A journalist at the Telegraph (U.K.) has some grim news for the Middle Class. Although Edmund Conway focuses on Britain in Middle class families face a triple threat, his remarks apply mutatis mutandis to the United States as well. I'll present his arguments with some brief commentary. Let's start at the top—

You don't usually expect radical neo-Marxism from the International Monetary Fund – the last great bastion of capitalism, spreading the gospel about the free market to the furthest reaches of the world... The claim made by the IMF's Financial Stability Report in 2005, in a seemingly throwaway remark, was that households had become the financial system's "shock absorber of last resort". In other words, whereas in previous eras, much of the pain of recession and financial crisis was borne by businesses or governments, with families afforded some degree of protection by the pensions system or welfare state, it was now households who were far more likely to face the music...

Here in the United States, it is quite clear that households are facing the music. How does it feel to be a shock absorber? Does it feel like somebody's jumping up and down on you all the time?

Let's get the details—

The problem is that families face a threefold threat to their prosperity. The first issue – the one that the IMF was originally focusing on – is pensions. Not so long ago, households were lucky enough to receive gold-plated pensions that would guarantee a certain pay-out upon retirement...

Private pensions disappeared in a puff of smoke years ago. And as Mish points out just about everyday, extravagant public pension programs are also unaffordable. Most Baby Boomers are completely unprepared for retirement, and many of them have debt up the wazoo. What should households do now?

Suddenly households have gone from being able to rely on a constant stream of legally protected income from their employer to having to manage their own investments... This would be fine if one could be assured that most people would have either the time or the inclination to understand these new responsibilities. But every piece of evidence – academic and anecdotal – suggests that they do not. The result is that the majority of households are heading blindly towards a future of relative poverty.

Actually, having to "manage" your investments to earn your retirement income, assuming there is some money to invest, is much worse than Conway says. First, it's now expected that you've got to gamble (or learn how to) in a sea full of sharks. And worse, even many of the professional gamblers have no idea how to make money in the markets anymore. Low-yield Treasuries, anyone?

The second issue is that the welfare state has become unaffordable...

This became obvious recently when Congress failed to pass extensions of benefits for the long-term unemployed.

And it is not merely that the middle class and the poorest have found themselves squeezed so hard: it is that so much of the extra cash generated during the boom years (and even after them) has been actively funnelled towards the most wealthy. The median wage in the US, adjusted for inflation, has been stagnant for pretty much three decades. But the figures at the high end of the scale have soared; whereas in 1970 the average US chief executive made $25 for every dollar of their typical employee's salary, today the figure is more like $90.

Well, yes, although this is hardly ever discussed in the United States. I write about wealth & income inequality in America all the time (e.g. see Trickle Down Economics). Let's get to the bottom line—

Moreover, there is good reason to suspect, as Raghuram Rajan points out in his new book, Fault Lines, that policy-makers have only been able to persuade people to live with this manifestly unfair situation by pumping up ever bigger booms in the property and stock markets to give them the impression that they are actually making money. Now that the bubble has burst and debt is harder to procure, that illusion has evaporated. All this before one even takes into account the third problem for households – that they are having to bear the costs of the clean-up for the financial crisis... So I have one simple question: when do the politicians intend to let the public know about the fate that awaits them? The longer they put it off, the nastier the reaction, the bigger the strikes and the greater the chance that governments will fall.

Don't say you weren't warned.

Perhaps you have the same question—When do the politicians intend to let the public know about the fate that awaits them?

I think we know the answer—Never. At least if you read DOTE, you can no longer say you weren't warned.