The rich get richer and the poor get poorer. The Parable of Talents, found in Matthew 25:24-30, is perhaps the earliest written statement of this famous aphorism:

For unto every one that hath shall be given, and he shall have abundance: but from him, that hath not shall be taken away even that which he hath.

Because of this verse, the entire phenomenon of “the rich getting rich and the poor getting poor” is often called the Matthew Effect.

However, the aphorism was first stated in its modern formulation by the great Romantic poet Percy Bysshe Shelley. In his 1821 book A Defence of Poetry, Shelly criticized the “utilitarians” of his day by remarking that under their administration “the rich have become richer, and the poor have become poorer.” Today the aphorism is commonly expressed in present indicative tense, expressing a seemingly unchanging pattern observed over time: “the rich get richer and the poor get poorer”

Whatever its source and tense, no one disputes the truth of the Mathew Effect. Indeed, its factuality is in evidenced everywhere! The Guardian reports:

The world’s five richest men have more than doubled their fortunes to $869bn (£681.5bn) since 2020, while the world’s poorest 60% – almost 5 billion people – have lost money.

The details come in a report by Oxfam as the world’s richest people gather from Monday in Davos, Switzerland, for the annual World Economic Forum meeting of political leaders, corporate executives and the super-rich.

The yawning gap between rich and poor is likely to increase, the report says, and will lead to the world crowning its first trillionaire within a decade. At the same time, it warns, if current trends continue, world poverty will not be eradicated for another 229 years.

…click on the above link to read the rest of the article…

The Second and Final Gilded Age

April 4, 2024

The Second and Final Gilded Age

New data shows that the total wealth of the top 1% of Americans just hit a record $44 trillion. Corporate profits are also hitting record highs, raking in $2.8 trillion in the last three months of 2023 alone. And that’s after taxes. It won’t surprise you to hear, given these massive numbers, that inflation is being driven primarily by corporate greed and these staggering, record profits. By raising the cost of food, housing, and every basic need corporations are facilitating a gargantuan transfer of wealth from the working class to the 1%. In doing so they’re cementing this era’s position as the second Gilded Age.

For most of you, that’s probably not new information. Inequality has been soaring since the Reagan era, and even though workers have been creating more and more wealth, we’re seeing a smaller and smaller share of the value we produce. But this Gilded Age is slightly different from the first, and more importantly our remedy for this era should be separate and distinct.

The Gilded Age of the late 1800s is typically defined by extreme inequality and the monopolistic consolidation of industries. A handful of men, the Robber Barons, controlled the railroads, mines, newspapers, and, ultimately, the country. The concentration of wealth was so extreme that one man, John D. Rockefeller, is estimated to have been worth approximately $400 billion at the peak of his wealth, which was about 2% of the entire U.S. economy. Others like Andrew Carnegie, J. P. Morgan, and Cornelius Vanderbilt also pillaged and ruled the country with ruthless business tactics, exploitation of workers, and political corruption.

…click on the above link to read the rest of the article..

Two Pins Threatening Multiple Asset Bubbles

June 2, 2021

Two Pins Threatening Multiple Asset Bubbles

“Powell Says Fed Policies “Absolutely” Don’t Add To Inequality” -Bloomberg May 2020

The headline above is but one of countless times Fed Chairman Powell and his colleagues confidently said their policies do not result in wealth or income inequality. Their political stature and use of complex economic lingo give weight to their opinions in the media. Nevertheless, a deep examination of the Fed’s practices and their consequences leaves us to think otherwise.

In our opinion, the Fed’s contribution to wealth inequality is significant and grossly misunderstood. We have written articles explaining why QE and low interest rates generally benefit the wealthy and harm the poor. This article backs up those prior arguments with quantitative muscle.

Timely for investors, we also draw some lines between wealth inequality and financial stability and their relationship to monetary policy. We think it is becoming increasingly possible wealth inequality, and in particular, the outsized effect inflation has on the poor, could be the needle to pop many asset bubbles. The other possible needle is the Fed’s wanting for financial stability.

**Due to the importance of monetary policy from economic, societal, and market perspectives we are breaking this article into two. We will share part two next week.

Background

More inflation and financial stability (rising asset prices) are two of the three core tenets backing monetary policy. A strong labor market is the third objective. We focus on inflation in this article and financial stability in part II.

