"How the Middle Class Lifestyle Became Unaffordable"

"...High profit margins are most easily maintained by persuading politicians to create/regulate quasi-monopolies and cartels.

...If the State fails to maintain monopolistic cartels, profit margins plummet and capital is unable to maintain its spending on investment and labor. Simply put, the economy tanks as profits, investment and growth all stagnate.

If the State fails to satisfy enough of the citizenry's demands, it risks social instability.

That is the nation-state's quandary everywhere. With growth slowing and parasitic cartels increasingly difficult to maintain and justify, the State has less tax income to fund its ever-expanding social spending.

In response, the State raises taxes and borrows the difference between its spending and its revenues. This further squeezes spending as the cost of servicing debt rises along with the debt. The rising cost of debt service is an ever-tightening noose that cannot be escaped.

...this leads us straight to financialization, the parasitic extraction of profits from the real economy by finance and the state.

...As the real economy stagnated, the state (which includes the Federal Reserve) incentivized financialization and speculative credit bubbles to keep the money flowing to feed its own spending.

In other words, the state isn't just a passive patsy in financialization--it is a willing partner, because financialization funds the state. Just look at the enormous expansion of property taxes and income taxes that flowed from the housing and stock market bubbles.

Asking the state to limit financialization is like asking the fox guarding the henhouse to stop eating plump hens. If the fox stops consuming the plump hens, it dies. If the state stops financialization, the state's enormously expensive programs and its debt machine all die, too.

In essence, the state has no choice: to save itself, the middle class must be sacrificed. From the point of view of global capital, the ideal partner is a powerful central state that imposes cartel pricing on the economy: $200 million a piece F-35 fighter jets, $100,000 college diplomas, $200,000 medical procedures, $1,000 a pill medications, etc.

From the point of view of the state, it's more important to protect corporate profits and preserve the ability to borrow another trillion dollars at near-zero interest rates than it is to restore a vibrant middle class.

Debt-serfdom works just fine for the financial sector and the central state that enforces the serfdom. Food stamps (bread) and distracting entertainment (circuses) are cheap.

What's not to like about debt-serfdom to those in power? Not only is it an ideal arrangement, it's the only one left to the state and its partner, global capital."

http://charleshughsmith.blogspot.com/2014/05/how-middle-class-lifestyle-became.html