Tag Archives: wealth

How “Wealthy” Would We Be If We Stopped Borrowing Trillions Every Year? by Charles Hugh Smith

Posted on August 24, 2018 | Leave a comment

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.

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The U.S. Economy In Two Words: Asymmetric Gains, by Charles Hugh Smith

Posted on June 1, 2018 | Leave a comment

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.

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Posted in Debt, Economics, Economy, Financial markets, Government

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Chung Kuo, by Doug Casey

Posted on February 24, 2018 | Leave a comment

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:

Chung Kuo

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

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Posted in Business, demographics, Economy, Foreign Policy, Geopolitics, Governments, History, Imperialism, Taxes, Technology, Trade, War

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The Hidden-in-Plain-Sight Mechanism of the Super-Wealthy: Money-Laundering 2.0, by Charles Hugh Smith

Posted on December 31, 2017 | Leave a comment

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

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Posted in Crime, Cronyism, Currencies, Financial markets, Governments, Money

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You’re Just Not Prepared For What’s Coming, by Chris Martenson

Posted on December 2, 2017 | 1 comment

Chris Martenson sings the same tune SLL has been singing for months, and for much the same reasons. From Martenson at peakprosperity.com:

I hate to break it to you, but chances are you’re just not prepared for what’s coming. Not even close.

Don’t take it personally. I’m simply playing the odds.

After spending more than a decade warning people all over the world about the futility of pursuing infinite exponential economic growth on a finite planet, I can tell you this: very few are even aware of the nature of our predicament.

An even smaller subset is either physically or financially ready for the sort of future barreling down on us. Even fewer are mentally prepared for it. 

And make no mistake: it’s the mental and emotional preparation that matters the most. If you can’t cope with adversity and uncertainty, you’re going to be toast in the coming years.

Those of us intending to persevere need to start by looking unflinchingly at the data, and then allowing time to let it sink in.  Change is coming – which isn’t a problem in and of itself. But it’s pace is likely to be. Rapid change is difficult for humans to process.

Those frightened by today’s over-inflated asset prices fear how quickly the current bubbles throughout our financial markets will deflate/implode. Who knows when they’ll pop?  What will the eventual trigger(s) be? All we know for sure is that every bubble in history inevitably found its pin.

These bubbles – blown by central bankers serially addicted to creating them (and then riding to the rescue to fix them) – are the largest in all of history. That means they’re going to be the most destructive in history when they finally let go.

Millions of households will lose trillions of dollars in net worth. Jobs will evaporate, causing the tens of millions of families living paycheck to paycheck serious harm.

These are the kind of painful consequences central bank follies result in. They’re particularly regrettable because they could have been completely avoided if only we’d taken our medicine during the last crisis back in 2008.  But we didn’t. We let the Federal Reserve –the instiution largely responsible for creating the Great Financial Crisis — conspire with its brethern central banks to ‘paper over’ our problems.

To continue reading: You’re Just Not Prepared For What’s Coming

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Posted in Collapse, Debt, Economy, Financial markets, Government

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Why Are the Homes of the Elite So Ugly? by Bill Bonner

Posted on November 30, 2017 | Leave a comment

Some things just can’t be bought, like class and taste. From Bill Bonner at bonnerandpartners.com:

BALTIMORE – Yesterday, we saw the soul of America.

We drove by a house so imposing… so monstrously ugly… so laughably pretentious that we almost drove off the road staring at it.

On a suburban lot, it was as though it had fallen off the delivery truck and rolled into place, with no thought as to its surroundings.

It was a fake mansion!

Yes, dear reader, it is all fake – our money, our economy, our markets, our government… even our mansions.

Bitcoin Bonanza

On Tuesday, we made another 10% gain on our bitcoin “investment”… at a rate of about $4,000 per hour.

That’s more money in one day than we made during our first 10 years of work – combined.

Our coins, formerly worth nothing, are now worth more and more.

At this rate – a 10% rise versus the dollar each day – if you make a $10,000 investment, before Christmas, you will have $100,000 or more. Or less.

Possibly much less…

We toiled not, neither did we spin. We invented not. We earned not. Not a single morning did we get up at the crack of dawn to earn that money… nor a single night did we stay up late studying to make it happen.

