The desire/need to maintain a “middle-class lifestyle” for the rank-and-file employees, or property owners in the case of real estate, appears to be driving up prices for products/services in these sectors. That’s the crisis, as I see it.

Thirty, forty years ago, ownership of one’s house was not a wealth-building, profit-making venture. Upward mobility was expected to come, mostly from one’s employment. During the last few decades, however, the expectation that the real estate one owns would dramatically appreciate in value has been a way for the middle-class and people who desire to be upwardly mobile (who doesn’t?) to supplement salaries that are not keeping up with inflation.

I was talking to a guy I met who lives in London, and he was saying that real estate prices are so bad there, they’ve tentatively started issuing intergenerational mortgages!

The salaries that are not keeping up with inflation? The difference between what they are and what they should be is being siphoned away in shell games run by various gate-keepers, as Jim Z describes — making the rich just some degree richer, or in a wider-spread maintenance of the entire middle-class relative to the underclass.

“Owners of capital will stimulate the working class to buy more and more
expensive goods, houses and technology, pushing them to take more and more
expensive credits, until their debt becomes unbearable. The unpaid debt
will lead to bankruptcy of banks, which will have to be nationalised and
the State will have to take the road which will eventually lead to
Communism.”

- Karl Marx, Das Kapital 1867

Just joking… we all know Marx couldn’t possibly have known then what we can’t possibly accept today. Ha! Ha!

But seriously folks, here is a link to two interesting and related themes I just saw todayMaking Markets be Markets. Elizabeth Warren is always fun to watch though sad to hear. She makes a great case for the necessity of the reform, and Johnson points out the fatuousness of our current SOP, but, as Krugman intimates, it almost certainly won’t happen in our life time.

These acquaintances have often been sold different insurance products whose common threads seem to be: (1) the product is very wrong for their particular situation, (2) it bears among the highest sales commissions of the various products the person could have bought to solve whatever issue they were conncerned about, (3) its internal rate of return compares dismally with similar products widely available, and (4) it was sold after an unsolicited contact by the company as opposed to being the result of the customer determining to acquire it after thinking through his/her needs and doing some basic research.

This pattern happens so often, it is exasperating to say the least.

I don’t know whether these episodes can or would be mitigated in the slightest under some sort of financial services watchdog legislation, but it does seem as if something needs to be done to reduce the instances of hard working people being separated from their hard-earned dollars by these sharks.