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America’s middle class is headed toward extinction
nypost ^

Posted on 05/12/2016 7:40:32 AM PDT by ChicagoConservative27

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To: Pelham

You dispute that?

The mechanism is inflation.


21 posted on 05/12/2016 8:32:35 AM PDT by zek157
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To: MichaelCorleone
The blame lies squarely with the Congress.

Its like asking a heroin addict to control himself in a drug den. Basically half our congress is progressive-left. Their path to power and control is passing out government benefits and favors, which they control. Over the past decades in fact, with our ability to support massive government debt, they have simply grown this system of patronage and power to where there is no other choice. Even so-called "conservatives" can't resist this.

Let's look at our recent mortgage crisis as an example. Starting with Jimmy Carter, and ramping up under Clinton/Cuomo, for purely ideological and political reasons, they pushed banks to lower lending standards (the CRA) and even created an apparatus to incentivize and permit Wall Street to sell the government crap mortgages (Fannie/Freddie). Even private insurers bought into this system and were guaranteeing such bonds (AIG, etc..). When this crashed in 2008, what happened? One 2nd tier bank was sacrificed (Lehman) while the others were bailed out by TARP - and especially the Federal Reserve, with pure fiat money. The Federal Reserve bought, and now sits on, something like $1.8 Trillion of MBS. They simply preserved the existing system in amber. No reform, no lessons learned. A Clinton is still running for President. Andrew Cuomo still sits as a popular governor of NY State. Fannie and Freddie still exist. Under that same model, Obama has even had Fed.gov take over all student loans as well. Government has simply used that crisis to grow in its scope and power and we have simply taught Americans that "yes, there is a free lunch after all."

22 posted on 05/12/2016 8:33:32 AM PDT by PGR88
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To: Pelham
I’m not the one hijacking threads with crackpot conspiracy nonsense.

OK name-caller. its time to tell the world what you believe. And tell me how a fiat, unbacked currency, Fed manipulated interest rates, and $19 Trillion in government debt doesn't favor the progressive nanny state in Washington, those closest to it, and its huge number of government dependents.

23 posted on 05/12/2016 8:40:55 AM PDT by PGR88
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To: PGR88

I understand.

But that does not exonerate the Congress.


24 posted on 05/12/2016 8:51:41 AM PDT by MichaelCorleone (Jesus Christ is not a religion. He's the Truth.)
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To: justlurking
The definition of middle class is somewhat arbitrary, so alarmism really isn't warranted

I think what the issue is what David Stockman calls the breadwinner jobs. Those are jobs that pay above $25. This number has been stagnate for years. We still have less of these jobs than before the GFC hit. The last time I looked at his site, it was something like 78M breadwinner jobs. You don't necessarily need one of those jobs to be in the middle class but it sure does help. A couple both earning $15 / hour FTE can do fairly well in my town and even better if one of them gets health benefits.

25 posted on 05/12/2016 8:53:36 AM PDT by EVO X
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To: Iron Munro
Amen!

It’s intentional.

Independent people, who provide for themselves and who don’t look to the government for handouts to survive are difficult to control.

Also, we learn to think and analyze what we hear/read and see. That is not what our political leaders from the GOPe and DEMe want. They want to spew their lies, and we are to accept them as the new gospels.

26 posted on 05/12/2016 9:17:47 AM PDT by Grampa Dave ( At 1150, Donald Trump has 87 delegates to get to the needed 1,237 as of May 10, 2016, by Jeff Head)
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To: PGR88
The American middle class grew to its largest extent in the 1950s and 1960s, 40 years after the creation of the Fed.

But if the claim that "Our totally unbacked, printed money, controlled by the central planners at the Federal Reserve, is the absolute cause" had any merit that wouldn't have happened, despite the ardent belief of a small segment of kooks that the Fed is a hotbed of James Bond level villainy.

The $19 trillion of national debt that you cite is entirely the responsibility of Congress, not the Fed. Evidently you don't know who votes on the debt limit, and who has the power to order the Treasury to sell bonds.

The "fiat, unbacked currency" is the result of Nixon abandoning the Bretton Woods Agreement, not the Fed. Evidently you failed to hear that the Fed operated under the gold standard when it was in effect, and that they had exactly no vote on ending it. It wasn't their call.

