The Great Discomfort is coming. A financial crisis could expose just how fragile middle class security has become.
For decades, millions of people have been encouraged to believe that a professional job, a growing pension fund and an increasingly valuable home would provide lasting economic security. But what happens if all three assumptions fail at once?
Stock markets are at extraordinary levels. The AI boom has many of the characteristics of a financial bubble. Yet even if that bubble bursts, businesses will continue adopting AI, potentially threatening professional employment. Meanwhile, falling confidence, insecure jobs and financial turmoil could put further pressure on house prices.
The consequences would go far beyond economics.
A generation that believed following the rules would guarantee prosperity could discover that the system never provided the security it promised. Pensions could fall in value. Careers could disappear. Housing wealth could evaporate. Expectations of inheritance could prove misplaced.
That could produce a profound political reaction.
Some people may respond to insecurity by looking for scapegoats and embracing authoritarian politics. Others may conclude that neoliberal capitalism itself has failed.
The question is what happens when a comfortable middle class suddenly discovers it isn't secure at all.
I am calling that process the Great Discomfort, and I expect it to start soon. The question is, are you ready for it? Now is your moment to be so.
This is the audio version:
This is the transcript:
The Great Discomfort is coming. By that I mean a financial crisis could shatter middle-class security, and it could happen in the next year or two. Those who are within the middle classes who think themselves immune to risk are not. That is the message of this video. The jobs, savings and homes of the middle class are now all exposed to enormous risk to their value, and the assumptions underpinning the lives of the middle class are becoming very fragile. Very soon, the comfortable middle-class could face an almighty shock.
Middle-class security rests on three basic beliefs.
The first is that secure professional jobs will provide reliable incomes for them. They also think their children will enjoy the same employment security, and we can join those two assumptions into one.
The second key assumption is that they think share and house prices will continue to rise. And that means they think that their financial wealth will provide security for them for the future forever.
And third, they think this life can continue. The good times are here to stay as far as they're concerned, and they do not wish to consider an alternative.
I'm sorry to say that none of these assumptions is true. That's why I think we will get a Great Discomfort. The stock market boom will not last. Markets in the UK and USA are at record highs. Every boom produces claims that this time it is different, and history suggests that those claims should not be trusted. The AI boom has all the characteristics of another bubble, and even the Bank of England are saying so. And when that bubble bursts, markets could fall dramatically.
A crash could destroy middle-class wealth. Middle-class savings are now exceptionally exposed to stock market valuations. That is because of the privatisation of the whole pension arrangement, which most middle-class people now have. And that leaves these people particularly exposed to stock market valuations with very little control over what will happen within their pension funds, largely because they haven't bothered to find out how they can take that control.
A major market fall could wipe out substantial paper wealth for the middle classes, as a result. And in that case, retirement expectations could suddenly look much less secure, because the security people think they might have will genuinely be lost. The resulting loss of confidence could be just as important as the loss of wealth.
And at the same time, AI will threaten jobs even if the AI bubble bursts. A financial crash will not stop businesses using AI. That is an incredibly important point to note. The dot-com bubble burst, but the internet continued to rise, and struggling companies will have even greater incentives to cut costs. Professional and middle-class employment will therefore become increasingly threatened. And young people will find traditional career paths disappearing even faster than they already are.
Following the established rules will no longer guarantee anyone from the age of 16 to 66 any form of security. The dream of matching your parents' well-being will then disappear in a way that few can, as yet, imagine. And the middle-class, remember, are not just those who have the wealth, but those who assume they will inherit the wealth. I come across this curious behaviour quite often these days.
And the housing market could be the next point of vulnerability for this very comfortable middle-class. Signs of stress are already appearing in house prices. Falling confidence and insecure employment could accelerate the trends we're already seeing with falling house prices, and a slow decline, which we're witnessing at present, could turn into something much more serious.
Negative equity could trap households in homes worth less than the debts that they owe on them. And the resulting financial and personal stress could last for years and have a major impact, not just on those households who cannot move when they might need to do so, but also upon the economy as a whole as mobility disappears and people cannot take up jobs that they'd like to move to.
What summarises all this? Well, neoliberal certainty will be shattered. Many middle-class people have completely internalised neoliberal thinking. They've been taught that their success reflects individual ability. They've been encouraged to ignore all the social scaffolding that supports them. They are blind to the well-being of others unlike themselves. And meanwhile, the belief has developed that financial assets provide the basis for long-term economic security. And a crisis could expose how fragile all these assumptions really are.
This could create an existential crisis for the middle classes. The shock will be about more than lost money. The whole of their understanding of status and security could disappear overnight. People who believe themselves safe and protected will discover their vulnerability. Their confidence in the existing economic order could disappear. The political consequences could be profound.
