Economic Armageddon Is Coming

[status quo buster]

Economic Armageddon Is Coming

Joel S. Hirschhorn

Stop being a compliant consumer. Face the ugly truth. Don’t get fooled by the stock market. Accept the need for the mistreated middle class to become the revolutionary class. The British military establishment's most prestigious think tank sees what too few over-consuming Americans are willing to anticipate. Unjustified and mounting economic inequality is planting the seeds for global economic conflict.

Here is what the new report from the UK Defense Ministry's Development, Concepts and Doctrine Centre warned might happen by 2035. "The middle classes could become a revolutionary class. The growing gap between themselves and a small number of highly visible super-rich individuals might fuel disillusion with meritocracy, while the growing urban under-classes are likely to pose an increasing threat...Faced by these twin challenges, the world's middle-classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest."

Consider the wisdom of economist John Maynard Keynes: The rich are tolerable only so long as their gains appear to bear some relation to roughly what they have contributed to society. Think of it as proportional and justified economic success. This can be tolerated by poor and middle class people if they believe the economic system is fair and properly rewards those who work harder or have better capabilities. But truly obscene economic rewards angers people. When most prosperity and wealth is unfairly channeled to relatively few Upper Class people, it is only a matter of time until fuming, resentful people in the Lower Class decide enough is enough and revolt. Perhaps violently, if the political system remains controlled by the Upper Class.

A ton of data demonstrate how crazy our economic system has become where a relatively few receive astronomical gains that no rational person could see as justified. One study tracked down home ownership data for 488 CEOs in the S&P 500 Index set of companies. The typical home of the CEOs has 12 rooms, sits on 5.37 acres, and carries a $3.1 million price-tag. Companies big enough to rate S&P 500 status hiked their median CEO pay by 23.78 percent in 2006 to $14.8 million. In comparison, U.S. worker weekly wages rose just 3.5 percent in 2006.

Despite what you hear about the sagging housing market and the many people facing foreclosure, business at the top end of the U.S. housing market is booming. Sales of homes in the $5 million-and-up price range rose 11 percent last year, reports the Dallas-based Institute for Luxury Home Marketing. Ten residential properties sold for over $28 million in 2006. The most expensive in New Jersey sold for $58 million; it went to Richard Kurtz, the CEO of Advanced Photonix, a telecom supplier. In the “ultra-luxury market” a set of suites in New York’s fabled Plaza Hotel was converted last year into one-bedroom condos that start at $6.9 million.

From another study we learn that pay for American college presidents over the past decade has jumped seven times faster than pay for college faculty. In 1996, only one college president took home over $500,000. In 2006, 112 college presidents hit that mark. Meanwhile, after inflation, compensation for college professors increased just 5 percent since 1996. And college students have faced rapidly mounting tuition far higher than inflation rates.

CEOs are getting away with economic murder. Bob Nardelli, the CEO who departed Home Depot early this year, had an exit package worth $210 million. IBM CEO Sam Palmisano took home $18.8 million in 2006 and will receive $34.9 million in deferred pay and $33.1 million in retirement benefits when he leaves IBM. Even more extreme is the case of Occidental Petroleum CEO Ray Irani. The interest income alone on the $124 million that ended the year in Irani’s deferred-pay account totaled $679,396. The Los Angeles Times estimated Irani's total payoff for 2006 at $460 million. Leslie Blodgett, the top exec at cosmetics giant Bare Escentuals, collected $118.9 million in 2006, with most of that coming from the $117.7 million she cleared cashing out stock options. She received 4 million additional stock options before 2006 ended.

Economists Emmanuel Saez of the University of California at Berkeley and Thomas Piketty of the Paris School of Economics found that the richest 10 percent of the U.S. population received 44 percent of the pretax income in 2005. This was the highest since the 1920s and 1930s (average: 44 percent) and much higher than from 1945 to 1980 (average: 32 percent). With more than 140 million U.S. workers, that top 10 percent equals 14 million workers. The bottom half of that top 10 percent had incomes of about $110,000. That may not seem all that high, except that the overwhelming majority of Americans can never expect such income. And remember that many of these top 10 percent Americans are married to or living with equally highly paid people.

