Fifty years ago, America’s power elites still had the capacity to admit that the nation’s problems were systemic and demanded honest appraisals. Now the country has self-serving virtue-signaling, posturing, narrative control, hearings, and spectacles in which the objective is to provide cover for all that is taboo because it threatens to reveal corruption and deceit or the self-interested skims and scams of the elites benefiting from the reverse wealth pump.
BY CHARLES HUGH SMITH
Starting from the historical perspective of 50-year cycles of socio-economic cooperation and discord, a specific cycle is documented by renowned author Peter Turchin, in which the author identifies three key sources of decay and collapse: rigidity (resistance to change / adaption), deep alienation and the erosion of crucial institutions.
In his recent book End Times: Elites, Counter-Elites, and the Path of Political Disintegration, Turchin identified America’s perverse wealth pump that transfers wealth from the working / middle classes to the wealthy elites as a core source of systemic risk, a source fueled by the time-honored dynamic of entrenched elites and incumbents rigging the economy and key institutions to serve their interests above the interests of the general public, i.e. the common good.
These entrenched interests resist any adaptation that might diminish their wealth and power, and this is a source of systemic rigidity. Any attempt to reverse the perverse wealth pump meets with fierce resistance: reforms are watered down, new tax breaks are secreted into legislation to replace those lost to reforms, and so on.
What’s different now compared to 50 years ago is the substitution of narratives for reality. Rather than honestly address the sources of risk and decay, the elites of 2023 America seek to persuade the restive populace that everything is going great, and their sense that things are unraveling is false.
The purpose of the misdirection and obfuscation is to obscure the rot within crucial institutions and the resulting deep alienation generated by the elites protecting their reverse wealth pump. In other words, facing the sources of systemic risk would reveal a power structure in which the only possible outcome is the perverse wealth pump eating away at the nation’s economy and social fabric.
Apologists and pundits shout that the public’s sense that things are going wrong is delusional because GDP is rising and inflation has been tamed. But these metrics are not measures of social or economic well-being; borrowing and squandering trillions of dollars boosts GDP even as it undermines the economy, and inflation is blatantly gamed to understate reality.
The tools of this effort to paper over real issues with happy-story narratives are Artifice, Suppression, Deceit, Denial and Delusion. As in the surveys that ask “Check all that apply,” if we examine the status quo response to any consequential issue, we find one or more of these being pressed into service.
Any conflicting evidence is suppressed or denied, delusions are hyped as reality (“we’re all getting richer!”, etc.), fabrications and artifice are deployed to misdirect and obfuscate, and when all else fails, deceit and subterfuge are rolled out in force.
Fifty years ago, the nation’s power elites still had the capacity to admit that the nation’s problems were systemic and demanded honest appraisals. Yes, there were the usual fumbling attempts to substitute PR for real solutions–for example, WIN, Whip Inflation Now–a PR ploy that was widely mocked at the time, but on the whole, leaders faced issues directly and serious, honest debates over the correct policy responses were open to public scrutiny and feedback.
Now we have self-serving virtue-signaling, posturing, narrative control, hearings and spectacles in which the objective is to provide cover for all that is taboo because it threatens to reveal corruption and deceit or the self-interested skims and scams of the elites benefiting from the reverse wealth pump.
The fatal rigidity unraveling the nation’s ability to adapt is the need to reassure the public with bogus statistics and narratives. Consider this chart, courtesy of the Federal Reserve, that displays the collapse of the bottom 50% households’ share of financial assets–the assets that generate income and build wealth.
 |
In comparison, the top 1%–1.3 million households–saw their share of financial wealth soar to 35.3%–15 times the financial assets of the bottom 50%, 65.5 million households. Perverse wealth pump, indeed. But for the punditry tasked with spewing the PR, it boils down to this: since I’m doing great, everyone must be doing great. We can be relatively confident that the economists and pundits spewing the happy PR aren’t living in self-storage units. They’re jetting off to a conference in Singapore and enjoying the high life.
 |
But what about total assets–you know, used vehicles and TVs and houses? The bottom 50% households’ share of total assets has declined, too. Quick, jury-rig some obscure metric to create the illusion that “we’re all getting richer,” something to mask the reality that “a few are getting much richer than everyone else.”
 |
The status quo refuses to understand the problem because that would demand changing the system that rewards them so richly. And so the “solution” is to twist the narratives and metrics to make it appear that all is well, and marginalize any skepticism of the cover story.
We’re constantly assured the problems are being dealt with and resolved, yet these solutions don’t actually seem to be addressing what’s unraveling: public trust, transparency, public health and an affordable cost of living, to name a few.
