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For all these reasons, we can anticipate that the Depression currently beginning to unfold will be deeper, longer and more destructive than the Great Depression of the 1930s.
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Next, let's recount the chain of events that to some limited extent parallel those of the first Great Depression but are about to synergistically take an unprecedented toll:
1. The postwar income convergence (i.e the rise of the great middle class, the reduction of poverty and the relative reduction of our plutocracy's share of national income) reverses in the early 1970s as the "true prosperity" of the postwar era ends and is replaced by income flowing increasingly to the top, as stagflation, globalization and the decline of dollar gut the purchasing power of the middle class.
2. The rising productivity of the 50s and 60s slips into flatline throughout the 70s and early 80s, only picking up again as computer software and hardware revolutionize the back office, sales, manufacturing, just-in-time shipping/production, etc.
3. Concurrent with this gradual return to productivity in the mid-80s is the gradual rise of finance as the key profit-center of corporate America. As income skews ever more heavily to the top 1-to-5%, capital/productive assets become ever more heavily concentrated in the hands of the financial plutocracy. (The top 1% now owns some 2/3 of the nation's entire stock of productive assets.)
4. As profits rise (from rising productivity), profits flow not to wages (which remain flat-to-down since 1975 for all but the top-10% professional class), but rather they flow to that 1% who own the lion’s share of the capital/productive assets.
5. As the middle class experiences a decline in their income and purchasing power (for reasons cited above, i.e. declining dollar, rising income disparity, and wages falling due to global wage arbitrage), they (the middle class) turn more and more to borrowing and ever greater indebtedness, to ‘pay’ for what they have been brainwashed to believe is "the American dream" of imported luxury goods, bloated homes, vacuous cruises, etc.
The only other mechanism available to the middle class to increase household income, besides longer individual hours of work, is for Mom/Aunt/Grandma to enter the workforce, which they do in the tens of millions, with sociological consequences that are still unfolding (ever higher rates of juvenile delinquency, drug abuse, homicide and suicide).
6. The advert/media-driven desire to borrow to fund the "good life" is hugely profitable to the money-center banks, which expand rapidly into mortgage securization, derivatives and consumer credit, to an extent that they come to dominate all other corporate profits.
7. The financial plutocracy, observing that actually producing goods is no longer very profitable unless you can fix prices (as per Archer Daniels Midlands) or gain government subsidies and tax giveaways (oil lease depreciation, etc.), then sinks its capital into the FIRE economy (finance, insurance and real estate), eschewing real-world investments as comparatively unprofitable.
8. As the tech bubble expands, middle-class investors see the plutocracy (those with enough capital to qualify as angel investors of vulture/venture capital) reaping huge gains, and they enter the dot-com stock bubble buildup with a vengeance.
9. In a happy accident, the Soviet Empire collapses just as productivity begins its computer-fueled rise in the US. In a so-called Unipolar World, in which US military, political and financial influence is unrivaled, non-US investors seek the relative safety and high returns (based on appreciation of the dollar) of US financial instruments.
10. The dot-com bubble implodes in a speculative meltdown, and middle class 401K investors are devastated. The ephemeral wealth they once possessed, however briefly, fuels their speculative desire to get into the next get-rich-quick game, which just so happens to be something everyone understands: real estate and housing.
11. Having exhausted the dot-com play, Elite capital seeks a new high-profit home. The miracles of derivatives (CDOs, credit default swaps, etc.) and securitized debt (mortgage tranches, etc.) open up vast new opportunities for leverage (investing with the use of lots of other people’s money), off-balance sheet shenanigans, and outright fraud/debauchery of credit. As chip wafer plants disappear from Silicon Valley (too dirty, too costly, etc.), they're replaced with paper, i.e. mortgage-backed securities that eventually prove to be near worthless.
12. Sniffing gold in them thar exurban hills, the under-capitalized and over-indebted US middle class reach for the chalice of easy-money gold: leveraged real estate.
