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Minyan Mailbag: The Debt Plagued Middle Class


The U.S. middle class loses jobs to China as a result and must go into debt to pay for higher living expenses as the dollar falls relative to other currencies.

Mr. Practical,

Rather than be angry, I would be better served to look for clarity. If in fact credit/debt is the way the US economy is driven, why then is this not explained in terms people can understand by the leaders in the country?

"We should acknowledge the source of our vibrant economic growth," was Fred Thompson's reference to tax cuts and economic policies.

I listen to the discourse very closely on many topics. The source and view of those I trust have become few and far between.

Can you comment on trade and the contention that increasing exports (shrinking dollar) will grow the economy? Also, tax cuts as they apply to revenues? Are corporations over taxed in U.S.?

-Minyan Skins

P.S. Adding to my skepticism is the fact that yesterday I entrusted my 19 year old son to the U.S.M.C. for 5 years. Bright enough, just cannot be in a classroom. "I'm going to get my resume." I believe the economic current in the middle class swept him away.

Minyan Skins,

Ron Paul does explain it. "Those with ears will hear." Almost no one has ears.

The U.S. economy used to manufacture things, have production, which created income for the middle class to save and invest, primarily in their homes.

But over time the U.S. has migrated toward a type of globalization that is insidious to the middle class of America, who are paying a high price. In the U.S., those who own companies outsource cheap/slave labor to increase profits. The Chinese economy benefits as they export and their standard of living rises. The U.S. middle class loses jobs to China as a result and must go into debt to pay for higher living expenses as the dollar falls relative to other currencies. The dollar is falling because debt is rising and that debt is external: it is owed to other countries like China that incrementally demand more and more dollars to lend.

As the U.S. middle class is now dependent on spiraling debt to finance consumption.

Tax cuts further make the rich richer and don't help the U.S. middle class or poor.

As the dollar falls, nominal stock prices (priced in dollars) rise further helping the rich and hurting middle class who don't own that many stocks (but encourages them to take this risk even when they can't afford losses because they are so in debt).

Every time the Fed lowers interest rates, they de facto lower the dollar and further accelerate the process of transfer of wealth from U.S. middle class to Asia. The Fed must be careful to keep this process "slow" and "incremental" so U.S. middle class doesn't really catch on to how their wealth is being taken away and given to exporting countries like China.

The U.S. rich support this as they are getting wealthier.

Eventually, the U.S. middle class will become poor. Because they are in debt they will be slaves to those who have lent them money. They will lose their assets (foreclosure) but won't lose their debt, thus becoming indebted servants.

-Mr. Practical
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