Inflation. The urban housing crisis. They are popular political talking points in the battle of information versus disinformation taking place in the media. All of us who live in the industrialized world are aware that prices for things we must buy are going up. Food, housing, clothing, and transportation are all becoming more expensive. It is worse in some countries and not as much in others, but prices are going up.
At the same time, income earned by working people is not going up at the same rate, despite workers being more productive than at any prior time in human history. What is going on? Why are working people not earning in proportion to their increased productivity?
Most importantly: Why is housing becoming so expensive so quickly? Peter Turchin and Gary Stevenson are experts, in separate fields, who have found out what is happening. The answer is worrisome. We are nearing the end game of trends which began about fifty years ago, but are part of a cycle which has repeated through history.
Here is a chart of inflation rates for the year 2023:
Elite Overproduction and the Wealth Pump
Tax rates are drastically lower for the super wealthy, who make money on interest, dividends, rent, and capital appreciation from their assets. Those types of income are taxed much lower overall rate than hourly wages and salaries. Wealth of of the super rich is barely taxed, while the middle class bear the brunt of taxation.
Low taxation and low interest rates are the means for priming the wealth pump and flowing money from the poor and middle class toward the super rich. That is how the asset based economy works and who it works for.
An Economy Structured to Feed the Wealty
Peter Turchin often asserts that civilizations go through a cycle of growth and decline which may be judged by the number of super wealthy elites and how they wield their political end economic clout. In America, for example, the super wealthy, (owning more than $10 million in assets), have been increasingly competing with each other for positions of power. They have been united in fighting business regulation, taxation, and labor unions. When there are too many of them, they divide into factions and cause political instability.
According to Turchin, the elites eventually become dominant economic forces by getting control of banking and lawmaking, setting up a "wealth pump." Wealth pumps are structures in the economic and legal system which open the flow of money from the bottom up and block the flow of money from the top down.
What actally is the phenomena we call inflation? Inflation is the measure of trends in the prices of goods and services. Inflation does not include prices of assets, which the wealthy buy. Asset prices actually go up at a rate faster than inflation. Working people spend most of their money on goods and services necessary in day to day life. Wealthy people spend most of their money on assets, which bring them more wealth.
Consider a few things about inflation:
- Inflation can be thought of as the rate at which money is being devalued.
- Inflation can be thought of as the rate at which your wages are being cut without your employer changing your pay.
- Economists want a 2.0 to 2.5 percent inflation rate, managed through the control of interest rates.
One of the metrics used for predicting future inflation is employment growth and another is wage growth. When too many people are being hired, or being paid too much, central banks force a cooling of the economy with interest rate increases.
The manner in which the economy is managed - at least by the wealthy and powerful who own most assets - can be traced back to a memo by Lewis Powell. The infamous Powell Memo was written by him in August of 1971, and set forth a blueprint for wealthy conservatives to take power and dominate in the United States and other countries, where it was possible to take advantage of democrati political systems and capitalist economies. The memo was a plan to fight back against liberalism and the spread of actual democracy.
Concepts set forth in the Powell memo took hold and guided the Ronald Reagan presidency and Republican politics from the 1980s through the present time. Taxes on the wealthy were cut, labor unions were broken, and regulatory agencies gutted. The net result is a primed and effective wealth pump, but wage stagnation for working people. The elite will now buy every house in your neighborhood, tell you that immigration is causing your pay to not go up, and that your inability to afford a mortgage is your own fault. None of that is true.
Housing, meaning buildings and land, are assets. They will increase in price, especially when governments are applying stimulus to the economy. It means the wealthy will become wealthier, and they will buy rental property en masse. Because they are buying assets, they will buy all of the real estate you can see, including the homes of your parents and the place you are renting.
As the wealthy and powerful become more so, not only will you be put under more financial pressure, but political instability will increase as the elites compete for power. They will direct talking points at you, which blame their adversaries for your distress. They will not cite the Powell Memo or the wealth pump, but popular culture war rhetoric which keeps pressure off of them.
Make no mistake: your housing costs, and living in general, are increasingly expensive because the economy is structured to extract money from working people and transfer it to the wealthy.
© 2021 - 2024 Renterbuddy.org, All Rights Reserved.
Contact, Privacy Policy and Affiliate Disclosure, XML Sitemap.
This website is reader-supported. As an Amazon affiliate, I earn from qualifying purchases.