How QE3 Will Make The Wealthy Even Wealthier While Causing Living Standards To Fall For The Rest Of Us

The mainstream media is hailing QE3 as a great victory for the U.S. economy.  On nearly every news broadcast, the “talking heads” are declaring that Ben Bernanke’s decision to pump 40 billion dollars a month into our financial system is definitely going to help solve our economic problems.  The money for QE3 is being created out of thin air and this round of quantitative easing is going to be “open-ended” which means that the Federal Reserve is going to keep doing it for as long as they feel like it.  But is this really good for the average American on the street?  No way.  Despite two previous rounds of quantitative easing, median household income has still fallen for four years in a row, the employment rate has not bounced back since the end of the last recession, and new home sales have remained near record lows.  So what have the previous rounds of quantitative easing accomplished?  Well, they have driven up the prices of financial assets.  Those that own stocks have done very well the past couple of years.  So who owns stocks?  The wealthy do.  In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.  Those that have invested in commodities have also done very nicely in recent years.  We have seen gold, silver, oil and agricultural commodities all do very well.  But that also means that average Americans are paying more for basic necessities such as food and gasoline.  So the first two rounds of quantitative easing made the wealthy even wealthier while causing living standards to fall for all the rest of us.  Is there any reason to believe that QE3 will be any different?

Of course not.

This time the Federal Reserve is focused on buying mortgage-backed securities.  Yes, the same financial garbage that helped cause the last crisis.  The Fed plans to gobble up tens of billions of dollars of that trash every month from now on.

But will the Fed pay true market value for those mortgage-backed securities?  If you believe that, I have a bridge to sell you.

So this is going to be a huge windfall for some people, and that does not include us.

Not a single penny of this 40 billion dollars a month will go directly into our hands.  The theory is that it will “filter down” to us eventually.

But that hasn’t happened with previous rounds of quantitative easing.

So where does the money go?

A recent CNBC article discussed a very interesting report from the Bank of England about the effects of quantitative easing….

It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.

Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.

Many said the BOE’s easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that  “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”

Wow.

Who benefits from quantitative easing?

According to the Bank of England, it is “mainly the wealthy” who benefit.

As I noted the other day, Donald Trump said essentially the same thing when he told  CNBC the following….

“People like me will benefit from this.”

As I already discussed above, a lot of quantitative easing money gets into the financial markets where it pumps up the prices of financial assets.

But not all of it goes there.

We were told that the whole idea behind quantitative easing was that it was supposed to get banks lending again, but this has not happened.  Instead, banks are sitting on unprecedented amounts of money.  Just look at how the first two rounds of quantitative easing have caused excess reserves being held by banks to explode from close to zero to over 1.5 trillion dollars….

Of course one of the biggest problems is that the Federal Reserve is still paying banks not to lend money.

Yes, you read that correctly.

The Federal Reserve is paying banks to park money with them.  So instead of risking their money by lending it out to us, the banks can just park it at the Fed and make risk-free profits for as long as they want.

Must be nice.

If the Federal Reserve really wanted banks to start lending again, all the Fed has to do is to stop paying banks not to lend money.

But of course if more than 1.5 trillion dollars suddenly started flooding into our economy (especially after you consider the multiplier effect) we would be dealing with nightmarish inflation unlike anything we have ever seen before.

So if you want to know why inflation was not even worse after QE1 and QE2 it is because more than a trillion and a half dollars is being parked with the Fed.

So did QE1 and QE2 do any good for average Americans?

Let’s go to the charts.

This first chart shows that the percentage of working age Americans with a job has stayed extremely flat since the end of the last recession.

Does it look like QE1 and QE2 made a difference to you?  I don’t see any difference….

Okay, but what about new home sales?

Did QE1 and QE2 help them?

Nope….

But the mainstream media is still buying the baloney the Fed is pushing.

The mainstream media is promising us that home sales will soon rise and that lots of new jobs are on the way.

