"Federal Reserves Confirms The Accelerated Decline Of The Middle Class" By Egberto Willies

[applegrove]

Federal Reserves Confirms The Accelerated Decline Of The Middle Class

By Egberto Willies at EgbertoWillies.com

http://egbertowillies.com/2012/06/13/federal-reserves-confirms-the-accelerated-decline-of-the-middle-class/

"SNIP..............................................

The article below “Family Net Worth Drops to Level of Early ’90s, Fed Says” is simply a confirmation of what most of us have known, assumed, and felt for the last several years. Let me be clear, the continual decline of the middle class is provably the result of supply side economics instituted by Ronald Reagan and laissez faire capitalism. Economist Richard Wolff in his presentation “Capitalism Hits The Fan” does an excellent job in explaining the semblance of prosperity we had in the pre-economic crash years. He illustrates how our titans of finance have extracted wealth from the middle class using credits and bubbles.

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).

..............................................SNIP"

[dkf]

1. Who sold the overpriced homes? Plutocrats?

You mean the home builders or the realtors? Because in general rich people haven't invested in single family homes for the purpose of flipping them.

[applegrove]

2. By losening up banking practices and getting people who couldn't afford mortgages into the market

the banking execs and stockholders made millions. Home builders are the rich no?

[dkf]

3. Goodness what bank stocks are you looking at?

Certain individuals may have done well but that is on a case by case basis I imagine with the most egregious lenders going bust. With the tight lending standards I am sure a lot of people lost their jobs.

Being imprudent leads to feast and famine. It's not something you can do for long.

[applegrove]

4. The bankers were betting with the bubble and against it. That is why they bundled and sold subprime

mortgages to pension funds. The sheer volume of transaction taking place was how rich builders and rich bankers made money. Think of the number of transactions that were taking place because the bubble was extended over a long period of time.

[dkf]

5. Now take a look at Bank of America stock and tell me if that worked out well.

[quaker bill]

6. Many people made a great deal of money

and many people went profoundly broke. Asset bubbles work like this. Little actual wealth is created, but a great deal of it changes hands.

The LLCs of the "greater fools" went profoundly broke. Those who did not veil their personal accumulated assets well went personally broke. Those who sold out of the market when they got the first whiff of impending doom are now buying back in at the bottom.

The banks were hosed by a fraud in which they were somewhat complicit. The fraud by guys in expensive suits was vastly more effective at plundering bank vaults than any group of guys with automatic weapons has ever been.

Here in this market, by the end of the bubble they were literally selling new 300K homes to people without proof of income or credit checks. If you had a pulse and could sign the documents, you were good to go. The brokers would then package this crap into a bundle and sell it to the bank. The people and houses were just vehicles to sell mortgages, the bigger the better.

Some home builders made massive piles of cash. They are easy to pick out because largely they are the ones still in business. There aren't that many and some really big and old firms drank the kool-aid and bought the farm (literally and for very inflated prices). The farm is still a farm (not a subdivision).

[dkf]

7. Yes...for a while it was amazing how many were employed as real estate investors.

And before, there were the day traders. Crazy.

[quaker bill]

8. The smart money got out in 2006 or early 2007

and locally, the smart money is coming off the sidelines now, bit by bit. They are buying up developed properties ready to build for sometimes less that 50% the cost of construction alone. I do the paperwork shuffle getting the development approvals retitled for part of my living...