When it comes to obscene economic inequality, however, you must focus on the huge gains received by the richest 1 percent - some 1.4 million people. Their share of pretax income has gradually climbed from 8 percent in 1980 to 17 percent in 2005. Their average income was $371,000. Who is in the top sliver of richness? Economists Steven Kaplan and Joshua Rauh of the University of Chicago estimate that there were about 18,000 lawyers, 15,000 corporate executives, 33,000 investment bankers (including hedge fund managers, venture capitalists and private-equity investors) and 2,000 athletes who made roughly $500,000 or more in 2004.

Do those at the top pay their fair share of taxes? Middle class Americans, after nearly 30 years of tax-cutting, are now paying about the same share of their incomes in federal taxes that they paid before Ronald Reagan entered politics. In contrast, America's richest have seen the share of their incomes that goes to federal taxes cut by over half. That’s what happens in a failed democracy and the rich control the political system.

What the future holds for the victimized middle class will not only depend on the uncontrolled greed of the wealthy Upper Class and its control of the political system. It will also be linked to the coming tsunami of global warming impacts on climate, sea level, water supplies, crops and disease. There will be devastating impacts on hundreds of millions and perhaps billions of people worldwide. Lower Class people will be sacrificed – left to suffer the consequences. The rich will retreat to their walled, protected and well stocked havens.

Add to this scenario the inevitable collapse of the entire economic system. At some point it will not be controllable as it is now by those in banking and finance, able to manipulate it to sustain economic injustice. Eventually the inherent fundamental absurdities of the global economic system will prove unsustainable. The wealthy Upper Class will have siphoned off most of the world’s wealth and hoarded resources to maintain a luxury lifestyle.

Gallup News Service recently reported on how the American public’s views on the need for government to redistribute wealth by more heavily taxing the rich. In 1939, 35 percent agreed with that policy. In 1998, it was 45 percent. In 2007 it rose to 49 percent. On whether upper income people pay too little taxes, 66 percent this year agreed. Also, this year, people were asked: Do you feel that the distribution of money and wealth in this country today is fair, or do you feel that the money and wealth in this country should be more evenly distributed among a larger percentage of the people? Again, 66 percent agreed that a more even distribution is needed. Economic revolt in the USA will happen when Lower Class people stop believing in upward mobility, because they finally have first hand knowledge that joining the Upper Class is out of reach, no matter how hard they work or how much education they obtain.

What the future holds: Lower Class economic slaves fighting to survive in a medieval, ugly and bleak world that so many science fiction stories have portrayed. In that hell their best option will be to rise up and revolt against the rich and powerful Upper Class. With such a prospect, global class war on a sick planet, prevention is a priority. For us, that requires paying much more attention now to economic inequality, economic injustice, economic apartheid and the many attacks on the middle class. If not, we get Economic Armageddon along with environmental disaster.

[ProfessorGAC]

1. Right But Wrong

Solid information. Most of the analysis is sound, and i concur with the notion that things are unsustainable. I personally know two of the people mentioned in the article. I would bet they're unhappy with the conclusions drawn from their comments.

We need to alter course, but the distance from here to economic armageddon is a trillion light years.
The Professor

[Rydz777]

5. Well said

Armageddon is a word that carries a lot of baggage, but we are clearly on a dangerous course. Jeff Faux's "The Global Class War" is a good primer. We are also increasingly dependant on highly complex, and unstable, systems which can go wrong and set off chain reactions.

[ProfessorGAC]

6. I Buy That. A Bit

Macroeconomies of significant scale move at a glacial pace. Therefore, even with a sieries of crossed variables all exerting negative leverage, nothing moves suddenly. Even with the poorly regulated systems prior to the Depression, the negative leverage began nearly 20 years prior. The more regulation, the slower the effects, and the larger the system the greater the inertia. There is simply no statistical likelihood that any sudden collapse is feasible.
The Professor

[Parisle]

2. "...... revolt. Perhaps violently,....."

--- It's overdue.

[paparush]

18. Absofuckinglutely. Light some torches. Hoist some pitchforks.

Its time to rattle the windows and shake the walls.

