A New Dawn for the Middle Class

by Kun Luf on January 17, 2011

The mass of men lead lives of quiet desperation. What is called resignation is confirmed desperation.” (Henry David Thoreau)

In the long run men hit only what they aim at. Therefore, though they should fail immediately, they had better aim at something high.” (Henry David Thoreau)

 

Exercise
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Is your current middle class status based on income (from salary, wages, fees or other compensation type)?

OR

Is your current middle class status based on wealth (earned, inherited, won in the lottery or through some other means)? Home equity doesn’t count – because it depends on the demand/supply state of the market, if and/or when you may need to tap it (plus, you would probably always need some form of ‘home’ as long as you’re alive).

My perspective is that if your middle class status is based on income, you may just be one step (unemployment or under employment) away from being pushed out of the middle class – that is why it is urgent to act today to solidify your position. Even if your middle class status is based on wealth, you will only be able to sustain it over the long haul by figuring out how to increase your income (active/earned or passive/investment/royalty) faster than inflation erodes its purchasing power. I can’t think of a better way to do this than by using the power of Personal Equity.

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I know this blog post is longer than most of you are accustomed to – and you have my apologies. Subsequent posts will be more focused (and much shorter) – this post (the first on this blog) is an attempt to condense our goals and motivation into a single message.

The state of the middle class demands a call to action. Some know that the outlook for the middle class is probably negative and at best, shaky – they may not need to read the whole length to take action and sign up.

To those who think life is rosy and the future is bright, there is a need to read through to put things in perspective – not because I think your future is not bright, but to ensure that your future will be bright, regardless of what happens. Nations don’t disarm because they hope for peace, they do the opposite – use arms to ensure peace. The privileged (wealthy) few have not relented in their quest for more, they even want your job (if you don’t think so, read through) – if they don’t, you shouldn’t.

Forget about your salary (it is paid in worthless cash [there’s more about that below]) – that is the wrong indicator, even if it is currently a six – or seven-digit dollar (US or its equivalent in other currencies) number. In Canada, the top 20% now own 70% of the wealth in the country while it is 84% in the United States – according to this source. That is the indicator we need to focus on and take steps to correct – before the middle class is wiped out.

To those who may think we are incapable of doing it, consider what experts have had to say about various developments in the past.

To those who say this is a ‘no name’ (non-branded) effort, consider this dialogue and you may conclude that sometimes, the ‘no name’ brand will treat you better and exceed your expectations. The ‘known’ names have no incentive to give you (Middle Class Joe/Jane) the best deal and there’s nothing you can do about it – conversely, if we don’t give you the best deal, we are DOA (dead on arrival).

To all my friends in the middle class, who have had to endure many years of frustration and helplessness, congratulations! This is our chance to shake things up and chart a new path for the middle class – not by doing anything new, but by paying attention to the things we neglected in the past, finding the fault in the status quo and doing something big to change it.

Introduction

Why has there been so much frustration in our (middle class) ranks? Why the feeling of powerlessness and helplessness? Why are we working harder for lower pay (at least in real – after inflation – terms)? Why is it so difficult to sustain our standard of living from year to year without reducing/depleting savings and/or going into debt? We have played by the rules – acquired as much academic and/or professional certificates, diplomas, degrees and certifications as possible, lived prudently and saved for the future, but each time we evaluate our financial health, we are falling behind – why? These are some of the questions most of us grapple with every day.

Listen to Warren Buffett (one of the richest men in the world) for some insight “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” What’s more, it has been a stealth war – no declaration of war, no noise, no bombs, no shots but the effects are there for the victims to see and experience. From the vantage point of the attackers, this is the best kind of war – the victims don’t know there is war and are not actively defending themselves; sometimes, the victims even get co-opted to inflict self-damage to the advantage of the attackers. That is why you have middle class folks (MCFs as we like to call them on this website) voting for lower taxes instead of fairer taxes – once you start down the road of lower taxes, it is difficult to reverse the devastation it will bring about (for example you get $500 cut from your taxes but government service cuts worth $2,000, job losses [government workers are laid off as budgets are cut and then other MCFs whose jobs were tied to the spending of the laid off workers]).