Sadly, the truth is that things have steadily gotten worse for average Americans over the past 4 years despite all of the money printing the Fed has been doing.  If you doubt this, just read this article.

But this is all that Ben Bernanke seems to have left.  When printing money doesn’t work, his answer is to print even more money.

QE3 is likely to cause agricultural commodities and the price of oil to rise even further.

So unless you can convince your employer to give you a corresponding raise, this is going to mean that your paychecks are not going to go as far as they did before.

And so that means a lower standard of living.

In a recent article, Bruce Krasting issued an ominous warning….

Higher inflation expectations in the US will filter around the globe. Post the extraordinary steps Ben took yesterday, people will be stocking up on “stuff”. Things like rice, flour, cooking oil, soy, wheat and sugar. If you can eat it, buy it now. It will be more expensive in a month. While your at it, fill up the gas tank, the price is going up next week and every week for the next few months.

In addition, the policy of the Federal Reserve of keeping interest rates as low as possible is absolutely crippling the finances of many retirees.  Even the former president of the Federal Reserve Bank of Atlanta, William F. Ford, recognizes this….

One of the overlooked consequences of the Federal Reserve’s recent rounds of monetary stimulus is the adverse impact those policies have had on the interest income of savers. The prolonged and abnormally low interest-rate structure put in place by the Fed has made life particularly difficult for retirees and others who depend on conservative interest-sensitive investments. But the negative effects do not stop there. They spillover into the overall performance of the economy.

Just about everything that the Federal Reserve does these days is bad for ordinary Americans.

But the Fed is not going to stop.  The Fed is addicted to money printing now, and as a recent article by Peter Schiff explained, the Fed is just going to “up the dosage” until it gets what it wants….

The Fed will try to conjure a recovery on the backs of currency debasement. It will not stop or alter from this course. If the economy fails to respond to the drugs, Bernanke will simply up the dosage. In fact, he is so convinced we will remain dependent on quantitative easing that he explicitly said he won’t turn off the spigots even if things noticeably improve.

This is complete and total incompetence by Ben Bernanke and his cohorts over at the Fed.

Economist Marc Faber believes that Ben Bernanke should resign, and I agree with him….

“If I had messed up as badly as Bernanke I would for sure resign. The mandate of the Fed to boost asset prices and thereby create wealth is ludicrous — it doesn’t work that way. It’s a temporary boost followed by a crash.”

And yes, a crash is coming.

Bernanke can try to put it off for a while, but every action he takes is just making the eventual crash even worse.

And some in the financial community clearly recognize this.  For example, credit rating agency Egan-Jones downgraded the credit rating of the United States to AA- on Friday.

The primary reason they gave for the downgrade was QE3.

Ben Bernanke and the Federal Reserve are destroying the U.S. dollar and destroying our financial system for a short-term economic sugar high.

It is utter insanity.

That is why we desperately need to get the American people educated about the Federal Reserve system.  It is at the very heart of our economic problems and yet neither major political party is willing to blame the Fed for the problems that it is causing.

A bunch of unelected bankers that are not accountable to the American people are running our economy into the ground and the American people do not even realize what is happening.

Please share this article with as many people as you can.  Hopefully we can get the American people to understand that more money printing is definitely not the solution to our problems.

Will Toledo, Ohio Be The First Major American City To Be Owned By China?

It has been said that there are two ways to conquer and enslave a nation.  One way is by using the sword, and the other is by using debt.  Fortunately, America is not in danger of being conquered by the sword right now, but America is being conquered by debt.  The borrower is the servant of the lender, and today we owe China more than a trillion dollars.  By running a gigantic trade deficit with us, China has been able to become incredibly wealthy.  We have begged them to lend us back some of the money that we have sent them and this has made them even wealthier.  Now China is gobbling up U.S. real estate and U.S. assets at an astounding pace.  In fact, some cities are in danger of becoming completely dominated by Chinese ownership.  One of those cities is Toledo, Ohio.  In many “rust belt” areas, real estate can be had for a song, and the Chinese are taking full advantage of this.  America was once the wealthiest nation on earth, but now we are drowning in debt and we are being sold off in chunks to the highest bidder.  Is this the legacy that we are going to leave for future generations?

