Voters are angry. Donald Trump, Marine Le Pen, Nigel Farage, UKIP, and the AfD party in Germany have all been accused of stirring up anger and hatred.
But anger is not the problem. None of those individuals or political parties are the problem.
Protectionism and isolation culminating in the Brexit vote in the UK, and the nomination of Donald Trump in the US are not the problem.
What is the problem? Why the anger?
Shrinking Middle Class
The above chart from the Wall Street Journal article IMF’s Grim Long-Term U.S. Outlook in Six Charts.
People Angry Because
- Banks were bailed out and they weren’t
- Middle class is shrinking
- President Bush’s Bankruptcy Reform Act of 2005 made kids with student loans debt slaves for life.
- Warmongering by the Bush and Obama administrators alike made billions for defense contractors at the expense of everyone but the contractors and their employees.
Instead of blowing up the world, making enemies in the process, and creating ISIS in the process, wouldn’t we have been better off building US infrastructure?
Social Anger
The above chart explains rising social anger perfectly. However, that chart does not portray the real problem.
Income inequality, the shrinking middle class, angry voters, and the rise of extreme political parties are all symptoms of the real problem: Central banks and their inflationary policies.
Productivity
Fed Chair Janet Yellen is very concerned about falling productivity. A chart from the same article shows the concern.
Productivity Will Rise Again – Will the Fed Like the Result?
Autonomous cars, truck, and buses are coming. Millions of jobs will vanish by 2024 if not sooner. Productivity will soar.
The loss of millions of truck driving jobs will be a catastrophe to those who cannot do anything else, but will be a boon to everyone else who pays lower prices.
The Fed will get productivity, but will the Fed like the result when it comes?
Central Banks Insist on Inflation in Deflationary World
The big problem is central banks insists on inflation in a deflationary world.
Even the BIS says routine price deflation is not damaging (See Historical Perspective on CPI Deflations: How Damaging are They?)
Productivity enhancements are inherently price deflationary. More goods produced at less cost should mean falling prices unless demand from population growth more than makes up for productivity gains.
Few could afford big flat panel TVs when they first came out. Everyone has them now. Improvements on top-end cars eventually make their way into every car. The same applies to cell phones and technology in general.
If price deflation was a problem, it sure does not show up in sales of flat panel screens.
The things that have risen most in price are the places where the Fed and Congress meddled the most: The Fed with financial assets, and Congress with health care, education, and affordable housing.
Central Banks – The Real Problem
In the wake of the Great Financial Crisis, central banks launched round after round of QE. Bernanke praised his own efforts for the wealth effect. The result was yet another massive bubble.
The only winners were the banks, the brokers, and the already wealthy. Asset prices inflated, but who has the assets? The poor?
Minimum wages hikes cannot possibly help. Nor can negative interest rates in the Eurozone and Japan. Both will make matters worse.
Much of corporate financing is already used for stock buybacks at insane prices. Lower interest rates fuel asset prices, not investment. Wage hikes sure don’t encourage mores stores.
People are angry, but they protest the wrong things.
Whom to Blame?
- Socialists in France and Spain who cannot find a job need to point a finger straight at socialist work rules that inhibit firing. If corporations cannot get rid of employees, the only solution corporations have is to not hire employees in the first place.
- US students mired in debt should blame Congress, public unions, and themselves for going deep into debt in pursuit of useless degrees.
- Most importantly, people should picket the Fed (central banks in general) for insisting on the extremely misguided policy of 2% inflation in a deflationary world.
The first chart speaks for itself.
Worse yet, central banks, led by the Fed, have blown another bubble in the absurd attempt to defeat routine price deflation.
This is the third major bubble in fifteen years. The result will be yet another round of asset price deflation, a crisis largely of central banks own making.
Mike “Mish” Shedlock
Mish, thought you would appreciate seeing this if you haven’t already https://workplace100.com/2016/06/30/henry-kissinger-on-brexit/
Most informative – just one more reason why citizens just won’t take it anymore.
Goldman Sachs To Lead Effort In Settling Mid-East Refugees…
It does not take a political junkie to begin connecting the globalist dots. And with the brutality of the sunlight upon them, the affiliations become increasingly transparent.