Instead, it was as though we had walked through a casino and randomly yanked on one of the one-armed bandits. Ka-ching!

Nor did we learn anything… except that it’s a mad, mad, mad, mad, mad world – which we already knew! And if Civilization author Clive Bell is right, this is the best kind of money. We didn’t distract ourselves from “thinking and feeling.” We have no coal dust under our fingernails… and no hands calloused by years of hard work.

 

To continue reading: Why Are the Homes of the Elite So Ugly?

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How the Deep State Squeezed America’s Wealth, by Bill Bonner

Posted on November 26, 2017 | Leave a comment

Funny money skews wealth. From Bill Bonner at internationalman.com:

NEW YORK – Salvator Mundi, said to be by Leonardo da Vinci, is the world’s most expensive painting.

Last Wednesday, at auction, each square inch was valued at nearly $1 million – including the bummed-up, restored, and damaged parts.

The painting may not be da Vinci’s work. Or perhaps, since it has been so heavily doctored up, little remains of his work. And whoever’s work it was must have been having a bad day.

And yet, it sold for over $450 million (including auction-house charges) – a lot of money for such a depressing work of art.


Donald Trump as da Vinci’s Salvator Mundi

The question on the table: Why?

But since we don’t know the answer to that question, we’ll answer another one: How come so many people have so much money?

Made in the Middle

The latest GOP “tax reform” proposals raise questions, too.

Though billed as a “middle-class tax cut,” the middle class gets almost nothing from the proposed plan.

Instead, almost all the benefits go to: (1) business owners, and (2) the rich.

And since the feds are unwilling to cut spending, the middle class ends up with about $2.2 trillion of extra debt, which it will have to reckon with eventually.

We bring up the tax cut because we think it helps explain the painting. Not for nothing are Republicans and the modern Salvator Himself, Donald J. Trump, setting up the middle class for a huge bamboozle.

A train ride we took on Monday – the Acela Express from Baltimore to New York – was subsidized by taxpayers from all over the country.

The train runs from one end of today’s modern economy to the other. It goes from Washington, D.C. – the center of politics – to New York – the center of money.

In between is nothing but poverty and dereliction. There are factories that last made a product in the ’50s. There are workers’ houses almost unchanged in half a century. There are abandoned warehouses… wrecked cars… junk steel… and burly men in orange vests working with machines.

To continue reading: How the Deep State Squeezed America’s Wealth

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Posted in Business, Debt, Economy, Government, Investing, Money, Taxes

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The Biggest Wealth Transfer In History, by Egon von Greyerz

Posted on November 18, 2017 | Leave a comment

If you’re into hard core doom porn, this is the article for you. From Egon von Greyerz at goldswitzerland.com:

What will happen between now and 2025? Nobody knows of course but I will later in this article have a little peek into the next 4-8 years.

The concentration of wealth in the world has now reached dangerous proportions. The three richest people in the world have a greater wealth than the bottom 50%. The top 1% have a wealth of $33 trillion whilst the bottom 1% have a debt $196 billion.

The interesting point is not just that the rich are getting richer and the poor poorer. More interesting is to understand: How did we get there? and what will be the consequences?

PANAMA & PARADISE PAPERS – SENSATIONALISM

As the socialist dominated media dig into the Panama Papers and now recently the Paradise Papers to attack the rich and tell governments to tackle the unacceptable face of capitalism, nobody understands the real reasons for this enormous concentration of wealth. Sadly no journalist does any serious analysis of any issue, whether it is fake economic figures or the state of the world economy.

Instead, all news is accepted as the truth while in fact a lot of news is fake or propaganda. The media is revelling in all the disclosures of offshore trusts and companies. The British Queen is being accused of having “hidden” funds. The fact that offshore entities have been used legally for centuries for privacy, wealth preservation and creditor protection purposes is never mentioned. The media sell more much news by being sensational rather than factual.

