The middle class happily accepts high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses.
It's well known that a major reason why the middle class is in decline is the stagnation of wages, a topic I have covered many times, most recently in What's the Source of Soaring Corporate Profits? Stagnant Wages.
But another often overlooked source of middle class decline is the erosion of middle class wealth. The dynamic behind this long-term trend was indirectly described in The Stock Market Is Like a Fish Tank: the middle class is the majority of fish in the wealth tank that arrive after the gains have been reaped.
In effect, the few who skim most of the financial gain need the middle class to pony up the liquidity and wealth to be skimmed.
In terms of risk, the middle class is always late to the asset class feeding frenzy, meaning that the middle class invests its capital when the opportunities for outsized gains is long-gone and the risk of loss has risen to levels that guarantee declines.
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Now this article has some truths. Basically people are stupid and quite intellectually lazy. Dummies went out and bought overly prices houses thinking they would be a great investment because the talking heads told them so. Then dummies fell for the doom and gloom of the stock market while it was in the doldrums and sold off cheap. Now they'll listen to the news and feel like its a great idea to go all in on stocks with the market at record highs. Intellectual laziness is tearing this country apart politically, economically, and morally.
ReplyDelete825, I totally agree. And all those buyers wound up at punkin Chunkin driving their penchant to over buy on housing.
ReplyDeleteHow astute of you to see this.
Maybe moving it to Kent County will help these poor SOB's.
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