Samantha Power, Ted Cruz, Barack Obama, Mitch McConnell, Heidi Cruz and Paul Ryan UNITED in common cause! Anticipate Glenn Beck and Mark Levin to run the distraction and avoidance campaign……
https://theconservativetreehouse.files.wordpress.com/2011/05/samantha-power-valerie-jarrett-president-obama.jpg?w=365&h=243
https://theconservativetreehouse.com/2016/06/30/goldman-sachs-to-lead-effort-in-settling-mid-east-refugees/
https://media.giphy.com/media/Al2AvpYr6VTa0/giphy.gif
Hillary Rodham-Goldman-Sacs-Clinton
https://wexfordrebelalliance.files.wordpress.com/2011/10/banksign.gif
http://www.coyoteblog.com/coyote_blog/2016/06/the-middle-class-is-shrinking-because-they-are-becoming-rich.html
Mike, wonder how to reconcile your first chart with the one Coyote has?
The linked chart shows an increasing upper middle class, which is typically missed in charts like the one you cite. Your (actually, the Census Bureau’s) chart probably mixes the “rich” with those who are doing somewhat better, but are hardly rich (by US standards anyway).
Also, the linked chart shows a declining poor and near-poor. Suspect the difference is in how the terms are defined.
“Income inequality, the shrinking middle class, angry voters, and the rise of extreme political parties are all symptoms of the real problem: Central banks and their inflationary policies.”
Really? From day 1 I thought their policies (ZIRP/QE/NIRP) were disinflationary … ultimately deflationary when asset bubbles burst. Back during the crisis the Ron Pauls of the world were babbling about hypeinflation. How wrong they were. Any attempt at inflation crushed by the collapse in velocity of money.
https://fred.stlouisfed.org/series/M2V
“The things that have risen most in price are the places where the Fed and Congress meddled the most: The Fed with financial assets, and Congress with health care, education, and affordable housing.”
More on target. No doubt FR policies have enhanced risk taking (FR has your back) but fedgov pushing for FASB157 (mark to model) got the ball rolling for financial assets … and other sources of inflation [in education and health] more from fedgov allowing crony cartel capitalism to thrive.
Wasn’t Bernanke the one pushing hard for FASB157? Most in Congress don’t even understand accounting, they just do what “experts” pay them to do.
Henry Paulson (former Treasury Secretary, former Goldman Sachs chair) essentially told FASB to cancel mark-to-market. It was the sort of black mail thing he used to convince Ken Lewis (BankAmerica) to overpay for Merril Lynch even after accounting irregularities were found. Merril’s CEO (Jon Thain, another Goldman buddy) was in trouble for his $20,000 toilet in his private office bathroom — but Lewis was more concerned about what assets (if any) Merrill had. The brokers could walk out the door at any time, the MBS and ABS Merril had were legal liabilities. Paulson threatened to have Ken Lewis fired and punish BofA, so the deal went through.
Tim Geithner (another of Paulson’s “buddies” from Goldman Sachs days) was NY Fed president and threatened further penalties, which lined Geithner up to be the next Treasury Secretary — enabling Geithner to threaten (and later punish) S&P for daring to suggest US Treasuries were no longer AAA.
After Paulson’s stunt, the board at FASB decided they had to obey Paulson’s edict. No one in Congress understands accounting — they can’t even balance their own checkbooks.
And it is this group of “Goldman” alumn that OWN Hillary Clinton. A vote for Hilary is a vote to put a crime syndicate into the oval office.
I meant to reply to “robs” … Tony Bennett’s comments are really just too stupid to bother with.
The EU has its JC Juncker acting like a clueless bafoon, MishTalk has Tony Bennett, Jon Sellers and Michael Surkan playing similar roles
Whatever.
Did you ever consider not reading them? Problem solved.
I asked you earlier for inaccuracy(s) in my post(s) … all I got was crickets.
I have no problem with you calling me out … but please have the courtesy to let me know what you took offense too.
