In layman terms, instead of increasing American wages they increased Americans access to credit. It became easy to get high credit limit credit cards and mortgages that extended middle class buying power and thus the semblance of prosperity. It was instrumental in causing the ever increasing price of homes.
The plutocrats sold the overpriced homes and kept their ill gained earnings. The banks provided the loans to the working middle class to pay the plutocrats that sold the homes. Investing firms repackaged the loans into financial instruments that they sold back partly to the working middle class in the form of pensions purchasing these instruments.
When the economic collapse occurred, the working middle class family lost their home or remained under water. Pension funds lost money from the bad investments in the financial instruments that consisted of repackaged loans. The investment firms were then bailed out by the taxpayers (comprised partly of the working middle class as well).
As I have mentioned in several of my blog posts, the titans of finance produce no product or real service of societal value. They simply make money from manipulating money. In so doing they must continue to create financial products to increase their ever expanding growth. Imagine that! These are companies that can continue to grow profits without creating any product or service of societal value,.
Now if you really want to talk about the extraction of wealth from the middle class one only need look at the most obscene financial instrument on the market today, the reverse mortgage. Most Americans have most of their wealth in their homes. Upon death this asset is transferred to the next generation thus improving the net worth and financial status of the next generation. Sadly reverse mortgages give even mildly struggling working middle class folks an out to transfer their wealth, the equity of their home to the titans of finance. They market it in a fashion that encourages bad financial planning. What is most interesting is they all tell you in marketing it that it is government insured. Yet these are the same companies that refuse to pay their fair of taxes to mitigate all the requirements many times they impose on government for their own existence.
I wrote about this in my book “As I See It: Class Warfare The Only Resort To Right Wing Doom”. At the time I saw the commercial hawking this I literally got sick.
Excerpt from “As I See It: Class Warfare The Only Resort To Right Wing Doom”.
Corporations by design have no morality. While taking a short coffee break from writing this book I saw former Republican Senator Fred Thompson, an AAG spokesman hawking reverse mortgages. He says:
“Hi folks, I am Fred Thompson. Now like me you probably heard a lot about reverse mortgages but weren’t quite sure how they worked or whether they would be the right financial solution for you. Well take my word for it and hundreds of thousands of other Americans who have used the Government Insured reverse mortgage as a safe effective financial tool. If you are 62 year or older and own your own home, give AAG a call and find out how a reverse mortgage can help you. I am extremely proud to be associated with AAG, a national reverse mortgage lender that is helping seniors overcome their financial worries and live the lives they’ve dreamed. Why don’t you find out more by calling AAG today? Find out how much call you may qualify for today.”
My first thought was how could a former Senator, a senior, a person who likes to tout morality be so callous to entice the elderly to splurge their wealth away. Most Americans have a large portion of their wealth in their homes. Having some wealth to transfer to one’s offspring helps the next generation to the next financial level.
Unfortunately, yet another financial instrument designed to use the ignorance of the average American citizen’s knowledge of our economic system to donate their money up the wealth tree to the rich. At the end of the reverse mortgage’s term, the elderly is left without an asset to transfer to their offspring at the time of their death.
Is it any surprise then that the family worth is steadily decreasing? Our plutocracy will continue to pilfer the middle class unless the working middle class standup for what is right.
Family Net Worth Drops to Level of Early ’90s, Fed Says
By BINYAMIN APPELBAUM
WASHINGTON — The recent economic crisis left the median American family in 2010 with no more wealth than in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said Monday.
A hypothetical family richer than half the nation’s families and poorer than the other half had a net worth of $77,300 in 2010, compared with $126,400 in 2007, the Fed said. The crash of housing prices directly accounted for three-quarters of the loss.
Families’ income also continued to decline, a trend that predated the crisis but accelerated over the same period. Median family income fell to $45,800 in 2010 from $49,600 in 2007. All figures were adjusted for inflation.
The new data comes from the Fed’s much-anticipated release on Monday of its Survey of Consumer Finances, a report issued every three years that is one of the broadest and deepest sources of information about the financial health of American families.
While the numbers are already 18 months old, the survey illuminates problems that continue to slow the pace of the economic recovery. The Fed found that middle-class families had sustained the largest percentage losses in both wealth and income during the crisis, limiting their ability and willingness to spend.
“It fills in details to a picture that we already knew was quite ugly, and these details very much underscore that,” said Jared Bernstein, an economist at the Center on Budget and Policy Priorities who served as an adviser to Vice President Joseph R. Biden Jr. “It makes clear how devastating this has been for the middle class.”
Given the scale of those losses, consumer spending has remained surprisingly resilient. The survey also illuminates where the money is coming from: American families saved less and only slowly repaid debts.
The share of families saving anything over the previous year fell to 52 percent in 2010 from 56.4 percent in 2007. Other government statistics show that total savings have increased since 2007, suggesting that a smaller group of families is saving more money, while a growing number manage to save nothing.
The survey also found a shift in the reasons that families set aside money, underscoring the lack of confidence that is weighing on the economy. More families said they were saving money as a precautionary measure, to make sure they had enough liquidity to meet short-term needs. Fewer said they were saving for retirement, or for education, or for a down payment on a home.
The report underscored the limited progress that households had made in reducing the amounts that they owed to lenders. The share of households reporting any debt declined by 2.1 percentage points over the last three years, but 74.9 percent of households still owed something, and the median amount did not change.
The decline in reported incomes could have increased the weight of those debts, tying up a larger share of families’ take-home pay. But one of the rare benefits of the crisis, historically lower interest rates, has helped to offset that effect. Families also have been able to reduce debt payments by refinancing into mortgages with longer terms and deferring repayment of student loans and other obligations.
The survey also confirmed that Americans are shifting the kinds of debts they carry. The share of families with credit card debt declined by 6.7 percentage points to 39.4 percent, and the median balance fell 16.1 percent to $2,600. [More]
Family Net Worth Drops to Level of Early ’90s, Fed Says – NYTimes.com