Falling Through The Cracks

In the trailer for our recent (and excellent) webinar WTF: What The Fed?!?, I ask:

What's it going to take for the pitchforks to come out? How much more does the common man need to be abused before he wakes up and says 'I'm not going to take anymore!'?
As discussed in detail in the webinar, our economic and political systems have been captured by monied interests. Industry, government, markets and the judicial system all work for their benefit, not ours.

The result? An acceleration of wealth and opportunity away from the masses and into the pockets of the top 1% (really, the top 0.1%)

The public is literally being sacrificed so that a tiny number of powerful elites can enjoy “more”.

Today, I’m not going to make my point with my usual onslaught of charts and data. Instead, I’m going to make it visually.

We’ve all read the articles about the dying middle class and the explosion of homelessness in recent years.

Well, I live in northern California, in Sonoma County, about an hour north of San Francisco. It’s quite pleasant up here, with lots of small farms, orchards and vineyards.

Yes, there are some rich folks here. But nothing like the rest of the Bay Area. Most families are working class.

The local economy is nothing like the Tech frenzy of Silicon Valley. But it’s better than most places in the country.

At least, it has been.

Recently, it’s become impossible not to see the signs that more and more people are falling into poverty. They just can’t afford the rising cost of living, even if they have a job.

Here where I live, nowhere is this more apparent than the Joe Rodota trail connecting my small town of Sebastopol with the nearby city of Santa Rosa. Over the past year, this previously quiet, clean, bike & pedestrian route has exploded into a sprawling homeless encampment for hundreds of dispossessed people.

Here's a 2-minute video I took of the encampment this afternoon (h/t to my daughter Charlotte for manning the camera as I drove):

YouTube is full of similar shocking video of much larger encampments across the West Coast, from Los Angeles to Seattle. Here in the Bay Area, even our "jewel" cities of San Francisco and Berkeley are becoming overrun by an exploding homeless problem and the mental health, sanitation, addiction, safety and crime issues associated with it.

It’s a major issue with no clear fix in sight. And folks, it’s only going to get worse. Far worse.

Remember, we’re in the 11th year of the longest economic expansion in US history. The markets are at record highs. The official reported unemployment rate is at a record low.

When the next recession hits it will be like pouring jet fuel on this fire.

Homelessness in California has doubled in just the past few years and our social support systems are already overwhelmed. What’s it going to be like if mass layoffs cause the homeless population to quadruple in a single year?

I remain amazed at how difficult life is for the millions of working poor in America. What harsh conditions they suffer just to hold a job, sleep under (any) shelter, find food, and wake up the next day to do it all over again. Day after day, always worried that sickness, injury, misfortune or theft is going to jeopardize the little you have.

Once you’ve dropped into poverty, especially if you have family dependents, it is damn hard to extricate yourself from it. Regardless of how hard you apply yourself.

If you have the time, I recommend watching this 45-minute documentary on US poverty produced by a German public broadcast service. Currently more than 40 million Americans live beneath the poverty line – that’s twice as many as in 1970.

Viewing our country through their outsider's eye is a stark warning that we ignore this metastasizing social epidemic at our peril:

Back to my question at the start of this post: What's it going to take?

How many more millions will fall into poverty? How much more abuse will continue until of those of us paying attention, with growing fear at the social implications and perhaps at our own financial vulnerability, actively revolt against the elite-centric status quo?

For thousands of years, history has warned us that such social imbalance will not stand:

Are we going to listen in time?

This is a companion discussion topic for the original entry at https://peakprosperity.com/falling-through-the-cracks/

A few similarities, apart from the quality of the building materials.
Yes, it’s all so sad and so unnecessary. And it wouldn’t take much for parts of Australia to start looking rather similar. Our housing market is a splendid bubble just now. Maybe the fires will trigger something: more than a few homeowners were underinsured, or not insured at all owing to the cost of premiums.
Meanwhile, the 0.1% might look at this video and see all the (industrious, self-reliant, entrepreneurial) people who aren’t homeless. There’s plenty of work out there, just waiting for someone to do it. At least, that’s what our Dickensian PM tells us.