Mish, read the foloowing book that forecast way back in 1997 everything that is currently happenning. Its philosopy is that there is a cycle to US history. It is worth the read. “The Fourth Turning” by William Strauss and Neil Howe. BTW, enojoy your blogs – the news not in the print media. Paul Verchinski 5475 Sleeping Dog Lane Columbia, MD 21045 410.997-3879
From: MishTalk To: verchinski@yahoo.com Sent: Thursday, June 30, 2016 4:03 PM Subject: [New post] Explaining Social Anger, Brexit, Donald Trump in One Chart #yiv9029194540 a:hover {color:red;}#yiv9029194540 a {text-decoration:none;color:#0088cc;}#yiv9029194540 a.yiv9029194540primaryactionlink:link, #yiv9029194540 a.yiv9029194540primaryactionlink:visited {background-color:#2585B2;color:#fff;}#yiv9029194540 a.yiv9029194540primaryactionlink:hover, #yiv9029194540 a.yiv9029194540primaryactionlink:active {background-color:#11729E;color:#fff;}#yiv9029194540 WordPress.com | mishgea posted: “Voters are angry. Donald Trump, Marine Le Pen, Nigel Farage, UKIP, and the AfD party in Germany have all been accused of stirring up anger and hatred.But anger is not the problem. None of those individuals or political parties are the problem.Prot” | |
You’re on form today Mish.
Change we can believe in. Go Trump.
Mish,
Your chart shows a steady decline in the middle class since at least 1970. Central banks have not been conjuring up craziness for that long. I think central banks have nothing to do with it. Based on the length of the trend, I would lay the blame squarely at the feet of the fuel price spikes in the ’70’s followed by 35 years of off-shoring manufacturing and busting labor unions. This has allowed for a bifurcation in wages. STEM folks making a whole bunch more, now joining the upper income classes, and former steelworkers joining the poor.
Secondly, the second chart shows a collapse in productivity over the last few years. Productivity is the dollar value of everything produced divided by the number of labor hours required to produce it. Based on the chart, I would suspect that the culprit is housing. With escalating sales of high ticket items (houses) at ever higher prices and the same labor input, productivity skyrockets. When the housing market busts, you get fewer sales of high ticket items with the same labor input (per house). Productivity busts with it.
The end of the gold standard may be of account
http://www.mybudget360.com/wp-content/uploads/2013/03/top-decile.jpg
When under a gold regime capital is highly restricted so just having a (real copper) penny in your pocket matters. I think where I have failed is in seeing how in even a fiat money regime capital can be just a if not restricted then certainly “controlled” (through information, identity confirmation, constant watch, algo trading, spoofing, entertainment to give it all a thin veneer of humans in charge, etc) So basically the computer is programmed not to pay anyone as the default in the program (can’t get an actual default if no one is being paid) and then risk is measured accordi(on)ngly. I think what the problem is when valuations become this stretched and interest rates this low is “how do I buy portfolio insurance in case the market crashes 2,000 points tomorrow?” In the USA this is all being handled by the Federal Reserve meaning they provide the zero bound (give or take), they provide the carry (low short term higher longer term rates), they are guaranteeing Federal Largesse and transfer payments, so basically if you’re a dollar hoarder it’s all about how much you can lever up and sustain the higher price. So far its not just demand for dollars but for real estate, stocks, bonds, commodities, financial “engineering”, everything that has Ben sustained. What hasn’t been created however is a wealth effect…no one really is making any money in the sense that there is an economic boom, recovery, growth, etc…so “portfolio insurance” courtesy of the Fed with not a lot of bread and a whole lot of circuses.
That’s how I look at it. Small amounts of actual money being exchanged for megatons of goods…most of which just sit on a shelf.
In all of that process , a relatively small number of people get to rake the incremental profits that appear , whether it is interest on loans , being able to front run markets, access capital to conglomerate enterprise , issue insurance, and so on and so forth . Though the ‘invented’ value of assets they hold may be staggering , amassed partly from those ejected from their previous wealth, at the end of the day their income is completely dependent on the increasing nominal value of those assets, on the support of debt repayment by lower rates , on having money put into the hands of others to continue purchasing from them . When this goes too far , when productivity is not guided by individual demand but programmed , when the economy becomes too disconnected from people’s needs , when people cannot meet their obligations because one too many expense is dumped on them , or when all their needs are met but their reality is empty of meaning … and so on … enough … then perceptions can change almost instantly across a nation , or in a market , sparked by a single event The further disconnected it all is from some sort of base arrangement that makes proper sense , that is willingly organized , the harder the adjustment that then takes place . No one can manage this really , but sure there are many who are set on controlling how events unfold when they do , to hem them into certain directions and results .
