As if the current global monetary system didn’t put the middle-class at a structural disadvantage versus the wealthy, by taxing them disproportionately with inflation, encouraging dissaving and taxing labor (ordinary income) much higher than capital (long-term gains), we now find out that the middle class has a new reason they’re being pushed into poverty: banks are willingly trying to put them there.
In a report by the Sydney Morning Herald, the newspaper notes that more middle-class Australians are being pushed into poverty. The simple explanation why this is happening: Australian banks are trying to figure out exactly how much they can charge customers before pushing them into poverty; to do this they are using a formula which incorporates a poverty index to calculate the last marginal dollar of disposable income that the middle class has for fees and charges.
The banking and finance royal commission has cast light on a new type of poverty to emerge in our society: middle class poverty.
To understand it, we have to go back to an earlier government inquiry: the 1972 Commission of Inquiry into Poverty, conducted by Professor Ronald Henderson. That commission had no real policy impact, but its cultural impact was profound. It gave prominence to the Henderson Poverty Index: a measure of consumption described by Henderson as so austere that it was unchallengeable. Updated versions of this index remain a standard benchmark of poverty.
But more than 45 years on, the royal commission into finance is revealing that poverty is no longer just about low income. The commission has heard that Australian banks have adopted actual lending practices (as distinct from their official lending policies) that claim so much household income for contract payments that borrowers are left without enough money to fund basic consumption levels: they are living in poverty.
This isn’t an accident: it is a strategic policy by banks. How much do banks think households need for daily living? According to the Australian Prudential Regulation Authority’s submission to the royal commission, banks “typically use the Household Expenditure Measure [a relative poverty measure] or the Henderson Poverty Index in loan calculators to estimate a borrower’s living expenses”.
And regulators in Australia aren’t doing much to help – in fact, they’ve simply made a blanket “don’t worry about it” type statement while conducting a “targeted review”:
So measures designed to capture the impacts of low incomes are now targeting financially-enmeshed middle-income households, and not as a statement of social shame, but as strategic objects of bank policy.
This has caused embarrassment to APRA, the regulator charged with overseeing those bank practices. In response, it was permitted to make a supplementary submission to the royal commission in March.
APRA now distances itself from use of these lowly measures, claiming them to be an “under-estimation” of household expenses. It reports that in 2017 it conducted a targeted review of a sample of loan files, using external audit firms to ensure independent integrity.
Following the review, one “groundbreaking” conclusion emerged:
The review contended that lending on the basis of either poverty index is not consistent with sound risk management. It assures that its discussions with banks are leading to improvements.
But it doesn’t stop there, as regulators had already identified the problem more than 10 years ago and did nothing to act on it:
The urgency of this attention is disingenuous. In 2007, then APRA chairman John Laker revealed that a survey by APRA showed that “most [banks] use either the Henderson Poverty Index or (the higher) Household Expenditure Survey data from the Australian Bureau of Statistics as the basis for their living expense calculations … Our review indicated that many lenders were, at the time, using estimates of living expenses below the HPI or were not regularly updating their estimates”.
So a decade ago, APRA had already publicly named the problem, in the exact same terms as it names it now. It has simply watched as the practice of using a poverty index to measure a customer’s ability to repay a loan has become normalized as a culture.
A consequence of APRA neglect is that “poverty” now goes significantly up the income scale, well into what we generally call the middle class.
As the report further elaborates, the middle class is far more susceptible to slip into poverty as a result of their financial profiles versus either the upper or lower classes:
Middle income people are the cohort in greatest financial risk. They are highly leveraged: they spend more of their income on loan repayments than do people with higher incomes.
Second, their assets are un-diversified: they own labor market skills, some home equity and some superannuation.
Third, these assets are illiquid (not easily sold): you can’t transfer your skills to another, houses are costly to sell and superannuation is generally inaccessible. By contrast, people at the top of the income distribution also hold more debt, but their assets are more diversified and liquid, and many generate income streams. Conversely, low income people hold proportionately less debt and are more diversified than the middle: they don’t have their (more meager) assets tied up in housing.
Fourth, middle income people are under-insured or, in financial terms, unhedged. Their insurance isn’t keeping up with their borrowing. Low income people are relatively well insured. They face compulsory insurance, such as for cars and health. High income people have also not increased their insurance, but their need is less because they are more diversified and have more discretionary funds.