Some MCFs don’t care about job losses – as long as it is happening to others – until it happens to them; rich folks don’t do that, the ones earning $1 Million will join forces to fight higher taxes on those earning $10 Million and above for example – not because that measure will affect them immediately, but rather because it opens the door for the same tax hikes to be passed down gradually until the ‘net’ captures them. MCFs need to copy this idea – the loss of any job is ultimately going to threaten not only my own job, but my overall financial and social well-being. High (sometimes double digit) unemployment means my employer has no incentive to increase my pay in line with the loss of purchasing power caused by inflation (even when profits increase faster than inflation), means the value of my home drops (because there are fewer potential middle class buyers), means lower tax revenue for the government (and service cuts which I am now going to add to my personal budget), means my employer can decide that our unit of 5 (workers) be reduced to 3 but the workload stays the same, crime also goes up and the resources for effective law and order enforcement are cut back because of lower government revenues – the list goes on and on. Finally, when middle class jobs are lost, it is inevitable that the snowball effect will lead to the loss of other middle class jobs – why? My job sustains my spending, which generates income for some other businesses (restaurants for example) that employ another MCF – when I cut back my spending because of job loss, the cumulative effect is that at some point, that other MCF at the restaurant will also be laid off because I (and another 199 unlucky and jobless  MCFs) stopped eating out at that restaurant. Once MCFs realize that we all swim or sink together, we can shake off the complacency that has helped to place us in our current position and gradually take back what we have lost over the years.

The ownership class likes high unemployment because it allows them to keep wages down, cut benefits, and keep more for themselves. Rich people like low taxes (reduced or zero public/government services for the poor and middle class, reduced regulation to hold them in line and accountable, reduced enforcement of any regulations in place and so on) because they can buy better services (education, recreation and so on) privately, for themselves (and their families) costing much less than they pay in taxes – for example, taxes support public (probably free) schools which they don’t use because their kids are in expensive private schools.

Why?

Why have we MCFs found ourselves in this position? Why are we in this helpless situation where we live on edge, hoping to keep our jobs and secure a wage/salary adjustment that is in line with inflation? Why is the government not protecting us nor seeing to it that enough jobs are created to keep us all employed?

We are here because we trusted (our employers, the government, our financial institutions) too much and followed their instructions sheepishly. Even when there was clear evidence that any or all of these institutions were either uninterested in,  or visibly working against, our best interests, we just left things as they were and continued to hope for the best. It should also be clear to MCFs by now that this approach has not worked out (in the past), is not working out (in the present) and will very likely not work out (in the future).

Why are the rich folks keeping what they have/own, increasing their wealth/net worth at the expense of others (the poor and middle class) and  well positioned to own everything in due course? They don’t trust anyone (the government, elected/unelected officials or financial institutions) – they are focused only on results (if an approach does not work, they discard it and try something else). If they put an elected official in office to execute their agenda, they have no qualms about running adverts against the same official – should he/she deviate slightly from 100% adherence to the demands of the rich. They may even be willing to contribute to the official’s re-election but they will fight tooth and nail against any tiny measure that in any way undermines their interests. Yes, they know they will lose some of those fights, but guess what, they win most. Why? Because the other side (the poor and middle class) hardly ever fights back – partly because of a lack of resources (time, money and so on), energy and will for a fight. The middle class seems to have succumbed to the ‘monkey syndrome’ (learning the status quo and refusing to ‘unlearn’ it when it becomes necessary) – many of us won’t fight and will discourage those who try to fight. We must learn to fight back, sometimes by stealth, sometimes openly – yes, we will lose some (possibly many) fights, but our win ratio will go up from where it is right now (close to zero – because many of us don’t even know we are at war with rich folks!)

Middle Class Folks (MCFs), it is time for us to focus on results too!

