The Middle Class Is on Life Support

There’s this illusion we’re all supposed to believe:

That the Fed has inflation under control. That GDP growth is the sole sign of economic health. That equity markets are functioning rationally. That the American middle class is hanging in there.

But let’s stop pretending.

The middle class has been hollowed out over the last fifty years, since America officially went off the gold standard. Not by one administration. Not by one crisis. But by a system built on permanent debt, loose monetary policy, and the fantasy that we can paper over significant downturns with a few trillion dollars of magic money.

What do you get when deficits hit nearly 7% of GDP during so-called peacetime? When over half of every tax dollar is already spoken for before the year even begins? You get a government headed toward insolvency, while pretending it can still steer the ship.

We’ve been north of the Fed’s 2% inflation target for four years (CPI currently sits just under 3%). So why is the Trump Administration talking about wanting rates cut?

It’s because America’s economy is hooked on cheap money…

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The Federal Reserve Is Trapped

The Fed is boxed in. Yes, its balance sheet is $2.3 trillion smaller than the April 2022 peak, but reserve balances are still about $3.2 trillion, roughly $1.6 trillion above the pre‑Covid level, showing how far policymakers would have to go just to get back to ‘normal’.

If they raise rates, they could trigger a debt crisis. If they cut them, they let inflation run hotter, and crush real yields. Either way, gold wins. That’s why we’re seeing it breach record after record. That’s why it isn’t just a hedge anymore. It’s becoming a vote of no confidence in modern monetary theory.

But I don’t want to get into the gold story again… The more alarming story is the structural rot beneath the surface.

The U.S. economy is already near recession, despite the headlines. Look past the stock indices. Look past the White House press briefings. GDPNow briefly dipped below zero in mid‑April and is hovering around +1 % today, hardly a boom. The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) came in at 48.7 in April, indicating contraction in U.S. manufacturing for a second straight month.

And yet the S&P 500 is still trading near record highs.

If you’re using the total market cap-to-GDP ratio as your guide, the S&P should be closer to 3,000, not 5,200, according to Michael Pento, a recent guest on my podcast.

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But of course, no one wants to talk about that. Because we’ve built an economy that requires inflated asset prices to function. The moment prices drop to historical norms, the illusion breaks, and with it, confidence, retirement portfolios, and maybe even the dollar’s reserve status.

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Housing Hurting Demographics

We’ve now reached a place where housing affordability is the lowest it’s been in decades, and yet supply is flooding the markets, with active listings up 14.1% year‑over‑year in April, according to Redfin. The middle class can’t afford homes.

What’s even more dangerous is how few policymakers seem willing to stop the madness.

There’s no political appetite to let a single bank fail. To cut spending. To let markets clear. Every time we hit a snag, the solution is the same: more debt, more liquidity, more distortion.

This is how you end up with three bubbles at once: equities, housing, and credit, each dangerously inflated, each feeding the other.

I don’t write this to be alarmist. I write it because I believe people deserve the truth. Especially the average investor who’s trying to protect their future.

Eventually, something will break. Maybe it’s the repo market. Maybe it’s another regional bank. Maybe it’s just a brutal correction in overpriced equities.

But when it does, we’ll see the same predictable cycle: emergency rate cuts, another alphabet-soup bailout, and more QE under a different name.

If you're looking for leadership, don't expect it from Washington or Wall Street. Expect it from yourself.

Because in the end, no one’s coming to save the middle class.