The Road to Plutocracy Accelerates

With all eyes on the state of the union speech by President Obama with the speech focused mostly on the economy, more evidence continues to emerge that the gap between the top 1% and the bottom 99% continues to widen at a very fast clip. The internals continue to be consistent with being in the second phase of "The Great Deflation".

The real story of President Obama's economic policy is gold, which was at around $600 an ounce at the start of the Obama Administration Period, which then rose to a high of $1921 an ounce before entering a long consolidation period. Gold is getting ready to explode higher, poised to go to $2000 an ounce and beyond in the very near future. The intermediate term chart of gold illustrates where we are with a leading diagonal in progress:

Gold has been recognized as money for thousands of years, going all the way back to past civilizations such as the Roman Empire, the Babylonian Empire, and the Assyrian Empire. There is a reason why gold has been on a tear on President Obama's watch : trillions of dollars of economic stimulus that has been pumped into the system since 2009, starting with the $787 billion stimulus package passed in February 2009, has devalued the dollar, therefore resulting in chronic inflation. In the aftermath of the state of the union speech, platinum shot up over $10 an ounce to over $1700 an ounce and palladium shot up over $2 an ounce to over $770 an ounce, a 17 month high.

Trillions of dollars of economic stimulus could not stop the nominal GDP from going into the red with a 0.1 % annual rate of decline in nominal GDP (GDP / $ ratio) during the last quarter of 2012. We are in the declining portion of the business cycle, with the low point to be reached in the 2016 - 2017 time frame. Factoring in the actual rate of inflation as per shadowstats.com, the real GDP (GDP / actual CPI ratio) declined at a rate of around 5.1% a year in fourth quarter 2012, and production of goods and services in the United States has fallen below 1982 levels.

For all the economic stimulus pumped into the system during the Obama Administration Period, the money has pretty much stayed at the top of the pyramid. Last year (see this post), the top 1% had captured 93% of nominal GDP growth since the false recovery (that does not exist in real terms) started in late 2009. As evidence that the top 1% continues to pull away from the bottom 99%, the portion of the nominal GDP growth that has been captured by the top 1% since the start of the false recovery is now at 121%. Not only has the road to plutocracy continued during the Obama Administration Period, but the process is accelerating. The rate that the gap between the rich and the poor is widening in the United States is accelerating as evidenced by the top 1% capturing 121% of nominal GDP gains. This means that the middle class is on the road to extinction with 35 statistics to prove the point.

Inflation will continue to reign during the second phase of "The Great Deflation" with the second phase, Cycle wave b or x within Supercycle wave (a) down (2000 - 2042) to continue until 2021. While the second phase is in play, inflation will continue to accelerate. Look for President Obama to push for more economic stimulus in the future with all the stops pulled out starting in 2014, especially as the nominal GDP and the job market goes farther into the red. This is very bullish for precious metals, especially gold. Gold is in the midst of Cycle wave V up (2001 - 2021) of a larger supercycle degree advance. It is quite possible that President Obama will pull all the stops out in terms of pumping economic stimulus into the system in the 2014 state of the union address, vowing to take all necessary steps to prop up the economy --- this could easily correspond to the center of Cycle wave V up in gold in which a powerful "third of a third" event takes place in which gold shoots up as much as $400 an ounce in a single day.

Chronic inflation is also expected to result in rising unemployment, now at 23% (according to shadowstats.com) as businesses and corporations take steps to remain profitable. With a large degree bear market unfolding, the mantra for businesses and corporations continues to be "limits and conservation", and the latest development is the use of robots to perform tasks in the place of human workers. As robots continue to go down in price and become more advanced, it will be more and more intuitive for businesses and corporations to replace human workers with robots in a corporate culture dominated by a "limits and conservation" mentality. Science fiction, as depicted in Phantom 2040, I Robot, and Borderlands 2, which all feature the use of robots in the corporate work force, is fast becoming science fact. The replacement of human workers with robots will also have the effect of widening the gap between the top 1% and the bottom 99%.

 A plutocracy is still in the forecast for the United States, starting in 2042 and continuing until 2076, consistent with the expected character of Supercycle wave (b) of Grand Supercycle wave [IV] in terms of economic internals in which only a very small cross section of the populace takes part in the return to prosperity after "The Great Deflation" climaxes in 2042.