MCFs should make a judgment call on which approach works and is likely to get best results. The ‘sheepish’, hopeful and trusting approach (of the middle class) or the paranoid, ‘take no prisoners‘ approach of the rich. If anyone should be trusting, or hopeful, it is the rich folks who are financially independent – interestingly, it is us in the middle class (financially dependent employees) that are focused on such things as job security. If there is any kind of security the middle class needs to focus on in these troubled times, it is income (cash flow) security.

The only answer most MCFs have to the economic risks (job loss, unemployment, disability) facing us is to double down on academic education (up to PhD), professional certificates and certifications. One problem with that approach is that there is no end to it (and each certification is costing you money that could have been otherwise used) – as soon as you complete one version, it becomes obsolete in a couple of years and you have to do it all over. The second problem is that you still need a job – so, really, you are just hoping that the certification will help you to stand out and there will always be enough replacement jobs, should you lose the current one.

How many rich folks do you think have academic certificates and professional certifications as their priority? They spend more time buying up income producing assets and manipulating government rules and agencies for personal profit while MCFs are doubling down an academic education. MCFs need to focus on the same things the rich folks focus on – certainly work on academics if you have to, but never lose sight of the things that matter (income producing assets and taking advantage of government rules and regulations for personal profit).

What?

What can we do? As individuals? As a group? Are we even in a position to do anything? Aren’t we helpless? Shouldn’t we just wait and hope? Is our best hope working passionately towards electing more ‘middle-class-friendly’ politicians (to legislative, judicial [where applicable], and executive governance positions) and holding their feet to the fire so that they follow through on their campaign promises?

Well, some MCFs have taken the bulls by the horns and in recent times (thanks to the Internet as well) ramped up individual as well as group engagement in political activism – at some level, this has (in some countries) focused attention on middle class challenges and issues. Politicians (though it’s not what they say in campaigns that matter, it’s what they do once elected – on that score, progress is ‘veeeerrry’ slow) now routinely sprinkle this focus on MCFs and their issues into campaign rhetoric and platitudes. This is a good start – we believe that MCFs need to become more active politically and regardless of ideology, encourage various political parties and platforms to shift focus away from divisive wedge issues (e.g. guns, abortion, gays) to substantive issues that affect the middle class. Right now, in some countries, all a politician has to say to socially conservative MCFs is that they are anti-abortion and the votes of those MCFs are in the bag – even if that same politician’s positions are the most unfriendly to the middle class. This needs to change such that, even in a socially conservative party, the anti-abortion pledge should be the beginning (a necessary but not sufficient condition) – a party primary can then throw up 2 candidates, both anti-abortion, one middle-class-friendly and the other rich-folks-friendly. We are not litigating the abortion issue up or down, but would like to point out that rich folks (many of whom actually procure abortions) have been able to co-opt socially conservative MCFs into their cause (of impoverishing the middle class) for too long because no one challenged candidates on their views beyond guns and/or abortion and so on.

The foregoing notwithstanding, political activism only goes so far and is quite limited in its potency – it is a necessary condition but not sufficient. Political activism has to be matched by economic activism – the type that extends beyond boycotting certain goods/services/organizations. One common thread you will see running through our (MCWS) philosophy (of solving middle class problems) is a tendency to use/adapt the tactics of rich folks. If we believe that rich folks tend to work against middle class interests, why would we be so eager to use their methods? Because those methods get results – there is no need to reinvent the wheel – especially as it relates to getting ahead financially. The reason why the methods and tactics of the rich have always worked against the middle class is because they were designed to do that – work for the rich (which, Bingo!,  usually works against the middle class). So, what MCFs need to do is, redesign/re-engineer, adapt and adopt those tactics to work for (and not against) the middle class.

