Every day, new insights emerge. Whether we welcome them or not, the volume of information continues to grow, much like the abundant Federal Reserve notes circulating globally. Last week was no exception; several remarkable revelations came to light.
For instance, Samsung was found guilty of infringing on Apple’s mobile product patents. Additionally, Mitt Romney announced his intention to replace Federal Reserve Chairman Ben Bernanke if he were to win the presidency. In a more sensational vein, images capturing Good Time Harry’s escapades in Las Vegas flooded the internet for public consumption. But that’s merely scratching the surface…
The September issue of National Geographic suggested that “Rome’s border walls marked the beginning of its downfall.” Furthermore, researchers at Columbia University now contend that droughts caused by corn crop failures led to the collapse of the Mayan Empire. Can you believe that?
At Economic Prism, we find it challenging to see how all these data points interrelate. Nonetheless, we have a hunch that, in some manner, they are connected. Making these connections requires creativity and imagination, as correlations are often nonlinear and dynamic.
While grasping the entirety of the situation may be difficult, we can draw conclusions from partial information. Essentially, we can hypothesize about the deeper meanings and potential future outcomes. More on that shortly—first, let’s delve back into the data…
The Incredible Shrinking Middle Class
In our effort to distill last week’s data to its core essence, we encountered Pew Research Center’s findings, which effectively summarized our concerns.
“Since 2000, the middle class has diminished in size, regressed in income and wealth, and lost some—though not all—of its characteristic faith in the future.”
“These stark assessments draw upon data from a comprehensive nationally representative Pew Research Center survey involving 1,287 adults who identify as middle class, along with the Center’s analysis of information from the U.S. Census Bureau and Federal Reserve Board of Governors.”
“A notable 85 percent of self-identified middle-class adults believe it is now more difficult for middle-class individuals to preserve their standard of living than it was a decade ago.”
“This bleak outlook emerges at the close of a decade during which, for the first time post-World War II, average family incomes fell across all income brackets. Remarkably, the middle-income tier—characterized in this analysis as all adults whose annual household income is between two-thirds to double the national median—is the only tier that has also shrunk in size, a trend persisting over the last four decades.”
The Great Middle Class Debasement
The ongoing shrinkage of the middle class isn’t a new phenomenon in America. According to the Pew Research Center, this trend has been in progress for 40 years. However, if it continues, the middle class may eventually become nonexistent.
As we contemplated this deduction, we stumbled upon a related data point: the U.S. Dollar. Similar to America’s middle class, the U.S. dollar has lost significant value over the past four decades.
Indeed, the dollar has declined by 84 percent since Neil Armstrong took his historic first step on the moon. To put it simply, $1 today can buy what would have cost only $0.16 in 1969. Clearly, incomes have not kept pace with inflation.
The erosion of the U.S. dollar corresponds directly to the weakening of the middle class. This relationship is straightforward: through sustained inflationary policies, the government has not only debased the dollar but also diminished the middle class. This troubling trend is evident in myriad ways across the landscape.
The increasing prevalence of graffiti serves as one measure, while the vast spread of urban decay is another. These are just two among many indicators of the alarming decline of the middle class and the emergence of a more troubling reality.
Sincerely,
MN Gordon
for Economic Prism
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