workers to retirees is down from 10-to-1 in the good old days to 2-to-1: there are 60 million beneficiaries of Social Security and Medicare and about 120 million full-time workers in the U.S.

Meanwhile, medical expenses per person are soaring. Profiteering by healthcare cartels, new and ever-more costly treatments, the rise of chronic lifestyle illnesses--there are many drivers of this trend. There is absolutely no evidence to support the fantasy that this trend will magically reverse.

Costs are skyrocketing and the number of retirees is ballooning, but wages are going nowhere. Do you see the problem? All pay-as-you-go programs are based on the assumption that the number of workers and the wages they earn will both rise at a rate that is above the underlying rate of inflation and equal to the rate of increase in pay-as-you-go programs.

If 95% of the households are earning less money when adjusted for inflation, and their wealth has also declined or stagnated, then how can we pay for programs which expand by 6% or more every year?

The short answer is you can't.

The budgets of state and local governments also expand every year as citizens demand more services, infrastructure requires costly maintenance and upgrades, and the overall costs of providing government services rises (soaring healthcare premiums are a major driver of higher government expenses). How can households pay higher property and sales taxes if their incomes are going nowhere?

Stagnant wages = stagnant income tax revenues.

Then there's the consumer economy that depends on ever-higher consumer spending. If wages are stagnant, how can households spend more money? The conventional answer is: we'll blow asset bubbles in stocks, bonds and housing, and households can spend this newfound wealth.

Nice theory, but only the top slice of American households own enough of these assets to matter. Feast your eyes on these two charts of skyrocketing income and wealth inequality. This chart shows that the majority of income growth is now concentrated in the top 1/0th of 1%, and most of what's left has gone to the top 5%. This is the only possible outcome of financialization and central-bank inflated asset bubbles.

Here's another look at the same dynamic, but excluding capital gains, which flow to those who own most of the assets, i.e. the top 1%: the bottom 90% lost 10% in the decade 2002-2012, the top 5% gained 6% and the very top of the wealth-power pyramid, the top 1/100th of the 1%, gained 76%.

The conclusion is sobering: wages/salaries are no longer an adequate means to distribute income or paid work. Our system is broken at the deepest levels--not just economically broken, but socially broken as well. Clinging to this broken model and filling the widening gap between the super-wealthy and everyone else with more debt will doom the system.

This is why I've proposed a new way to organize production, consumption, work and income in my book A Radically Beneficial World: Automation, Technology & Creating Jobs for All.

The point is the present system cannot endure. Borrowing trillions of dollars to paper over this failure won't work for much longer. We need a new system, or we're well and truly doomed.

TOPICS: Business/Economy; Society
KEYWORDS: demographics; economy; gdp; markets; medicaid; medicare; nationaldebt; socialsecurity; wages; wealth

1 posted on 09/01/2017 8:44:21 AM PDT by SeekAndFind
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To: SeekAndFind

Use this CPI (Consumer Price Index) Inflation Calculator to check your wages against inflation from when you were first employed or when you started your present job:

you may be surprised.....................

2 posted on 09/01/2017 8:51:09 AM PDT by Red Badger (Road Rage lasts 5 minutes. Road Rash lasts 5 months!.....................)
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To: SeekAndFind

Like the fat man wearing pants that are two sizes to small.
Something has to give.

3 posted on 09/01/2017 8:51:26 AM PDT by Leep (Less talk more ACTiON!)
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To: SeekAndFind

This is why there is a push for a higher minimum wage. It is price/wage inflationary. That is the model all these programs are built on.

4 posted on 09/01/2017 8:56:28 AM PDT by robroys woman
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To: SeekAndFind; All
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5 posted on 09/01/2017 9:00:09 AM PDT by musicman (The future is just a collection of successive nows.)
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To: SeekAndFind

Plain and simple: the system has been rigged by the elites through the political class, and that is why Trump was elected.

The Deep State might succeed in toppling Trump, but they are riding around on a pi$$ed off tiger (the American worker and middle class) that will throw them off and eat them if they do.