A good starting point is that MCFs need to be converted away from the gospel of certificates and jobs to the gospel of ownership. This may sound simple but is probably the root cause of middle class financial woes. MCFs need jobs – we are not contesting that; but when MCFs abandon ownership to rich folks while chasing down jobs, they sow the seeds of self-defeat – it’s quite interesting that there would be more middle class jobs if MCFs owned/controlled more of the businesses out there (Duh!). Today, rich folks have even managed to turn the obsession of MCFs with academic education into profit opportunities – not that the proliferation of certificates and the institutions/organizations granting them has brought any material gains to the middle class as a whole (it just makes each certificate worth less and ultimately worthless in the long run – uncontrolled supply in the face of constant or shrinking demand will [ultimately] drive price down to zero, not counting the cost of student loans). Even if MCFs manage to get good and/or better jobs with their certificates, they find out that as they get to earn higher salaries, the government (via taxes) becomes an almost equal partner with them as they get pushed into higher tax brackets. Meanwhile, a rich (hypothetical) millionaire with a stock portfolio worth $1 Million yielding $30,000 dividends is actually considered sufficiently ‘poor’ by the government and qualifies for certain subsidies – on the other hand, that MCF earning $40,000 is unqualified for the same subsidy. If that is the case – does it make sense to remain focused on certificates, jobs and earned income? You be the judge.

Remember, I don’t recommend you quit your job – just stop seeing the job as the end – see it as a means to an end (the ownership/personal equity end that leads to income/cash flow security as opposed to the myth of job security).

In a recent article (The Rise of the New Global Elite) by Reuters financial journalist, Chrystia Freeland, she makes reference to a 2005 Citigroup report (to investors) in which 3 analysts advised that the world is dividing into 2 groups – the Plutonomy and ‘the rest’. “In a plutonomy, there is no such animal as “the U.S. consumer” or “the UK consumer”, or indeed the “Russian consumer”. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie.

http://blip.tv/file/4600597/

(Check out her video interview about the article above – focus on [minutes] 8:30 to 11:45)

What I find more interesting, both from the article as well as the video above is that this new (global) super elites think the problem is you (Middle Class Joe/Jane). They believe the 2008 financial meltdown was caused by those clueless people who bought houses they couldn’t afford (using sub-prime mortgages) – conveniently forgetting that most of these people are not very savvy (yet another reason why you need to act today) in these matters and were aggressively pushed on by financial services industry players who knew better. Somewhere else in the article, she also mentions that “The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled. I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.” ” Nowhere would these plutocrats suggest that the single hedge fund manager earning $1 Billion (structured as capital gains with a low 15% tax rate – better than the top earned income tax rate in the US – 35%, Canada – 44%) take a pay cut – that is a punishment reserved for middle class losers.

What should concern MCFs about the foregoing sentiments is that these super elites control government policy in your country (wherever you may be) and this philosophy of racing (the middle class) ‘down to the bottom’ will have no end – rich folks will just keep on peeling off layer after layer after layer (don’t wait until your layer is targeted for elimination) of the middle class by eliminating jobs and/or benefits in exchange for a few more dollars of profit. They (super elites) are the ones trying to convert public (government-run) schools to private (for-profit) schools in the name of reform, even though their kids are going to attend some other private school anyway – do you need any stretch of imagination to know what will happen to your kids under that for-profit system (if you want to know, investigate how the US middle class has fared under a for-profit health care system and compare that with other OECD countries with non-profit health care systems)? Especially when they (rich folks) will not put their kids in the same schools as yours? Yes, maybe today they are taking that $60,000 job from the US and claiming they can employ 4 Indian and/or Chinese workers at $5,000 – $10,000 per worker and thus, grant them ‘middle class’ status. Tomorrow, they will equally take those same jobs from the Indians & Chinese if they can locate someone (or better still, a robot) willing to charge below $1,000 – there will be no end to their demands for middle class folks to take a pay cut. If you think it doesn’t affect you, think it through again from all angles/perspectives – it is only a matter of time; a persistent glut of qualified (unemployed) folks chasing after a reducing number of openings does not bode well for everyone or anyone (the laws of supply and demand suggest that this will drive down compensation and ensure less favourable terms of service for the lucky few who manage to keep a job).

We (middle class folks – MCFs) swim or sink together!.