According to a recent Fortune article, Chinese investors have been very busy purchasing distressed commercial real estate in Toledo lately….

In March 2011, Chinese investors paid $2.15 million cash for a restaurant complex on the Maumee River in Toledo, Ohio. Soon they put down another $3.8 million on 69 acres of newly decontaminated land in the city’s Marina District, promising to invest $200 million in a new residential-commercial development. That September, another Chinese firm spent $3 million for an aging hotel across a nearby bridge with a view of the minor league ballpark.

Toledo is being promoted to Chinese investors as a “5-star logistics region“.  From Toledo it is very easy to get to Chicago, Detroit, Cleveland, Pittsburgh, Columbus and Indianapolis.

With a population of 287,000, Toledo is only the fourth largest city in Ohio, but it lies at the junction of two important highways — I-75 and I-80/90. “My vision is to make Toledo a true international city,” Toledo’s Mayor Mike Bell told the Toledo Blade.

For some reason the Chinese seem to be very interested in that area of the country.  Last month, I wrote about how one Chinese group plans to develop a 200 acre “China city” just 40 minutes away from Toledo….

A Chinese group known as “Sino-Michigan Properties LLC” has bought up 200 acres of land near the town of Milan, Michigan.  Their plan is to construct a “China City” with artificial lakes, a Chinese cultural center and hundreds of housing units for Chinese citizens.  Essentially, it would be a little slice of communist China dropped right into the heartland of America.  This “China City” would be located about 40 minutes from both Detroit and Toledo, and it would be marketed to Chinese business people that want to start businesses in the United States.

But it is not just the rust belt that is being bought up by the Chinese.  A recent Forbes article documented several of the huge real estate deals that the Chinese are doing in New York right now….

According to a recent report in the New York Times, investors from China are “snapping up luxury apartments” and are planning to spend hundreds of millions of dollars on commercial and residential projects like Atlantic Yards in Brooklyn. Chinese companies also have signed major leases at the Empire State Building and at 1 World Trade Center, the report said.

In addition to real estate, the Chinese are also buying up businesses and natural resources all over the United States.

For example, the Dalian Wanda Group recently bought U.S. movie theater chain AMC Entertainment for 2.6 billion dollars.

Also, the Obama administration has been allowing companies owned by the Chinese government to gobble up U.S. oil and gas deposits worth billions of dollars.

On top of all that, the Federal Reserve recently announced that it will now allow Chinese banks to start buying up American banks.

So how in the world did we come to be so completely and totally dominated by China?

Well, the key to all of this is the trade deficit.

Most Americans can’t even tell you what a trade deficit is, but it is at the very heart of our economic problems.

Basically, we buy far, far more from other countries than they buy from us.

Most Americans don’t realize this, but the truth is that the United States has a trade imbalance that is more than 5 times larger than any other nation on earth has.

Overall, the U.S. has run a trade deficit of more than 8 trillion dollars with the rest of the globe since 1975.

If you go into a Wal-Mart of a dollar store today and you start looking at product labels, you will notice that hundreds of products say “made in China” and very few of them say that they were made in this country.

Every single month, China sends us gigantic mountains of plastic crap to sell in our stores and we send them gigantic mountains of our money.

The U.S. trade deficit with China during 2011 was $295.4 billion.  That was the largest trade deficit that one country has had with another country in the history of the planet.

Sadly, so far our trade deficit with China in 2012 is about 12 percent larger than it was last year.

So things are getting even worse.

To get an idea of how far things have come, let us take a look back at the 1980s for a moment.

Back in 1985, the U.S. trade deficit with China was only 6 million dollars for the entire year.

All of this imbalanced trade is absolutely killing us.

Today, the United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

So why doesn’t China buy more stuff from us?