Such as the unemployment numbers, or inflation figures. If you remove ALL the expanded, Government programs such as food stamps or government assistance, it would look just like a DEPRESSION. You don’t have to know a damn thing about economics or finance and that’s really what we entered in 2008-09.
Just look at the TRILLIONS of dollars The Fed has created out of thin air and it’s barely moved the growth needle. Take away those trillions of dollars and I have NO doubt you would see negative growth. Why? Because wage disparity has been going on for decades. It’s why we have 6-7 yr car loans. Most jobs are low wage. you can’t support a family with it.
I ran into a young mom who was working a a SW Florida Marshall’s store and she quit because she was being paid less than $9 an hour and working less than 15 hrs a week and her employer demands a flexible schedule (in their favor). So she quit and went to work at Walmart which doesn’t much more but shes now working 40 hrs.
I have seen my far share of homeless people. I live on a man made island and while walking to the beach one early morning, getting my exercise. I walked to the back of the beach bathhouse and there were several homeless people quietly sleeping.
The other day I stopped by my local Walmart and there were two individuals sleeping under a tree and another man sleeping on the sidewalk of the parking lot. They both setup temporary beds. IMO, homelessness is a lot more of a problem than we will want to admit.
Onto Adam’s comment regarding pitchforks. Gerald Celente, founder of the Trends Journal (hopefully Chris can interview him one day) has the best quote regarding pitchforks. He says: "when people lose everything and have nothing else to LoseThey Lose It !
That day of reckoning is approaching. It’s why he has coined the phrase The New World Disorder with all the civil unrest going on around the world because people are starting to get angry over the growing wage disparity.

Adam, thank you so much for your very thoughtful and timely article and video posts. Your video of the homeless encampments along the highway mirror those I witness daily within my community and commute. And it breaks my heart. :-/
I’ve viewed the documentary re: the homeless in America a few times prior to your posting and yet it never fails to move and disturb. Even still, it brings me to tears. Consider that one bout unemployment, illness or misfortune: there but for the grace of God go I.
I see more and more strangers, acquaintances, friends and family struggling daily–“cutting back” significantly (sometimes surgically) but still attributing their “failures” to themselves without understanding how the monetary system contributes to their demise. Society by and large also places the blame at the feet of the working poor and to laziness, mental illness, and drug addiction. I do my conscious best to anticipate and navigate this twisted system of income inequality, and to help myself, loved ones and strangers to survive and prevail even one more day against the growing odds against them.
I stockpile and carry foodstuffs, water and personal supplies in my home and car to distribute to those in need, and make regular drops to local charities serving the homeless. But honestly, I fear that it is a losing battle. Homelessness is not just a US West Coast problem, but is every where, world wide. The homeless “situation” is very, very, very bad and will undoubtedly get worse as this corrupt global system unravels and/or explodes/implodes.
I remind myself that whatever I do to help (even temporarily) each failing starfish washed ashore in this tumultuous storm is arguably insignificant, but still matters at the very least to that particular starfish: day by day, minute by minute, soul by soul. Wearily, I still keep on, keeping on. But truthfully, I am often tired and deeply discouraged.
Your article is personally very timely. I continuously ask myself, “What did I know”, “When did I know it?”, and “What did I do about it?” Ultimately, I know I can do more. I am determined to accelerate my efforts with renewed energy and purpose, even while doing my level best not to personally succumb to the powerful and insidious forces that conspire to undermine my honest efforts.
I’m inspired and enlightened through PP conversations of expansive (hard-earned) land holdings, traditional and alternative energy inputs and outputs and stock ““markets”” catalysts, mechanisms and performance.
However, while interesting and educational, I find these have little direct impact upon the day-to-day reality I witness and experience as a struggling middle/working class single parent of three adult, college-age children in a mid-sized mixed community. For better or worse, with my urban permaculture farmstead I choose to remain here to support and defend my adult children and grandchildren.
I have grave misgivings as to how we’ll fare on the other side of the reset, but I will take comfort in knowing that I will have done all possible to support my loved ones and those less prepared/fortunate during and after the transition.
This may be a somewhat different mindset than that of secure individuals well-prepared to capitalize on the other side of the inevitable, historic reset/wealth transfer. Many of us less fortunate know we’re being continuously robbed and will be possibly decimated in the “wealth transfer” inevitably to come.
Bottom line is that debt is dramatically increasing more rapidly than income/personal or sovereign GDP. The rich are getting obscenely richer while the middle class/poor are becoming poorer. We are becoming a nation and world of debt slaves to the 1% and .001% wealth holders/MIC criminals.
I don’t know for certain how this reset/transformation will end, but I am certain that there’s a whole lot of pain and loss in what lies ahead. Personally, I am determined to mitigate that pain and loss to the extent humanly possible.
Consider that the growing homeless population are the canaries in the coal mines portending the demise of a failed debt-based feudal monetary system that enslaves generations to the will and whims of the incestuously co-joined Military Industrial Complex (MIC), the Bank for International Settlements (BIS) and the Federal Reserve/Central Banks and their multi-national governmental/corporate co-conspirators and beneficiaries.
I honestly don’t know where this will lead us. But with God as my witness, my (permaculture) roots are firmly anchored in the ground determined to weather the storms ahead and to grow fruitful harvests despite climatic, geopolitical and economic uncertainty and upheaval.