One of the reasons why these plutocrats think they deserve all the money is because they are the ones showing up on the ownership/risk taking side to play – they forget that in most cases, MCFs are locked out of those opportunities by law. Even where MCFs are not excluded by law, the plutocrat class determines what options are available to MCFs and we are still waiting for them to start prescribing the solutions of rich folks to the poor and middle class – don’t hold your breath waiting for that day because I think rivers are more likely to flow uphill before that happens.

What MCFs need to do now is show up on the ownership/risk taking side to play so that we can get our fair share of the rewards. Maybe there was no platform to do that before now, but the MCWB Club makes it possible for MCFs to do what the rich have always done. Wall Street types are not smarter than Main Street MCFs – they just happen to control all the levers (access to huge sums of money, setting government policy, rigging the game) and  have successfully used that control in ways that profit a tiny few.

Well, the MCWB Club would allow MCFs to pool their limited resources together and use those resources in ways that profit everyone.

When?

John F. Kennedy said in September 1962 “We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.”

The time for MCFs to come together and stop the rape of the middle class by the rich, to prove to the rich folks out there that we are not any less intelligent and can do a better job at ensuring shared prosperity (as opposed to the ‘trickle down’ mindset – which promotes giving tax breaks to the rich in the hopes that it will also ultimately help the working class) is NOW.

Is it hard? Yes. But like Kennedy said, it will serve to organize and measure the best of our (collective middle class) energies, intellect and resources – the MCWB Club thinks this is a challenge we can all tackle together. It is a challenge we should be unwilling to postpone and one we should intend to win.

The decimation of the middle class which started in small, unnoticeable ways in the 1970s has picked up speed and momentum and threatens to become an avalanche – the super elite say we should take a pay cut, the only problem is that they keep asking for more. When they are asked to take a pay cut or pay more in taxes, it is wrong. Where is the fairness? Or balance? Shared sacrifice – to the global super elites – means those of us in the middle class should carry the load.

A lot is going on everyday in government and the financial markets that most MCFs know nothing about on one hand – on the other hand, ‘when the other shoe drops‘ (or the negative consequences materialize), MCFs are going to be the victims. In the United States, the Federal Reserve (the equivalent of a central bank) is ‘creating’ money – they call it Quantitative Easing – and some of the money being created is ending up outside the US (see video here – focus on 4:00 to 5:00).

Rich folks are always one step ahead – should the US manage to implode, they will simply pack their bags and move elsewhere. Where will Middle Class Jane and Joe go? The crisis is not limited to the US, and its severity varies from country to country, but don’t wait until you feel the impact before you hedge your bets.

The time to act is (not tomorrow, next week, next month or next year) NOW!

Middle Class Addictions

Addiction can … be viewed as a continued involvement with …. [an] activity despite the negative consequences associated with it. (Wikipedia)

In order to be the best we can be, as MCFs (Middle Class Folks), we have to break free of these addictions.

The first addiction is cash. We are welded to cash – the only vision most of us have of ourselves is as workers paid in cash. It doesn’t matter whether the cash is paid as bank notes or as a direct deposit (credit) to your bank account, it is still cash. What is the problem with cash in our world today? It leaves us MCFs vulnerable to (or victims of) money illusion. Consider that “…modern fiat currencies have no inherent value and their real value is derived from their ability to be exchanged for goods and used for payment of taxes.” Furthermore, “…people generally perceive a 2% cut in nominal income as unfair, but see a 2% rise in nominal income where there is 4% inflation as fair, despite them being almost rational equivalents.”

What is most interesting is that many MCFs are actually getting 0% raises, some are getting cuts – but inflation is marching forward (and don’t focus on the government’s inflation numbers, check your family budget and your everyday expenses)

Sadly, the only ones who act on the foregoing piece of information are wealthy folks. Some MCFs may know mentally, but their actions show that they don’t really know because they don’t take any concrete steps to diversify away from a sole dependence on jobs and cash. Consider that an ounce of gold that,  10 years ago, would have cost you less that US$280 would now cost approximately US$1,400 and an ounce of silver, which 10 years ago would have cost you US$4.80, now costs approximately US$30. Granted, commodity prices fluctuate but the overall long-term trend is clear – the fiat money (currency or cash) is trending down and the precious metal is tending up.

