Are we about to witness trillions of dollars of “paper wealth” vaporize into thin air? During the next financial crisis, a lot of “wealthy” investors are going to be in for a very rude awakening. The truth is that securities are only worth what someone else is willing to pay for them, and that is why liquidity is so important. Back on April 17th, I published an article entitled “The Global Liquidity Squeeze Has Begun“, but it didn’t get nearly as much attention as many of my other articles do. But now that the liquidity crisis is intensifying, hopefully people will start to grasp the implications of what is happening. The 76 trillion dollar global bond bubble is threatening to implode, and if it does, the amount of “paper wealth” that could potentially be lost during the months ahead is almost unimaginable.
For those that do not consider the emerging liquidity crisis to be important, I would suggest that they check out what the financial experts are saying. For instance, the following comes from a recent Bloomberg report…
There are three things that matter in the bond market these days: liquidity, liquidity and liquidity.
How — or whether — investors can trade without having prices move against them has become a major worry as bonds globally tanked in the past few months. As a result, liquidity, or the lack of it, is skewing markets in new and surprising ways.
Things have already gotten so bad that Zero Hedge says that some fund managers “are starting to panic” about the lack of liquidity in the marketplace…
Fund managers who together control trillions in assets are starting to panic in the face of an acute bond market liquidity shortage.
Dealer inventories have collapsed in the post-crisis regulatory regime, eliminating the traditional source of liquidity in secondary corporate credit markets, while HFTs and central banks have combined to create the conditions under which USTs and German Bunds can, at any given time, trade like penny stocks (October’s Treasury flash crash and May’s dramatic Bund rout are the quintessential examples).
For a moment, just imagine what would happen if someone yelled “fire” in a very crowded movie theater, and the only exit was a very small doggie door that only one person at a time could squeeze through. According to experts, that is what the bond market could soon look like…
“When the unwind comes, like we’ve seen in the past few months, it comes abruptly and sharply as the exit door is tiny,” said Ryan Myerberg, a London-based fund manager at Janus Capital Group Inc., which oversees about $190 billion.
Are you starting to get the picture?
In the end, I believe that those that “squeezed through the door” during this time period are going to be very glad that they got out while they still could.
Another very prominent voice that is deeply concerned about bonds is Carl Icahn. The following is what he told CNBC on Wednesday…
Carl Icahn warned investors on Wednesday that he believes the market is “extremely overheated—especially high-yield bonds.”
“I think the public is walking into a trap again as they did in 2007,” the activist investor told CNBC’s “Fast Money Halftime Report.” “I think it’s almost the duty of well-respected investors, like myself I hope, to warn people, to tell people, that really you are making errors.”
Icahn compared the current market situation to the prerecession days, when mortgage-backed securities were being widely sold. “It’s almost deja vu,” he said.
Let’s talk about high-yield bonds for a moment. Prior to the last financial crisis, they started crashing way before stocks did, and now we see the exact same pattern repeating once again.
Normally high yield credit tracks stocks very closely. When there is a disconnect, that can be a huge sign of trouble. The following chart comes from Zero Hedge, and it brilliantly demonstrates how similar things are today to the period just before the stock market crash of 2008…
It is glaringly apparent that we are due for a “correction”. And even though stocks have recently hit brand new record highs, there are rumblings under the surface that a big move down is right around the corner.
For example, USA Today is reporting that mutual fund investors have pulled more money out of stocks than they have put in for 16 weeks in a row….
In a sign of stock market nervousness on Main Street, mutual fund investors have yanked more money out of U.S. stock funds than they put in for 16 straight weeks.
The last time domestic stock funds had positive net cash inflows was in the week ending Feb. 25, according to data from the Investment Company Institute, a mutual fund trade group.
In the week ended June 17, the most recent data available, mutual funds that invest in U.S. stocks suffered net outflows of $3.45 billion, according to the ICI.
Since late February, U.S. stock funds have suffered estimated outflows of nearly $55 billion. Those net withdrawals come despite the fact the benchmark Standard & Poor’s 500 hit a fresh record high of 2130.82 on May 21 and the Dow Jones industrial average notched a fresh record on May 19.
Those that are smart are getting out while the getting is good.
