Middle class shuffle – how the banking system has given the illusion of prosperity with debt serfdom to working and middle class Americans. $14 billion in consumer credit yanked from the system last month.

A cold bucket of water was thrown on many middle class Americans when the consumer credit figures for May were released.  Analysts were expecting an increase of $1 billion but instead over $14 billion in consumer credit was yanked from the system.  You would think that a growing and healthy economy would require more credit as more people enter into the middle class.  Yet the banking system has been pulling money away from working and middle class Americans at the same time that they have ramped up speculating in the stock market (with taxpayer money).  The fact of the matter is that over the last 40 years middle class Americans have been given the impression of wealth building all on a foundation of debt.  This debt was specific since it was handed out like chains from the banking system.

We should first take a look at total debt in the United States:

American consumers hold over $13 trillion in total debt secured by homes, cars, student loans, and other items.  As you can see from the above, there are many other areas with enormous amounts of debt.  It has been a massive debtor party for the last 40 years and this economic crisis is merely an inflexion point.  Many who thought they were middle class are quickly realizing that they were operating on borrowed time from a banking sector that was all the willing to suck taxpayer money dry while pulling access to money away from the public.

The growth in total household debt has been exponential since the 1970s:

What happened during the 1970s?  This is when the idea of “deficits don’t matter” took hold and the U.S. was completely decoupled from any static restrictions on the U.S. dollar.  We were free to print what we wanted and float the currency.  This of course sounded good at the time and in theory, with good leaders at the helm things would turn out okay.  But this was a misguided assumption.  Banks over this time have used their long tentacles to buy off politicians and weaken the enforcement branch of the government.  It finally culminated to our current epic debt crisis.  Yet what you notice is the consolidation of banking power.  Even after all the bailouts growth is extremely weak.  In fact, the only noticeable change has been a direct correlation with government spending which really isn’t good.  If I put a dollar into the system we shouldn’t be shocked that we see a dollar of activity.  Trillions of dollars funneled into the banking system and we have little to show for it.

The opiate given to numb the middle class was through easy access to debt.  Just take a look at credit cards:

Notice a few familiar names?  These are the banks that are now turning large profits on Wall Street as the economy struggles to get by.  What exactly are they betting on?  Keep in mind these banks are only surviving today because of the extensive taxpayer bailouts they have received.  Middle class Americans are largely opposed to these bailouts but they don’t have much of a say in what goes on today in American governance.  It is one giant illusion.  Politicians will say the right things when it comes to reigning in Wall Street but by the time legislation gets through the Senate and lobbyists, it is so watered down that nothing is really done.  It is all theatre for the masses.

The contraction in debt is rare:

An expanding economy theoretically will see more access to debt as people move into a wealthier status.  The above data shows us something extremely different.  Banks are largely promoting their propaganda to keep the taxpayer wallets open while data on the real economy is certainly still weak.  Recent data on home sales has shown a dramatic collapse once the easy money was taken away from the home buying market:

New home sales have collapsed nearly in tandem with the removal of the tax credit.  The market is so dependent on easy money that once it is removed, it nearly collapses in real time.  The illusion of wealth masked by debt is a powerful force.  I think many Americans are waking up to the reality that they have lived through an entire decade with no real wage gains.

The perception of being more prosperous was nothing more than spending money we didn’t have from banks that were simply looking for an easy way to grow their power.  Once things went boom, they stuck the bill to all Americans while they dug their fangs deeper into the taxpayer neck.

As people were distracted with fancy plastic and absurd amounts of debt, the entire workforce was being eroded:

The amount of hours worked on average per week has been falling rather steadily for the past decade.  So what was pushed as prosperity from the banking sector was nothing more than one enormous debt illusion.  Now that the bubble has burst, working and middle class Americans are left cleaning up the mess and paying the bill.  Like any magic trick, once it is revealed to you how it is done it loses its luster.

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