Reading time: 3,820 words, 10 pages, 9 to 15 minutes.
With Labor Day and the recent 50th anniversary of Martin Luther King’s “I Have a Dream” speech, it is fitting that we examine the misguided notion of “sharing the wealth”. Why is it misguided? After all, sharing is good isn’t it? And it’s good to have wealth isn’t it? If you agree, keep reading so I can disabuse you of your foolishness.
There are three words in “sharing the wealth”. The most dangerous and revealing word is “the” because “the” implies the existence of wealth; as if wealth is some ‘thing’. It is a dangerous word because it is misleading and reveals a gross misunderstanding of wealth.
Since there are no piles of money or gold bars sitting on street corners available to whoever wants them, what is wealth? The Wiki definition of wealth is the abundance of valuable resources or material possessions. The United Nations definition of inclusive wealth is a “monetary measure which includes the sum of natural, human and physical assets. Natural capital includes land, forests, fossil fuels, and minerals. Human capital is the population’s education and skills. Physical (or “manufactured”) capital includes such things as machinery, buildings, and infrastructure.”
Missing from this definition is the concept of ownership. Unless you own land, forests, etc. you have no natural wealth. If your country has natural wealth, you can “share” in it if you have a paying job that involves the exploitation and development of this natural wealth. Jobs will be discussed momentarily.
Human capital such as education and skills cannot be shared. You cannot demand education and skills nor can they be given to you. They must be acquired through discipline, study and practice.
Physical assets such as machinery and buildings require capital (fancy word for money). There are several ways to acquire money: you can earn it, inherit it or steal it. Stealing it is punishable unless you’re a Wall Street bankster. To inherit, you need to belong to the Lucky Sperm Club. So that leaves earning it.
There are several ways to earn money. Investing it wisely is one way but that requires money in the first place. You can earn money with a job but to save capital you must spend less than you earn (after taxes, of course). And savings (or borrowing others’ savings) is what you need to acquire natural and physical assets that can generate further income.
Warren Buffet, the “master of indirect exchange”, shows how it’s done. Paper money loses its purchasing power due to inflation. So, he uses money to buy businesses such as Heinz (which also owns farmland) and Burlington Northern Railroad (to ship Heinz’s ketchup). These businesses generate income (money) to buy more assets and they raise their prices (or reduce package size) to overcome inflation. Thus, he exchanges a depreciating asset (money) for appreciating assets (businesses, land, etc.) which generate more money to buy more assets. Rinse, repeat.
Wealth requires both jobs (the labor theory) and capital (savings) which gives us capitalism. Nowadays, capitalism is a dirty word among people who think the world’s shortcomings are due to unbridled capitalism. The problem is we DON’T have capitalism. I challenge anyone to show me capitalism and I’ll show you excessive taxation, overregulation, union stupidity, government intervention, impossible political promises and corruption (crony capitalism). We don’t have capitalism. We have varying degrees of socialism.
And, the socialism and corruption, especially in Amerika, has infected all levels of society and will lead to the downfall of the Amerikan Empire. More on this later.
Those same people who think capitalism is a dirty word also believe that ”sharing the wealth” is a solution. It’s not.
As Dr. Adrian Rogers said, “You cannot legislate the poor into freedom by legislating the wealthy our of freedom.
“What one person receives without working for, another person must work for without receiving.
“When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because someone else is going to get what they work for, that, my dear friend, is about the end of any nation.”
Today, more than half of Amerikan households get money from the government. Good-bye Amerika.
Also, those who want to share the wealth never clearly define the problem. If you don’t know what the problem is, how can you develop a solution? Furthermore, ‘cause and effect’ are very difficult for human beans to determine.
For instance, we say unemployment is a problem requiring a solution. That’s wrong. Unemployment is not a problem. It is a RESULT of a problem. It is the result of an ailing economy. You cannot solve results.
So, how do we fix an ailing economy? You don’t, because an ailing economy is also not a problem. It too, is a result. An ailing economy can be the result of a number of causes; a normal business downturn which if left alone will correct itself or it can be caused by excessive taxation, over-regulation and many of the problems outlined previously.
Another example of confusing cause and effect is a recent article correlating poverty with mental illness. Poor people suffer more mental illness than those who aren’t poor. We are supposed to believe that poverty increases mental illness. According to How Poverty Taxes the Brain poverty causes the equivalent of a 13 point drop in IQ.
“The limited bandwidth created by poverty directly impacts the cognitive control and fluid intelligence that we need for all kinds of everyday tasks.
