James Madison: “We are free today substantially but the day will come when our Republic will be an impossibility. It will be an impossibility because wealth will be concentrated in the hands of a few.”
The tax cut has now been shown the very scam I outlined it to be in 2017. Debt is soaring and so are debt financing obligations. The CBO estimated that the US will have to add $12 trillion in debt over the next 10 years. As growth estimates for GDP keep being revised downward into 2019 and 2020 there is zero evidence that the tax cut has added anything but a 2 quarter temporary bump to GDP, but the financial consequences will linger for years to come. The promises of resulting investments were of course lies:
And guess what happens to discretionary spending when $7 trillion go to service the debt? No cuts to its largest line item, the military, oh no, they’ll cut benefits, social programs, etc. someone has to pay for it.
Indeed Larry Kudlow is already laying it all out there following the now familiar script:
I keep highlighting the ever increasing obscenity of wealth inequality as the distribution keeps getting more and more extreme:
The wealthiest 0.1% and 1% of households now own about 17% and 50% of total household equities, respectively, up significantly from 13% and 39% in the late 1980s. The bottom 90% (which is pretty much everybody) owns less than 10% of the stock market. Just ponder that. And as central bank policy has disproportionately benefitted the asset classes owned by the top 10%, or rather top 1%, it’s no wonder wealth inequality has soared to unseen heights since the 1930’s.
And so this has happened:
The median net worth for the bottom 90% is less than it was in 2007 while the top 10% net worth has soared.
And guess what the top 10% are doing with their wealth? Buy real estate, driving real estate prices higher and in the process are leaving the rest unable to compete with rising home values as their wages are stagnant.
What’s the ultimately end game of this circle jerk? Beats me, but I continue to suspect it won’t have a happy ending.
And so here we are with the Fed back to backing off from reducing its balance sheet and stock markets have again been soaring on this policy shift benefitting again the very few.
Does any of the above matter? Apparently not is the message. An ever high debt burden carried by the many, and ever more concentration of wealth in the hands of the few. That has been the trend over the last 30 years and I see zero signs of any of it changing, no matter who is in charge.
This is what our so called capitalistic system produces, a structure geared toward the few and not working for the many.
As Ray Dalio recently outlined our system of capitalism is not working for the majority of people and this has consequences:
And so be clear who benefits from the Fed having caved. Not a single person on minimum wage or on a median household income. The tax cuts have not resulted in more investments, it is buybacks benefitting again the very shareholders which we know are the top 10%. The entire system is geared toward that narrow group of ownership.
The Empire has struck back and is benefitting the very few it serves.
And the Fed is a driving force behind everything, inflating the very assets that the very few increasingly own. Unelected and accountable their policies have exacerbated wealth inequality and contributed to global discontentment:
And the rest of America keeps getting screwed with little real wage growth and exploding debt obligations.
So yea Ray Dalio is right in pointing out the obvious: Capitalism is not working for the majority and it hasn’t in a long time. People may be inclined to blame the current administration for these problems, but they are only doubling down on the same script that has been at play since the early 80s. Nothing has changed in trend, only the actors keep changing.
And nothing will change until this country engages in an informed, fact based debate (in this political climate? Best of luck) on the causes and consequences of our current form of capitalism. Unfortunately those benefitting the most from the current structure have little incentive to change it unless the consequences will force them to. By that time it may be too late.
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