In our article Two Percent for the One Percent, we explain why inflation is detrimental to the poor, while rising asset prices (financial stability) primarily benefit the wealthy. The following paragraphs from the article explain:

…click on the above link to read the rest of the article…

The Secret

May 17, 2021

The Secret

The secret is out. It can no longer be denied and it’s up to each and everyone of us to help bring the secret to the forefront of public awareness.

For the mainstream financial media won’t do it, indeed they allow the guardians of the secret to continue to deny its existence.

For years those of us who have been critical as to the negative consequences of easy money policies, QE in particular, were dismissed and mocked as “QE conspiracists” and even as “swashbuckling pirates of free market capitalism” by central bankers directly including yours truly:

It’s easier to mock and ignore with a Tweet and then go into hiding versus engaging in substantive debate.

But the lid just got blown off the false narratives that have been propagated by central bankers from Powell on down with his now infamous claim that “Fed policies absolutely don’t add to inequality“.

Of course QE adds to inequality. Even the Bank of Canada just sheepishly admitted it:

But the real hammer just dropped by one of the most successful investors ever, billionaire Stan Druckenmiller. Not only does QE add to inequality it is the main driver:

“I don’t think there has been a greater engine of inequality than the Federal Reserve Bank of the United States”.

Watch this clip for it lays bare not only the brutal reality of how the Fed has reshaped the country for the benefit of the rich, but also who will pay for the consequences:

The data Druckenmiller is referring to is as obvious as the light of day:

…click on the above link to read the rest of the article…

Have You Noticed How Push-Back Against Powell-Fed’s Actions Is Getting Louder in the Mainstream Media, from NPR to CNBC?

September 11, 2020

Have You Noticed How Push-Back Against Powell-Fed’s Actions Is Getting Louder in the Mainstream Media, from NPR to CNBC?

Still a lot of fawning coverage, but big dissenters are now given prominent spots, and loaded questions are used to politely hammer Powell into telling obvious nonsense.

This is an interesting turn of events, in a world of Fed-fawning mainstream media. In one version, the push-back takes the form of loaded questions about asset bubbles and wealth inequality caused by the Fed’s asset purchases.

Fed Chair Jerome Powell then answers, following what looks like a script because these loaded questions are now being thrown at him regularly. He admits that the Fed’s policies have increased asset prices, then says the Fed as a matter of policy doesn’t comment on asset prices, and hence cannot comment on asset bubbles, but then assiduously denies that this increased wealth of the asset holders, which he admits the Fed has engineered, widened the wealth inequality to the majority of Americans who hold no or nearly no assets, and who got shafted by the Fed. It’s like getting pushed on live TV into saying that, yes, indeed, two plus two equals three!

This happened many times, most notably during the July 29 FOMC press conference when a Bloomberg reporter pushed Powell on that (transcript of my podcast on the Fed’s role in wealth inequality); and during the interview with NPR which aired on September 4, when he was pushed on both, asset bubbles and wealth inequality.

In another version, the push-back in the mainstream media takes more accusatory forms expressed with exasperation and dotted with exclamation marks.

In early August, notable push-backers were former president of the New York Fed William Dudley and Bloomberg News which carried and promoted his editorial.

…click on the above link to read the rest of the article…

VIDEO: The Fed’s Evil Juggernaut

January 18, 2020

VIDEO: The Fed’s Evil Juggernaut

Don’t let it crush your future

Juggernaut: (n) massive inexorable force, campaign, movement, or object that crushes whatever is in its path

The US Federal Reserve is once again force-feeding liquidity into the system. At its fastest rate ever.

The result? Record high stock prices whose valuations defy all logic.

What’s wrong with that? Shouldn’t we just enjoy the party and be grateful for our rising 401ks?

What’s wrong is that the Fed’s actions are dooming us. Their poisonous cocktail of endless cheap money and rock-bottom interest rates is hastening a terminal breakdown of the economy, while deliberately enriching a tiny cadre of elites to the ruin of everyone else.

Though most remain blind to this, Fed policy (and the similar ones pursued by the other major world central banks) is directly responsible for, or a major contributor to, many of the biggest challenges society is facing.

