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A Simple Example of How the Free Market Is Sucking the Middle Class Dry

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How the Free Market Sucks the Middle Class Dry by

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A Simple Example of How the Free Market Is Sucking the Middle Class Dry

By John F. Miglio

OK, by this time you've read all the articles from progressive economists and financial analysts about how the middle class is being squeezed by the free market, how workers' jobs are being outsourced and lost to automation, and how the disparity in wealth between the super rich and everyone else has reached epic proportions.   You've also heard the counter arguments proposed by die-hard libertarians and Ayn Rand acolytes who maintain that all of society's ills stem from Big Government.

It's been my experience that in order to truly understand a problem, you need to either live through it yourself, or understand it on a level that resonates with your own personal experience.   So with that in mind, let's analyze our current economic situation vis---vis a simple example that cuts through all the arguments and charts and statistics and gets to the heart of the matter.  

Here's the setup:   Ten guys (or gals) are old friends who have been playing poker every Friday night for decades.   Each one brings $100 to the game.   Over the decades, every time they play, each player either wins a little or loses a little.

On the way home from the game, each player stops in his local bar, has a beer and a sandwich, and spends $20.   As a result, the owners of ten bars count on making money every Friday night from their steady poker patrons. It's been that way for decades and the bar owners have become friends with their regular customers.

Everybody is happy.   Then one day one of the players (we'll call him Slick) serendipitously bumps into a professional poker player who shows him a foolproof trick to stack the odds in his favor and beat the average player at poker every time.  

Although he is not convinced it will work, Slick takes his inside knowledge to the next game, and sure enough, he wins all the money ($900) from his fellow players (we'll call them the Chumps).   On the way home that night, instead of spending his usual $20 dollars at his local bar, Slick celebrates his good fortune and goes to a more upscale bar and spends $100.   Then he goes home and stashes the remaining $800 under his mattress.

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His fellow poker players, unfortunately, have lost all their money, so not only do they have less money to spend in the general economy for the next week, but they forgo their beer and sandwiches at their local bars and go directly home.   Thus all nine of the bar owners don't make any money on their regulars for that night.

Although Slick feels a little guilty at scamming his fellow players, greed gets the better of him, and he uses the same technique at their next game and rakes in another $900 as the Chumps lose all their money.   Once again, Slick goes to the upscale bar after the game, drops a C-note, and stashes another $800 under his mattress when he gets home.   And once again the Chumps spend less money in the general economy and skip their weekly beer and sandwiches at their local bars.

The third week produces the same outcome.   By this time, the Chumps are pissed off and tapped out.   Moreover, they can't believe Slick is so lucky that he has won all their money three weeks in a row.   When they accuse him of somehow rigging the game, Slick feigns innocence and says they are just poor sports.

Now let's freeze frame it here for a moment.   In real life, the Chumps would either stop playing poker with Slick or beat the hell out of him and take their money back.  

But this is a hypothetical situation and a metaphor for where we are right now in our economy.   If you haven't already guessed, Slick represents the upper one percent of the population that controls Wall Street and Corporate America.   The Chumps represent the middle class, and the bar owners represent the general economy.

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So, throughout the years, when all the players at the poker game were either winning or losing a little, the wealth was spread around and everyone prospered.   But once Slick rigged the game in his favor, everyone else--with the exception of the upscale bar owner--lost out.

In addition, since Slick won cash and stashed the money under his mattress, he paid no tax on his winnings; plus he took his three weeks' worth of winnings ($2,400) out of circulation in the general economy.

This represents how the super rich and large corporations in our country today stash their cash in places like the Cayman Islands to the tune of trillions of dollars--yes trillions! And to make matters worse, they get away with paying little or no tax on it.

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John F. Miglio is the editor of the Online Review of Books & Current Affairs and author of Sunshine Assassins, a futuristic political thriller.

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When you have Eric Holder, President Obama's ... by John F. Miglio on Friday, Apr 26, 2013 at 12:07:51 PM