Guess what happened in 1971?
Ummm…. 1971 was when the media decided everything was Richard Nixon’s fault (**SOME** of it actually was).
1971 is when the cost of LBJ’s great society and FDR’s new deal reached critical mass and overtook the economy’s ability to pay for it… Nixon defaulted on US debt (at least the third official US government default in the 20th century). And OPEC decided they weren’t going to accept devalued new USDollars on the same terms as dollars backed by gold.
But Mish, were you seriously expecting Jon Sellers to actually think through second and third order effects of massive socialist programs? People who vote for Obama and Hollande and LBJ are simply not that smart
And next November, he plans to vote a crime syndicate into the oval office, because that is what “independent” media pundit George Stephanopolous told him to do. Thinking for yourself is hard work! Much easier to let the media do your thinking for you.
Tony……But a lot of serious things happened in the sixties, and we see that external dollar liabilities overseas exceeded the value of the dollar’s gold backing around 1962, as James Dines mentioned, aggravated by Lyndon Johnson’s Guns and Butter programs in Vietnam and at home. Money creation surged, and thus the dollar’s value began it’s long descent, aided by Richard Nixon’s repudiation of the dollar’s link to gold in 1972. It’s all in the numbers…… As the money supply increases, the value of each dollar decreases and the populace gets poorer, as exhibited repeatedly throughout history. Deflation results eventually when the currency unit fails completely through overissuence and it’s value falls to near zero. That’s my understanding anyway……..
I respectfully disagree. It is govt at the root of the problems. You could eliminate the Fed tomorrow, and unless you also eliminated the career politician, nothing would change. Deficit and wasteful spending, coupled with malinvestment by govt is a much bigger problem. Just look at the socialist-leaning countries in the world. They are in their predicament because of govt largess, not a central bank.
Yes, but largess is not accommodated by a hard currency regime, because you have to resort to open confiscation, a.k.a. increased tax, to maintain it. With a fiat system not only is money easily fabricated and distribute,, but there is a deceptive opacity to it. The government becomes the hand that appears to give from nowhere ( including to business indirectly) and take to ‘tame excess individual accumulation’. In other words fiat allows a socialist take over from top to bottom. Most socialist politicians are rich, they tie government with big business as happily as any capitalist, in fact are happy to make the state a business authority.
Money has always been fiat, even under a gold-backed system. The only thing that matters is confidence in govt. When that goes, so does the currency – https://www.armstrongeconomics.com/uncategorized/forget-the-fiat-its-confidence/.
“Our problem is not what is money, it is government and its endless historical evolution toward corruption” – https://www.armstrongeconomics.com/uncategorized/fiat-and-the-abuse-of-using-this-term/.
Listening only to people who make their livlihoods selling gold will cause you to loose your wealth, house, and family. Don’t get me wrong, gold will rise with the collapse in govt, and its additiction to debt. What will confuse the majority is the bigger rise in stocks, along with rates.
Money vs fiat –
https://www.armstrongeconomics.com/armstrongeconomics101/basic-concepts/money-v-fiat/
Gold can still be fiat – https://www.armstrongeconomics.com/uncategorized/gold-can-still-be-fiat/
I’ll read those and get back to you at some point .
I appreciate those articles , and Martin Armstrong is looking at the table openly , identifying the concepts with clarity . My own viewpoint differs in its reading , there is no argument just a distinct interpretation .
Fiat to me is administrative law , ‘it shall be done’ . It implies forceful or coercive application .
Money is well described by Martin in its basic meaning .
Anything may be regarded as money if chosen, an individual might even decide sand is money to him , though no one might share his perception beyond the point of stripping him of other wealth in exchange for a trip to the beach , and the exercise proving eventually futile unless one enjoys lots of sand .
Gold is gold , no more no less, yet fiat may declare it money , currency or legal tender .
However as Martin points out it is the belief that counts . Gold being given the status of fiat is a form of usury , only fiat is fiat – coercive administrative law .