Well, there are a whole lot of reasons.  One of the main reasons is that they slap huge tariffs on many American-made goods.

For example, according to the New York Times a Jeep Grand Cherokee that costs $27,490 in the United States costs about $85,000 in China thanks to all the tariffs.

So why do we allow China to keep doing this to us?

That is a very good question.

Meanwhile, China is continually getting wealthier and we are continually getting poorer.

All of the money that is leaving this country and going to China could be going to U.S. businesses and U.S. workers instead.  In turn, those businesses and workers would pay taxes on that money to support the government.

Instead, we have to go beg China to lend us the money that we just sent to them.

At this point, China now holds approximately 1.17 trillion dollars of U.S. government debt.

None of this ever had to happen.

But it did happen because we were stupid.

Now China has mountains of money to literally buy us up.

But China is not the only country that we have an imbalanced trading relationship with.

For example, the new “free trade agreement” between the United States and South Korea that Barack Obama has been touting went into full effect on March 15, 2012.

So how has that “free trade agreement” turned out so far?  The following is from a recent article by Pat Buchanan….

The U.S. trade deficit with Korea tripled in one month. Imports from South Korea jumped 15 percent to $5.5 billion in April, while U.S. exports to South Korea fell 12 percent to $3.7 billion. Suddenly, the U.S. trade deficit with Seoul surged to an annual rate of $22 billion.

Shades of NAFTA. When it passed in 1993, we had a $1.6 billion trade surplus with Mexico. By 2010, our trade deficit with Mexico had reached $61.6 billion.

Ouch.

The truth is that these free trade agreements are not fair and balanced.

U.S. workers end up competing for jobs with workers in countries where it is legal to pay slave labor wages.  And other countries often have far fewer rules and regulations to follow as well.  In his recent article, Buchanan described why all Americans should be economic nationalists….

Global free trade means U.S. workers compete with Asian and Latin American workers whose wages are a fraction of our own and whose benefits may be nonexistent. Global free trade means U.S factories that relocate to Indonesia or India need not observe U.S. laws on health, safety, pollution or paying a minimum wage.

Global free trade means that companies that move factories outside the United States can send their products back to the United States free of charge and undercut businessmen who retain their American workers and live within American laws.

Free trade makes suckers and fools out of patriots.

Unfortunately, both major political parties in the United States are absolutely married to the one world economic agenda that the elite are pushing.

So we will continue to bleed wealth, businesses and jobs at an astounding pace.

You can get a really good idea of the horrific manufacturing job losses in the United States over the past 40 years by checking out this map right here.

Overall, the United States has lost a total of more than 56,000 manufacturing facilities since 2001.

According to the Economic Policy Institute, since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone.

There seems to be absolutely no concern with protecting American jobs these days.

If you can believe it, Chinese corporations are even building our bridges.  The following is a brief excerpt from a recent ABC News article….

In New York there is a $400 million renovation project on the Alexander Hamilton Bridge.

In California, there is a $7.2 billion project to rebuild the Bay Bridge connecting San Francisco and Oakland.

In Alaska, there is a proposal for a $190 million bridge project.

These projects sound like steps in the right direction, but much of the work is going to Chinese government-owned firms.

“When we subsidize jobs in China, we’re not creating any wealth in the United States,” said Scott Paul, executive director for the Alliance for American Manufacturing.

Americans need to start understanding that our trade deficit is causing us to lose massive numbers of businesses and jobs and that this is making us poorer as a nation.

As I wrote about the other day, the median net worth of families in the United States declined “from $126,400 in 2007 to $77,300 in 2010” according to the Federal Reserve.

Even if you take away the effect of the housing collapse, household net worth still declined by 25 percent between 2005 and 2010.

A lot of that decline in wealth was due to the recent recession, but the point I am trying to make is that we are getting poorer as a nation.

A decade ago, the United States was ranked number one in average wealth per adult.  By 2010, the United States had fallen to seventh.