In all the time that I have been publishing The Economic Collapse Blog, I have never seen stocks so primed for a crash. If you were writing up a scenario for a textbook that imagined what a lead up to a major stock market crash would look like, you could very easily use the last six months as a model.
For a long time, many people out there (including some of my readers) have been very impatiently waiting for the financial markets to crash. But this is not something that any of us should want to see. When this next great financial crisis comes, it is going to be absolutely horrible. Millions upon millions of workers will lose their jobs, and there will be tremendous economic suffering all over the planet.
Tomorrow I plan to share something that is going to shock a lot of people.
It is going to be something that I have never done before, but the time has come.
Did you know that the rate of homeownership in the United States has fallen to a 20 year low? Did you know that it has been falling consistently for an entire decade? For the past couple of years, the economic optimists have been telling us that the economy has been getting better. Well, if the economy really has been getting better, why does the homeownership rate keep going down? Yes, the ultra-wealthy have received a temporary financial windfall thanks to the reckless money printing the Federal Reserve has been doing, but for most Americans economic conditions have not been improving. This is clearly demonstrated by the housing chart that I am about to share with you. If the economy really was healthy, more people would be getting good jobs and thus would be able to buy homes. But instead, the homeownership rate has continued to plummet throughout the entire “Obama recovery”. I think that this chart speaks for itself…
Of course this homeownership collapse began well before Barack Obama entered the White House. Our economic problems are the result of decades of incredibly bad decisions. But anyone that believes that things have “turned around” for the middle class under Barack Obama is just being delusional.
The U.S. homeownership rate fell to the lowest in more than two decades in the fourth quarter as many would-be buyers stayed on the sidelines, giving the rental market a boost.
The share of Americans who own their homes was 64 percent in the fourth quarter, down from 64.4 percent in the previous three months, the Census Bureau said in a report. The rate was at the lowest since the second quarter of 1994, data compiled by Bloomberg show.
Rising prices and a tight supply of lower-end listings have put homes out of reach for some entry-level buyers, who also face strict mortgage standards. The share of U.S. homebuyers making their first purchase dropped in 2014 to the lowest level in almost three decades, the National Association of Realtors reported last week.
And it appears that this trend is actually accelerating. During 2014, the rate of homeownership plummeted by a total of 1.2 percentage points for the year. That was the largest one year decline that has ever been measured.
So why is this happening?
Well, in order to buy a home you have got to have a good job, and good jobs are in very short supply these days.
Over the past decade, the quality of the jobs in our economy has steadily declined as good jobs have been replaced by low paying jobs. In addition, government policies are absolutely murdering small business. At this point, small business ownership in the U.S. is hovering near record lows.
This has resulted in millions of people falling out of the middle class, and it has contributed to the growing divide between the wealthy and the rest of the country.
If our economy was working the way that it should, the middle class would be thriving.
But instead, it is being systematically destroyed. If you doubt this, I have some statistics that I would like to share with you. The following facts come from my previous article entitled “The Death Of The American Dream In 22 Numbers“…
#1 The Obama administration tells us that 8.69 million Americans are “officially unemployed” and that 92.90 million Americans are considered to be “not in the labor force”. That means that more than 101 million U.S. adults do not have a job right now.
#2 One recent survey discovered that 55 percent of Americans believe that the American Dream either never existed or that it no longer exists.
#3 Considering the fact that Obama is in the White House, it is somewhat surprising that 55 percent of all Republicans still believe in the American Dream, but only 33 percent of all Democrats do.
#4 After adjusting for inflation, median household income has fallen by nearly $5,000 since 2007.
From a very early age, we push our young people to go to college, and today more of them are getting secondary education than ever before.
But when they leave school, the “good jobs” that we promised them are often not there, and most of them end up entering the “real world” already loaded down with massive amounts of debt.
According to the Pew Research Center, close to four out of every ten households that are led by someone under the age of 40 are currently paying off student loan debt.
It is hard to believe, but total student loan debt in this country is now actually higher than total credit card debt. At this point, student loan debt has reached a grand total of 1.2 trillion dollars, and that number has grown by an astounding 84 percent just since 2008.