That that law chooses gold to trade its effect is merely representative of an underlying value that gold is naturally perceived to have . Hence fiat is attempting to empower itself by and of that value .
According to Martin a gold standard “… is an indirect solution making money “tangible” to prevent fiscal irresponsibility” .
He wishes to tackle fiscal , which is fiat law, matters via legislative restriction . All well and good . I think he must admit that the transparency offered by accounting in gold IS a legislative restriction – there is a great difference between having a natural money confiscated directly and a paper owned by its creator made more worthless by dilution , or reclaimed as sourced by the fiat regime that ordered its creation .
Perceptions – people , ordinary people , realize with a money such as gold exactly what is going on , that someone is taking something of theirs from them . There is no better way for a social reaction to be formed that rejects the confiscatory nature of government .
I haven’t mentioned debt on gold and banking , but the same applies in the sense that paper gold , or claims on, is automatically degraded in value from the authentic , it is speculative , nothing that transparency of accounting would not deny a fair valuation of .
Unlike other forms of money , gold may be hidden also , or digitalized as an efficient currency … a balance between practical and conservative attitudes may be chosen by the owner .
I am not trying to convince anyone of anything , people should have the choice of using what they like as money, and be left to it . You will find that gold (and metals of use of the time) , was traditionally used in private international trade beyond all other measures , administrative currencies being shunned as worth no more than the metal they were printed on … reminding me of Spartan iron fiat , probably designed to repel the introduction of foreign precious metal based trade and any reliance that might accompany it .
How about this book?
https://www.amazon.com/Conquer-Crash-Survive-Deflationary-Depression/dp/047056797X
It increasingly looks like Prechter will be viewed as the Nigel Farage of economic analysis. I wonder if we are FINALLY getting close to the Grand Supercycle fireworks as the 3rd of 3rd spirals around, and with it the death of the Fed?
I used to laugh when people spoke of conspiracies, the New World Order and One World Government. I don’t laugh at it any longer. Too many parallels occurring simultaneously on the globe for it to be mere coincidence. The People are have awoken and are protesting the active and wanton destruction of Western Civilization. Look at the nations being targeted if you question that premise. If they can impoverish the middle class they can easily control the population. Do not make the mistake of placing the onus of blame entirely on liberals or conservatives. That’s just a ploy to divide and conquer. Haven’t you noticed a blending of the 2 main political parties in the US? A one-party system? It’s so simple it’s stupid.
The Uni-Party!
Robert Redford stated he once considered going into politics.
He changed his mind after attending a DC gala.
There at an after party, Redford saw supposedly “bitter political enemies” (according to the Lie-Stream Media) almost making out. He became sickened watching two supposedly bitter political enemies giving each other intense back and shoulders rubs.
“Too many parallels occurring simultaneously on the globe for it to be mere coincidence.”
I heard globalization is a thing.
“If they can impoverish the middle class they can easily control the population.”
Well ‘they’ can’t as you see with the rise of far-left and far-right anti-establishment candidates across the West.
I would like to add to Mish’s post that the middle class is also being taxed out of existence. Rising federal, state and local taxes, and Obamacare which is essentially a tax, is all conspiring against the middle class.
“Autonomous cars, truck, and buses are coming. Millions of jobs will vanish by 2024 if not sooner. Productivity will soar.”
2024? How can you be so sure?
When I see dates like that in a blog, I know that the blogger is among the millions described above. A computer can write meaningless sentences like these.
Anyone who does not think self driving trucks are coming by mid 2020’s is clueless about the progress of technology
2024 is a very conservative date
Mish,
It is not about technology but the mindset of the people in charge. We heard the news of a Tesla going up in smoke and killing its driver while in the auto-driving mode. All it takes is for one of these cars to run over somebody. All it takes is a Three Mile kind of incident for the technology to be held back.
On a more practical note, I work in software and I know for a fact that most hyped up stuff is usually buggy and won’t work as advertised. The rule of thumb is that more hyped up the s/w, the more I the developer will get screwed because of mismatched expectations of my managers. This is especially true if a journalist goes gaga over it. Just look at CNBC, Yahoo Finance, NYT, and even NPR reporters who will tell us in a Buzzfeed fashion why we should use some new technology and then shut up if it doesn’t get adoption.