Moreover the Fed is a central bank, they aren't "central planners"- that's more kook talk. They have some control over monetary policy and the ability of the banking system to expand and contract credit. But as we saw back in the 1970s the bond vigilantes of the private sector have more firepower than the Fed when they act in concert. Not the sort of stuff that the kook sector pays attention to but then facts are stubborn things and it really happened

Manipulating interest rates, at least on the very short term, is indeed something that the Fed can do. So amazingly you managed to get one claim right. Good work.

27 posted on 05/12/2016 9:42:54 AM PDT by Pelham (Trump/Tsoukalos 2016 - vote the great hair ticket)
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To: Pelham
Moreover the Fed is a central bank, they aren't "central planners"- that's more kook talk. They have some control over monetary policy and the ability of the banking system to expand and contract credit.

You contradict yourself. They aren't central-planners, but they have the ability to "expand and contract credit." Which is it? Perhaps you would like to explain the purposes of 4 rounds of Quantitative Easing or "operation twist" to influence long vs. short term rates?

Moreover, you didn't read my post - you just immediately gave your knee-jerk reaction. Yes, Nixon took us off the gold standard, which made our currency totally fiat and unbacked. That, AND the Federal Reserve's manipulations means our currency is completely centrally-controlled.

Your comments about America reaching its apogee in the 1950's - 40 years AFTER the establishment of the Fed are post-hoc thinking. You ignore the effects of two world wars, a great depression and the utter destruction of Europe and Japan afterwards, as well as our abandonment of the gold standard. As Toynbee said - there's a lot of ruin in a great nation.

As for Congress - I have explained elsewhere. Easy money and massive debt has enabled at least 60 years of nanny state growth and all their political dependents and cronies. Obama has increased debt by $10 Trillion, thanks to massive Federal Reserve QE and ZERO interest rates. Sorry, but Congress' only role now is simply to pass out the free money to its constituents and supporters. Show me any conservatives who can resist this?

28 posted on 05/12/2016 10:05:11 AM PDT by PGR88
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To: PGR88; MichaelCorleone

The CRA affected only deposit taking firms, ie commercial banks and savings and loans. It never touched pure mortgage lenders, investment banks, hedge funds, the entire lending sector known as the shadow banking system. The majority of mortgages written during the bubble were written by shadow banking firms, which the CRA had no power to regulate.

The CRA, for all its faults, didn’t force banks to lower their lending standards. Loans to subprime borrowers continued to be conforming loans if banks chose to follow traditional lending standards. All loans handled by Fannie and Freddie had to be conforming paper, and they held up the best during the crisis.

The worst performing mortgages were the NINJA, Option ARM, No Down, No proof of income non-conforming paper that was cranked out by the billions by Fannie and Freddie’s private sector competitors. Some of these began blowing up before the second payment was due. There’s reason to suspect that this was intended in some cases due to a peculiarity in the credit default swaps market.

AIG was the dominant writer of credit default swaps. CDS were unregulated. You could buy insurance on mortgages owned by other investors. You could buy as many CDS against a pool of mortgages as you wanted to. And if you happened to know that the mortgage pool was made up of $800,000 loans to illegal alien strawberry pickers you stood to make a fortune when the CDOs blew up and your credit default swaps paid off.


29 posted on 05/12/2016 10:20:44 AM PDT by Pelham (Trump/Tsoukalos 2016 - vote the great hair ticket)
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To: rhinohunter
-- scrubama's "fundamental transformation" of America is proceeding according to plan. --

It's not just Obama's plan. He's just playing point for his duration. The plan to lower the standard of living in the US has been in place for a few generations.

30 posted on 05/12/2016 10:22:05 AM PDT by Cboldt
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To: PGR88

I didn’t contradict myself at all. You just manage to confuse yourself.

Central planning is what a bureaucracy does in a socialist economy. Or MITI in Japan, and its twins in Korea and China. The Fed is a central bank, not a central planner. Maybe you know the difference and just misspoke.