The Rise of Paul Ryan

This is an update to an earlier post, "Update on the Road to Plutocracy", in which the forecast for a full blown plutocracy in the United States is slowly being fulfilled as the stage continues to be set behind the scenes. In August 11, 2012, Mitt Romney selected Paul Ryan as his running mate. The significance of the event, as with so many cases, is not fully recognized by most people. The key to the larger picture is that Paul Ryan is a member of the American Legislative Exchange Council (ALEC) and is closely connected with the Koch Brothers (and Koch Industries).

Paul Ryan's connection with Koch Industries and ALEC is very significant, as the Koch-ALEC cabal is identified as the engine that will drive the future plutocracy in the United States starting in 2042. This also does not conflict with the idea of a Bachmann Administration Period, which is forecast to span from 2017 to 2024. While Michele Bachmann has not been confirmed to be a member of ALEC, her platform is virtually identical to Paul Ryan's as far as economic policy is concerned. This brings about the possibility of Ryan / Bachmann or Bachmann / Ryan for the 2016 presidential election in which bearish social mood is guaranteed to result in the Democratic Party taking massive losses during the 2016 elections to a comparable (if not even larger) degree to the losses that the GOP sustained in the 2008 election and either Michele Bachmann or Paul Ryan as the next president of the United States.

The forecast for a plutocracy is based on the characteristic of a B wave within a larger bear market of Supercycle degree and above, in which B waves are technically weak with weak fundamentals. Just as fifth waves are weaker than third waves by every measure, B waves are weaker than fifth waves by every measure. A full blown plutocracy is consistent with the expected character of Supercycle wave (b) up (2042 - 2076) of Grand Supercycle wave [IV] (2000 - 2118), including the fact that only a small cross section of the populace will take part in the return to prosperity in the United States after "The Great Deflation" ends in 2042.

We continue to see evidence of a coming plutocracy in the United States, as new developments illustrate:

1 -- The middle class continues to decline with most people in that group substantially worse off than they were a decade ago.

2 -  The destruction of living wage jobs and family wage jobs continues unabated, with the last of the family wage jobs projected to be gone by 2015 and the last of the living wage jobs projected to be gone by 2020.

3 -- In spite of the phony "recovery" in the job market, corporations and businesses are not really putting in much effort in hiring more workers. This is consistent with the expectation of increasing conservatism due to a bearish social mood that is unfolding.

4 -- Poverty continues to proliferate, with the official poverty rate reaching the highest point since the 1960s. The actual poverty rate in the United States is likely around 35% to 40%. Expect the poverty rate to reach much higher levels by the time the plutocracy arrives in 2042.

5 -- As of 2011, 40% of households in the United States were living paycheck to paycheck. At the start of the Grand Supercycle degree bear market, the figure was 31%. There is no doubt that the bear market continues to have an effect on the economy, akin to a house that is prettied up with new paint on the outside even as the foundation of the house continues to rot.

The rise of Paul Ryan in the political arena is another indication of the coming plutocracy, In 2016, bearish social mood associated with Primary wave [X] down 2011/2012 - 2016) within Cycle wave x up (2009 - 2021) will make conditions ripe for Paul Ryan to ascend to the White House in 2017 either as VP or President.

Update on the Road to Plutocracy

This is an update to the earlier blog entry in which there is a case to be made that there is a full-scale plutocracy in the forecast for the United States. More developments in the last several months strengthen the case for a coming plutocracy. The Unites States has clearly become more plutocratic over time on President Obama's watch, continuing the multi-decade trend that goes all the way back to the Reagan Administration Period. The case for a plutocracy is also compatible with the Elliott Wave Principle, as plutocracies fit the character of a large degree wave B in the economy, within a bear market of at least Supercycle degree.

Here are some of the latest developments that bear evidence of a coming plutocracy:

1 -- The wealth gap between the rich and the working class in the United States continued to widen during the Obama Administration Period, continuing the trend that also played out during the Bush 43 Administration Period. The gap between the rich and the working class in the Unites States is now comparable to places such as Serbia, China, and Rwanda. Even now, people on the low end of the top 1% make over 10 times as much ($250,000 a year) as a typical worker ($25,000 a year).

2 -- The top 1% have captured 93% of nominal GDP growth during the Obama Administration Period, compared to 65% during the Bush 43 Administration Period and 45% during the Clinton Administration Period. Working class wages accounted for 20% of the nominal GDP growth under Clinton, falling to 6% under Bush 43 and then dropping below zero (1% in 2010, dropping below zero in late 2011) under Obama. We are now seeing the effects of President Obama's economic policies, and the result is a larger chasm between the top 1% and the bottom 99%.