If we can no longer discuss consequential issues openly and directly, the odds that real solutions that require trade-offs and sacrifices can emerge are vanishingly low. Yet that is the path we’re on: rigidly stick to the script and act as if that fixes what’s broken.
Why does the phrase bread and circuses keep coming to mind?
PURCHASING POWER AND INFLATION
Official measures of inflation are a long-running tragi-comedy: comedic in the transparency of the distortions, and tragic in the consequences: what will you believe is true–the statistics or your lying eyes?
The basic gimmick of distortion is to underweight whatever is eating away at the purchasing power of earnings and highlight the trivial items that are getting cheaper due to declines in quality and globalization. So your rent went up by $200 a month, or $2,400 a year, but since TVs dropped $40 and toys dropped $20, inflation is only 3%. So stop feeling poorer, everything’s great! Inflation is dropping!
You see the problem: the scale of spending on essentials such as shelter, healthcare, childcare, etc. is far greater than the trivial “lower in price” items. If 95% of your essential spending is rising in cost, trivial declines in the 5% of discretionary spending do not offset the gargantuan declines in purchasing power.
The chart below reflects this distortion. Essential expenses that cost thousands of dollars annually consume far more of our earnings now, and these vast declines in the purchasing power of earnings are not offset by the occasional purchase of cheaper TVs.
The only accurate measure of increasing or decreasing costs is purchasing power: how many hours of work does it take to pay housing, taxes, college tuition, healthcare, childcare, etc., then and now. The official measures of inflation use gimmicks to distort the staggering drop in purchasing power by claiming the quality of stuff has increased by extraordinary leaps and bounds. So the fact that cars have rear cameras offsets the fact that it takes far more hours of labor to buy a car now than it did a few decades ago.
 |
Measuring purchasing power eliminates these distortions, which is why nobody measures purchasing power: once we calculate costs in terms of hours worked, we recognize that a much larger percentage of our labor / earnings is devoted to paying for essentials. Simply put, we’re getting less value for our labor.
Pundits tend to overlook the fundamental sources of declining purchasing power. These include:
1. Decay of gains reaped from globalization. Stripped of corporate PR, globalization is the ruthless exploitation of as-yet unexploited pools of cheap labor and resources. This exploitation yields enormous gains at first and then these gains decay as wages rise and the easy-to-get resources are depleted.
The dependence on foreign sources for essentials has also been revealed as a national security threat, and so the catch-phrase is “de-risking,” which means developing multiple sources of essentials.
2. Capital demanding higher returns due to soaring global risks. In the conventional view, the Federal Reserve chair waves a magic wand and lowers interest rates at will. It’s not quite that simple. All new debt–for example, Treasury bonds–must be purchased by capital, and if risks are rising, capital demands a risk premium to offset the known unknowns and the unknown unknowns, both of which are proliferating rapidly.
If capital is no longer willing to accept low yields, yields have to rise regardless of central bank policy, and this drags interest rates higher. Yes, central banks can create currency out of thin air and use this free money to buy Treasury bonds, but ballooning the money supply has its own consequences:
3. Increasing the money supply to maintain a sclerotic, unproductive status quo generates a decline in the purchasing power of currency. Throwing trillions of new units of currency around doesn’t magically mean production of goods and services increase, or the quality and quantity of items increase. It just diminishes the value of existing units of currency.
4. Global scarcities crimp supply, pushing up costs. Humans have a very high opinion of themselves, but fundamentally we’re like rabbits (or rats, if you prefer) let loose on an island without predators. Like rabbits, we proliferate and consume more per rabbit until the resources have been consumed. Then we wonder why scarcities arise. But AI, blah-blah-blah. AI can’t restore depleted soil or reverse droughts.
5. Soaring entitlements must be paid for with higher taxes. Promises made decades ago in different conditions require ever greater resources must be skimmed by governments. Creating money out of thin air isn’t a solution (see #3 above) and so the government must collect a greater share of income and wealth. The more taxes we pay, the less we have left to spend on essentials and discretionary purchases.
This is a global dynamic. Global entitlements and debt are both soaring.
 |
If your earnings rose by 34% from January 2020 to October 2023, congratulations, the purchasing power of your labor kept pace with higher costs. All of us who aren’t earning 34% more since January 2020 have lost ground, i.e. purchasing power: it now takes more hours of work to buy groceries and everything else we need.
 |
The official measure of inflation since January 2020 is up 19%. Whether that actually maps the decline in our purchasing power can be massaged–stop believing your lying eyes!–but what can’t be massaged away is the reality that costs are rising for structural reasons that aren’t going away.