One of the Fed’s primary roles since its inception is to adjust the quantity of high-powered money in the banking system. This was a very big deal to the agriculture sector. They do this by buying or selling bonds in open market operations- “expanding and contracting credit”.

Quantitative Easing is a tool that the Fed used to fight the deflationary forces unleashed by the collapse of trillions in bad paper issued during the housing bubble. Bernanke is a student of Milton Friedman and Anna Schwartz’s writing on the cause of the Great Depression, the collapse of the banking system, and QE is one attempt to follow their advice and prevent a repeat.

“That, AND the Federal Reserve’s manipulations means our currency is completely centrally-controlled. “

Google “pushing on a string” and it will teach you something about the ‘central control’ that you imagine the Fed possesses. The size of the money supply is ultimately determined by the decisions of tens of thousands of loan officers at local banks and not a committee at the Fed.

“Your comments about America reaching its apogee in the 1950’s - 40 years AFTER the establishment of the Fed are post-hoc thinking.”

I wasn’t ignoring anything. I was pointing out that contrary to kook belief the Fed isn’t the determining factor in middle class prosperity. The one time that they arguably were was 1930-33 when they failed to save the banking system.

“Obama has increased debt by $10 Trillion, thanks to massive Federal Reserve QE and ZERO interest rates.”

Facts are stubborn things. Obama hasn’t got the power to spend a cent that Congress doesn’t give him. And none of that spending has anything to do with the Fed’s QE, which was entirely aimed at keeping financial firms from collapsing. As far as zero interest rates, if the bond vigilantes weren’t acquiescing to them they wouldn’t be this low. They have more firepower than the Fed as they demonstrated all through the 70s.


31 posted on 05/12/2016 11:08:12 AM PDT by Pelham (Trump/Tsoukalos 2016 - vote the great hair ticket)
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To: Theodore R.
They are attracted to Mrs. Bill’s claim, “Working for you”.

Only if they are duped and don't care their healthcare premiums and deductibles have skyrocketed and none of their family members are out of work.

32 posted on 05/12/2016 12:37:33 PM PDT by CptnObvious
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To: zek157

http://www.deflation.com/understanding-deflation/

Q: For the past ten years, I’ve mostly seen a lot of predictions of more inflation or even hyperinflation. Why do you guys disagree?

A: One good reason is that the consensus is calling for the opposite, and in finance the consensus is often wrong. But most of us base our opinion on the belief that the amount of outstanding debt worldwide is unpayable.

Q: I do remember hearing about deflation briefly in 2008, during the worst of the “liquidity crunch,” but not since. Isn’t the big threat over?

A: No. Remember, in 2006-2007, most people thought then that deflation was impossible. That’s when real estate peaked and dropped in half, commodities and stocks crashed 57%, and short term interest rates went to zero. Most people can’t see around the corner. We base our work on precursors of deflation, not the event itself. By the time you can see it, it’s too late.

Q: Everyone says that since 2008 the Fed has been printing money like crazy, creating inflation. Isn’t that right?

A: The Fed has monetized a lot of debt: about $2 trillion worth. But this is not precisely equivalent to printing money. The bonds the Fed holds back the money it creates. Its monetization is indeed inflationary, but not necessarily permanently so. The Fed can create new money only with good debt, and our case is that there is hardly any of that left. If some of the debt it holds begins to sour, it might have to divest itself of some of it, in which case it would have to call in the money that debt was backing. In other words, the Fed still operates as a bank, albeit a privileged one.

Q: Two trillion dollars’ worth is a lot of new money. Isn’t that the definition of inflation?

A: No. Most deflationary crashes emerge from periods of high indebtedness. They happen when the amount of outstanding credit contracts. New money can be enough to balance the retirement of old debt, and that’s what the Fed has nearly managed to do. But it hasn’t created net inflation, because at the same time more than $2 trillion worth of debt has melted away. If the Fed could create inflation at will, real estate would not be down by half, commodities would not be down 40%, and rates on T-bills would be pushing 20%, not sitting at zero. And think about it: These results have occurred despite unprecedented monetization by the Fed and record federal-government spending. What will happen when those trends slow down or reverse?