And when you factor in our debts, we are a complete and total mess.  U.S. consumers are more than 11 trillion dollars in debt and the federal government is nearly 16 trillion dollars in debt.

We are getting deeper in debt at the same time that our ability to service that debt is declining.

The reality is that our economy is completely falling apart and it no longer produces enough jobs for everyone.

In fact, it isn’t even close.

Right now there are about 3.7 workers that are “officially” unemployed for every single job opening.

So what we are doing right now is clearly not working.

We need to fundamentally change direction as a nation.

Unfortunately, that is not going to happen any time soon.

So where do we go from here?

How The Super Rich Avoid Taxes Even As They Demand That The Rest Of Us Pay More

The way that we tax people in the United States is fundamentally broken and should be completely discarded.  The U.S. tax code is absolutely riddled with loopholes that allow the super rich to legally avoid taxes while many of the rest of us are being taxed into oblivion.  In our system of taxation, middle class families that work hard and try to play by the rules are deeply penalized while those that are willing to abuse the system make out like bandits.  There is something fundamentally wrong with a system that enables wealthy politicians such as Barack Obama and Mitt Romney to pay a smaller percentage of their incomes in taxes than millions of middle class families.  Mitt Romney has millions of dollars parked down in the Cayman Islands and in other tax havens.  He does this to avoid taxes.  Unfortunately, most Americans do not have the resources to funnel money through offshore tax havens.  Most Americans just automatically have their paychecks shredded by taxes and then try to live on whatever is left over.  Most Americans are just trying to survive financially from one month to the next.  But the super rich have options.  Thanks to technology, they can live almost anywhere they want and they can run their companies and manage their investments from anywhere in the world.  The truth is that the wealthier you are the easier it is to avoid taxes.  But even as the ultra-wealthy do their best to avoid taxes, many of them still feel free to demand that the rest of us be taxed more.

So what are some of the ways that the super rich avoid taxes?

Well, let’s start with those that are just “somewhat wealthy”.  Many millionaires still want or need to be U.S. citizens, so they are subject to the U.S. tax code.  Fortunately for them, their tax lawyers know of thousands of loopholes that have been designed to help the rich avoid taxes.

The following is from a recent article by Jen Talley….

Some of the richest people in the country pay the least, relatively speaking, in taxes. How is this possible? Answer: Through the clever manipulation of the U.S. tax code’s loopholes. And it works: as income rises, effective tax rates rise as well, but only up to a point. IRS data shows that the effective income tax rate flattens out at just over 24 percent for those making over a million dollars. As income exceeds $1.5 million, the rate begins to decline; those with incomes above $10 million pay an average income tax rate of around 19 percent. So, how do they do it?

You could write an entire series of books on the technical details of how this gets done.  Trust me, I studied tax law when I was in law school.

If you are interested in digging into some of the technical details of tax avoidance, a recent Businessweek article detailed 10 ways that the wealthy use our current tax code to avoid paying billions of dollars in taxes.  It is an article worth reading if you have the time.

Sadly, tax avoidance by the wealthy is not just something that happens in the United States.  The truth is that the exact same kind of thing happens in the UK as well.

There is not an easy fix to this problem.  Our politicians have had decades to try to come up with a fair tax system and they have completely failed.  The wealthy are always several steps ahead of them.

But federal taxes are not the only taxes that can be avoided.  The vast difference in state tax rates creates another opportunity.

One advantage that wealthy Americans have is that they are far more mobile than most other Americans are.  So if they don’t like the tax system in one state they can simply pick up and move to another state.

According to the Tax Foundation, 3.4 million Americans left New York state between 2000 and 2010.

So where did they go?

The following is from a recent CNS News article….

Where are they escaping to?  The Tax Foundation found that more than 600,000 New York residents moved to Florida over the decade – opting perhaps for the Sunshine State’s more lenient tax system – taking nearly $20 billion in adjusted growth income with them.

