*** Financial crises often destroy the middle and lower classes. The
rich
figure out what is going on. They find ways to protect themselves.
After
all, how did they get to be rich in the first place?

On the other hand, America's middle classes have no idea what is
happening
to them. They do not understand the Fed, credit bubbles, debt, or paper
currencies. And why should they? They have public officials, and
elected
representatives, who are supposed to watch over those details for them!

But their public servants lie to them...and set them up, leaving them
unprepared for what could turn out to be one of the worst financial
catastrophes in history. Didn't Mr. Greenspan himself tell them that it
was safe to put money in mutual funds in the late '90s, because "once
or
twice in a century [comes] a phenomenon that will carry productivity
trends national and globally to a new, higher track"? And didn't this
same
bureaucrat urge them to take advantage of adjustable rate mortgages in
the
heyday of the real estate boom? And now, they are told that jobs are
plentiful and their incomes are rising. "Keep on borrowing," is the
sotto
voce message.

Mr. Bush thinks he should get more credit for creating so many jobs and
so
much prosperity. He is puzzled by why Americans are not more grateful.
Here, we rush to explain:

Jobs are plentiful, that much is true. But they are jobs that don't pay
very well. And while average incomes are going up, incomes for most
people
are not. In fact, there are more and more people earning less and less.
Average wages are rising, because pay levels at the top are soaring.
Goldman Sachs employees, for one, have never had it so good. But for
most
people, wages are going down. Weekly wages fell 0.7% last month.
They're
down 0.2% for the year. Half the months from '01 through '04 saw no
wage
gains. And for 90% of workers, those earning less than $184,800 per
year,
median incomes fell 0.5% during the period '01-'04.

These are the same people who don't pay cash for their houses, who
depend
on jobs for their livings, and who, especially lower down the income
ladder, have no savings and owe large amounts on small houses, which
they
service out of small incomes. Now, their ARMs are being reset higher,
even
as their house values and incomes drift lower.

The feds spared the nation a serious correction in 2001. But they did
it
at the expense of America's working classes, who were lured deep into
debt
in order to keep spending. Now that rates are rising, they find it
impossible to continue. And they are left in a position you might wish
upon your enemies, but not your friends. They are not only relatively
poorer than they were - compared to the rich in America as well as the
poor in Asia, whose incomes have been racing ahead - they are poorer in
absolute terms, too. Their net assets are few. Their debts are many.
And
their incomes are lower than they were five years ago.

When middle and lower classes finally figure out what has happened to
them, they are not going to be very happy about it.