The Great Extraction Enters a New Phase

Written by Adam English
Posted June 2, 2020

The modern American caste system is rarely this exposed.

While the markets hover 10% away from all-time highs, everything else is in a downward spiral.

One in four American workers are collecting, or still simply trying to file for, unemployment.

One in three renters didn't make a full payment last month. It will be worse this month. Plus eviction and mortgage protections soon expire and courts are opening up with a flood of eviction filings expected.

As the pandemic rages, the nation is going into a kind of double lockdown. Check out this map.

national guard deployments map


If you don't think the economics and protests are related, you are missing the big picture.

I don't intend to get into all of the reasons why these protests should be happening and co-opt those topics. I want to focus on what is happening parallel to them and exacerbating them.

The Congressional Budget Office just warned of an upcoming “lost decade” but it is missing the big picture too.

For most Americans the last decade was a lost one in spite of stock market gains. The one before that wasn't much better. Same with before then for decades upon decades. We're talking about lost generations.

It was only six months ago that I was listening to the radio on the way into work and heard an economist talk about how wages were growing faster for Americans at the top of the first quartile — 25% of average earnings per year — versus those at the top of the third — or 75% of average earnings per year.

wage growth quartiles through 2019

Without a second thought, this chart looks great. Finally. the pendulum swings back after decades of disparity.

Think again. Using end-of-2019 numbers:

  • A 4.5% bump in yearly wages for those at the top of the first quartile, with average yearly earnings of $24,284 at the time, worked out to an extra $1,092 per year.

  • A 3.9% bump for those at the top of the third quartile, with average yearly earnings of $78,728, saw an extra $3,017 per year.

  • The top 10%, at 3.9% growth and $118,560 a year, works out to an extra $4,623. From there the sky is the limit.

Even when the times are good they are still really getting worse for a majority of Americans. They — we — are perpetually getting left behind.

And the good times are most certainly gone.

Instead of recognizing the unsustainable trajectory of wealth disparity, those at the very top — the top 10% is far less culpable than the top 1% here — are engineering the market and bailouts solely for themselves.

Their efforts to extract as much money from the market and economy as possible are accelerating and entering a dangerous new phase.

It shouldn't be a surprise. Since 2009 over 90% of profits generated by S&P 500 companies went to share buybacks and dividends.

Think about that, 9 out of 10 dollars that were available were pulled out of companies.

It shouldn't be a surprise at all. A Duke survey of CFOs found that 78% — three out of four — of them were willing to "“give up economic value” and 55% of them would cancel a project with a positive net present value in order to fulfill Wall Street’s desire for “smooth” earnings."

And what comes with the downturn from the pandemic? A round of bailouts where the most contentious part, direct payments to people, accounted for about 10 cents on the dollar.

With 90% of profits going right out the door, no wonder those bailouts were immediately needed.

After the Great Recession taxpayers were put on the hook for government spending. Now it is government AND corporate spending with the possibility of direct share purchases with taxpayers fronting the bill but getting no equity at all.

We are now socializing risk in the market by putting taxpayers on the hook for all of the risk while continuing to exclusively funnel the rewards to shareholders.

This is not capitalism. It is a perverse "socialism" for the few and a free-for-all for the rest. The scraps falling from the high table are meager and diminishing.

Everything being decreed from the parapets of the new American royalty is telling us to stay in our lane. And for the marginalized at the very bottom, it means a lifetime of despair. One those in power would prefer they handle with “dignity” — meaning quietly and out-of-sight.

One in four workers unemployed, a new lost decade, a pandemic, a society pushed to the brink by decades of inequality across any metric you can imagine.

All while the top 1%, which was looking at taking a hit to their already unimaginable wealth growth, made sure the gravy train just keeps on rolling with no risk for themselves and no reward for the rest of us.

These levels in the markets won't last. Without change, the protests should get worse. We haven't even begun to address the problems America faces and we're moving faster and faster towards economic collapse.

I wish I could say I knew a way out. Anyone who does deserves a Nobel Prize.

I do at least know a way to make sure we can make it through what is only going to get worse with some wealth left.

Gold has never seen better days, and they will only get better as everything else only gets worse. Protect yourself while you can.

Take care,

adam english sig

Adam English

follow basic @AdamEnglishOC on Twitter

Adam's editorial talents and analysis drew the attention of senior editors at Outsider Club, which he joined in mid-2012. While he has acquired years of hands-on experience in the editorial room by working side by side with ex-brokers, options floor traders, and financial advisors, he is acutely aware of the challenges faced by retail investors after starting at the ground floor in the financial publishing field. For more on Adam, check out his editor's page

*Follow Outsider Club on Facebook and Twitter.

Heal Your Ailing Portfolio Body