A parallel example to the self-driving tech would be the stuff that was hyped in dot com 1.0 — that one could pay ones electricity and phone bills over the web. Even the bubble of mid 2000s did not get to the point of realizing this completely. It is only in the last 4 or 5 years that doing everything online has become the norm.
The point is that the adoption curve rules will apply. Even if the technology is viable, the economic incentives have to be right. I don’t think the momentum will build for at least another 10 years. I think we are just in the first phase of early adoption.
I recall vividly in the late 1960’s when mainstream news reports were predicting the advent of driverless vehicles on the road by the end of the following decade. 3.5 decades came and went. But they continue to rattle on about it.
Color me extremely skeptical. Not a Missourian. But show me anyway. I believe practically nothing of what I’m told anymore. My eyes have to see it.
The NTSA announced earlier this week that they launched an official investigation into a “self driving” Tesla causing a fatality
http://consumerreports.org/tesla/nhtsa-opens-investigation-into-tesla-self-driving-fatality/
If you know anything about technology, you know there are bugs in all software — including self driving cars / trucks. The tech works great in the lab, it works pretty well during field testing with engineers and coders in the car, and a mobile truck following behind. But once exposed to real world conditions, there are ALWAYS unforeseen situations and glitches.
A lot more time and a LOT more money has been spent “perfecting” anti-aircraft missiles — which miss their targets about a quarter of the time, even if the target does not deploy counter-measures.
Self driving cars also have to deal with humans. The same idiots who want to put Hilary’s crime syndicate into office also drive cars — badly.
And self driving cars will also have to face a generation that grew up learning how to play Pacman and the later generation that learned World of Warcraft. Every glitch, every tell, every “cheat” … the same tactics to exploit games can (and will) be used to circumvent self driving car safety features.
The technology for self driving cars under research conditions might be ready by 2020, but hackers and trial lawyers were ready many years before.
There’s bugs in ALL technology, not just software. Bug-filled technology gets adopted as a new standard all the time. All that matters is the autonomous driver software is less buggy than the typical skilled driver. If the accident rates of autonomous vehicles are lower than human driven vehicles, that will be enough to satisfy insurance companies to insure the new autonomous driver risk.
Insurance companies will increase their profits by insuring against a risk that is LOWER than the previous risk. They will lobby government to permit the technology on the road, and government will always take money over their phony concerns over safety.
@robs — just because the people selling driverless cars say they are less risky doesn’t mean they are. Insurance companies have to prove whatever assertions with actual facts, not sales brochures.
The “driver” in all the Tesla cars is the same piece of software — one driver making mistakes in hundreds / thousands of cars. And the “guilty” in any accident would be Tesla Inc (or whatever company wrote the software). One accident and the whole company is on the line.
As you said, there are bugs in all software — but most don’t result in loss of lives. Once you bring that into the equation (and the resultant lawsuits) its a different ballgame.
Every Airbus and Boeing airplane has auto-pilot, and everyone of those autopilots can land / takeoff. No airline lets them do so. The pilots union would have a hissy, but they (theoretically) could be replaced.
The problem is when something goes wrong, humans will adapt. The pilots will save their own skin, and as a happy by-product, save the passengers. Software will do as it is told, even if it makes no sense at all.
When (not if) a pilot screws up — everyone says fire the pilot. When (not if) a piece of software screws up, the same applies… but that same faulty driver (the software) is in every car of the same model.
What about software upgrades? Does the driverless car refuse to drive itself to the dealership to be upgraded? Does the neighborhood kid install updates via wifi?
Who gets sued when your car shows the blue screen of death?
Its not just the technology, its also the customer. You are forgetting how many people cannot program a VCR (as out of date as they are). Spreadsheet macros are “magic” to many of the people who serve on jury duty.
Juries will decide if Tesla gets sued into oblivion after the first crash — not techies, not blog hosts.
Are you aware that 7 of the 8 current members of the US Supreme Court do not use email (they have a secretary do it for them, or don’t use email at all)?
Did you read the report Congressional investigators prepared for Congress, stating unequivocally that Congress members lack the technical expertise to write laws about encryption?
That is who will write and interpret the laws, while voters who are scared of computers will be on jury duty.
