A lot of what’s counted as wealth these days will simply vanish when collapse sets in. From Simon Black at sovereignman.com:
File this one away under ‘completely ridiculous’.
You might have heard that Elon Musk was on trial last week in Los Angeles; he was being sued because he claimed (multiple times) that British spelunker Vernon Unsworth was a pedophile. (He’s not.)
It’s generally damaging to one’s reputation when a world-famous billionaire erroneously calls you one of the worst things anyone could possibly be. So Unsworth sued for defamation.
Defamation in the United States is actually quite difficult to prove.
In order to win a defamation case in the US, the claimant has to demonstrate that you knowingly said something false, or that you completely disregarded whether or not something was false.
It’s pretty clear that Musk knew his comments were false; he acknowledged that Unsworth is not a pedophile.
But winning a defamation case in the US also requires proving that Musk had the deliberate intent to harm Unsworth’s reputation. And that’s tough to do.
There’s nothing quite as revolting as honestly acquired wealth apologizing for it. From Becky Akers at lewrockwell.com:
Marxism has claimed its myriads of victims, but none of them are sorrier or more craven than American billionaires. These guys don’t just turn the other cheek to communists: they kneel and kiss their butts. Then they carefully wipe any spittle from their enemies’ posteriors, chirping about democracy and equality. As if abject submission has ever protected anyone anywhere.
I don’t understand the relationship between staggering affluence and cojones, but for sure it’s an inverse one. You’d think it would be the other way round: I mean, how many folks will tell a billionaire to take a hike? Even fewer will risk punching him out.
Surely Mr. Billionaire understands this; surely the hordes he employs, whether professionally or personally, have shown him that when boots are licked, it’s the Guccis on his own feet, not the hoi polloi’s $30 Frogg Toggs, that wind up glistening.
Just because you’re rich doesn’t mean you’re happy. From Charles Hugh Smith at oftwominds.com:
The price we’re paying to keep our heads above water steepens while the pay-off is dropping off a cliff.
A good friend related a story that goes directly to the heart of what’s broken in our way of life. My friend went to a reunion in Silicon Valley attended by the most successful cohort in America: super-smart, highly educated people in their mid-40s who have achieved the highest levels of professional accomplishment and built enormous financial wealth, with net worths not just in the millions but in many cases in the tens of millions of dollars.
These are people at the apex of the American economy and society, those who did everything right, worked hard and grasped the brass ring of conventional success.
Yet when the meeting broke into small groups and individuals were asked to speak briefly about their lives, more than a few people teared up and began weeping. My friend was struck by the disconnect between their tremendous success and their personal misery–of failed marriages, of being trapped in their jobs, in feeling their sacrifices weren’t worth it and in sensing the shallowness of their success and the poverty of their inner lives.
Charles Hugh Smith asks the trillion dollar question. From Smith at oftwominds.com:
These charts reflect a linear system that is wobbling into the first stages of non-linear destabilization.
The widespread presumption is the U.S. is wealthy beyond words, and will remain so as far as the eye can see: wealthy enough to fund trillion-dollar weapons systems, trillion-dollar endless wars, multi-trillion dollar Medicare for all, multi-trillion dollar Universal Basic Income, and so on, in an endless profusion of endless trillions.
Just as a thought experiment, let’s ask: how “wealthy” would we be if we stopped borrowing trillions of dollars every year? Or put another way, how “wealthy” would we be if the rest of the world stops buying our trillions in newly issued bonds, mortgages, auto loans, etc.?
The verboten reality is our “wealth” is nothing but a sand castle of debt. Take away more borrowing and the castle melts away. I’ve gathered a selection of charts that show just how dependent we are on massive debt expansion that continues essentially forever, as any pause in debt expansion will collapse the entire system.
Corporate buybacks have powered rising corporate earnings–and the buybacks are funded by debt. Corporate debt has exploded higher in the past decade, enabling stock buybacks on an unprecedented scale.
Government debt–federal, state and local– is rising an exponential rates.We’re not paying for more government programs with earnings–we’re simply borrowing trillions and hoping we can borrow the interest payments that will also rise along with the debt.
Household debt, student loans, auto loans–all are soaring. The corporate sector, government and the household sector–all are living on borrowed money, and relying on magical thinking to mask the inevitable consequences.
Here’s debt to GDP. Yes, the economy expanded, but debt expanded much faster. Every additional dollar of GDP now requires multiple dollars of new debt.
Gains in income and wealth have become very concentrated in the US. From Charles Hugh Smith at oftwominds.com:
The Status Quo is in trouble if the bottom 95% wake up to the asymmetric gains that are the only possible output of our hyper-financialized economy.
The core dynamic of the U.S. economy in this era is asymmetric gains: the gains in income, wealth and power are increasingly concentrated in the top slice of the economy and society, while the income, wealth and power of the majority stagnate or decline.
The Status Quo must paper over this widening gulf with threadbare narratives that no longer match reality: for example, we’re an ownership society. We sure are: the vast majority of the nation’s productive assets are owned by the top 5%.