“’When your bandwidth is loaded, in the case of the poor,’ Shafir says, ‘you’re just more likely to not notice things, you’re more likely to not resist things you ought to resist, you’re more likely to forget things, you’re going to have less patience, less attention to devote to your children when they come back from school.’”
In the experiment, both high and low income people were given problems to solve involving both small and large amounts of money. Poor people had more difficulty dealing with large amounts of money because they supposedly ran out of bandwidth. It doesn’t take a rocket scientist to see they have cause and effect backwards. The poor are poor because they have less bandwidth and the rich are rich because they have more.
The implication is we can solve mental problems by “sharing the wealth”. However, if all it took to cure mental problems was money, then wealthy nations would have far fewer mental patients than poor countries and that’s simply not the case.
Still another problem is “the” wealth that they want to share. What they mean by wealth is more wishful thinking based on ignorance and envy than on reality. A person living in a McMansion with several vehicles and ‘all the toys’ is considered wealthy. But, that’s looking only at the surface; from the outside in. Stuff is not wealth if it’s bought on credit cards, with borrowed money and a mortgage. People who think of wealth think of Disney’s Scrooge McDuck swimming in his vault of money. You cannot acquire wealth if you don’t understand it.
But, again there is no “the” to wealth. There is only ownership. Sharing ownership (or the “means of production”) has been tried. It’s called Communism. And, it doesn’t work. The Soviets tried it for 70 years and it ended in misery and the equal sharing of poverty. Cuba has tried it since 1959 and they’re piss-poor as well. North Korea keeps trying it and they’re starving. China gave up on communism and, despite being a dictatorship and a command economy; it could be argued they’re more capitalistic than Amerika.
So, it all boils down to jobs again. And that means education and skills again. And, no amount of sharing will create education or skills or jobs. That takes initiative and discipline and a willingness to forgo short term pleasure for long term gain. It takes responsibility and that is something sadly lacking among human beans nowadays. It also takes an understanding and an acceptance of ‘consequences’. Like it or not, every action has consequences.
The trouble with life is it is fair. I did not say ‘unfair’; I said fair. We may not like it, but actions have consequences. And, it may not happen immediately, but if you wait long enough, justice prevails. We have many ways to describe consequences:
– actions have consequences
– there’s always a price to be paid
– chickens come home to roost
– inevitable results
– there ain’t no free lunch
– beyond the point of no return
– we reap what we sow
– what goes around, comes around
– there’s no such thing as coincidence
– whatever you send out into the world comes back to you in one way or another
– there is always a day of reckoning
– shit to be paid
… and so on.
You would think that with so many ways to describe it, we would not have such difficulty accepting it the idea of consequences. Yet, most people are deluded to some degree or another. The lies we live by come back to haunt us. If you live a life of lies, you will someday suffer the consequences. And, the bigger the lie; the greater the consequences.
Consequences of the Great Unwind
Another great lie that will have dire consequences is that Central Banks, especially the U.S. Fed and most recently the Bank of Japan will be able to unwind their massive bond purchasing. They created unprecedented quantities of fiat currency to buy long-dated bonds (debt) in order to keep interest rates at unprecedented low levels for an unprecedented length of time thus creating unprecedented levels of debt.
When you have that many new precedents, you know there’ll be shit to pay. Hundreds of billions of dollars have already been lost to savers, investors, pension funds, pensioners, etc. earning near zero in savings and bonds when historical interest rates were once about 6%.
It needs to be said because it’s been so long since we’ve seen 6% that we’ve almost forgotten what normal was. It needs to be said because conditions have been abnormal so long that abnormal has become the new normal. It needs to be said because the bigger the lie; the greater the consequences.
And, we ain’t seen nothin’ yet. Hundreds of billions of lost interest is peanuts compared to what’s coming. Imbecilic Central Banksters embarked on Quantitative Easing (QE) on the mistaken assumption that the last so-called “Great Recession” was just another downturn in a regular business cycle.
Had it really been just another downturn, their ‘unprecedented’ efforts would have healed global economies long ago. It didn’t. It couldn’t. It couldn’t because this is a financial crisis, a credit crisis and a debt crisis all rolled into one. Added to the mix are an (again) unprecedented crisis of confidence and an (again) unprecedented level of financial and regulatory corruption that makes the U.S. more rotten than any third world banana republic (more corruption below).