There is no state income tax in Florida.  So moving from New York to Florida can end up saving you a bundle.

The same kind of migration is happening out west as well.  According to that same CNS article, hundreds of thousands of people have been moving from California (a high tax state) to Texas (no state income tax)….

Between 2000 and 2010, the most recent data available, 551,914 people left California for Texas, taking $14.3 billion in income.  Texas has no state income tax or estate tax.

A total of 48,877 people moved to Texas from California between 2009 and 2010 alone, totaling $1.2 billion in income.  Another 28,088 from California relocated to Nevada and 30,663 to Arizona, a loss of  $699.1 million and $707.8 million in income respectively.

Not that anyone really needs much of an excuse to move away from California.  It is rapidly decaying right in front of our eyes.

But a lot of families do not have the same options that wealthy people do. Unfortunately, most average Americans are tied to their jobs and it would be much more difficult for them to pick up and move across the country.  In this economy it can be economic suicide to give up a good job.

The reality is that most of us simply do not have the resources to play the same kinds of games that the wealthy play.

Sadly, even our most prominent politicians avoid taxes.

Just look at Massachusetts Senator John Kerry.  He has avoided approximately $500,000 in taxes by docking his yacht in Rhode Island rather than in Massachusetts.

Yet Kerry sure does love to call for more taxes on the rest of us, doesn’t he?

Now let’s talk about the “super rich” and the “ultra-wealthy”.  For many people that are worth billions of dollars, tax avoidance has become an art from.

Facebook co-founder Eduardo Saverin made national headlines recently when he gave up his U.S. citizenship, but the truth is that his case is small potatoes compared to the global elite and the shadow banking system that supports them.

According to the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks.

That amount is more than the GDP of the United States for an entire year.

So what do I mean by “offshore banks”?  I defined the term in a previous article….

Well, the term originally developed because the banks on the Channel Islands were “offshore” from the United Kingdom.  Most “offshore banks” are still located on islands today.  The Cayman Islands, Bermuda, the Bahamas, and the Isle of Man are examples of this.  Other “offshore banking centers” such as Monaco are actually not “offshore” at all, but the term applies to them anyway.

Traditionally, these offshore banking centers have been very attractive to both criminals and to the global elite because they would not tell anyone (including governments) about the money that anyone had parked there.

It has been reported that 80 percent of all international banking transactions involve offshore banks.  A whopping 1.4 trillion dollars is being held in offshore banks in the Cayman Islands alone.

An article that appeared in the Guardian estimated that a third of all the wealth on the entire planet is being kept in offshore banks.  One of the primary reasons for this is tax avoidance.

A lot of wealthy individuals never even visit these tax havens and yet reap the benefits anyway.  The truth is that tax avoidance has become way too easy.  The following example is from a recent Politico article….

A plausible scenario plays out like this: I hire an accountant. Doing her job, my accountant tells me that if I sign a few legal documents and route my money through a small Caribbean island, I could keep more of my paycheck and pay a lower tax rate. I may have earned my money in the United States, but legally I can claim that it was, in fact, earned in a tax haven.

Are you disgusted yet?

You should be.

But even though they avoid taxes like the plague, many of these elitists have the gall to call for higher taxes on all the rest of us.

For example, let’s review what the managing director of the IMF, Christine Lagarde, said in a recent interview….

“Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.”

Even more than she thinks about all those now struggling to survive without jobs or public services? “I think of them equally. And I think they should also help themselves collectively.” How? “By all paying their tax. Yeah.”

It sounds as if she’s essentially saying to the Greeks and others in Europe, you’ve had a nice time and now it’s payback time.

“That’s right.” She nods calmly. “Yeah.”

And what about their children, who can’t conceivably be held responsible? “Well, hey, parents are responsible, right? So parents have to pay their tax.”

Well, it turns out that she doesn’t pay any income taxes at all on her own income….

The IMF chief Christine Lagarde was accused of hypocrisy yesterday after it emerged that she pays no income tax – just days after blaming the Greeks for causing their financial peril by dodging their own bills.