Prices can fall because of productivity gains and technology advances and both are good things. But prices can also fall because aggregate demand collapses in a debt deflationary spiral and that’s a self feeding destructive bad thing. Right now the bad thing dominates over the good thing. What went wrong is our finance sector used bank money to lend too much credit money into existence over the past thirty years and worse, that credit money was spent foolishly on consumables like housing rather than productive endeavors. This can and did go on for a long time as total private sector debt grows and grows. When you reach total private debt equal to two times GDP the party is over. Aggregate demand equals income (GDP) plus the change in debt. The party being over means private debt stops growing and then starts shrinking. The resulting loss of aggregate demand makes prices fall and the total debt unwinds by default and bankruptcy. There are relatively smarter ways to manage this but none are painless. We are using nearly the dumbest possible ways out and people are justifiably angry.
Explaining social anger…
https://2.bp.blogspot.com/-9cBM-V8rnso/V3T0LKpMmpI/AAAAAAAAQU0/3Pq5WALRYiIyN3Je26k3r1DNmHctcNZ3gCLcB/s640/Juncker_Farage.jpg
Why is there such a focus on the wealth gap? Does it really matter if the rich are getting disproportionately richer so long as the poor have the same standard of life as they previously had?
Isn’t it better for a millionaire to become a billionaire and a person making $50,000 a year double their salary to $100,000 than to have stagnation?
Wealth gap is real – the bottom 80% are actually losing
As long as the tide lifts the majority of boats things are OK
Conclusion: tide is not lifting the majority of boats
Declining standards of living is something to be concerned about. But the widening or shortening of a “gap” doesn’t mean a whole lot, in and of itself. If living standards were rising across the board then it wouldn’t really matter if the rich were rising at a faster rate than the poor.
Of course the bottom 80% is losing. “Free Trade” is exporting their jobs. Labor unions are being destroyed. Automation is destroying good jobs.
In addition to the bottom 80% getting poorer; wealth in a bailoutocracy is not allocated to those who create it. But rather to those who get it handed to them via connections, graft, or, at best, plain luck. So, wealth creation stagnates, since; why bother? Instead of building something more valuable than the inputs you used to build it, just be Juncker. Or sit on your butt cheering on the Fed as they print like mad until someone end up overpaying even more for the shack you live in, than you yourself did at one point.
And with stagnant total wealth, simple arithmetic dictates more for some, means less for the rest. Now matter how dense an obfuscation web of “hedonic adjustments.”, “core baskets” and “but, but Rockefeller didn’t have an Iphone spying on him….” are being spun to cover it up.
“Why is there such a focus on the wealth gap? Does it really matter if the rich are getting disproportionately richer so long as the poor have the same standard of life as they previously had?”
The problem is, you left out the middle class, which doesn’t have the same standard of life as they previously had. The middle class is also now a minority, as more and more people have fallen out of it.
The rich are getting richer at the expense of another group of people, middle income.
ot: Chicago Is Pushing For A Massive Bailout Of Its Public School System
“(((Rahm Emanuel))) is now quietly asking the city to change investment rules that would allow Chicago to purchase debt from sister agencies such as the Chicago Public School system – said differently, (((Rahm Emanuel))) wants to bail out the Chicago Public School system.”
Emanuele is a light weight fascist. The EU thought of having Spain bail out Greece, and Greece bailout Spain years ago.
Other deadbeats have been using Mastercard to pay off Visa, while using Visa to pay off Mastercard for decades.
Millions of jobs will vanish by 2024 if not sooner. Productivity will soar.
Why can’t we count this as a result of negative interest rates? Surely some of the investments in R&D for autonomous driving would not have happened if interest rates weren’t so low.
Congress can always do what they’re best at: outlawing productivity gains.
“…be a boon to everyone else who pays lower prices.”
Except that bankers will prevent prices from going lower. Only bankers will benefit from productivity, unless the printing press is tamed. Joe average only benefits if CPI deflation is allowed to happen.
People do not get it. This is not about financial pressures but instead the result of government trying to crush the unique cultures of diverse people by mass immigration.
…and the fed has these policies because they can. The problem started on August 15th, 1971.
There you go – Someone put the correct date on it.
Excellent comment and the correct answer to the question I asked above.