Tens of millions of Boomers who can’t afford to retire. Tens of millions of Millennials who can’t afford to purchase a home. History’s largest wealth gap between the 1% and everyone else. Relentless increases in the cost of living while real wages remain stagnant. Depletion and degradation of our key natural resources by zombie companies run without profits. We can thank the Fed for all of these ills, plus many more.

All we’re offered in return is the fake reassurance that “everything is awesome” because stocks are higher today than they were yesterday. As if that really makes a difference when the top 1% owns 50% of all stocks and the top 10% owns over 90%.

And when today’s epicly distorted markets reach their breaking point — which may be imminent given the truly manic action recently — not only will the resulting damage be commensurately epic, but it will injure the 99% FAR more than the 1% who benefitted from it.

Mass layoffs. Bankruptcies. Destroyed retirement portfolios and pensions. State and city budget crises. Higher taxes. More fees. Cancelled social services. Hollowed-out communities.

…click on the above link to read the rest of the article…

A Survival Guide For 2019

February 7, 2019

A Survival Guide For 2019

How to safely navigate the ‘Year Of Instability’

As the first month of the year concludes, it’s becoming clear that 2019 will be a very different kind of year.

The near-decade of ‘recovery’ following the Great Financial Crisis enjoyed a stability and tranquility that suddenly evaporated at the end of 2018.

Here in 2019, instability reigns.

The world’s central banks are absolutely panicking. After last year’s bursting of the Everything Bubble, their coordinated plans for Quantitative Tightening have been summarily thrown out the window. Suddenly, no chairman can prove himself too dovish.

Jerome Powell, the supposed hardliner among them, completely capitulated in the wake of the recent -15% tantrum in stocks, which, as Sven Henrich colorfully quipped, proved what we suspected all along:

The global tsunami of liquidity (i.e. thin-air money printing) released by the central banking cartel has been the defining trend of the past decade. It has driven, directly or indirectly, more world events than any other factor.

And one of its more notorious legacies is the massive disparity and wealth and income resulting from its favoring of the top 0.1% over everyone else. The mega-rich have seen their assets skyrocket in value, while the masses have been mercilessly squeezed between similarly rising costs of living and stagnant wages.

How have the tone-deaf politicians responded? With tax breaks for their Establishment masters and new taxes imposed on the public. As a result, populist ire is catching fire in an accelerating number of countries, which the authorities are anxious to suppress by all means to prevent it from conflagrating further — most visibly demonstrated right now by the French government’s increasingly jack-booted attempts to quash the Yellow Vest protests:

Meanwhile, two other principal drivers of the past decade’s ‘prosperity’ are also suddenly in jeopardy.

…click on the above link to read the rest of the article…

Breaking the Chains of Debt: Lessons from Babylonia for Today’s Student Crisis

November 26, 2018

How Can They Lie to us so Blatantly? The Strange Case of Wealth Inequality in Russia

September 2, 2018

How Can They Lie to us so Blatantly? The Strange Case of Wealth Inequality in Russia

The figure is taken from the “Independent” dated 23 November 2016. It looks like a serious chart, but it is not. It is pure propaganda or, more simply, a lie. It is just an example of how blatantly they can lie to us and get away with it. We live today in a true Empire of Lies.

By mere chance, I happened to stumble into the graph you see above. It bothered me: can it really that Russia is, by far, is the most unequal country in the world? It just didn’t fit with what I know of Russia.

Yet, the power of well-presented graphic information is such that for a while I tried to rationalize these data in my mind. Maybe the fall of Communism caused the ancient rich nobles, the Boyars to reappear in Russia? Or maybe there returned the huge masses of destitute muzhiki living in poor izbas in the countryside?

Scratching my head, I thought that I could just check the data. And I found that the “high wealth inequality” of Russia is a lie. A complete, shameless, utter lie.

I checked with the World Bank, I checked with the “World Inequality Database,” I even checked the CIA Factbook, not exactly sites known for their sympathies for those evil Russians. The result was always the same: Russia is NOT the most unequal country in the world. There are several indices that can be used to measure inequality, all show that Russia is somewhat more unequal than most Western European countries but at about the same level of the United States and much lower than countries like India or Brazil. The share of wealth of the top 1% of the Russian population reported by WID is around 42%, very far from the value of 74.5% given by the Independent.