The U.S. economy has changed, but the transformation is largely invisible to the average participant and conventional economist. The previous iteration of the economy expired in the 1970s, an era of stagflation (stagnant growth and rising inflation that eroded the purchasing power of most households), higher energy costs and increasing global competition, an era in which the “external costs” of industrial-scale pollution finally came home to roost and the early stages of digital technologies began impacting human labor.
Stocks and bonds were destroyed in the 1970s. Investing capital in industrial production no longer generated outsized profits.
The 1980s ushered in a New Economy based on financial magic: the outsized profits flowed to those with access to credit and the tools of financialization: buying assets with borrowed money, selling the assets off in the global marketplace and reaping enormous gains by producing no goods or services.
We now inhabit a hyper-financialized economy in which the only way to get ahead is to speculate. For the middle class, this means speculating in housing: if you hit the jackpot and your house soars in value, then leverage this new wealth into the cash needed to buy a second property–or extract the equity to fund a more luxe lifestyle.
Entrepreneurs seek to generate “value” only as a means of cashing out via an initial public offering or selling their company to a global corporation. The “value” sought now is the perception of value–the magic of future promise that boosts valuations into the millions, or better yet, billions.
Many Americans have problems with the idea of an ascendant China, especially when it feels like America is descending. From Doug Casey at internationalman.com:
This article is entitled Chung Kuo, which means Middle Kingdom.
The Chinese have long seen themselves as superior to every other race (like almost every race does) and the center of the world. It’s because they were so confident of this that they never ventured out as Europeans did, with a brief exception in the 15th century when a gigantic Chinese fleet, composed of ships vastly superior to those of Europe, ventured as far as Africa. Since dropping the ball on world conquest back then, or at least exporting their culture wholesale, they’ve been in stasis, and on the receiving end of what Europe had to dish out.
The Chinese resent the “gweilo,” or “laowai” (loosely translated in Cantonese and Mandarin respectively as “foreign devil”) for appropriating places like Hong Kong, Macau, Shanghai, and numerous other enclaves. They resent episodes like the Opium Wars, which resolved whether they were to be used as a market for narcotics. They never learned to appreciate lots of foreign soldiers running around their countryside, even though Westerners felt it was a birthright.
Rent 55 Days at Peking for the conventional European view of imperialism during the Boxer Rebellion. Better yet, buy or rent The Sand Pebbles, in my opinion one of the best movies out there—and the book is even more entertaining and educational.
The Chinese absolutely resent the U.S. government parading its aircraft carriers off the China coast as if it owned the place. The U.S. government is not showing strength, it’s displaying arrogance and stupidity by antagonizing a sleeping dragon. And the thought of American politicians—which is to say an assortment of insular lawyers, eggheaded wannabe social engineers, and refugees from Arkansas trailer parks—negotiating with people who’ve been through what the Chinese have, is just scary.
The U.S. government may feel like it can call the shots now because it has a dozen aircraft carriers and a couple thousand fighter planes. But it’s making a serious enemy while it’s going to bankrupt America in a counterproductive projection of force to the other side of the planet. And that’s not all. Because the day will go to the people with the most wealth, not the ones that have the most expensive military hardware.
To continue reading: Chung Kuo
Posted in Business, demographics, Economy, Foreign Policy, Geopolitics, Governments, History, Imperialism, Taxes, Technology, Trade, War
Tagged China, Savings, wealth
The very wealthy have a variety of ways to legally launder their money. From Charles Hugh Smith at oftwominds.com:
Financial and political power are two sides of one coin.
We all know the rich are getting richer, and the super-rich are getting super-richer. This reality is illustrated in the chart of income gains, the vast majority of which have flowed to the top .01%–not the top 1%, or the top .1% — to the very tippy top of the wealth-power pyramid:
Though all sorts of reasons have been offered to explain this trend–I’ve described the mechanisms of financialization here for years–two that don’t attract much mainstream media attention are money laundering and control fraud, i.e. changing the rules of what’s legal so what was illegal yesterday is legal today–presto-magico, illegally skimmed wealth is now “legal.”
Correspondent JD recently submitted an excellent summary of the progression from Money Laundering 1.0 to Money Laundering 2.0:
Money laundering 1.0 is making dirty money legal, control fraud is manipulating the ‘legal’ options, and money laundering 2.0 is making sure that ‘legal’ fortunes are not taxed and cannot be clawed back.”
Conventional money laundering works by shifting ill-gotten gains into legitimate banks and/or assets. Ill-gotten gains can be laundered quite easily by buying homes or businesses (in the U.S., Europe, etc.) with cash. The home or enterprises can then be sold and the net is now legit.
Another kind of money laundering opens shell accounts in U.S. states with no income tax or offshore tax havens and then transfers intellectual property or other income-producing assets into the shell accounts.
As JD pointed out in his email to me, control fraud is a profoundly insightful concept presented by author William K. Black
(Wikipedia), the essence of which is that those with control/ power in centralized institutions can defraud the institutions and their users/citizenry by modifying the rules of what’s legal/allowable, and do so legally, i.e. within the letter of the law if not the intent of the law
To continue reading: The Hidden-in-Plain-Sight Mechanism of the Super-Wealthy: Money-Laundering 2.0