The implication of that statement is why MCFs (specifically you) need to redirect our focus away from the gospel of jobs and academic education to the gospel of ownership – like wealthy folks have always done. As long as our lives are all about our jobs and the cash income from it, we are steadily getting poorer, everyday! Even governments (because they rely on cash payments via taxes) are also getting poorer every day. What do they (governments) do? They sell the few items of value they have in exchange for cash – a terrible trade. See this example out of California (state government) and another out of Chicago (municipal government), Illinois – both examples are in the US (but once it is done successfully in one jurisdiction, it is not too far away from you because these officials exchange information and are confronting similar challenges). In Chicago’s case, what happened after the sell-off? “…rates quadrupled at most meters when the private company took over in early 2009, a further increase averaging 25 percent was instituted on Jan. 1 [2010]. The revenue from the higher rates more than offset the slight decline in meter use.” “It’s another tax on the middle-class people of the city of Chicago,” – if you think similar developments are not coming to your city (over the next couple of years), you are misguided. Parking meters have been sold in Miami, Los Angeles, and Pittsburgh to mention a few – as other cities are squeezed by budget woes, the same (wealthy few) folks who bought the other meters will make similar proposals to struggling cities (maybe the one in which you reside), that will in turn hang it on (you guessed it) the middle class. California expects to receive US$2.3 Billion from the sale of some of its (state-owned) commercial buildings but pay to the buyers (from whom it will continue to rent/lease the same space) US$5.2 Billion over the next 20 years. When the dust from this all settles, the MCFs of the state will be the victims – not the rich folks arranging these deals. This is why MCFs need to step up to the plate – at least, be the buyers, if it must be sold – because you can at least operate with a ‘human’ face and for the benefit of a broad cross-section of the population, unlike the wealthy folks who will take everyone to the cleaners just to benefit a few.

The second addiction of the middle class is consumption type spending.If there’s anything worse than our (middle class) dangerous dependence on worthless cash, it is our ability (as a group – not necessarily as individuals) to spend it faster than we can earn it. The wealthy folks play into this mindset – there is always something new coming out and ‘hot’. iPad, iPhone, iPhone 3G, iPhone 4, flat screen TVs, Blu-Ray players, bigger and more expensive personal residences, exotic vacations, vacation homes and time shares – the list is endless. Have you ever wondered why credit card (with extremely high rates of interest) adverts always suggest vacations, furniture purchases and so on? Or why it is so easy to get a loan when you want to buy a car, personal residence or big-ticket furniture and appliances? Why wouldn’t the financial institutions ever suggest loans for buying income producing assets (even with a requirement for an equity contribution on your part)?  If they are willing to lend you unsecured funds for consumption, why won’t they lend you for income generating investment? Because that would benefit you – instead of enslaving you as consumption expenditure would.

Between these 2 addictions and our obsession with certificates (academic education) even if we have to use student loans, the wealthy few have most MCFs legally bonded to a lifetime of slavery.

If you want the best (for your kids and self), start building personal equity (using income producing investments) today, however small and watch it grow in the same proportion that paper money loses value. Reduce your dependence on fiat (paper) money that has a track record of losing value everyday – as opposed to ownership stakes in well-managed businesses, commercial properties and other income producing (cash paying) vehicles that tend to increase in value because you can’t just ‘print’ or ‘create’ them by government fiat (decree).

How Will Your MCWB Club Membership Effect Change?

We will put together below a list of things that MCFs currently find difficult ([to do] if not outrightly impossible) – without a platform like the MCWB Club. Your membership is necessary because a few MCFs cannot effect this change – we need large numbers, so after you join, it is important to point out the advantages to others (colleagues, friends, family members and so on). The MCWB Club is accountable to its members and actually depends on the collective efforts of its members to succeed.  The MCWB Club members have rights and the club believes the middle class as a whole should have better rights than they currently do.