…click on the above link to read the rest of the article…

Here’s How We Ended Up with Predatory, Parasitic Elites

August 29, 2018

Here’s How We Ended Up with Predatory, Parasitic Elites

Combine financialization, neoliberalism and moral bankruptcy, and you end up with predatory, parasitic elites.

How did our financial and political elites become predatory parasites? Some will answer that elites have always been predatory parasites; as tempting as it may be to offer a blanket denunciation of elites, this overlooks the eras in which elites rose to meet existential crises.

Following in Ancient Rome’s Footsteps: Moral Decay, Rising Wealth Inequality(September 30, 2015)

As historian Peter Turchin explained in his book War and Peace and War: The Rise and Fall of Empires, the value of sacrifice was a core characteristic of the early Republic’s elite:

“Unlike the selfish elites of the later periods, the aristocracy of the early Republic did not spare its blood or treasure in the service of the common interest. When 50,000 Romans, a staggering one fifth of Rome’s total manpower, perished in the battle of Cannae, as mentioned previously, the senate lost almost one third of its membership. This suggests that the senatorial aristocracy was more likely to be killed in wars than the average citizen….

The wealthy classes were also the first to volunteer extra taxes when they were needed… A graduated scale was used in which the senators paid the most, followed by the knights, and then other citizens. In addition, officers and centurions (but not common soldiers!) served without pay, saving the state 20 percent of the legion’s payroll.

The richest 1 percent of the Romans during the early Republic was only 10 to 20 times as wealthy as an average Roman citizen.”

Now compare that to the situation in Late Antiquity Rome when

…click on the above link to read the rest of the article…

We Are All Lab Rats In The Largest-Ever Monetary Experiment In Human History

August 18, 2018

We Are All Lab Rats In The Largest-Ever Monetary Experiment In Human History

And how do things usually work out for the rat?

There are ample warning signs that another serious financial crisis is on the way.

These warning signs are being soundly ignored by the majority, though. Perhaps understandably so.

After 10 years of near-constant central bank interventions to prop up markets and make stocks, bonds and real estate rise in price — while also simultaneously hammering commodities to mask the inflationary impact of their money printing from the masses — it’s difficult to imagine that “they” will allow markets to ever fall again.

This is known as the “central bank put”: whenever the markets begin to teeter, the central banks will step in to prop/nudge/cajole the markets back towards the “correct” direction, which is always: Up!

It’s easy in retrospect to see how the central banks have become caught in this trap of their own making, where they’re now responsible for supporting all the markets all the time.

The 2008 crisis really spooked them. Hence their massive money printing spree to “rescue” the system.

But instead of admitting that Great Financial Crisis was the logical result of flawed policies implemented after the 2000 Dot-Com crash (which, in turn, was the result of flawed policies pursued in the 1990’s), the central banks decided after 2008 to double down on their bets — implementing even worse policies.

The Largest-Ever Monetary Experiment In Human History

It’s not hyperbole to say that the monetary experiment conducted over the past ten years by the world’s leading central banks (and its resulting social and political ramifications) is the largest-ever in human history:

(Source)

This global flood of freshly-printed ‘thin air’ money has no parallel in the historical records. All around the world, each of us is part of a grand experiment being conducted without the benefits of either prior experience or controls. Its outcome will be binary: either super-great or spectacularly awful.

…click on the above link to read the rest of the article…

The Pie Is Shrinking So Much The 99% Are Beginning To Starve

January 27, 2018

Melissa E Dockstader/Shutterstock

The Pie Is Shrinking So Much The 99% Are Beginning To Starve

How much longer until the pitchforks come out?

Social movements arise to solve problems of inequality, injustice, exploitation and oppression. In other words, they are solutions to society-wide problems plaguing the many but not the few (i.e. the elites at the top of the wealth-power pyramid).

The basic assumption of social movements is that Utopia is within reach, if only the sources of the problems can be identified and remedied. Since inequality, injustice, exploitation and oppression arise from the asymmetry of power between the few (the financial and political elites) and the many, the solution is a reduction of the asymmetry; that is a tectonic realignment of the social structure that shifts some power—economic and/or political—from the few to the many.