3 -- There is more evidence that President Obama has cast his lot with the top 1% -- in February 2012, he put up a proposal to cut the corporate tax rate from 35% to 28%. This is the same type of voodoo economics that was implemented by Reagan and Bush 43. Indeed, the advent of voodoo economics (also known as trickle-down economics) corresponds to the start of Cycle wave V (1974 - 2000).

4 -- The poverty rate continues its relentless rise with extreme poverty hitting record highs. This trend underscores the extreme weakness of economic fundamentals. The actual poverty rate in the United States is likely closer to 30% as the official poverty rate thresholds are not indexed to the actual inflation rate. This also reflects persistent weakness in the job market -- while the economy has created 2.7 million jobs from the low on December 2010, virtually all the jobs created have been part-time jobs that pay minimum wage with no benefits.

5 -- Another effect of the coming plutocracy is food hardship -- over a third of US households have had difficulty putting enough food on the table at some point in the last 12 months due to food prices rising relative to wages. This scenario is not surprising since commodities have been rising faster than stocks (It's all the same market in a deflationary environment and a robust bear market rally is unfolding now) and will continue to do so until the "Extend and Pretend" phase (Cycle wave x) ends. Couple this with persistent wage deflation and its no surprise that food is getting more expensive for the typical household.

6 -- Homelessness is on the rise with people that were previously successful ending up on the streets after losing their jobs and the subsequent long-term unemployment that followed. This trend is a precursor to what will come in the future -- every major city in the United States surrounded by "Obamavilles" in the suburbs as "The Great Deflation" continues to unfold, a parallel of the "Hoovervilles" that appeared during the Great Depression.

7 -- President Obama is also pushing for a "super-NAFTA" in which more free trade agreements are implemented extending all the way to South America. The effect of a super-NAFTA is quite predictable. Back in the 1992 election when Bill Clinton proposed NAFTA, Ross Perot warned about a "giant sucking sound" that would take place is NAFTA were to be implemented. Ross Perot's prediction was since fulfilled in the aftermath of NAFTA going into effect in 1994 -- slowly at first, but now a deafening roar as millions of living wage and family wage jobs continue to be outsourced every year. The effect of a super-NAFTA would therefore be the loss of all remaining living wage and family wage jobs as corporations find new places for cheap manufacturing and labor. The advent of a super-NAFTA would play a strong role in purging the last of the family wage jobs on Main Street by 2015 with the last of the living wage jobs on Main Street purged by 2020.


It is very clear that the United States is on the road to becoming a full-blown plutocracy. The trend has accelerated during the Obama Administration Period. Some people already characterize the United States as a plutocracy, but there is a case to be made that the country is currently in a transitional period where there exists a hybrid of democracy and plutocracy. The transitional period started in 2000, corresponding to the start of Grand Supercycle wave [IV] and the start of "The Great Deflation". The US economy stopped creating family wage jobs in 2000 and stopped creating living wage jobs in 2007. The transitional period will continue for the duration of Supercycle wave (a) until the nadir of "The Great Deflation" is reached in 2042. During Supercycle wave (a), everyone will take a massive hit from the deflationary collapse in the economy. The deflationary collapse will unfold in full force with the start of Cycle wave y in 2021 in which 90% of corporations and businesses implode by the time the bottom is reached. However, the bottom 99% will lose ground faster then the top 1% will, so the wealth gap will continue to widen.

Given the road that the United States is currently on, it does not matter whether Mitt Romney or Barack Obama wins the November 2012 election -- whoever wins, we (the 99%) lose. Both Romney and Obama have cast their lot with the top 1%, ensuring that the inevitable road to plutocracy will continue.

Every plutocracy has an engine, and the one that is coming in the United States is no exception. The driving force of the future plutocracy has already been identified -- Koch Industries and its extension, the American Legislative Exchange Council (ALEC). The structure for the coming plutocracy is already being built and the stage is already being set. ALEC was founded in 1975, just a short time after the start of Cycle wave V (1974 - 2000). Koch Industries was founded in 1940, but its political activism started in 1977 with the founding of Cato Institute, also a short time after Cycle wave V (1974 - 2000) started. The socionomic model explains why ALEC and the political activism of Koch Industries appeared when they did -- that was when the social mood of the United States population became favorable for the organizations to carry out their political agenda.

