Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Where Does All the Money Go?

Politics / Credit Crisis Bailouts Jun 11, 2012 - 01:52 AM GMT

By: Bill_Bonner

Politics

Best Financial Markets Analysis ArticleThe 1%…the zombies…and the rest of us…

How about that Dow? Up 286 points yesterday. And gold up $17. Markets are counting on their hero, Mr. Benjamin S. Bernanke, to come to the rescue. They can practically hear the printing presses warming up…and smell the fresh $100 bills rolling off.


And where does all the money go? Long time passing…

Where does all the money go? Long time ago…

Where does all the money go? Gone to rich people every one…

When will they ever learn? Oh when will they ever learn?

But nobody seems to make the connection. Only here at The Daily Reckoning will we give it to you straight:

The working classes made substantial gains until the 1970s. Then, wages went flat for the next 40 years.


Wealth was shared out fairly evenly too…until the 1970s. From Wikipedia:

…data from a number of sources indicate that income inequality over all has grown significantly since the late 1970s, after several decades of stability.

A 2011 study by the CBO found that the top earning 1 percent of households gained about 275% after federal taxes and income transfers over a period between 1979 and 2007.

What happened in the ’70s that changed things? Take a guess. The feds changed the money. From a money that was limited – because it was connected to gold – to new money that would stretch as far as the feds wanted to pull it. In the event, they used it to increase US credit outstanding 50 times since the ’60s. Total US credit didn’t exceed $1 trillion until 1964. Over the next 43 years it rose to over $50 trillion.

Where did this new money go? Well, to lots of people…all over the world…

But more of it went to rich people than to anyone else.

And now everybody’s gunning for the rich…for the 1%. And what was their crime? Didn’t they just get lucky?

But the complainers act as though they did something wrong. As if making money was wrong…

And even if that were true, it doesn’t address the real issue: how come the 1% got to make so much money?

Even very rich people themselves don’t know. And very smart people, such as Nobel Prize-winning economists seem to have no curiosity about it. They just think it’s time for the rich to ‘give back:’

The 1 Percent’s Problem
By Joseph E. Stiglitz, Vanity Fair

Let’s start by laying down the baseline premise: inequality in America has been widening for decades. We’re all aware of the fact. Yes, there are some on the right who deny this reality, but serious analysts across the political spectrum take it for granted. I won’t run through all the evidence here, except to say that the gap between the 1 percent and the 99 percent is vast when looked at in terms of annual income, and even vaster when looked at in terms of wealth – that is, in terms of accumulated capital and other assets. Consider the Walton family: the six heirs to the Walmart empire possess a combined wealth of some $90 billion, which is equivalent to the wealth of the entire bottom 30 percent of US society. (Many at the bottom have zero or negative net worth, especially after the housing debacle.) Warren Buffett put the matter correctly when he said, “There’s been class warfare going on for the last 20 years and my class has won.”

That’s about as close as Mr. Stiglitz comes to analyzing the situation, as if it were the result of ‘class warfare.’ He doesn’t seem to realize that Buffett was joking. Or should have been.

Instead, he goes on to describe how wealth inequality is a problem: because people without money can’t consume…because it leads people to become zombies (rent seekers…rather than producers)…because it is “unfair”…and because it creates mistrust in the society, leading to dysfunctional institutions.

Then, he offers a solution. He pitches it to the 1% in terms of self-interest:

When invited to consider proposals to reduce inequality – by raising taxes and investing in education, public works, health care, and science – put any latent notions of altruism aside and reduce the idea to one of unadulterated self-interest. Don’t embrace it because it helps other people. Just do it for yourself.

He doesn’t explain how getting 1% of the voters on your side would make much of a difference in a general election. Presumably, the electorate or its representatives must approve these proposals. Nor does he bother to tell us how spending more money, or “investing” as he puts, on more education, more boondoggles and more health care will cause wealth to move from the 1% to the 99%. After all, the feds have been lavishing money on those programs for the last 30 years – just as income equality increased!

Nowhere did they spend more money than in the Zombie City itself, Washington, DC. For every dollar Washington pays in taxes it gets back $5 from taxpayers elsewhere. And nowhere is there greater income dis-equality than in Washington.

Well here’s a little good news.

The zombies were dealt a setback this week. Wisconsin’s governor, Scott Walker, beat back the public employees’ unions in a recall election.

We don’t usually touch politics here at The Daily Reckoning. We don’t have a pair of rubber gloves thick enough. But when a politician balances a state budget without raising taxes it is noteworthy. It is even more noteworthy when he has cut back on zombie expenses…and then is able to hold his own when the zombies counterattack!

It might even lead some observers to imagine that Mitt Romney might win the presidential election and that he might turn out to be a zombie-killer too. Others go so far as to think the tables have been turned against the zombies, generally.

We’d like to believe it. But history is a long, sad tale of strong leaders doing the wrong thing, not the right thing. If they did the right thing there wouldn’t be so much history. No big wars…no great revolutions…no economic catastrophes.

If history can count on leaders to do the wrong thing so can we.

Mitt Romney is no threat to the zombies. In fact, he’s already pledged to give them more fresh meat. That’s right, he says he’ll send more resources to the US military – the biggest zombie organization on the planet. Why does Mitt think the Pentagon is a little short? Because some of the most powerful lobbyists and biggest campaign donors say so! What more proof could you want?

As to the un-armed zombies, we haven’t seen Mitt declare himself one way or the other. He seems to have no fixed positions; he’ll go where the zombies push him. Just like Barack Obama.

But it probably doesn’t make any difference. For every successful fight against the zombies, such as the one just won by Scott Walker, there are hundreds or thousands of skirmishes, ambushes, and pitched battles where, when the dust settles, zombies are the only ones still standing.

Yesterday, we sat in our local Ford dealer’s office while our truck got serviced. Keeping an eye on the TV screen in the waiting room, we noticed no fewer than three zombie ads within a 15-minute period. Two of them were for lawyers. One at 1-800-299-HURT offers to sue someone for you if you were in a traffic accident or a victim of medical malpractice. The other, at 1-800-THE-FIRM , said that if you were injured on the job or in a store, there was a good chance that the business was responsible.

The third advertisement appealed directly to the zombie instinct. It was for a company that calls itself “Disability Associates,” a group that makes a business out of getting people firmly into zombiedom, where they are fully supported by the rest of us.

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).

http://www.lewrockwell.com

    © 2012 Copyright The Daily Reckoning, Bill Bonner - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules