Monday, February 2, 2015

Middle Finger Economics

It's unusual to have a trending topic "buzzing along" the lines of my own recent thoughts about gold. So let's have some fun and juxtapose the two.

Apparently, this idea of "middle class economics" has been forming, with a little boost from the recent Oxfam report on wealth inequality, along with numerous "leading indicators" of global stagnation. The idea is a simple one - we can't have a robust global economy with all wealth concentrated in the hands of the top 10%, or 1% (or some other % ranging between the two).

Let's face it. A couple hundred of the world's wealthiest families are not going to purchase millions of hamburgers from McDonalds or millions of chicken breasts and cheap Chinese made sunglasses from Walmart. This is an oversimplification of course, but you get the idea. It's great that Christies had another banner year auctioning fine art, antiques and wine from the stratospheric ethos of the wealth elites, but these luxury purchases do not a robust global economic engine make.

On the other hand, as we journey down the trail toward super high priced gold (in debt terms) otherwise known as FREEGOLD, we suddenly find ourselves in a very, very different world.

Not only is this the ONLY world where the super rich can preserve much contractual paper-wealth with a waiting currency conversion into an equity based monetary system, but we also now have millions upon millions of "3rd World Nobodies", once struggling to enter the lowest rung of the "middle class", now firmly embedded into an "upper middle class" with great wealth to spend.

Even the Roacheforques can support a middle class in India, where the majority of people actually squat in open fields to release their morning excrement. Here is a country where Caterpillar can now earn a profit, and where oil and gas can now find a reasonable price to power such earth movers as to construct the most basic of sewage systems.

The Chinese working class will now be the upper middle class, and can now move from long hours of manual labor (and tiny apartments) to the various pursuits of the former developed countries like Candy Crush Saga, the "Kardashian app" and E-Trade. And they can enjoy these diversions from the balconies of their great ghost cities, soon to be filled.

Russia, China, India and the Middle East will now be some of the wealthiest nations on Earth and can take turns policing each others gold, instead of fields of oil, and so forth ... Who knows, they may even begin a color revolution in Alaska, as the USG has in Ukraine.

As for the American people, a hard landing is assured. We have been trained to see debt as wealth (without actually realizing it) and few of us hold or save in real gold of any quantity. Having been groomed to favor paper wealth instead, we save in 401 K's for their "matching" and stocks for their yield, based on future outperformance of inflation.

Obama's 4 trillion dollar middle class economic growth package of infrastructure investment based on endless trade deficits and increased public debt can still take place in dollar terms and US companies can still earn profits and pay wages in dollars, as long as they can resource their inputs within the dollar world - outside that world, things may get a little dicey-pricey.

But middle class economics can still take place in America - even if middle finger economics is the real attitude abroad. The Wealthy and the Meek alike will inherit this new world of inverse wealth redistribution with demonetized gold, unencumbered from debt.

It is simply the best solution for all (rich and poor alike) to an otherwise unworkable malaise of lost decade after lost decade, enmired in unrepayable debt and continued stagnation.

We are already on this road, and have been for a while. It's just that the way ahead is uncharted in dollar terms, and some who live and die by the dollar will live hard and die young.

As the Greek Philospher Heraclitus was known to say: "Change is essence". It sometimes happens so slowly, we just don't recognize it until we're already there.

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