After that date – central banks could inflate at will
Mish, wasn’t it FDR that took us off the gold standard in 1933? Federal reserve notes were no longer redeemable in gold starting in 1934 with the gold reserve act. It was that year when they took the word gold off the paper and replaced it with lawful money. 1963 was when they started printing the same federal reserve notes we use today.
Unless you mention the socialist policies that led to Nixon’s default in 1971 — the explanation is incomplete.
FDR’s new deal, and LBJ’s great society (and the various expansions of both) made default inevitable.
Oh, while the **financial** cost of Korea / Vietnam was a LOT less, they made a default happen sooner
Greg, the gold standard acted as a limit on the extent of socialist policies. Nixon had a choice – adjust the socialist policies to not exceed the limits, or kill the limits. The socialist policies didn’t LEAD Nixon to kill the gold standard, he chose to expand socialist policies by killing the gold standard.
@robs — just say it: you hate Nixon. Feel better?
If only Nixon woulda, coulda, shoulda… but every option would be a default. Default on the “promises” FDR made (and did not fund). Default on the empty promises of LBJ. Default on the gold standard. A default is a default is a default.
Before Nixon started breaking lots of other laws — the US government was already bankrupt on an actuarial basis. It could not meet its obligations…. LBJ “privatized” (but not really) the GSEs like FNMA and FHLMC to pretend his budget was balanced.
Lets blame Nixon for Nixon’s mistakes (there are LOTS to choose from). But the ponzi schemes FDR started were never financially sound.
In Ed Seykota’s “Govopoly in the 39th Day” he says in the book’s conclusion:
The government continues borrowing, raising debt ceiling limits and exceeding them. It continues spending through stimulus packages that favor friends of those in power. Business continues to decline, people lose jobs and fall into poverty. Many companies and even some towns declare bankruptcy. This holds a lid on prices for a while.
The extensive use of fiat currencies eventually lead to price inflation, even as the economy continues to stagnate and show high unemployment, particularly among low-wage earners.
Prices advance as a series of disruptive asset bubbles. The standard of living falls. Personal freedom declines. Ethics decay. Eventually, the system itself falls apart, providing an opportunity for a new start.
The Assimilation cycle appears again and again throughout history. It usually takes a couple of centuries to consummate.
A few congressmen and conservative talk show hosts try pushing back against the growth of government. Despite their efforts, the govopoly system (monopoly by government control) continues to grow and to suffocate the free-competition sector.
You might as well try to take down a fighter jet with a slingshot. Only a miracle can stop the govopoly system’s growth. More than likely, govopoly perishes only after destroying the free-competition sector and reaching its own limits to growth.
Central banks are not the problem per se but that only depository institutions may have accounts there and not individual citizens, businesses, State and local governments etc. Fiat is for the citizens, not just for the banks.
Of course Open Market Purchases and the Discount Window must go. Instead, any fiat creation needed beyond normal deficit spending should be by equal fiat distributions to all citizens into their individual accounts at the central bank.
Also, since accounts at the central bank are inherently risk-free that means that deposit insurance can be abolished too. And that should require new reserves to be equally distributed to the citizens.
“In the wake of the Great Financial Crisis, central banks launched round after round of QE. Bernanke praised his own efforts for the wealth effect. The result was yet another massive bubble.
The only winners were the banks, the brokers, and the already wealthy.”
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Again….the central banks are noting more than a red-herring, as they are owned and directed – lock, stock and barrel – by the TBTF commercial banks in concert with co-opted regulators and politicians.
I know you know….but it’s not apparent when you write stuff like this.
The only solution is to put their heads on pikes.
It is now evident that the CBs are the problem. But they seem to be carrying along just fine.
May be it is time people start lynching the central bankers… throwing shoes at them whenever any one of them opens his/her mouth would be a good start. In effect what I am saying is we need a popular uprising against central bankers…
They way they have screwed savers for the past 8 years and counting and getting away with it, all in the guise of saving the world, just boggles my mind.
“Voters are angry. Donald Trump, Marine Le Pen, Nigel Farage, UKIP, and the AfD party in Germany have all been accused of stirring up anger and hatred.”
The accusers aught to look in their own mirrors, as to who is stirring up anger and hatred.