The Pope Is Completely Wrong About Capitalism And Inequality

Pope Francis - Photo by Tania RegoOn Monday, the following message was posted on the Pope’s official Twitter account: “Inequality is the root of social evil.”  This follows on the heels of several other extremely harsh statements that he has made about capitalism over the past year.  The Pope appears to believe that inequality is one of the greatest evils that humanity is facing.  So if we redistributed all money and all property and made sure that everyone had an equal amount, would that wipe out social evil?  Of course not.  Such a notion is absolutely absurd.  Being the Pope, he should know that the evil that we see all around us is not the result of the distribution of wealth.  Rather, it is the result of humanity’s deep rebellion against God.  Yes, the fact that the wealth of the planet is being increasingly funneled to a very small minority at the top of the pyramid is a major problem.  This is something that I have written about repeatedly.  But the answer is not to make sure that everyone has the exact same amount of money and property.  In the end, that would only turn us into North Korea.

In case you missed it, here is the tweet by the Pope that is causing such an uproar…

By itself, that statement could perhaps be “interpreted” a number of different ways.  But this follows other statements by the Pope that make it exceedingly clear what he is talking about.  Here is one example

Just as the commandment “Thou shalt not kill” sets a clear limit in order to safeguard the value of human life, today we also have to say “Thou shalt not” to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality.

Yes, the Pope is correct to highlight the plight of the homeless and the needy.  Even in “wealthy America”, we have an epidemic of hunger.  This is something that I wrote about yesterday.

And yes, the Pope is correct to point out society’s obsession with the stock market.  Personally, I have been relentless in criticizing the big Wall Street banks.

But the solution is not to take everything away from everybody and put it into a giant pile and redistribute it equally.

History has shown us what happens when a society adopts an extreme form of socialism or communism.

The incentive to work is destroyed, the incentive to create new ideas and new businesses is destroyed, and living standards for everyone go down.

Please don’t think that I am defending our current system.  What we have in the United States today is not the kind of pure capitalism that our founders intended.  Instead, it is a form of collectivism where nearly all of the economic power is now in the hands of giant collectivist institutions.  That includes public collectivist institutions (the government) and private collectivist institutions (large corporations).  In this type of economic environment, it should not be a surprise that government dependence is at an all-time high, the number of Americans that are self-employed is at an all-time low and millions of small businesses are being regulated out of existence.

Collectivism, socialism and communism are all close cousins.  People are promised that such systems will result in greater “equality”, but it never seems to actually work out that way.  Instead, the small elite that hold all the power usually end up enjoying the vast majority of the benefits.

And without a doubt, as the power of the government and the power of the corporations has increased, inequality has been rising.  Just check out the following chart from a new book by 42-year-old French economist Thomas Piketty entitled “Capital In The Twenty-First Century“…

Thomas Piketty Inequality

As I write this, Pinketty’s book is the number one seller on Amazon.  That is pretty remarkable for an economics treatise.  But Pinketty fails to realize what actually caused U.S. income inequality to start skyrocketing in 1971.  As Brian Domitrovic recently detailed, that was the year when the U.S. completely went off the gold standard and the Federal Reserve started running wild…

The big switch to the foundation of the American financial structure at the advent of this period was the U.S. decision in 1971 to go off the gold standard. Before that time, it was basically clear that outside of wartime (when gold-standard conventions were often suspended), you could basically count on the dollar holding its value against major things like the consumer price level, foreign currencies, and commodities such as gold itself.

After 1971, in contrast, it became basically clear that you could count on no such thing. The CPI might go up 125% in one decade (as it did 1971-1981), the dollar could permanently lose 66% against major currencies (as it did against the yen in this period), and commodities could shoot up ten-to twenty-five fold (as was the case with oil and gold).

Therefore a new day in financial planning also arrived. Suddenly the importance of simply saving money diminished. Money that was saved also had to be hedged. If you simply saved money after 1971, you stood to get killed as the dollar lost value against things it was supposed to be able to procure in the future.

This is where the financial services industry began its long march upward in the share of U.S. economic output it gobbled up. People who had significant money—the rich—threw their money into the products offered by the financial sector, in that the worst thing to happen to a fortune diligently built up over the years would be to see it frittered away on account of currency depreciation.

So much has gone wrong since 1971.  Out national debt has gotten more than 40 times larger, our economic infrastructure has been absolutely gutted and the value of the U.S. dollar has declined by well over 80 percent.

Once again, we need to go back to a system that much more closely resembles what our founders intended.

Did you know that the greatest period of economic growth in U.S. history was when there was no income tax, no IRS and no Federal Reserve?

We could have such a system again.

But the solutions being proposed by the mainstream media, our politicians and even the Pope involve even more centralization of economic power.