The managing director of the International Monetary Fund is paid a salary of $467,940 (£298,675), automatically increased every year according to inflation. On top of that she receives an allowance of $83,760 – payable without “justification” – and additional expenses for entertainment, making her total package worth more than the amount received by US President Barack Obama according to reports last night.

Her “diplomatic status” allows her to escape all income taxes.

So perhaps she should pay her “fair share” before pointing the finger at anyone else.

But she is not the only one being hypocritical.

The super rich claim that they should pay lower taxes on investment income for the good of our “capitalist system”, but when their banks are about to go under they are more than happy to have those losses be socialized.

As I wrote about yesterday, the stage is already set for another massive round of bailouts when the next great financial crisis strikes.  Once again our taxes will pay for the mistakes of the ultra-wealthy.

The truth is that our system is fundamentally broken.

We need to abolish the income tax and shut down the IRS.

Those two steps alone would do wonders for our economic system.

We also need to shut down the Federal Reserve and break up the too big to fail banks.

Unfortunately, the vast majority of our politicians are not even willing to consider any of those solutions.

So our fundamentally broken system will continue to chug along.

It really is sad.

12 Facts About Money And Congress That Are So Outrageous That It Is Hard To Believe That They Are Actually True

Do you want to get rich?  Just get elected to Congress.  The U.S. Senate and the House of Representatives are absolutely packed with wealthy people that are very rapidly becoming even wealthier.  The collective net worth of the members of Congress is now measured in the billions of dollars.  The people that we have elected to the House and Senate are absolutely swimming in money.  Unfortunately, it is not easy to get elected to Congress.  In this day and age you generally have to be heavily connected to those that are very wealthy to get into Congress because it takes gigantic amounts of cash to win campaigns.  But if you can get in to the club, you pretty much have it made.  The numbers that you are about to read are very difficult to believe and they should deeply sadden you.  They show that Congress has become all about money.  Congressional races are mostly financed by wealthy people, most of the people that we elect to Congress are very wealthy, and they rapidly get wealthier after they are elected.  All of this money has turned our republic into something far different than our founding fathers intended.

The following are 12 statistics about money and Congress that are so outrageous that it is hard to believe that they are actually true….

#1 The collective net worth of all of the members of Congress increased by 25 percent between 2008 and 2010.

#2 The collective net worth of all of the members of Congress is now slightly over 2 billion dollars.  That is “billion” with a “b”.

#3 This happened during a time when the net worth of most American households was declining rapidly.  According to the Federal Reserve, the collective net worth of all American households decreased by 23 percent between 2007 and 2009.

#4 The average net worth for a member of Congress is now approximately 3.8 million dollars.

#5 The net worth of House Minority Leader Nancy Pelosi increased by 62 percent from 2009 to 2010.  In 2009 it was reported that she had a net worth of 21.7 million dollars, and in 2010 it was reported that she had a net worth of 35.2 million dollars.

#6 The top Republican in the Senate, Mitch McConnell, saw his wealth grow by 29 percent from 2009 to 2010.  He is now worth approximately 9.8 million dollars.

#7 More than 50 percent of the members of the U.S. Congress are millionaires.

#8 In 2008, the average cost of winning a seat in the House of Representatives was $1.1 million and the average cost of winning a seat in the U.S. Senate was $6.5 million.  Spending on political campaigns has gotten way out of control.

#9 Insider trading is perfectly legal for members of the U.S. Congress – and they refuse to pass a law that would change that.

#10 The percentage of millionaires in Congress is more than 50 times higher than the percentage of millionaires in the general population.

#11 U.S. Representative Darrell Issa is worth approximately 220 million dollars.  His wealth grew by approximately 37 percent from 2009 to 2010.

#12 The wealthiest member of Congress, U.S. Representative Michael McCaul, is worth approximately 294 million dollars.

So how are members of Congress becoming so wealthy?