In a commercial setting, financial units that are highly leveraged, un-diversified, illiquid and un-hedged are considered to be high risk.
So who is advocating for the interests of this cohort? Not the regulators. Their mandate is to ensure that households don’t default at unexpected rates and create problems for financial institution solvency (APRA’s concern) or for wider financial stability (The RBA’s concern). The fact that people are living on the Henderson poverty line is not a concern in itself to the regulators; it only matters if they stop paying their bills.
The article’s author, an emeritus professor of political economy at the University of Sydney, concludes that the regulatory system is
rigged set up in such a way so that banks can continue to rip off the middle class, as opposed to making sure that the consumer is actually protected:
So Australia’s regulatory framework is vigilant in ensuring that households don’t create stability problems for the financial system, but no regulator has a mandate to ensure that the financial system doesn’t create stability problems for households. Someone or something has to assume this mantle, for mounting poverty and default risk is surely going to play out as a social crisis, not just a financial one.
This leaves the obvious question: if taxpayers are blanketed with regulation that benefits banks at the expense of the middle class, just why did taxpayers (i.e. the middle class) bail out the world’s banks ten years ago?
Several months ago, a chart produced by one of the Big Banks was presented to readers . It was supposed to be innocuous data on global wealth distribution, but instead portrayed a horrifying picture.
The focal point of the aforementioned article was that when it came to “the world’s poorest people,” the Corrupt West has now produced a greater percentage of severe poverty in its own populations than in India, and an equal percentage of such poverty as exists in Africa.
Stacked beside this, we see that when it comes to the richest-of-the-rich, the Corrupt West remains in a league of its own. Supposedly, we are living in “the New Normal,” where life is supposed to get increasingly harder and harder. So why does the New Normal never affect those on top?
Of course all of these extremely poor people being manufactured by our governments (as these regimes give away our jobs, destroy wages, and eviscerate our social programs) have to come from somewhere. Certainly they don’t come from the Wealthy Class.
Indeed, the chart above provides us with a crystal-clear view of where all these poor and very-poor people are coming from: the near-extinct Middle Class. In order to manufacture hundreds of millions of impoverished citizens in our nations, the Old World Order has had to engage in a campaign to end the Middle Class.
We are conditioned to consider economic “classes” within our own societies, but with the chart above, we’re given a global perspective. Where does the Middle Class exist today, globally? At the upper end, it exists in China, and to a lesser extent, in Latin America and other Asian nations. At the lower end of the Middle Class, we see such populations growing in India and even Africa.
Only in the West, and especially North America, is the Middle Class clearly an endangered species. Two incredibly important aspects of this subject are necessary to cover:
1) How and why has the One Bank chosen to perpetrate Middle Class genocide?
2) What are the consequences of the Death of the Middle Class?
Attempting to catalogue the nearly infinite number of ways in which the oligarchs of the One Bank have perpetrated their Middle Class genocide is impractical. Instead, discussion will be limited to the five most important programs responsible for the Death of the Middle Class: three of them relatively new, and two of them old.
- a) Globalization
- b) Union decimation/wage destruction
- c) Small business decimation
- d) Money-printing/inflation
- e) Income taxation
Globalization was rammed down our throats in the name of “free trade,” the Holy Grail of charlatan economists . But, as previously explained, real free trade is a world of “comparative advantage” where all nations play by a fair-and-equal set of rules. Without those conditions, “free trade” can never exist.
The globalization that has been imposed upon us is, instead, a world of “competitive devaluation,” a corrupt, perpetual, suicidal race to the bottom. The oligarchs understood this, given that they are the perpetrators. The charlatan economists were too blinded by their own dogma to understand this. And, as always, the puppet politicians simply do what they are told.
Next on the list: union decimation and wage destruction are inseparable subjects, virtually the flip side of the same coin. “But wait,” shout the right-wing ideologues, “unions are corrupt, everyone knows that.”
Really? Corrupt compared to whom? Are they “corrupt” standing next to the bankers, who have stolen all our wealth ? Are they “corrupt” standing next to their Masters, the oligarchs who are hoarding all our stolen wealth ? Are they “corrupt” standing next to our politicians, who betrayed their own people to facilitate this economic pillaging? No, compared to any of those groups, unions (back when they still existed) were relative choir-boys.