And, because these are crises of (again) unprecedented historical number and proportions, the biggest lie of all – that QE can be unwound – will have the greatest consequences in world history. The consequences are endless. Here’s a few:
Fed Chairman, Ben Bernanke’s speech on May 29, 2013 merely hinting the beginning of the end of QE produced a “taper tantrum” that wiped about $3 trillion from global equity markets.
Ending QE will raise interest rates that will make mortgages more unaffordable and jeopardize the so-called U.S. housing recovery as well as bust Canada’s housing bubble. Rising interest rates will increase interest owing on over-indebted government borrowing further sinking governments into debt. Bond prices will collapse because bond prices move in the opposite direction of interest rates and collapsing bond prices will burst the biggest bubble in history: the bond bubble upon which rest the fortunes of pension funds, hedge funds, insurance, etc. etc.
Ending QE spells economic collapse. Continuing QE spells currency collapse. The Fed is caught between a rock and a hard place. Do you wonder why Bernanke has announced his departure this coming January?
Here is Michael Snyder’s take, “Most people have no idea that the U.S. financial system is on the brink of utter disaster. If interest rates continue to rise rapidly, the U.S. economy is going to be facing an economic crisis far greater than the one that erupted back in 2008. At this point, the economic paradigm that the Federal Reserve has constructedonly works if interest rates remain super low. If they rise, everything falls apart. Much higher interest rates would mean crippling interest payments on the national debt, much higher borrowing costs for state and local governments, trillions of dollars of losses for bond investors, another devastating real estate crash and the possibility of a multi-trillion dollar derivatives meltdown. Everything depends on interest rates staying low. Unfortunately for the Fed, it only has a certain amount of control over long-term interest rates, and that control appears to be slipping. The yield on 10 year U.S. Treasuries has soared in recent weeks. So have mortgage rates. Fortunately, rates have leveled off for the moment, but if they resume their upward march we could be dealing with a nightmare scenario very, very quickly.”
Martin Luther King and Other Dreamers
Martin Luther King was a socialist and a great orator. You can read his speech in its entirety HERE.
It is both sad and ironic that a few years after he gave that moving speech, the United States underwent a dramatic change followed by the rest of the developed world. In 1971, the U.S. went off the gold standard and the rest of the world had no choice but to follow because the U.S. dollar was the world’s reserve currency. There was no longer a limit to money printing and debt accumulation at all levels of society.
Jim Quinn of the The Burning Platform in a series of articles titled TRYING TO STAY SANE IN AN INSANE WORLD says “The insanity of our debt accumulation in relation to our pathetic economic growth is clearly evident to even an Ivy League educated economist or a bubble headed CNBC anchorwoman. Since 1971 nominal GDP has grown by a factor of 14. Over this same time frame total credit market debt (household, corporate, government) has grown by a factor of 32. Real GDP (even using the fraudulent BLS manipulated CPI) has only expanded by a factor of 3.5 since 1971. The exponential growth model is clearly failing, with debt going hyperbolic, while GDP has stagnated.”
On the graph below, the blue line shows total debt and the red line shows GDP growth. And, GDP growth is overstated as it’s calculated using governments understated inflation statistic so the real divergence between GDP and debt is even greater than shown.
“With the shackles removed from the wrists of corruptible knaves and shysters, America’s future depended upon the wisdom, honesty and financial acumen of Washington politicians and Wall Street financers. Once the citizens realized they could vote for more bread and circuses, our ultimate demise was set in motion. A nation that had produced real annual growth of 4% during the 1950’s and 1960’s has seen a steady decline for the last four decades.”
He quotes Michael Lewis in Boomerang: Travels in the New Third World. “The people who had the power in the society, and were charged with saving it from itself, had instead bled the society to death. The problem with police officers and firefighters isn’t a public sector problem; it isn’t a problem with government; it’s a problem with the entire society. It’s what happened on Wall Street in the run-up to the subprime crisis. It’s a problem of taking what they can, just because they can, without regard to the larger social consequences. It’s not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They’d been conditioned to grab as much as they could, without thinking about the long-term consequences.
“All over the world people borrowed vast sums of money they could never repay. The honest toting up, and taking, of the losses is being delayed. There’s a reason for this. The bad debts are owed, largely, to big banks. The big banks (even bigger than they were at the start of this crisis) and the people who own them enjoy a wildly disproportionate amount of political influence. And so, even now, five years into this mess, we remain at the mercy of the failed financial institutions that sit at the center of our capitalism. Geithner & Bernanke, along with their European counterparts, are doing everything in their power to prevent banks from failing. But the effect of this new financial order is bizarre: capitalism for everyone but the capitalists. Ordinary workers remain fully exposed to the increasingly harsh collisions in the marketplace while the highest paid financial elites ride protected by a passenger airbag.”