[LiberalEsto]

3. Recommended & kicked

Although I really don't envision a revolution happening. Americans are passive. We are easily pacified by big-screen tvs and video games and other toys.

In addition, this Misadministration has seen the development of hideous crowd control weapons like the ones that make a person feel like their blood is on fire. Even if someone managed to start a revolt, I wouldn't be surprised to learn that there are many ugly weapons that can be used to keep the peons in their places.

[SpiralHawk]

4. Bottoming out on the J-curve of rising expectations

"But don't worry, me and my corrupt cabal of republicon
cronies will make out like bandits. We are doing Totally
Bitchin with War Profits, and we will find a way to get even More.
Too bad about you noisy proles. Smirk, smirk, smirk."

- Commander AWOL & republicon cronies

[formercia]

8. As long as Junior can keep hold of the Rooster's neck

he's happy. Once he loses control, no telling what will happen, thus the motive for total control.

[Mojorabbit]

7. I'm not so sure

I think all it would take is several Katrina like incidents in a row or perhaps a really virulent pandemic or maybe gas at 10 dollars a gallon with no concurrent increase in wages.
If enough people are affected, it would give people an impetus to move. I really do believe that a few meals missed by enough people is the difference between civilization and chaos.

[Javaman]

10. I totally agree...

once rolling blackouts are common and joe blow can't gas up his SUV for his 3 block drive to work for under 10 bucks a gallon or the price of an apple from China is 4 bucks, things will get interesting.

What I wonder is, what will a war with yuppies as the soldiers look like? That frightens me.

[gravity]

9. We are always on the verge of collapse

according to some people.

The truth is that things were much worst off before in America in the past, and we are far better off than most countries. People don't starve to death here anymore, and working conditions are still relatively safe compared to most parts of the world. Conditions have deteriorated some over the past 25 years, but nothing too extreme.

Our system gas it's flaws, and that income inequality can be a problem, but overall our system is stable nowhere near economic armageddon.

If you want to see real economic problems, just visit any South American country. We complain about 3.5% inflation, while countries like Venezuela experiences rates closer to 35%. Developing countries have much more income inequality too. While India has an emerging middle class, with high standards of living, half the country still lives off of a dollar a day. It could always be a lot worst.

[The2ndWheel]

12. We are always on that verge

"Our system gas it's flaws"

I found that funny.

It's all about the energy. As long as we have cheap energy, and America gets to use most of it, we'll be fine. However, if the rest of the world wants to(and have every right to) get in the game, we're going to lose a little, then a little more, and a little more. That's because our lives have been built around production and competition, so it's a zero-sum game.

[gravity]

13. lol, Freudian slip

That was completely unintentional

[IDemo]

16. Bingo

We just need to recruit more economists to locate and extract enough crude to continue the good times. The petroleum geologists and engineers evidently don't know what they're talking about when describing the peaking and decline of the four largest supergiant oil fields that supply the energy needed to fuel industry, agriculture, trucking, and shipping.

[loudsue]

14. People don't starve to death here anymore? Ask some Katrina victims.

And people freeze to death here all the time...just ask the homeless, many of whom are our Vietnam Vets.

Those who are on minimum wage aren't exactly "starving", but they are starving for nutritious food, which they cannot afford on a minimum wage salary.

:kick::kick::kick:

[camero]

Could be happening now

Since the war on terra is mostly being fought against poor people. Osama's still hangin around somewhere. Where is he?

[camero]

11. self delete

[KoKo]

15. Chalmers Johnson (Sorrows of Empire and Nemesis) say it will take Economic Collapse

for America to understand the result of what our policies have been and what our debts and deficits portend for us.

With a Dow approaching 1300 and euphoria by the CNBC/WSJ crowd about this one has to know that this is what the Bushies and "Powers that Be" are conscious of. Yet that this no long affects the 401 contributor or the small investor isn't registering yet. The Day Traders and Hedge Funds and Private Equity firms control the markets and the reality of whats really going on isn't revealed in the manipulated economic numbers.

It will take economic collapse but we won't see it coming until its finally full force in our face. We will just see "indicators" of inquities like are being reported by economists and analysts who still have some integrity left.

[KoKo]

17. kick.......