The rich folks are betting that we (middle class folks – MCFs) cannot do it, that we won’t join forces to push back against the escalating inequality (economic, wealth, income, privileges – you name it). We need to prove them wrong.

  1. Currently – if you hear that your company (employer) is in the process of being sold (possibly to leveraged buyout private equity players who will initiate layoffs), you can only watch helplessly, pray and hope the eventual buyer keeps you on the job. With the MCWB Club, as long as the company is healthy, generates decent cash flow and has good future prospects, you can count on MCWB Club members pooling resources to buy the company. If club members buy the company, the last thing they want to do is to lay off anyone. They want working folks to keep their jobs. They want compensation and other incentive rewards to go around – we don’t think the most highly paid executive should earn  more than 7 – 10 times what the lowest paid employee earns for example. The directors of the company will not be from the country club crowd – they will be the MCF owners. The employees will be able to have at least 1 representative (possibly more) on the board of directors. More weight will be given to actual cost of living (within the limits of the company’s resources) than rigged CPI numbers in setting wages/salaries, raises and/or cost of living adjustments. Overall, if the company does well, ALL stakeholders (including employees) will benefit financially.
  2. You may have heard recently of how Goldman Sachs invested in Facebook as well as arranged for some of its clients to invest using a Special Purpose Vehicle (SPV). Before we go further, we think these kind of investments should not exceed 1% – 5% of your total portfolio – but as you would read in the Home Depot story, these plays can be sometimes transformational. MCFs should only invest a budgeted (expense) amount like you would for dinner at a restaurant in these somewhat speculative plays – you shouldn’t even think of ‘betting the farm’. You should also realize that for every 10 (somewhat speculative) plays, you would probably only succeed with 1, but that single success would pay for the other 9 losses and leave you with a tidy surplus (assuming you invested equal amounts in each of the 10). In the Home Depot story, you would find out that if you’d been among the lucky ones who got in on Day One, your $10 investment in 1979 would be worth $100,000 today with $2,700 of annual dividends. But, we are pretty sure that MCFs were not invited to play – that’s just the way it works. In the case of Facebook, the bulk of its revenue is from the patronage of MCFs (there are not enough super elites to make it viable) – but the profits are going to flow to the rich folks, as usual. With the MCWB Club, there would be a way for interested MCFs to get a piece of the action on the same terms as wealthy folks. Did you receive an email similar to the one referred to here?
  3. MCFs have very little influence on tax policy, even progressive political activists who worked hard and contributed monetarily towards the election of progressive legislators and executives, have watched with dismay as the very tax policies they sought to discontinue have been extended because other (more important) interest groups held them ‘hostage’. We think that the easiest way to get politicians (even the right wing ones) to amend tax policy is to make the most generous loopholes available to large cross sections of the population – see what the Canadian conservative government did with Income Trusts if you doubt it. So, if you don’t like hedge fund billionaires structuring their billion dollar incomes as capital gains, figure out a way to make that loophole available to large cross sections of the middle class – the MCWB Club will definitely try. Once the loophole becomes broadly available, the politicians will be forced to shut it down.
  4. Do you know for example that the type of income you earn matters? That’s why a millionaire whose (million dollar) stock portfolio pays out $30,000 per year is considered poor enough for certain subsidies while MCFs earning $40,000 are not ‘poor’ enough. MCFs need to change the mix of their incomes so that the percentage that is earned income (e.g. salary or wage – 100% for most MCFs) drops as low as possible. Right now, most MCFs don’t know how  to do this nor do they have access to the vehicles that would allow that – the MCWB Club will change that. Contrast that with the kind of advice wealthy folks get – “….The fund pays distributions from its bond portfolio in the form of capital gains – a feature that can cut a tax bill in half for those in the highest tax bracket.” Did you know that fixed (interest) income can be structured as capital gains? Do you think your retired middle class parents who live off interest income would care to know? Even if you know, it may be that the minimum required to participate is too high for MCFs – the MCWB Club will make it easy for MCFs to get the same opportunities. The more broad sections of the population take advantage of this loophole, the better life would be for MCFs or the earlier the government will change the rules to stop the discrimination against earned income (salaries, wages, fees  and the like).