Let's not pretend otherwise. Some will turn to the far-right. Economic insecurity creates a powerful demand for explanations, and migrants and the working class could become convenient targets. At the same time, democratic government itself could be blamed. Personal misfortune could be turned into resentment against others, and the possibility of a powerful right-wing reaction as a consequence of this collapse in middle-class confidence cannot be dismissed.
Others will rightly blame the con-trick that is the neoliberal system. They will realise that it is neoliberal capitalism that has failed them. The fact is that ever-rising asset prices could never have provided permanent security. That's because inflating asset values does not itself create new real wealth. The fact that a house has doubled in price provides no more houses. That is the perfect example of the misunderstanding that has underpinned this perception of wealth, which has never been real.
Financial instability has always been inherent within this economic model as a consequence, and repeated financial crises this century and last have already demonstrated that weakness.
But let's be clear, the political choice people will make at this point in time will be fundamental. One response will be to seek security through division and authoritarianism. Another will demand a new architecture for society. That second alternative must be based upon mutual well-being because that is the only way in which real worth can be created that will prove that speculation is no longer the basis for the society that we live in.
The struggle between those responses will shape what follows. Although society has always won out against abuse in the end, the road to that may be tortuous, and I'm flagging that up now. This discomfort could be very uncomfortable indeed.
And the point of this is that the middle class is not invulnerable at this moment. They'd like to think they are, but they're not. Their jobs, pensions, savings and homes can no longer guarantee them permanent security. Neoliberalism encouraged people to believe otherwise, but a financial crisis now could bring that worldview to its knees. The resulting discomfort could transform politics as well as economics.
What replaces the old certainties will be what will define our future for generations to come. What's needed now? An informed middle class is needed now that realises that they, along with the working class, have been taken for a ride. But will they realise that? Time alone will tell. If they do, we have a chance. If they don't, life is going to become very uncomfortable indeed. That Great Discomfort could be very miserable, and that's all down to whether the right-wing exploits this situation to put themselves in power, at the cost to everyone, including the middle class, who will have already lost all the status that they think they have at present.
That's what I think. What do you think? There's a poll down below. Please let us have your comments. This is a difficult topic. It may well affect you. You might have strong opinions on it. If so, please like and share this video. Please do subscribe to the channel. Please do tick the bell button so you will be notified when we make a new video. And if you'd like to support our work, there is a button down below so you can buy Tom and me a coffee, and we'd really appreciate that.
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Europe has very few natural resources available. Our wealth has been accumulated mainly through exploitation of and extraction from less “developed” countries, initially using military methods and later switching to economic colonialism. The ability of European governments to print money at will has been an important component of this domination. Even before the abandonment of the gold standard, governments would frequently authorise expenditure above and beyond the availability of the metal reserves that supposedly backed spending.
The real material power available to the nation states in the Global North has been decreasing steadily over time as we exhaust the reserves of the fossil fuels upon which technological modernity is entirely dependent. There is no way of reversing this decline. “Renewables” (better described as rebuildables) cannot match the exergy currently drawn from oil, never mind the peak enjoyed in the past, and anyway their construction needs fossil fuels. They are not a replacement, they just add to the energy usage and ecological overshoot that is driving the fastest mass extinction event the planet has ever seen.
We are entering a phase change in which the modern way of life will be irrevocably transformed. There is an urgent need to bring our culture back into alignment with Mother Earth and the biosphere and to relearn our correct place in the order of things. Our species evolved as a pack animal and we are naturally inclined to systems of cooperation, mutual aid, and interdependence. It is time to rediscover this fundamental truth.
I don’t have much hope for the Global North though. The people with the best chance of surviving the current metacrisis are the few surviving pockets of indigenous culture still living in harmony with the natural world. Managed decline is probably our best option.
Thanks to you and your team for a distubingly relevant article.
Below is a set of “headlines” from an AI response to this question:
“How can present politici-socio-economic problems be best manage for the whole of a society?”
* Progressive taxation and safety nets
*Investment in human capital
*Sustainable development
*Transparent institutions
* Deliberative democracy
* Evidence based policymaking
* Universal basic services
* Bridging cultural divides
For the U. K. it adds:
* Catalyse investment
* Energy independence
*Tax and threshold reform
*Devolve power
* Fix the housing crisis
*Combat misinformation
* Support public spaces
I agree with it.
For anybody under forty this illusion has long gone. Many have massive student debt and are either living with their parents are paying high rent for insecure homes and often not in the well paid graduate jobs they were told to expect. I guess you are illuding to those fifty and above who didn’t pay for their university education and managed to get on the housing ladder before it became near impossible without help from parents? In my lifetime the concept of a safe job for life has long disappeared, even in the public sector and whilst public sector pensions are better than private sector ones, they are nothing like what they used to be.
I am…those who created the problem.
Not intentionally. I believe in free university education for our brightest and able and free nursing training etc. You are aware of the imbalance. My issue is with the pensioners, many of whom retired in their late fifties having endless holidays and believing they are somehow hard done by and the same lifestyle is still available to younger adults.
