Seven Grey Swans a Swimmin’ in 2025: #3 Death of the Middle Class

“I believe we are on an irreversible trend toward more freedom and democracy – but that could change.”

–Dan Quayle

December 27, 2024— Are you better off now than you were four years ago?

That question, which Ronald Reagan first asked voters in 1980 after four inflationary years of the Carter presidency, resonated. It’s no wonder Donald Trump brought it back successfully in 2020.

The past four years, inflation hasn’t been terrible compared to the 1970s and 1980s. But in a world of 2% inflation expectations, the jump to 9% was huge. It caused millions to see, in real-time, the cumulative damage inflation does.

For wealthier Americans, inflation may have been painful, but it was also beneficial. That’s because inflation tends to mean rising asset prices.

For instance, since 2020, the Case-Schiller home price index has risen 47%. If you owned a “median” home valued at $300,000, it’s now likely worth closer to $450,000, plus or minus your local market conditions.

A $1 million home? Closer to $1.5 million.

And let’s not forget the stock market over the past four years, which has nearly doubled. Even the 2022 bear market is starting to look like just a speed bump in the rear-view mirror.

It’s no wonder that the four wealthiest Americans, Elon Musk, Larry Ellison, Warren Buffett, and Jeff Bezos, now have a combined wealth of $1 trillion.

But for millions of Americans who don’t own a home or invest in a 401(k) plan, rising inflation means lower take-home pay.

Food costs are up over 20% over the past few years. As are rents.

And next year, when Donald Trump starts ratcheting up tariffs again, there will be more pressure for prices on goods to rise even further. That will make it harder to keep prices down.

Time magazine reported that if Trump gets the full tariffs he has in mind, consumer prices could rise as much as 5.1%. That’s likely more than enough to offset any savings consumers might see from deregulations or a small reduction in tax rates.

When you’re on the liability side of inflation, it’s painful. And more and more Americans are falling behind.

This increasing wealth inequality, combined with tech trends that include major advances in AI and robotics, could lead to another Grey Swan event: the death of the middle class.

Grey Swan #3: Death of the Middle Class

The middle class, long considered the engine of our economy and the embodiment of our national values, is shrinking at an alarming rate, fundamentally altering America’s social and economic landscape.

According to a recent Pew Research Center study, the share of Americans living in middle-class households has plummeted from 61% in 1971 to just 51% in 2023. And bear in mind, the U.S. population has increased by 67% since then.

As the middle class contracts, the rift between lower-class and higher-class Americans grows wider.

From 1970 to 2022, middle-class incomes increased from $66,400 to $106,100, barely keeping pace with inflation.

Over that same time, upper-income households saw their median income skyrocket by 78%, from $144,100 to $256,900.

But as prices have risen, the middle class’s share of total U.S. household income has plummeted – from 62% in 1970 to just 43% in 2022.

Turn Your Images On

The middle class is disappearing, bleeding into upper and lower-income groups.

Chances are, if you’re reading this, you’re movin’ on up. Let’s make sure it stays that way.

One way to do so is to invest in some of the latest technologically transformative trends. As Grey Swan Investment Fraternity contributor and AI expert Zoltan Istvan recently told paid-up members of our fraternity:

If we just go back about two years, to when most people used ChatGPT for the first time, we see that the increased use and evolved complexity of AI is almost a straight line up on a J-curve graph.

In other words, the world is changing at an accelerating pace. The best way to ensure you’re not left behind is to invest in some of today’s top tech trends, as well as with assets that have massive return potential, such as bitcoin.

Regards,

Addison Wiggin,
Grey Swan

P.S. It’s not too late to review some of our most recent research in the tech space, including what we call “Quantum Energy.” We’ve identified several companies developing this technology, which is the key to fully unlocking AI’s potential.

There are many ways to play this trend, depending on your comfort level. While we believe that investors should focus on safety first, playing growth trends is crucial to growing your wealth above and beyond inflation’s incessant bite.

Your thoughts on the top Grey Swan events of 2025 are welcome here: addison@greyswanfraternity.com.

“I believe we are on an irreversible trend toward more freedom and democracy – but that could change.”

–Dan Quayle

December 27, 2024— Are you better off now than you were four years ago?

That question, which Ronald Reagan first asked voters in 1980 after four inflationary years of the Carter presidency, resonated. It’s no wonder Donald Trump brought it back successfully in 2020.