  5. Currently, when companies (public or private) are looking for directors (or individuals to serve in similar oversight roles), how likely is it that MCFs would get a chance? Very unlikely – those positions are reserved for country club members (little wonder that MCFs are just ‘numbers’ (fire 1,000 workers) or ‘percentages’ (prune 20% of the workforce) when layoffs are being discussed. Any MCWB Club organized acquisition or purchase would have MCFs as directors (or any similar oversight role e.g. trustee) – if layoffs are ever brought up (we acknowledge that layoffs may happen – but it will be the last option after all other alternatives, not the first), it will be decided on by working folks who know first hand what it means, who know that workers are not just numbers, but living, human beings with families, hopes, aspirations and dreams. If you would like to serve in an oversight position (e.g. as a director or trustee) for MCWB Club sponsored businesses, entities or projects, please fill out the necessary form.
  6. MCFs currently have no say in what company executives are paid – this is all decided by the country club crowd. As a matter of fact, CEOs from other companies B, C, D & E get to decide what the CEO of company A is paid, knowing that higher salaries for company A’s CEO, will ultimately translate into higher salaries for his colleagues at companies B, C, & D. In any MCWB Club owned company, salaries, wages, bonuses, working conditions and benefits for ALL employees will be subject to the approval of MCFs (club members serving in an oversight capacity – directors, trustees, etc). These MCFs will be as interested in the janitor’s and/or secretary’s (whether those or similar roles are outsourced or not) terms of employment as they would the CEO – the goal being to ensure that folks are paid a living wage and allowed to participate in the profits of the enterprise (if company profits increase faster than inflation, they would like employee compensation [across the board] to increase lockstep – not necessarily on a fixed wage/salary basis, but at least on a variable bonus/incentive basis).
  7. Most importantly, the MCWB Club is the sum of the collective kindness, goodness, sense of fairness, intellect and other attributes of its members – in other words, the MCWB Club and any income producing asset(s) it acquires and/or creates will be whatever its members want it to be. We are open to new ideas – whatever it takes to make the world a better, fairer and family friendly place for middle class folks is what we want to be. When you join, you will get a chance to push initiatives that nudge, push and drive us in that direction – whatever they may be.
  8. There are a number of opportunities that wealthy folks profited from in the past (links below) and some from which they continue to profit, which we use as examples. What will be different is that the MCWB Club will figure out a way of allowing MCFs access to similar opportunities going forward – and you wouldn’t need be able to write a $2 million cheque in order to qualify. The MCWB Club intends to engage (on behalf of its middle class members) the services of the best professionals in the market – when all is said and done, all the Club is doing is hiring the best expertise available to achieve set goals, on behalf of its members. Members will not have to pay the club directly (other than membership fees – which are subject to accountability restrictions) – investments will flow through independent, reputable, third-party trustees and/or custodians with good track records. And as a club member, you get to choose what you want to participate in – no obligations to participate in any particular opportunity and no preferential treatment for anyone in terms of access.

Based on the foregoing, what the middle class has lost, is losing and stands to lose if no action is taken, can you afford not to act today?

Sometimes, the ‘no action’ step is the most risky, not only for you and your family, but for the middle class as whole. Do you really believe you can afford to wait at a critical point, when ALL hands are needed on deck?

We can do great things, together. We can stem the tide threatening to wipe out the middle class – but only by working together.

We are counting on you – join us today and let’s change the world and make it a better place for the middle class. The middle class in developed countries does not have to be wiped out for the middle class to emerge in emerging countries – that is the vision of the plutocrats (only you and I working together can stop them). If we strengthen the middle class in developed countries and keep their purchasing power intact, it will spur the emergence of the middle class in emerging countries.

Yes we can do it. What are you waiting for?

Let’s get started.

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