When it comes to corruption, nobody plays the game as well as those on top. Compared to the Fat Cats, everyone else are rank amateurs. When unions were strong and plentiful, everyone had jobs. Almost everyone earned a livable wage (or better). Gee, weren’t those terrible times! Look how much better off we are now, without all those “corrupt unions.”
The other major new component in the deliberate, systemic slaughter of the Middle Class was and continues to be Small Business decimation. “Small business is the principal job-creator in every economy.” Any politician who ever got elected can tell you that.
If this is so, why do our corrupt governments funnel endless trillions of dollars of Corporate Welfare (our money) into the coffers of Big Business, while complaining there is nothing left to support Small Business? Why do our governments stack the deck in all of our regulations and bureaucracies, greasing the wheels for Big Business and strangling Small Business in their red tape?
Why do our governments refuse to enforce our anti-trust laws? One of the primary reasons for not allowing the corporations of Big Business to grow to an illegal size is because these monopolies and oligopolies make “competition” (meaning Small Business) impossible. One might as well try to start a small business on the Moon.
Then we have the oligarchs’ “old tricks” for stealing from the masses (and fattening themselves): banking and taxation. Of course, to the oligarchs, “banking” means stealing, and you steal by printing money. As many readers are already aware, “inflation” is money-printing – the increase (or inflation) of the supply of money.
“In the absence of the gold standard, there is no way to protect savings [i.e. wealth] from confiscation through inflation”
- – Alan Greenspan (1966 version )
Then of course we have income taxation: 100 years of systemic thievery. No matter what the form or structure, by its very nature every system of income taxation will:
- i) Provide a free ride to those at the very, very top
- ii) Be revenue-neutral to the remainder of the wealthy
- iii) Relentlessly steal out of the pockets of everyone else (via over-taxation)
This is nothing more than a matter of applying simple arithmetic. However, many refuse to educate themselves on how they are being robbed in this manner, year after year, so no more will be said on the subject.
These were the primary prongs of the oligarchs’ campaign to exterminate the Middle Class. As always, skeptical readers will be asking “why?” The answer is most easily summarized via The Bankers’ Manifesto of 1892 . This document was presented to the U.S. Congress in 1907 by Republican congressman, and career prosecutor, Charles Lindbergh Sr.
It reads, in part:
The courts must be called to our aid, debts must be collected, bonds and mortgages foreclosed as rapidly as possible.
When through the process of law, the common people have lost their homes they will be more tractable and easily governed through the influence of the strong arm of government applied to a central power of imperial wealth under the control of the leading financiers [the oligarchs]. People without homes won’t quarrel with their leaders.
We have “the strong arm of government.” The oligarchs saw to that by bringing us their “War on Terror.” When it comes to throwing people out of their homes, and creating a population of serfs, that’s a two-part process.
Step 1 is to manufacture artificial housing bubbles across the Western world, and then crash those bubbles. However, this is only partially effective in turning Homeowners into Homeless. To truly succeed at this requires Step 2: exterminating the Middle Class. A Middle Class can survive a collapsing housing bubble, assuming they remained reasonably prudent. The Working Poor cannot.
Finally, after more than a century of scheming, the oligarchs have all of their pieces in place. In the U.S., they’ve even already built many gulags – to warehouse these former Middle Class homeowners – since a large percentage of those people are armed.
This brings us to one, final point: the consequences of the Death of the Middle Class. What happens when you destroy the foundation of a house? Just look.
As readers have been told on many previous occasions, the “velocity of money” is effectively the heartbeat of an economy. It is another way of representing the economics principle known as the Marginal Propensity to Consume, probably the most important principle of economics forgotten by charlatan economists.
The principle is a simple one, since it is half basic arithmetic and half common sense. Unfortunately, these are both skills beyond the grasp of charlatan economists. If you take all of the money out of the pockets of the People, and you stuff it all into the vaults of the wealthy (where it sits in idle hoards), then there is no “capital” for our capitalist economies – and these economies starve to death .
What is the response of the oligarchs to the relentless hollowing-out of our economies? They have ordered the puppet politicians to impose Austerity: taking even more money out of the pockets of the people. It is the equivalent to someone with anorexia going to a doctor, and the doctor imposing a severe diet on the patient (i.e. victim). The patient will not survive.
The Middle Class is dying. Unlike the oligarchs’ Big Banks, we are not “too big to fail.” Our jobs are gone. Our unions are gone. Our Middle Class wages are gone. Very soon, our homes will be gone. But don’t worry! It’s just the New Normal.