Hazel says “ In my lifetime the concept of a safe job for life has long disappeared”
I think this is interesting to think about.
At a basic level, people in large groups require the structure of a functioning society with agreed rules, implemented through institutions, in order for life to be mostly stable.
In order for this to work, jobs are required to both create the structure, maintain the rules and thus allow further jobs, which add depth beyond simple needs. (Richard’s cappuccino idea, I think)
These framework-jobs must exist, else society can’t function. The jobs themselves must last more than a lifetime or be replaced by something else that provides a similar function for society. So, there’s some sort of continuity there, beyond one lifetime. Otherwise society fails. (Aside: if you’re not ‘in the group’…we know where that leads, and it’s never good).
The large group of people still exist though. Do they not still need a society? Do they not still want a stable life? Security? Safety? A chance to live their lives in peace, joy and love?
Of course they do. The same as any society has in the past, and into the future.
Yet the jobs for life are being discarded, deliberately un-replaced, and society crumbles.
Society is lives, followed by lives…. so we require ‘jobs for lives’. A job that lives longer than a lifetime.
Every society has needs, that global society can fulfil, if we work in harmony, within planetary boundaries, for multiple lifetimes. Yet, in lots of countries, the jobs for lives are being killed off.
Governments getting rid of the jobs, or not stepping in when the market fails, are eventually getting rid of society, are getting rid of YOU.
Every society needs jobs for lives, or it dies.
Much to agree with. Thank you.
I guess I’ve seen job security eroded. That job might still be needed but the conditions of employment change and the rights degraded. A person might be TUPEd over, sometimes multiple times and then the role outsourced to somewhere cheaper. And traditionally public sector jobs were viewed as not subject to redundancy but now even teachers and nurses find themselves redundant. No job is immune any more and loyalty is no longer rewarded.
Much to agree with
I totally agree – for me the middle class has been captured by hyper-liberalism more than any. Their skills in the legal and accounting professions as well as management have put them at the centre of some very toxic changes to the world of work and business. And all of this seems to have been achieved without considering who is next? Well, it’s you lot! Yeah, that’s right.
The rapaciousness of modern capitalism has always been a dead end – it will even sell us the rope that we hang it with someone once said.
Agreed
[…] my economic predictions for this autumn remain: The Great Discomfort is […]
“Many middle-class people have completely internalised neoliberal thinking.” = “Our market which art in heaven”
I have to regularly deal with middle class imbeciles & what passes for their thinking when it comes to elec market reform. They are incapable of independent thought. It is pathetic to see & frankly, I have zero sympathy. As John Doyle (ex Commission official) said to me wrt the Commission (a bastion of the middle classes), they are all “nice people, with nice families all thinking they are doing the right thing”. & this will lead to no EU.
(John btw called Mandelson “a c…t” to his face when he was Commissioner).
Much to agree with
In 2024/25, according to FCA data, 961,575 people accessed their DC pensions for the first time, adding to the 885,455 who did so in 2023/24. The amount accessed was £70,876m. Many ‘small pots’ were ‘cashed out’, but 349,992 people decided to use ‘drawdown’, with only about a third taking independent regulated advice, with only 88,430 people buying annuities (Source: Retirement income market data 2024/25 | FCA )
So, we now have millions of ‘middle class’ DC pension plan holders living on hope, having adopted a ‘probabilities-based’ approach to their pension. Sure, these decisions need individual context, but goodness they will face problems as and when the markets turn against them (they might run out of money). Those who adopted the ‘safety-first’ approach of using insured annuity lifetime income (with the wise choosing RPI-linking) can rest contentedly.
An important example of potential discomfort, but I regularly meet people who are absolutely convinced that markets can only go up and really dislike being challenged about that assumption as it threatens their well-being. Insanity.
Might I use this on the blog?
For better or worse, I take a very simple view when looking at what to think about for the hundreds of thousands of people rapidly approaching decision time with any DC pension pots they might have. By covering at least basic expenses with inflation-linked lifetime income annuities (or ‘fixed-term income plans’), retirees are able to focus on discretionary funds as a source for enjoyment. The problem currently is that I believe that inflation is rather more than ‘sticky’ because of war, El Nino, energy costs, housing costs, etc., meaning that a decent margin should be built in to one’s guaranteed income amount assumptions.
However, locking in one’s basic expenses does mean that a retiree’s discretionary funds can remain invested in equities for a longer period of time, if that is desired. But with gross interest rates from building societies and NS&I now approaching 5% – often available as income payments – do you really ‘need’ to continue playing in what Anne Pettifor calls “The Global Casino” My Latest Book: The Global Casino: How Wall St Gambles with People and the Planet – Ann Pettifor
This isn’t specific advice, as everyone’s circumstances are different, but bears close inspection, I think, despite all of the ‘noise’ from those trying to sell you their marvellous investments.