It's All Good
Things couldn't be better in our blissful economic utopia. I mean, for crying out loud, look at the stock market! It goes UP every day!! Things must be better than they've ever been.
Look, I know that this is neither the time nor the place for a treatise on how The Fed and the banks have created massive wealth inequality by constantly creating and devaluing the currency. But understand this...The reason why the rich and get richer and everyone else is stuck in neutral and getting squeezed more every day is Fed policy. Furthermore, since The Fed primarily creates money in order to fund an ever-expanding federal leviathan, the ones primarily responsible for wealth inequality are the politicians, both R and D. And it's these same, despicable politicians who constantly seek to divide and pit us against each other, all in the name of "fixing income/wealth inequality". This is NOT that complicated.
- Politicians demand to grow "the government" through military and social spending.
- To fund these demands, the central bank creates new money from nothing.
- This devalues the existing money stock.
- This new money gets continually levered and multiplied, further devaluing the currency.
- Money supply expands faster than the supply of goods, services and paper "assets", all of which rise in price accordingly.
Now here's the catch. If you are/were wealthy enough to own paper or real assets before and during the money supply growth, you see the value of these assets increase. If you're lucky enough, perhaps these assets grow faster than the rate of cost increase for material goods and, in the end, you come out ahead and "wealthier" in the process. HOWEVER, if you don't have assets...if you're living paycheck to paycheck as so many tens of millions are...then you don't participate in the "wealth effect". Instead, all you get are the negatives:
- rising food costs
- rising energy costs
- rising education costs
- rising healthcare costs
- rising government costs (taxes)
And now, if you're one of the masses, The Great Unwashed, you're really getting pinched. Money creation and Quantitative Easing have benefited the already-wealthy with great gains in nearly every asset class. But for the majority...those with very few, if any, assets...money creation has only served to greatly decrease your standard of living. This is why you, my dear friend, feel crushed and are not experiencing the kind of lifestyle your parents and grandparents may have enjoyed.
For example, my father had a regular job and my mother was a school teacher. Between them, in 1975, they brought in $40,000-50,000/year. We lived in a nice home, owned two cars and my dad belonged to the local country club. They also saved for retirement and managed to put all four of their children through college. Today, what level of income would a similar, middle class family need to pull this off? $200,000?? $300,000??? And what is the median income in the U.S.? It's still about $51,000: http://money.cnn.com/2013/09/17/news/economy/poverty-income/
So, the politicians spend and spend AND the Fed prints and prints. And who "benefits"? Only those who had money and assets in the first place. Take a look at the two charts below. On the left is the S&P 500 for the past 25 years. Note that from a low of around 300 in 1990, it has now increased more than six-fold. On the right is the the total M2 money stock. Note that from a $3T level in 1990, it has seen a 3.5X increase. THIS IS NOT COINCIDENCE! THIS IS CAUSE AND EFFECT.
And is it any surprise then that all of this has only accelerated since QEI, QE2 and QE∞ began in March of 2009. This direct monetization of debt now appears on "the Fed's balance sheet" and is plotted on the chart below along with the S&P, courtesy of ZH:
So, since direct debt monetization began five years ago, the "stock market" has soared and nearly tripled. IF you had wealth and were able to participate, you're pretty happy and you can at least still afford to drive and eat. IF, on the other hand, you're just a regular guy or gal with a spouse and a family, struggling to make ends meet, here's what you've had to endure, instead:
Protein? A double.
Milk? A double.
Gasoline? A double.
Education and healthcare? Both up by nearly 50%.
So, what's point of this post? The income and wealth disparity cannot be blamed on:
- War on Women
- War on White Males
- Gender inequality
- Illegal immigration
- Taxes too low
- Taxes too high
- Etc, etc, etc
No, wealth and income disparity is, in large part, due to the ever-expanding supply of money...printed by The Central Banks in order to empower the political class.
One day, perhaps soon, this current system will break as it is simply unsustainable. What comes next? I have no idea and I'm not looking forward to finding out. However, in the meantime and in preparation, I will continue to stack and hold physical precious metal. True, sound money and a store of wealth that cannot be debased by central bankers and politicians.