INEQUALITY IS DUE TO IRRESPONSIBLE MONETARY POLICY

Let me first put the facts right. It is not capitalism in its traditional sense which has created this enormous concentration. One definition of capitalism is:

“An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state”

The “controlled by private owners” part of the definition fits our current Western system. But what is missing is that the current economic system could not function without complete state sponsorship and interference. This is the clever construction that a group of top bankers devised on Jekyll Island in the US, in November 1910. This was the meeting that led to the creation of the Fed in 1913. The Central Bank of the US was set up as a private bank, and thus controlled by private bankers for their own benefit.

To continue reading: The Biggest Wealth Transfer In History

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Posted in Capitalism, Collapse, Debt, Financial markets, Governments

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What Is Real Wealth? by Charles Hugh Smith

Posted on September 19, 2017 | Leave a comment

Philosophers have pondered the question through the ages: what is real wealth? Here’s Charles Hugh Smith’s answer, at oftwominds.com.

As for acquiring capital–the most important types of capital don’t require much money.
What is real wealth? Money, right? Currency, gold, quatloos, you name it. Money is real wealth because you can use it to buy whatever you want.
I would argue money in any form is only the means to acquire real wealth, which is the agency, opportunity and time to pursue your life’s work.
The conventional view of wealth is money and leisure has it all wrong. Let’s imagine the owner of a vault of conventional treasure: jewels, gold coins, etc.
If the “wealth” stays in the vault, what’s the point of owning this “wealth”? The secret satisfaction of being “wealthy”?
If “wealth” is only an internal state, then let’s measure friendship and being needed/wanted as the metrics of “wealth.” You see the point; if “wealth” is merely an internal state of satisfaction, then a vault full of “money” is a poor metric.
What money buys that is real wealth is freedom and control of one’s life. This control over one’s life is called agency. Agency is defined as “the capacity of an actor to act in a given environment.” This may not seem like a profound concept, but another way to describe agency is that agency is the opposite of powerlessness.
People with agency define themselves and their identity; they shape the world they inhabit rather than passively await whatever circumstances deliver up.
In the real world, people with agency move on when things no longer work for them in a particular situation. Agency is not just the opposite of feeling powerless; it’s also the opposite of victimhood, i.e. the state of being in which others are held responsible for all of one’s travails and difficulties.
To continue reading: What Is Real Wealth?

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Record “Wealth” in America: 72% of US businesses are NOT profitable, by Simon Black

Posted on June 13, 2017 | Leave a comment

Debt-fueled asset appreciation, not business profitability, has been behind the increases in “wealth” since the financial crisis of 2008-2009. From Simon Black at sovereignman.com:

The Federal Reserve in the United States just released a new report showing that “Total Household Wealth” in the United States has reached a record $94.8 trillion.

That’s an impressive figure.

Even more impressive is that Total Household Wealth has increased by $40 trillion since the lows of the Great Recession in 2009.

No doubt there’s probably a multitude of central bankers and bureaucrats toasting their success in having engineered such magnificent prosperity.

And it’s certainly an achievement worth celebrating. As long as you don’t look too closely at the data.

Total Household Wealth is exactly what it sounds like– the total net worth of every person in the United States, from Bill Gates down to the youngest newborn baby.

So when you add up all the 330+ million folks in the Land of the Free and tally up their combined net worth, the total is $94 trillion.

The thing is that the VAST majority of that wealth, especially the incredible growth over the last 8 years, has been from increases in just two asset classes: real estate and the stock market.

In fact, stocks and real estate alone account for roughly 2/3 of the wealth increase since 2009.

I’ll come back to that in a moment.

Now, simultaneously, we see plenty of other interesting data, also published by the Federal Reserve and US federal government.

Both the Fed and Census Bureau, for example, tell us that over 80% of businesses in the US are “nonemployer” companies, i.e. businesses which only employ one person (the owner), and often provide his/her primary source of income.

Yet according to the Federal Reserve, only 35% of these small businesses are profitable. Most are operating at a loss.

In other words, only 35% of the companies which make up 80% of American businesses are profitable.

You’re probably already doing the arithmetic– this means that a whopping 72% of all US businesses are NOT profitable.

That hardly sounds like record wealth to me.

To continue reading: Record “Wealth” in America: 72% of US businesses are NOT profitable

 

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Posted in Business, Debt, Economy, Government, Uncategorized

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