If we follow this path to the end, we will ultimately become like North Korea.

It is hard to describe the crushing poverty that exists in that hellhole of a country.  In North Korea, there is so little electricity that the country appears almost totally dark from space at night.  Just check out this picture taken by NASA…

North Korea At Night

North Korea may have more “equality” than we do, buy in that country “a ballpoint pen is considered a luxury item“.  Here is much more on what life is like for ordinary people inside North Korea from the New York Post

Jobs often come without salaries. Those who do get a paycheck, earn, on average, between $1,000-2,000 a year. Food and clothing are rationed by the government.

Most North Koreans have access to that one TV station and one newspaper, both state-run; they are told that their country is the only functioning and prosperous nation on Earth and that outside rages an apocalypse. Only elites are allowed cellphones, but they can just make calls or text — there is no Internet.

Would you like to live in such a society?

When you take away the incentive to work and the incentive to create, you end up with a much poorer society.  Without outside help, much of North Korea would have already starved to death by now

“The majority of North Koreans believe completely in the regime,” says Barbara Demick, a Seoul-based journalist and author of “Nothing to Envy: Ordinary Lives in North Korea.”

“They are barely surviving,” she says. “Only the rich can afford to eat rice. They’re in a chronic state of food shortage.”

The average citizen eats twice a day — a manageable state of affairs for citizens who lived through the great famine of the ’90s, which reduced millions of people to eating tree bark and plucking undigested kernels of corn from animal excrement.

Yes, something needs to be done about the rising level of income inequality in our country.  The middle class is being systematically destroyed and most of our politicians do not seem to care.  Some big steps in that direction would be going back to a much purer form of capitalism, shutting down the Federal Reserve, changing laws to shift power much more in the direction of individuals and small businesses, and ending the practice of shipping millions of our good paying jobs to communist nations such as China.

We also need a massive shift in our culture.  We need to shift away from a culture of greed and selfishness to a culture of love, compassion and generosity.  Those that have been blessed have a responsibility to be a blessing.  That is something that we have largely forgotten.

But trying to use government and taxation to wipe out inequality never works and will only make society poorer.  This is a lesson that Barack Obama, the Democrats, the Republicans, the mainstream media and the Pope all desperately need to learn.

The U.S. Has An Even Larger Gap Between The Rich And The Poor Than Downton Abbey Does

The U.S. Has An Even Larger Gap Between The Rich And The Poor Than Downton Abbey DoesThere are two very different Americas today.  In one, the stock market is soaring, high end homes are selling briskly, big banks and hedge funds are rolling in money as if the last financial crisis never even happened, and life is really, really good.  In the other America, good jobs are incredibly scarce, incomes are declining, and poverty is skyrocketing to levels that we have never seen before.  The gap between the wealthy and the poor in America is getting wider with each passing day.  In fact, it is my contention that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does.  If you have never seen Downton Abbey, you really should.  It is one of the most extraordinary shows to appear on television in years.  It is a drama set in the UK which follows the lives of the aristocratic Crawley family and their servants throughout the early part of the 20th Century.  It can be a bit jarring to watch servants wait on their masters hand and foot and refer to them by such titles as “Lord” and “Lady”, but the truth is that in many ways there is more inequality today than there was back then.  As far as people living in the worst areas of cities such as Detroit and Cleveland are concerned, the socialites that live on Fifth Avenue in New York City or in multi-million dollar homes out in the Hamptons might as well be from another planet.  If you have lots of money, America is still a really great place to live.  If you barely have any money, America can be really cold and cruel.  Sadly, our politicians continue to pursue policies that make things even better for those working for the establishment in places such as Washington D.C. and Manhattan, and worse for all the rest of us.  This has especially been true over the course of the past four years.  If nothing is done, the gaping chasm between the rich and the poor will continue to get even worse, and in the end that will have some really severe consequences for our society.

So is the answer to raise taxes and “redistribute” more money to the poor?  Of course not.  Today, we are already paying dozens of different kinds of taxes every year and the government is handing out more money to people than ever before.  But poverty just continues to explode.

What the poor in the U.S. desperately need are good jobs, but we continue to ship millions of good jobs out of the country and Barack Obama continues to pursue policies that are killing the U.S. economy.

There is not much help on the horizon for the poor or the middle class in America, and that should be distressing for all of us.

But things in the wealthy parts of America are going absolutely wonderfully right now.  Let’s take a few moments and contrast what life is like in the two Americas right now…

In the “good America”, stocks are absolutely soaring.  In fact, the S&P 500 closed above 1,500 on Friday for the very first time in more than five years.

In the “bad America”, poverty statistics just continue to get worse.  According to a newly released report, 60 percent of all children in the city of Detroit are living in poverty.