We know that the problem is “the banks.” But when I go into Wells Fargo and look closely at the teller, I don’t see any kind of evil person. Just an earnest young person getting started in a job, hoping to build a career, striving to be helpful.
Similarly, I would be glad to burn down a bank, but the branch on my street is just a cheap building and its demise would not improve the world a bit.
The people, the super-wealthy, are masked from view behind corporate ownership.
Who owns Wells Fargo?

When a predatory home loan goes bad and a little old lady is evicted from her home by the local sheriff, are we going to take it out on the sheriff? Again, look closely at the sheriff and we see a very normal working class person, often one with integrity. Nothing evil in the eyes of the sheriff.
Who do you lynch? What do you burn?

…who passed laws and ordinances allowing the .01% to gain undo favor?

I started a business in Southern Colorado to take a swing at this problem. It’s thriving. Any joiners?

The Great Depression was “great” because it was an experience shared by a large percentage of the population. Everyone could see it, feel it, and relate to it,…they were all part of it.
Today is different because the pain isn’t distributed evenly, and the information is individualized.

Originally posted by me in The One Good Thing About the Fed. New material for this thread: Perhaps many of those tents are occupied by people in the 2nd or 3rd quintile, people with kids and the expenses that come with them being squeezed between falling real income and soaring housing costs. In our small city in upstate NY, there are no tent cities, and definitely fewer homeless, but the cold winters force people to seek other more sheltered options (doubling up, shelters) or to leave for warmer climes.
Here's the original post:
Chris, Your income inequality section (in the original piece) inspired me to do some research and I found this Wikipedia article. Lots of the data is from the congressional budget office. If you piece together the various charts, you can reconstruct values for various subgroups of the top quintile (80-90%, 90-95%, 95-99%, 99-99.9% and the top 0.1% and 0.01%). It also shows the same values, but after taxes and government transfer payments. Here is a bar plot made from the table in the article. The top 0.1% and 0.01% values are estimates from a chart near the beginning of the article that had different reference years. Several things I noticed:
  1. The trend has more-or-less leveled off over the past 5 years at least and more like 10.
  2. When taxes and transfer payments are accounted for, the poor have done slightly better than average.
  3. The middle class (21st-80th percentiles) have been the big losers. Since this represents many families, it is probably an important factor in the homelessness problem.
  4. The 91st-95th percentile has been a very slight winner and the 96th-99th has been a much more significant winner.
  5. The top 1% (and, especially, the top 0.1% and 0.01%) has been the big winner, although they lost some ground since 2007.
  6. Other charts in the article suggest things didn’t change much from 2016 to 2018, although Trump’s tax and transfer payment changes may have hit those at the bottom and pushed more money to the top, and perhaps the improvement in working conditions has improved things a smidge for the middle since 2018.

Is it a for profit business, or NFP org? If it’s the former, how can I invest? If it’s the latter, how can I help?

The list of Wells Fargo ownership looks like a cross section of those who have seen increased income in the past 40 years (see chart in my previous post). Hedge Funds, other investment firms and big banks represent the top 1% or maybe 0.1%. Mutual fund companies including one with a mutual ownership structure (owned by it’s fund investors) represent the those in the next 4-9%. There is one insurance company that has a mutual ownership policy (State Farm - theoretically owned by it’s policy holders). But who knows how much the top executives of even those mutually owned companies skim off as salaries and bonuses (Vanguard at least has by far the lowest expense ratios in the business for their funds).

From The Saker:

The Wells Fargo owners list you shared are just investment firms. The pooled assets they represent, which collectively own Wells Fargo, are institutional (public and corporate) pensions, endowments, foundations, ultra high net worth individuals, and middle class 401K assets.
These owners are not inherently bad people/actors. It’s the frameworks and incentives in our country that are misaligned.
America measures success by the health of those living the dream. These are the people we all watch on TV and pretend to be on Instagram. Instead of idolizing and aspiring to be THESE people (who are often miserable themselves), we need to somehow adjust the metrics and incentives we care about in order to get us excited and aspirational about the guy with the Mohawk who’s building houses for the homeless.
It’s individualism vs collectivism It’s what Sebastian talks about in Tribe.
How do we inspire people to want to be like mohawk-guy? We need The socially connected reward system we evolved to desire.

