Global capitalism and income inequality over four decades

The American Dream has always been tied to homeownership, yet homeownership has always been a prospect made possible through long-term loans made to credit-worthy applicants. For Main Street, this was mainly the case at least since the Baby Boomers came to age. For subsequent generations, predatory lending came about as the monetization of debt became another way for Wall Street to make money off Main Street. The American Dream prior to this was connected to the concept of upward mobility, but this too has been linked to the prospect of homeownership. Essentially, the American Dream has always been a dream about ownership of assets, of being at the minimum part of the middle class—a status that anyone could achieve in America so long as he was willing to work hard. Today, with globalization and the offshoring of manufacturing, the blowing of credit bubbles, the devaluation of the dollar, the rise of inflation, the turning of the economy from free market to command (thanks to central banking interventionist policy like quantitative easing), and the stagnation of wages, it is harder for the American Dream to seem possible.

As Kiersz (2015) shows using data from the St. Louis Fed, income inequality has gone up considerably over the past 40 years. The top 1% in the country have seen their paychecks grow exponentially while the working class wages have barely moved. Meanwhile, food prices, health care, education, homes, cars, stocks, bonds—virtually everything has gone up. The wealthy can afford them, but the lower classes have to borrow or work two jobs just to maintain the status quo—and it is getting harder and harder to do that as inflation continues to be seen across the board, though wages for the middle and lower classes stay put.
The video uploaded by WarZalez (2011) entitled “The One Percent” shows that the top 1% of families own 40% of the nation’s wealth. That is an astounding figure and indicates the extent to which the wealth gap has grown in America. While most Americans are just working to get the car or the house or the vacation, the 1% own multiple homes, luxury cars, take vacations for entire years from time to time. For the 1%, the American Dream is an everyday reality. For the rest of the planet it is largely an illusion sold to them by creditors.

What should be done about the situation? Redistribution of the wealth is one thing that could be done—but this would go against the American ethos. Leveling the playing field is another option. The intervention by central bankers to prop up asset prices while taxing the middle class by keeping interest rates artificially low (which punishes savers, the traditional pursuers of the American Dream), is a big cause of this growing wealth gap. By getting the Fed out of the marketplace and keeping the central bank from printing money, devaluing the currency, suppressing interest rates, and taxing the middle class, America could actually become again a place where the American Dream can be pursued by one and all.

Instead, today, the Dream is for none but the wealthy. This class is essentially protected by the Fed. The executives are paid with stock options that pay out handsomely because of asset bubbles blown through central bank intervention when the markets should be crashing as a result of bad loans, bad bets on derivatives, and bad policies all the way around. Letting the bad system fail is the first step in correcting the bad situation. The one thing I did not understand about all the materials used for this assignment is this: why didn’t any of them mention this? The answer, I believe, is that in doing so, they would be pointing out the real elephant in the room and calling out the fact that Emperor has no clothes but those provided by the Fed and its cronies in the federal government.