In the “good America”, hedge funds are rolling in the profits.  The Dow just had its best January since January of 1994, and many analysts are projecting that 2013 will be a banner year for the markets.

In the “bad America”, median household income has fallen for four years in a row, and millions of families are really struggling to find a way to pay the bills each month.

In the “good America”, expensive homes are selling at a pace that we have not seen in years.  Just check out what is happening in the Hamptons.  According to the National Association of Realtors, sales of homes worth at least a million dollars were 51 percent higher in November 2012 than they were in November 2011.

In the “bad America”, there are hordes of young adults that cannot find jobs and cannot take care of themselves.  Shockingly, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

In the “good America”, the “too big to fail” banks are partying like it was 2005 again.  For example, revenues at Goldman Sachs increased by about 30 percent in 2012 and Goldman stock has soared by more than 40 percent over the past 12 months.

In the “bad America”, poverty is exploding and government dependence has become a way of life.  If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.

In the “good America”, those working for the establishment will do just about anything to make a buck.  For instance, Goldman Sachs made 400 million dollars driving up food prices in 2012 while hundreds of millions around the world existed on the edge of starvation.

In the “bad America”, millions of families are wondering how they will make it until next month.  If you can believe it, more than a million public school students in the United States are homeless.  This is the first time that has ever happened in our history.

In the “good America”, everyone has a good ride.  In fact, sales of luxury German-made vehicles set new all-time records in 2012.

In the “bad America”, those that have lost everything are shunned and ostracized.  In fact, many communities all over America are actually making feeding the homeless illegal.

The fact that there is poverty in America should not alarm you.  Every country in the world has poverty.  What should alarm you is how rapidly it is growing.  Even though the Obama administration tells us that we are in an “economic recovery”, things just continue to get worse.  The wealthy elitists in Washington D.C. and New York City may be doing wonderfully, but the truth is that the middle class continues to shrink and just about every poverty statistic that you can think of continues to rise.

If you are convinced that we do not have a “wealth gap” problem in the United States today, just check out the following statistics.  Most of them are from one of my previous articles entitled “The Middle Class In America Is Being Wiped Out – Here Are 60 Facts That Prove It“…

-According to the Economic Policy Institute, the wealthiest one percent of all Americans households on average have 288 times the amount of wealth that the average middle class American family does.

-In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

-According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.

-The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

-At this point, the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.

-The United States now ranks 93rd in the world in income inequality.

-The average CEO now makes approximately 350 times as much as the average American worker makes.

-Today, corporate profits as a percentage of U.S. GDP are at an all-time high, but wages as a percentage of U.S. GDP are near an all-time low.

Sometimes, when the “good America” and the “bad America” collide, the results are quite humorous.

For example, a 23-year-old homeless Brazilian man and his friends recently decided to “move in” to a 7,522 square foot house down in Florida that is valued at $2.1 million.  The following is from a recent article in the Orlando Sentinel

Bank of America has filed to evict nine squatters from a $2.5-million mansion in a posh Boca Raton neighborhood.

In a filing in Palm Beach County court that names 23-year-old Andre De Palma Barbosa and eight other unknown people, the bank claims rightful ownership of the home – despite Barbosa’s attempt to stake his claim on the foreclosed waterside property by using an obscure Florida real estate law.

Barbosa has been invoking a state law called “adverse possession,” which allows someone to move into a property and claim the title – if they can stay there seven years.

A signed copy of that note is also posted in the home’s front window.

Yeah, they will be able to get him and his friends out of there eventually, but in future years I fear that the conflicts between the rich and the poor will not be so nice.

Already, a very ominous “Robin Hood mentality” is building among the poor in this country.  Many wealthy people don’t even realize that it is happening.  But someday when desperate “flash mobs” are roaming through their neighborhoods looking to do a little “creative redistribution”, then they will get it.

Our society is starting to come apart at the seams, and there is an incredible amount of tension between the rich and the poor.  This is unfortunate, but instead of calming things down many of our politicians are actually exploiting this tension.

When our economy crashes, the class warfare of today may actually turn into real war in the streets.  Desperate people do desperate things, and when people are hungry and they can’t feed their families, many of them will not be afraid to go over to the wealthy neighborhoods and take what they want.

A lot of people don’t want to see them, but dark clouds are building.  According to a recent Gallup poll, Americans are more negative about where America will be five years from now than they have ever been before.  Most people know that we are on the edge of something really bad, even if they can’t really explain it.

It is time to get ready for what is coming.  Even though the stock market is soaring right now, that could change at any moment.  All of the long-term economic and societal trends are pointing to some really bad things in the years ahead, and sticking our heads in the sand and pretending that everything is going to be okay somehow is not going to help.

So what do you think about all of this?

Do you think that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does?

Please feel free to post a comment with your thoughts below…

Downton Abbey

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