American Banker reporting High-Level Wells executives are under criminal investigation and may be indicted as soon as this month.The probe could yield the most high profile criminal charges since the financial crisis.Dragging them out in cuffs would be a nice touch…

I have watched the Joe Rodota trail transition over the years from the nice bike path that bicyclists and families used to enjoy. Its now a sprawling homeless camp that entails great risk to ones personal safety to transit. Think also of all the residents that live in the homes behind this area- it has become a nightmare. The County appears to be getting ready to clear it out (again), so will see how that works. However this is not simply a income disparity issue. If you are able and willing- there is no shortage of work in Sonoma County. I think this very well done video speaks to the larger issue(s): https://komonews.com/news/local/komo-news-special-seattle-is-dying

Thanks for that Saker link, Afridev.
Here’s one slide from it showing how the top 0.1% are pulling way ahead of everyone, even the remaining 0.9% of the top 1%:

I like how the Saker refers to the 0.1% as the “Dismal Decimal”, the tiny elite hoovering up all the world’s wealth.
Like all social shifts, change is going to require a shift in perception. Right now, society is remaining tolerant of the billionaire class – wrapped in the mantle of ‘proof of the the American Dream’ and the fruits of the benefits of capitalism. In many ways we still venerate and celebrate their wealth.
The change we need won’t happen until we admit the system has metastasized into a cancer very different from what we pretend it to be.
We don’t have capitalism where the plucky and hardworking can succeed on a level playing field. We have ‘crony capitalism’ where the rich and powerful control the rulemakers, enforcers, and profit & information flows to slant the playing field increasingly to their advantage – squeezing out competition.
It’s deeply unfair. And when left unchecked as it is now, it ends with Plutarch’s prophecy of the desperate masses rising in revolt against the master class. Nobody benefits by going down that road.
What’s the solution? I don’t have all the answers, but stopping the current subsidization of the rich by ending central banking’s intervention in the economy and financial markets is a good place to start.
The central banks (many of which, like the US Federal Reserve, are owned by private banks) are picking winners and losers.
They are rewarding those who own financial assets (predominately the already rich), providing dirt cheap credit to corporations fueling stock buybacks and investment in automation (further driving up the price of said financial assets), enabling otherwise failed businesses to persist as zombie companies, and bailing out these players when the music stops.
On the other side of the ledger, savers have been destroyed. The $trillions in new thin-air money have driven the cost of living so high that household and capital formation is now out of reach for an increasing majority of society. Millions of jobs are being lost for good to globalization, robotics and AI. Little of the growing debt pile and deficit spending is being invested back in improving our infrastructure, education or health care systems. And yet, when the music stops, it’s the bottom 99% that gets stuck with the bill via layoffs, higher fees and higher taxes. No bailouts for Joe Sixpack.
I’m NOT a fan of wealth redistribution as a general policy. I believe competition and the incentive structure offered by true capitalism, tempered with enough limits to protect the “commons”, is probably the best system we yet know of.
But when the game becomes as rigged and the wealth as concentrated as its becoming now, it will be corrected. Either by policy or by pitchfork.
And both paths start with a change in sentiment towards those holding all the cards.
The Dismal Decimal should start being very worried.

Who cares?!
I’m a bond trader at JP Morgan and I’ve never known it so good! The Fed buys everything I tell them at prices I demand. My bonus this quarter is going to be MASSIVE!

I bought a pitchfork. I’m not into guns. I’m going to put it on my front porch as a symbol of the Jeffersonian yeoman farmer ideal. I am trying to think of someone I could use it on locally but I am in the top 10% and might experience a little blow-back if push came to shove. I am greedy for new experiences and am resentful that I have no one to vote for. Overall I have no complaints except that I am old. My last demonstration was Mayday against the Vietnam War when we turned trash cans into the street to block the Pentagon workers from getting to work. I would counsel the politically interested to go to a City Council meeting and lobby for no new “growth”. Tell all the people. They will ignore you but that is the first step…

As a 40-year loyal customer of State Farm, I would like see a distribution of some of that $2.78 Billion. I would not invest it in Wells Fargo…

I largely agree with your views in this comment, Adam.
But, of course, when the pitchforks do come out - or, should it come first to a collapse of the bubble - the plutocrats in the Dismal Decimal will not be on the pointy end of the revolt - or the bust. They will remain behind the curtain, largely unknown to the masses and certainly insulated by layers of security, legal teams, bought politicians, loyal public safety officers, military troops, corporate screens, and remote addresses across the globe. It will be those whose bodies and jobs make up the screen that hides and protects them who will take the beating. It’s what they’re paid for, and the deeper into the screen they’re located, the better they’re paid to hold the line and deflect and blunt the hoi polloi’s anger.