33 posted on 05/12/2016 8:51:25 PM PDT by Pelham (Trump/Tsoukalos 2016 - vote the great hair ticket)
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To: Pelham
The Fed is a central bank, not a central planner.

Nonsense. The Fed has collected the mandates of "maximum employment," "stable employment," and "reasonable long-term interest rates." It has given itself the entirely fictional and unprovable "goldilocks" rate of 2% price inflation. That is not central planning, comrade?

Quantitative Easing is a tool that the Fed used to fight the deflationary forces unleashed by the collapse of trillions in bad paper issued during the housing bubble.

And what caused the housing bubble? Wouldn't have anything to do with Federal interest rate policy beforehand, would it? And what did the Fed do when the housing bubble hit? They bought up $1.8 trillion of mortgage backed securities, thus bailing out all the major players - from Fed agencies to its owners on Wall Street. The Fed thus creates extreme moral hazard, among its many other faults.

What always surprises is that so-called conservatives, who believe in "free-markets" - and scream if the government meddles in the auto-industry, highly regulates prices and terms in the health care market, and would never accept bureaucratic central planning of the food supply - are so willing to ascribe honorable intentions and vast intelligence to those who centrally plan the most basic commodity of all - money.

34 posted on 05/12/2016 9:02:58 PM PDT by PGR88
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To: PGR88

Oh, and by the way, here is the “central bankers’ bank” admitting that central bank policies and particularly “unconventional monetary policies” of the last eight years are probably skewing wealth and income inequality

http://www.bis.org/publ/qtrpdf/r_qt1603f.htm


35 posted on 05/12/2016 9:31:31 PM PDT by PGR88
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To: PGR88

Nationalized banking is hardly tin-foil stuff. Far from it. A cursory review of history instructs that. Of course, most people have never bothered to study the very things they have their strongest opinions about. They determinedly and proudly remain uninformed.


36 posted on 05/12/2016 9:40:13 PM PDT by gg188 (AMERICA FIRST)
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To: PGR88

“That is not central planning, comrade? “

Nope. But it was Congress pressuring the Fed to an inflationary bias, instead of using a strict price rule under the gold standard. Politicians like to meddle and will always push for easy money, it’s hard for a central bank to remain independent and do their job as they see fit.

“And what caused the housing bubble? Wouldn’t have anything to do with Federal interest rate policy beforehand, would it?”

That was one factor. The extremely low interest rates that Greenspan set in response to 9-11 had investors searching for yield. But the financial engineering of the 1990s was a factor, David Li’s Gaussian copula function was a factor, investment banks looking to farm the virgin subprime mortgage market was a factor, and maybe the dismantling of the last vestiges of Glass Steagall was a factor. It was more of a perfect storm than any one thing.

“And what did the Fed do when the housing bubble hit? They bought up $1.8 trillion of mortgage backed securities, thus bailing out all the major players - from Fed agencies to its owners on Wall Street. The Fed thus creates extreme moral hazard, among its many other faults. “

You should read Friedman and Schwartz’s ‘The Great Contraction’ to see why Bernanke did that. The alternative was to let a trillion dollars of bad paper implode the balance sheets of banks all over the world, which would have given us something much closer to the 1930s than what we got. By the time the Fed began QE the enormous damage was already baked into the cake and it was a matter of how best to keep it from causing a Great Depression 2.0. The time to have stopped this was circa 2003 when housing prices first began heading into uncharted territory. But no one would listen then.

As to your last point, banking is different from all other industries and the government has had some sort of control over banking since Alexander Hamilton set up our financial system in 1789.

Von Mises was as big a foe of bureaucratic central planning as there is, his philosophy being ‘praxeology’, independent human action, but I don’t recall him calling for an absence of government involvement in banking in his ‘Theory of Money and Credit’ which is his book about money and banking.


37 posted on 05/12/2016 9:57:03 PM PDT by Pelham (Trump/Tsoukalos 2016 - vote the great hair ticket)
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To: Pelham

Actually do understand imploding debt is ultimately deflationary. Japan has never recovered values they saw in the 80’s.

Hard to wrap ones mind around long term deflationary trends as you see savings buy less & less.


38 posted on 05/13/2016 5:51:24 AM PDT by zek157
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