Well, there are lots of ways they are raking in the cash, but one especially alarming thing that goes on is that members of Congress often make investments in companies that will go up significantly if legislation that is being considered by Congress “goes the right way”.

This is called a “conflict of interest”, but it happens constantly in Congress and nobody seems to get into any trouble for it.

The following is video of Steve Kroft of 60 Minutes ambushing Nancy Pelosi about one particular conflict of interest involving credit card legislation.  As you can see, she does not want to talk about it….

As noted above, insider trading is perfectly legal for members of Congress.

A law that would ban insider trading by members of Congress has been stalled for years on Capitol Hill.

So has this been a significant benefit to members of Congress?

Well, there has been at least one study that appears to indicate that members of Congress have been much more successful in the stock market than members of the general public have….

A 2004 study of the results of stock trading by United States Senators during the 1990s found that that senators on average beat the market by 12% a year. In sharp contrast, U.S. households on average underperformed the market by 1.4% a year and even corporate insiders on average beat the market by only about 6% a year during that period. A reasonable inference is that some Senators had access to – and were using – material nonpublic information about the companies in whose stock they trade.

Of course all of this could just be a coincidence, right?

Meanwhile, members of Congress keep telling the rest of us that we are just going to have to cut back because times are tough.

For example, during an interview with George Stephanopoulos of ABC News, Nancy Pelosi actually claimed that we should try to encourage poor people to have less children because it costs the government so much money to take care of them….

PELOSI: Well, the family planning services reduce cost. They reduce cost. The states are in terrible fiscal budget crises now and part of what we do for children’s health, education and some of those elements are to help the states meet their financial needs. One of those – one of the initiatives you mentioned, the contraception, will reduce costs to the states and to the federal government.

STEPHANOPOULOS: So no apologies for that?

PELOSI: No apologies. No. we have to deal with the consequences of the downturn in our economy.

This elitist attitude extends all the way into the White House as well.  Earlier this year, Barack Obama made the following statement….

“If you’re a family trying to cut back, you might skip going out to dinner, or you might put off a vacation.”

Meanwhile, the Obamas are living the high life at taxpayer expense.  In a previous article I mentioned one outrageously expensive vacation taken by the Obamas that was paid for by our taxes….

“Back in August, Michelle Obama took her daughter Sasha and 40 of her friends for a vacation in Spain.

So what was the bill to the taxpayers for that little jaunt across the pond?

It is estimated that vacation alone cost U.S. taxpayers $375,000.”

There is a massive disconnect between what our politicians say and what our politicians do.

The high life is good enough for them, but the rest of us have got to “cut back” and suffer becomes times are hard.

But when it comes to money and Congress, the most corrupting influence of all is probably all of the campaign money that gets thrown around.

In America today, it takes gigantic mountains of money to run a successful campaign.

Sadly, the candidate that raises the most money almost always wins.  In federal elections the candidate that raises the most money wins about 90 percent of the time.

More than 5 billion dollars were spent on political campaigns back in 2008.

That represents a huge number of favors that need to be paid back.

In 2012, it is being projected that 8 billion dollars could be spent on political campaigns.

When big corporations and wealthy individuals shovel huge piles of money into political campaigns, it is generally because they expect something in return.

Most of those that get sent to Congress realize that they never would have won if wealthy donors had not showered cash on them.  Most of them understand that they should not bite the hands that feed them if they want the cash to keep rolling in.

Politics in America has become a game that is played by the elite for the benefit of the elite.

Average Americans have the perception that they are involved in the process and that their opinions really matter, but mostly it is just an illusion.

It is so sad.

Meanwhile, members of Congress rapidly get wealthier and average American families continue to suffer.  In fact, the standard of living in the United States has fallen farther over the past three years than at any other time that has ever been recorded in U.S. history.

But for members of Congress the good times just keep on rolling.

Just as it has been for most of human history, the rich rule over the poor.

Does anyone out there believe that we have any hope of changing this?

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