Big Oil will certainly survive through "The Great Deflation" intact. With the advent of Supercycle wave (b) in 2042, alternative energy will drive the "Green Technology Revolution" in Canada, Western Europe, Japan, South Korea,  Australia, and Brazil. However, alternative energy will never take root in the United States -- the Koch-ALEC cabal will have a strong enough stronghold on the government (both state and federal level with many lawmakers being members of ALEC) and the country to shut down all forms of alternative energy in the country through unprecedented lobbying power. At the beginning of Supercycle wave (b) in 2042, all the oil companies will be folded into Koch Industries and all the corporations and large businesses that managed to make it through the deflationary collapse of the economy will be folded into ALEC. With the merging of corporate power into the Koch-ALEC cabal in 2042, a full-blown plutocracy is born. The top 1% will pull away from the working class at a greatly accelerated clip with living and economic conditions on Main Street comparable to the 1930s.

The appearance of a plutocracy from 2042 to 2076 fits the character of Supercycle wave (b) as B waves are technically weak with weak breadth (only a small cross section of stocks take part in the advance in the stock market, only a small cross section of the populace will take part in the return to prosperity in the United States). Just as fifth waves are weaker than third waves, B waves are weaker than fifth waves by every measure. The nominal GDP of the United States is likely to hit new highs by 2076, but virtually all of the increase will go to the top 1%.

The Koch-ALEC cabal will be unstoppable until the plutocracy peaks in 2076, corresponding to the beginning of Supercycle wave (c). It is very likely that the Koch-ALEC cabal will start overplaying their hand in 2074, thereby sowing the seeds of their own destruction, as we approach the peak of Supercycle wave (b). Once Supercycle wave (c) -- "The Great Tribulation" --- starts, the Koch-ALEC cabal will suffer damage from their own seeds of destruction, exposing more and more cracks in the formerly impenetrable armor. A combination of the plutocracy taking damage from their own seeds of destruction and bearish social mood associated with Supercycle wave (c) motivating the 99% to take their country back will eventually bring about the downfall of the plutocracy in 2118 as the Grand Supercycle degree bear market reaches its epic climax.

A View of the Coming Plutocracy

A plutocracy is in the forecast for the United States during the "Green Technology Age", which will start in 2021, immediately following the end of "The Great Deflation". Right now, I would characterize the United States as a hybrid of democracy and plutocracy, much like the economic conditions that existed from 1842 to 1852 (Cycle wave b of Supercycle wave (II)). The United States is rapidly moving towards becoming a full-fledged plutocracy, and the country is more plutocratic during the Obama Administration Period than it was during the Bush (43) Administration Period.

Part of the basis for forecasting a plutocracy has to do with wave personality, as B waves have weak breadth and are technically weak. For the economy, weak breadth translates to a strong concentration of wealth in the hands of the top 1%. The coming "Green Technology Age" would be Supercycle wave (b), which should be a parallel of economic conditions that existed in the United States from 1842 - 1852, but with an even stronger concentration of wealth at the top and even weaker economic fundamentals even as the nominal GDP hits new highs in the early 2040s.

One of the more obvious hints of a coming plutocracy is the widening gap between the top 1% and the working class, which is already larger than it was in 1929 and the trend is still unfolding at a rapid clip. In 2017, we enter the "Bridge to Plutocracy" as the Bachmann Administration works in tandem with the Koch Brothers (more on that later) to set the United States on an inexorable course to a full-fledged plutocracy, that is, the rule of the nation by the top 1%.

On "Main Street", the last of the family wage jobs is predicted to be purged by 2015, and the last of the living wage jobs is predicted to be purged by 2020. When it becomes impossible for the average Joe and Jane on "Main Street" to support a family even with both parents working full time, a full-fledged plutocracy is born -- that point should happen in 2021.

We are already seeing precursors of the coming plutocracy in terms of working conditions as well. A case of point underscoring that trend is the working conditions in the warehouses owned by Amazon Corporation, in which employees are routinely forced to work in an environment where the heat index soars as high as 115 degrees. We are seeing a trend of falling wages and increasingly unsafe working conditions as the wealth gap between the working class and the top 1% continues to widen.

The article Allentown : Inside Amazon.com's warehouse details examples of many of the horror stories associated with increasingly unsafe working conditions that come with the inexorable trend towards a full-fledged plutocracy.

Even now, we are seeing indications of a coming plutocracy in the United States, in which a full-fledged plutocracy will be in place starting in 2021. The wealth gap will continue to widen over time. In 2010, the low end of the top 1% earned $250,000 a year, 10 times the median wage of the working class. In 2021, the ratio will rise to 40 to 1, and by 2042, the ratio will rise to 200 to 1. The CEO to worker wage ratio will skyrocket even faster.