For wealthier Americans, inflation may have been painful, but it was also beneficial. That’s because inflation tends to mean rising asset prices.

A $1 million home? Closer to $1.5 million.

And let’s not forget the stock market over the past four years, which has nearly doubled. Even the 2022 bear market is starting to look like just a speed bump in the rear-view mirror.

It’s no wonder that the four wealthiest Americans, Elon Musk, Larry Ellison, Warren Buffett, and Jeff Bezos, now have a combined wealth of $1 trillion.

But for millions of Americans who don’t own a home or invest in a 401(k) plan, rising inflation means lower take-home pay.

Food costs are up over 20% over the past few years. As are rents.

And next year, when Donald Trump starts ratcheting up tariffs again, there will be more pressure for prices on goods to rise even further. That will make it harder to keep prices down.

When you’re on the liability side of inflation, it’s painful. And more and more Americans are falling behind.

This increasing wealth inequality, combined with tech trends that include major advances in AI and robotics, could lead to another Grey Swan event: the death of the middle class.

Grey Swan #3: Death of the Middle Class

As the middle class contracts, the rift between lower-class and higher-class Americans grows wider.

From 1970 to 2022, middle-class incomes increased from $66,400 to $106,100, barely keeping pace with inflation.

Over that same time, upper-income households saw their median income skyrocket by 78%, from $144,100 to $256,900.

But as prices have risen, the middle class’s share of total U.S. household income has plummeted – from 62% in 1970 to just 43% in 2022.

Turn Your Images On

The middle class is disappearing, bleeding into upper and lower-income groups.

Chances are, if you’re reading this, you’re movin’ on up. Let’s make sure it stays that way.

If we just go back about two years, to when most people used ChatGPT for the first time, we see that the increased use and evolved complexity of AI is almost a straight line up on a J-curve graph.

Regards,

Addison Wiggin,
Grey Swan

Your thoughts on the top Grey Swan events of 2025 are welcome here: addison@greyswanfraternity.com.

America has consistently reinvented itself in times of crisis. The founders survived monarchy. Lincoln survived disunion. We’ve survived bank panics, oil shocks, stagflation, and disco. We’ll survive deplatforming, too.

The Second American Revolution won’t be fought with muskets or manifestos. It won’t be fought with petty violence and street demonstrations. It will be written into code. And available to those who wish to take advantage of it.

Russell Kirk called the first American Revolution “a revolution not made, but prevented.” The second will be the same. We’re not tearing down the house — we’re going to rewire it in code.

The result may not be utopia. But it will be freedom you can bank on.

Treasury Secretary Scott Bessent has called stablecoins, including USDC, “a pillar of dollar strength,” estimating a $2 trillion market within five years. U.S. Treasuries back every coin.

Bessent’s formula even suggests that a broader, more efficient market for US dollars will help retain its best use case as the reserve currency of global finance… and, perhaps, help the current administration address the nation’s $37 trillion mountain of debt.

In trying to cancel a man, the establishment accidentally reinforced the dollar, and may add decades to its life as a useful currency.

As we approach the 250th anniversary of the United States, it’s worth recalling that our first Revolution wasn’t waged to destroy an order — it was fought to preserve one.

Political philosopher Russell Kirk called it “a revolution not made but prevented.” The colonists sought not chaos but continuity — the defense of their “chartered rights as Englishmen,” not the birth of an entirely new world. Kirk wrote:

“The American Revolution was a preventive movement, intended to preserve an old constitutional structure. The French Revolution meant the destruction of the fabric of society.”

The difference, Kirk argued, was moral. The American Revolution was rooted in ordered liberty; the French in ideological frenzy. The first produced a Constitution; the second, a guillotine.

Two and a half centuries later, the argument continues — only now, the battlefield is financial. Who controls access to money? Who defines legitimacy? Can a citizen’s ability to transact depend on their politics?

Trump and Powell are no buddies. They’ve been fighting over rate cuts all year—Trump demanding more, Powell holding back. Even after cutting twice, Trump called him “grossly incompetent” and said he’d “love to fire” him. The tension has been building for months.

And Trump now seems ready to install someone who shares his appetite for lower rates and easier money.

Trump has been dropping hints for weeks—saying on November 18, “I think I already know my choice,” and then doubling down last Sunday aboard Air Force One with, “I know who I am going to pick… we’ll be announcing it.”

He was referring to one Kevin Hassett, who—according to a recent Bloomberg report—has emerged as the overwhelming favorite to become the next Fed chair.