^[1]I have talked about the middle class a lot in this space, and how important it is to what America truly is…or rather, used to be.

The great American middle class is both the backbone and the belly of the country.

The middle class is the backbone of the country because its buying power supports American businesses and provides both the market and the capital—until recently at least—to Wall Street.

Billions of dollars flow into mutual funds and ETF from retirement plan contributions made by working middle class Americans every year.

And it is the belly of the country—the guts of America--in the sense that the nation’s vitality and values are mostly found in the middle class work ethic and belief in following the law in business and in life.

The American middle class is what made the economy and the country, great.

But when a country no longer has a vibrant, productive middle class…

It will soon cease to be a great country.

And the sad fact is, the great American middle class is rapidly vanishing.

Where is it going?

It is being wiped out, devolving from a productive, property owning class into a vast, government dependent underclass.

How do we know this?

Consumer Spending Shifts Upward

Because the ratios of consumer spending is changing.

It is shifting more in favor of the top 20% of American, and declining among the lower 80%.

The wealthy in this country are doing fine; and there’s nothing wrong with that.

The wealthy make 50% of the purchases that are counted as consumer spending.  This accounts for some good revenues for Macy’s and other higher end retailers.

But guess who else is seeing sales rise?  Dollar stores.  Those retailers that sell nothing for over a dollar have been the go-to for lower income folks, and their business is booming.

Why is this?

Several reasons.

For one, most middle class wealth is in their house. When housing prices crash, and continue to decline, a big chunk wealth goes with it.

Another reason is that many middle class jobs have gone away.  They have been replaced with lower paying jobs that many former middle class workers have been forced to take.

Another clue is the rise in demand for rental housing.  The key part of the America middle class equation was home ownership.

But these days, even with millions of homes sitting empty, many former middle class Americans cannot afford to buy a house; not even at a 40% discount in price.

Thus, 11% of houses in the US sit empty.

Also, the number of Americans living on government welfare checks is higher than ever before.

And finally, there are taxes.  Taxes are rising for those who still in the middle class, which means that middle class net take home pay is declining.

And on the flip side of that, the number of Americans who are not earning enough to pay taxes has risen to 49%.  If you earn a poverty level income then you don’t get taxed…

Actually, you get paid.

You get supported.

And where does that money come from?

Too much of it comes from taxes on…the middle class.

Tight Credit

Since the banking industry imploded in the Crisis of 2008, banks have been unwilling to lend for the most part.  They have been making a guaranteed rate of return lending their bailout money back to the government.

As the financial health of the banks and the greater economy remains in question, middle class access to credit has virtually gone away.

This applies not just to the housing market—although that is a huge factor—but also to small business credit and consumer credit as well.

This tight credit climate also impact consumer spending.

Without credit, middle class consumers spend less.  It’s that simple.

Banks Closing

This has a direct effect on banks.  That is, if lending volume is much less than it was, say, 5 years ago, banks will find it unprofitable to keep as many branches open.

The fact is, banks are servicing much less of the middle class than before.  For example, by some estimates, Citibank will be closing 5,000 branches nationwide in the next couple of years.

And the Dodd-Frank financial reform laws will make it more expensive for banks to operate, which will also drive banking into a retreat.  Analyst Meredith Whitney notes that:

“Excessive regulation of financial institutions is squeezing out middle-class consumers who soon will find themselves locked out of the banking system.”

The result of all these factors is what Whitney calls the un-banking process.  In fact, Whitney thinks that the number of "unbanked" American households will be 41 million in 2015, as institutions reconsider the costs and benefits of all manner of products.

That’s roughly one third of all Americans living outside the financial system!

Banks are for the Rich

The take away from all of this is that in the very near future, as the middle class blends downward into one massive underclass in America, banks may well become less accessible to the middle class.

They may become like exclusive clubs for the wealthy, with exclusive access to credit.

The average American will get their credit from “old school” lenders like pawnshops and shady, predatory outfits like paycheck advance lenders and such.

Think it can’t happen?

That’s where most Americans got their credit up through the 1950’s.

It could be so again, and much worse.

Not too many years away, traditional banking in America could become a relic of the past, nothing more than a memory of a time and place that has since passed into history.

And those are…The Gorrie Details.

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