Today, we seem to be farther from fulfilling King’s dream than ever. Joblessness among youth is at unprecedented levels. Joblessness among African Americans is high and among young African Americans it is higher still. But, to get a job, you need a semblance of shared culture and a common language. Black culture and language is as much a barrier to lifting African Americans out of poverty as Canada’s Aboriginals pretending to be traditional Indians long after they’d lost their land, their language, their culture, their skills and their future.
James Howard Kunstler, in American Anxiety, although writing about the Trayvon Martin case, speaks to minorities in general, “It doesn’t help that we stopped even pretending that something called common culture matters or even exists. By common culture I mean shared values and behavioral norms. The “multiculturalism” offered in place of it — at least among so-called progressives — hasn’t worked out too well either. On one side of the street you have Slate podcasters foolishly wringing their hands over “the N-word” while over on the other side Kanye West is making millions shouting “nigga, nigga, nigga.” We pretend to want to have a national conversation about race, but the truth is that it makes us too uncomfortable, so we retreat into platitudes and sentimentality.”
“The most uncomfortable part of the botched conversation is about behavior in general and the behavior of young black men in particular. The visible social failure is too gross and its implications are too scary, namely that we have more and more an oppositional culture saturated in violence that will never accommodate itself to any kind of a common culture. At this point that culture of young black men is oppositional to virtually every other group in America, white, Asian, Hispanic, et cetera, and the only response to it from the jittery “others” is a set of excuses for black opposition and failure.”
America’s Gilded Capital
For a truly frightening exposé of how corrupt Washington vampires suck the system dry, watch Bill Moyers’
RealEconTV in Understanding the monsters in Washington says the barbarians aren’t at the gates; they’re inside and they run the Amerikan Federal government.
“They talk about ‘affordable homes’ – and let banks turn mortgages and home prices into a global Ponzi scheme.
“They talk about ‘quality health care’ – and give the medical industry abusive monopoly power no other industry or profession is permitted.
“They talk about ‘eduction for all’ – and turn public schools into top-down run prisons where administrators make $100K +++ for dumbing down the curriculum and discouraging good teachers.
“They talk about ‘security”’ – and engage in the most reckless and unconscionable behavior imaginable.”
The reason why is very simple: power and greed. They discovered how to personally profit from every disaster they create. They’re creating them as fast as they can and prolonging them as long as they can to make as much money as they can for as long as the gravy train keeps running.
The same is true of the Amerikan military-industrial complex. Never before in history has the Excited States of Amerika engaged in so many wars world-wide. And, now the puppet President Obama’s handlers want to start another one in Syria and they’re chomping at the bit to do Iran next.
How John Kerry is lying the U.S. into a war in Syria
Martin Luther King must be rolling in his grave to see how low Amerika, and by extension, the West has sunk.
Can we stop this madness, this corruption, this inevitable economic collapse? No. I wish we could. This is the slow motion train wreck I identified six years ago in Crash of 2007 – Economics 101 and in numerous subsequent posts.
It began long before 2007. It began with the nefarious creation of the U.S. Federal Reserve Bank (the Fed) in 1913 to serve the interests of the banksters and was followed by the creation of other central banks world-wide. That train’s been rolling for a century now but, it picked up speed with Nixon’s 1971 closing the gold window by taking the dollar off the gold standard and unleashing money printing and debt accumulation unprecedented (that word, again!) in world history. What we’re seeing now and for a long time yet is the Great Unwinding as this giant Ponzi scheme, house of cards slowly crashes down around us.
So, if you can’t stop this train wreck, what can you do? Well, the most obvious is get out of the way. As Jim Sinclair says in his numerous posts: “GOTS” – Get Out of The System.
This has all been discussed before in subsequent posts. Get out of debt, get out of the banks, get marketable and survival skills & stockpile food, get healthy, get lots of exercise and plenty of sleep, unplug from the matrix by getting better sources of news (trash your stoopid boob toob!), get to know your neighbors, maintain good relationships with family and friends (you cannot survive alone) and, most important of all; maintain a positive attitude because the world has been through these shit-storms before and most of us will survive this one, too.
Have a great Labor Day weekend and remember …
We cannot borrow our way out of debt.
We cannot spend our way to prosperity.
We cannot pretend our way out of trouble.
September 1, 2013
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