A great immorality is occurring, it is an insidiousness so great that it has the power to shackle generations of Americans, yet it is hardly perceptible. It is the Great Wealth Extraction. It is a transfer of wealth from young to old and from the middle classes to the financial elite. It has been aided by policy makers, corporations, and most of all the bankers.
Not too long ago in America, a person could enter the workforce debt free, with the expectation of upward mobility and security, buy a home for 2x’s their annual earnings, and enjoy retirement on modest assets they had acquired, social benefit programs and for many a pension. For today’s youth, while some have yet to realize it, this has become a pipe dream. The youth has been screwed; for many going to college means incurring debt with no guarantee of a job after, many find themselves in the gig or service economies without benefits or security and ever increasing healthcare costs, a starter home in booming areas may cost 6x’s their annual earnings, with asset prices already overvalued and a looming financial day of reckoning ahead there may be little wealth to gain from a 401k or in real estate, also pensions and social programs are in trouble or will be insolvent. Already heavily burdened by debt and poor employment prospects, indicative of a slow growth economy, they will be asked or forced to do more than their fair share as the system collapses around them. We have been pacified by an overabundance of cheap money and foreign made goods that has created an illusion of prosperity. America’s unique global position has made much of this possible, but the nation is in decline, and globally faith is waning in this country’s ability to lead and in its financial intuitions.
How did this happen?
The country’s financial and monetary policies are based on bad practices and faulty thinking. Financially, basic bookkeeping was thrown in to the wind and replaced by short-term political promises that continued, making them permanent. Pensions, social benefit programs and alike are essentially Ponzi schemes, each generation has to be larger and wealthy to support the generation it succeeded. The Baby Boom generation is large and the wealthiest the world has ever seen, they had no problem funding the smaller generation they succeeded. Soon, for every retiree there will be only two workers paying for their entitlements. Pension systems have also been inadequately funded and have performed significantly below expectations in a prolonged low interest rate environment. These are already beginning to fail. There are no readily available solutions other than more debt and taxes. These issues have been generally known for decades, it has been a failure of numerous leaders and policy makers and it continues.
The god-like belief in Keynesian economics has turned into demonic possession. The belief is that governments should borrow currency (money) from the central banks in times of recession to spur growth, the pay that creditor back with interest when times are good. This, along with interest rate manipulation is supposed to encourage capital investment and increase productivity. This has had some success in the past, but today it primarily benefits the wealthy (who tend to be older). It has been the only thing propping up the stock market in recent years. Borrowing cheap money has driven up asset prices on just about everything from houses and art to stocks and bonds. No longer is this cheap borrowed money invested in machinery, equipment or infrastructure, it goes to banks to gamble in markets or corporations to buy-back stocks to further inflate prices, and to speculators worldwide that extract not just today’s equity but future equity too. Much of the equity has been sucked out already; all that is left is insurmountable debt, which in this country alone is over $60 trillion (public and private). Globally the markets are overvalued and we are reaching our debt limits. What comes next and possibly soon is going to be painful.
In a globalized economy that provides this country with an abundance of inexpensive goods and services, we no longer need to make things. The productive capacity of this country is low, now we just circulate currency trading services and administering those services, very little is produced (except bombs, we make lots of weapons). With a robotic and software revolution on our doorstep that will make many of today’s entry and mid-level jobs obsolete in a couple of decades, the shrinking demand for labor will put downward pressure on wages and in turn tax receipts. It is clear that something will have to give. The looters and those with power to coerce are in charge. Smartly, they have the masses brain washed and squabbling among themselves. A revolution is well overdue, but we are too comfortable, distracted and entertained to even notice our crumbling empire.
Long story short, it’s theft. We are enjoying prosperity today by stealing from tomorrow.
Enjoy the decline.
Christian X