In some instances, the power asymmetry is between ethnic or gender classes, or economic classes (for example, labor and the owners of capital).

Social movements are characterized by profound conflict because the beneficiaries of the power asymmetry resist the demands for a fairer share of the power and privileges, while those who’ve held the short end of the stick have tired of the asymmetry and refuse to back down.

Two dynamics assist a social, political and economic resolution that transfers power from those with too much power to those with too little power: 1) the engines of the economy have shifted productive capacity definitively in favor of those demanding their fair share of power, and 2) the elites recognize that their resistance to power-sharing invites a less predictable and thus far more dangerous open conflict with forces that have much less to lose and much more to gain.

In other words, ceding 40% of their wealth-power still conserves 60%, while stubborn resistance might trigger a revolution that takes 100% of their wealth-power.

…click on the above link to read the rest of the article…

“Wealth Effect” = Widening Wealth Inequality

December 27, 2017

“Wealth Effect” = Widening Wealth Inequality

Note that widening wealth and income inequality is a non-partisan trend.

One of the core goals of the Federal Reserve’s monetary policies of the past 9 years is to generate the “wealth effect”: by pushing the valuations of stocks and bonds higher, American households will feel wealthier, and hence be more willing to borrow and spend, even if they didn’t actually reap any gains by selling stocks and bonds that gained value.

In other words, the mere perception of rising wealth is supposed to trigger a wave of renewed borrowing and spending.

This perception management only worked on the few households which owned enough of these assets to feel wealthier–the top 5%, the top 6 million out of 120 million households. This chart shows what happened as the Fed ceaselessly goosed financial assets higher over the past 9 years: the gains, real and perceived, only flowed to the top 5% of households earning in excess of $200,000 annually.

Spending by the bottom 95% has at best returned to the levels reached a decade ago in 2007.

By focusing on boosting financial assets to the moon as a means of goosing spending, the Federal Reserve has widened wealth and income inequality to the breaking point. Perception management doesn’t actually boost the inflation-adjusted wages of the bottom 95%, which have stagnated for decades. Nor does boosting assets do much good for the vast majority of households which have modest holdings of stocks and bonds, usually in IRA or 401K retirement accounts they can’t touch without paying steep penalties.

As the charts below illustrate, the Grand Canyon between the top 5% and everyone else is widening. Let’s say a househould has $12,000 in retirement funds and $5,000 in a savings account. (Many households have less than $1,000 in savings, so this example-household is doing pretty well to have $17,000 in cash and financial assets.)

…click on the above link to read the rest of the article…

The Problem Isn’t Populism: the Problem Is the Status Quo Has Failed

November 27, 2017

The Problem Isn’t Populism: the Problem Is the Status Quo Has Failed

The top 5% who have benefited so immensely from the consolidation of wealth and power cannot confess the status quo has failed the bottom 95%.

The corporate/billionaires’ media would have us believe that the crisis we face is populism, a code word for every ugly manifestation of fascism known to humanity. By invoking populism as the cause of our distemper, the mainstream media is implicitly suggesting that the problem is “bad people”–those whose own failings manifest in an attraction to fascism. If we can successfully marginalize these troubled troglodytes, then our problem, populism, would go away and the wonderfulness, equality and widespread prosperity of pre-populist America will be restored.

The problem isn’t populism–the problem is the status quo has failed 95% of the populace. Life isn’t wonderful, prosperous and filled with expansive equality except in the Protected Elite of the top 5% of technocrats, corporate executives, tenured academics, bureaucrats, financiers, bankers, lobbyists and wealthy (or soon to be wealthy) politicos.

The bottom 95% need a time machine to recover any semblance of prosperity.They need a time machine that goes back 20 years so they can buy a little bungalow on a postage-stamp lot for $150,000 on the Left and Right Coasts, because now the little bungalows cost $1 million and up.

Housing valuations have become so detached from what people earn that even the top 5% has trouble qualifying for a jumbo mortgage without the help of the Bank of Mom and Dad or the family trust fund.

The bottom 95% need a time machine to return to the days when college tuition and fees were semi-affordable–say, 30 years ago.

The bottom 95% also need a time machine to return to a time when they could afford healthcare insurance without government subsidies–a generation ago, or better yet, two generations ago.

…click on the above link to read the rest of the article…

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