6 posted on 09/01/2017 9:03:33 AM PDT by RatRipper (Unindicted co-conspirators: the Mainstream Media and the Democratic Party)
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To: SeekAndFind
This book describes a global system that integrates money, work, commerce and community in new ways, using social/technical innovations that are already in daily use.

This book is the practical blueprint of a new system that offers opportunities for meaningful work and ownership of the sources of prosperity not just to a few, but to everyone.

In this system, every individual has the power to change the system for the betterment of themselves and every other participant. Being at the top of the heap is no longer a prerequisite. Everyone who is powerless in the current arrangement is empowered in this new system. Empowered to not just better themselves and their family, but better their community and through that organization, the larger community of Planet Earth.

Yeah yeah yeah. Buy the book.

7 posted on 09/01/2017 9:03:46 AM PDT by plain talk
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To: All
The answer is probably not that complicated. Lower taxes and cut governmental expenses will have a tremendous positive impact.

BLS: Americans Spend More on Taxes Than Food and Clothing Combined! By Terence P. Jeffrey | August 30, 2017 | 12:18 PM EDT

( - Americans on average spent more on taxes in 2016 than they did on food and clothing combined, according to data released this week by the Bureau of Labor Statistics.

8 posted on 09/01/2017 9:14:57 AM PDT by Grampa Dave (Did voting for Trump for President, make 62+ million of us into Deplorable Racists/Nazis? NO! NADA!)
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To: SeekAndFind

Verily it is the case that there’s no plan devised by either of your broken, craven political parties to fix this problem. Only the Deep State has a plan to do anything, whether it will fix this problem or not remains to be seen. That plan is WAR!

9 posted on 09/01/2017 9:21:56 AM PDT by Rich21IE
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To: SeekAndFind
Authored by Charles Hugh Smith via OfTwoMinds blog,

A double minded man is unstable in all his ways.

10 posted on 09/01/2017 9:26:29 AM PDT by Harmless Teddy Bear (Not a Romantic, not a hero worshiper and stop trying to tug my heartstrings. It tickles! (pink bow))
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To: Rich21IE

Henry ford shared the gains of mass manufacturing with his employees so that they could afford to buy his cars. The Waltons and others kept the gains to themselves and benefited from a financial system that made unlimited credit available. Ford’s employees formed the middle class. The Waltons’ employees formed the debtor class.

11 posted on 09/01/2017 9:29:56 AM PDT by AZLiberty (A is now A once again.)
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To: AZLiberty

True, not that it matters.
Its happened because the Waltons and their like are “globalized”, they don’t care about US Government fiscal problems. The elites in the US, Corporate and Financial/Banking are helicopter elites, not “national” elites, as in nation states mean nothing to them except as tax jurisdictions. Their only loyalty is to their wealth.

Once the world went down this route, there’s no going back. The elites could care less if the US financial system collapses, which is why nothing is done to prevent it.

The elected government doesn’t care because their only constituency is the Corporations and Financial Corporations/Banks that pay for their campaigns. That’s why you have elections without any real change. That’s why you have RINOs. They could care less about the parties or the people who vote for them; they work for their Corporate And Banking bosses.

12 posted on 09/01/2017 9:56:07 AM PDT by Rich21IE
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To: Grampa Dave; All

The answer is probably not that complicated. Lower taxes and cut governmental expenses will have a tremendous positive impact

The ONLY legal\proper recourse: Restore Federalism to its rightful size per the Constitution.

Even ‘lowering taxes’ still allows govt beyond its rightful bounds. Govt ‘expenses’ even more limited.

I can find NO ‘issue’ that one cannot trace back to existing because of, or exacerbated by, out of control govt.

13 posted on 09/01/2017 10:06:15 AM PDT by i_robot73 ("A man chooses. A slave obeys." - Andrew Ryan)
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To: SeekAndFind


Nothing that presently exists will survive the “Bowl Judgments” that ensue for the ten days that follow the Day of Trumpets, in the fall of 2024.

Sit back and enjoy the beauty of Yehova’s perfect plan.

14 posted on 09/01/2017 10:10:22 AM PDT by editor-surveyor (Freepers: Not as smart as I'd hoped they'd be)
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