Now that the political theater of the debt ceiling debate is behind us, we can all breathe a sigh of relief, wipe our brows, pull up our suspenders and get back to work right? Well, not exactly.
It’s only been a few days since the debt ceiling vote, but market signals and continuing rotten economic news suggest we aren’t nearly out of the woods with our massive debt problems:
- Gold (the classic hedge against economic uncertainty) is on a tear… The Telegraph concedes this morning that it will likely be at $2000 an ounce by the end of the year.
- Reams of scary technical signals abound (see here and here) that strongly suggest stocks may be in for additional swooning on top of the 828 point, 6.5 percent loss over the past nine trading days.
- The Commerce Department’s report last week of disappointing GDP numbers of 1.3 percent from April through June, and a miserable stall-speed revised first quarter GDP number of 0.4 percent suggest that the Fed’s billions of dollars in quantitative easing accomplished absolutely nothing.
No matter how you slice it, the U.S. economy looks like a great big shit sandwich. Any happy talk about our “continuing economic recovery” by the political muppet show in Washington is so farcical at this point it’s simply amazing they can get the words out of their yappers before breaking down into guffaws.
But when autocrats like Russia’s Vladimir Putin accuse you of being a parasite on the world economy, and instinctively you know it’s true (!), that’s when you know you’ve got real problems.
Putin’s criticism that the U.S. doesn’t live within its means and shifts the burden of their problems onto the world economy is absolutely correct in one respect. But what he neglects to mention is that the parasitical nature of a U.S. economy characterized by crony capitalism at the top of the economic food chain and Socialist wealth redistribution at the bottom, has devastating domestic consequences as well: It’s left the American “host” (our dwindling middle class), anemic, lethargic, feverish, bed-ridden and on the verge of death.
To liberally paraphrase Charles Hugh Smith, the great tragedy of our parasitical economy is that the middle class has been conned into supporting income redistribution which a) favors the super-rich in the form of massive government bailouts of Wall Street for instance, and b) heaps middle class beneficence on an unproductive class that pays no taxes whatsoever.
(Let’s stipulate for the record before the slings and arrows come a-flyin’ that by “unproductive class” I’m not including the truly needy and poor who need a helping hand. But if you can work, and simply choose not to, you are part of the unproductive class.)
The fascinating thing about the evolution of parasites is that they are careful not to extract too much from their hosts, lest the host croaks. But sometimes they become too greedy and they end up killing the host, and thus themselves. And that’s the economic dilemma the U.S. finds itself in at the moment.
The middle class must somehow be persuaded to keep toiling away while the mandarin class in Washington extracts their earnings and wealth through higher taxes, junk fees, and a devalued currency. The bottom line is that parasites at the top of the food chain and the bottom of the food chain will get their vig one way or another and they are squeezing the middle class to death to do so.
The consequences aren’t pretty: The middle class will either turn its back on the state’s ever increasing demands and “opt out”, resulting in lower tax revenues (think “gray economy” where middle class workers are paid under the table to avoid ever-increasing tax demands) or they will simply join the unproductive class and thus contribute to a massively higher and unsustainable national tax burden.
Either way, it’s a self-reinforcing death spiral that eventually kills not only the host, but the parasites as well.
In the last days of Rome, the estates of Roman senators and wealthy elites were largely removed altogether from the tax rolls, while the unproductive classes at the bottom of the food chain got free bread and circuses (170 days of free public entertainment a year). The middle class — and it’s taxpaying capacity — was exterminated.
Today, America’s “fortunate 400“, the wealthiest 400 taxpayers in the nation, pay an average income tax rate of about 17.2 percent while the unproductive class collects 99 weeks (almost 3 years worth) of unemployment benefits.
Meanwhile, the “host” — a typical American average middle class small business owner – pays an average tax rate of anywhere between 35-50 percent while also having to comply with ever more burdensome junk fees, rules and regulations that further threaten his/her livelihood.
They say the true nature of a scandal isn’t what’s illegal, it’s what’s legal… What society chooses to turn a blind eye to tells you a lot about what its values are. And unfortunately, all of the sound and fury around our debt ceiling debate in Washington signifies nothing. If you want to see a scandal at work, it’s a parasite nation feasting on its host — the productive middle class — and slowly sucking it dry.
In practice, it’s the “petty con”…
or the “big con”…