If you are already burdened with tens of thousands (or in some cases hundreds of thousands) of dollars of debt when you get out of school and you can’t find a decent job, there is no way that you are going to be able to afford to buy a house.
So we have millions upon millions of young people that should be buying homes and starting families that are living with their parents instead.
Back in 1968, well over 50 percent of all Americans in the 18 to 31-year-old age bracket were already married and living on their own.
Did you know that 65 percent of all children in the United States live in a home that receives aid from the federal government? We live at a time when child poverty in America is exploding. Yes, the U.S. economy is experiencing a temporary bubble of false stability for the moment, but even during this period of false stability the gap between the wealthy and the poor continues to rapidly expand and the middle class is being systematically destroyed. And sadly, this is having a disproportionate impact on children. This is happening for a couple of reasons. First of all, poorer households tend to have more children than wealthier households. Secondly, most people tend to have children when they are in their young adult years, and right now young adults are being absolutely hammered by this economy. As a result, things just continue to get even worse for children living in this country. Here are 14 facts that show that the number of children in America living in poverty this Christmas is at an all-time record high…
#1 The National Center for Children in Poverty says that 45 percent of all U.S. children belong to low income families.
#2 According to a Census Bureau report that was released just this week, 65 percent of all children in America are living in a home that receives some form of aid from the federal government…
“Almost two-thirds (65 percent) of children,” said the Census Bureau, “lived in households that participated in at least one or more of the following government aid programs: Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Medicaid, and the National School Lunch Program.”
#3 According to a report recently released by UNICEF, almost one-third of all children in this country “live in households with an income below 60 percent of the national median income”.
#4 When it comes to child poverty, the United States ranks 36th out of the 41 “wealthy nations” that UNICEF looked at.
#5 An astounding 45 percent of all African-American children in America live in areas of “concentrated poverty”.
#640.9 percent of all children in the United States that are living with only one parent are living in poverty.
#7 These days, a lot of single mothers are really, really struggling to survive. A decade ago, the number of women in America that had jobs outnumbered the number of women in America on food stamps by more than a 2 to 1 margin. But now the number of women in America on food stamps actually exceeds the total number of women that have jobs.
#9 According to a report that was released last month by the National Center on Family Homelessness, the number of homeless children in the United States has reached a new all-time high of 2.5 million.
#13 One of the primary reasons why kids are suffering so much is because their parents are simply not making enough money. This is especially true for parents of young children. For example, check out the following numbers from the Atlantic…
Since the Great Recession struck in 2007, the median wage for people between the ages of 25 and 34, adjusted for inflation, has fallen in every major industry except for health care.
In retail, wholesale, leisure, and hospitality—which together employ more than one quarter of this age group—real wages have fallen more than 10 percent since 2007. To be clear, this doesn’t mean that most of this cohort are seeing their pay slashed, year after year. Instead it suggests that wage growth is failing to keep up with inflation, and that, as twentysomethings pass into their thirties, they are earning less than their older peers did before the recession.
#14 Overall, the quality of the jobs in America continues to decline. At this point, most Americans do not bring home enough income to support a middle class lifestyle for their families. Below I have shared an excerpt from an article that I published a while back…
The following are some statistics about wages in the U.S. from a Social Security Administration report that was recently released…
-39 percent of American workers made less than $20,000 last year.
-52 percent of American workers made less than $30,000 last year.
-63 percent of American workers made less than $40,000 last year.
-72 percent of American workers made less than $50,000 last year.
In addition to all of these numbers, there is also a lot of anecdotal evidence that families with children are really struggling right now.
For example, McDonald’s has traditionally been a place where poor and middle class families have taken their children for a cheap meal. But the restaurant chain just released the worst sales numbers that we have seen in more than a decade.
And the really bad news is that this is just the beginning of the economic pain for families with children. The U.S. economy is in a bubble period right now, and the authorities have been trying with all of their might to keep the bubble inflated.
Just imagine a bodybuilder that is pressing with all of his might to do one more rep on the bench press. That is essentially where we are at. In a recent piece, Brian Pretti summarized some of the extraordinary measures that global central banks have taken to keep the economic bubble inflated…
Since early 2009, central banks globally have printed more than $13 trillion. In addition, governments across the planet have increased their borrowings at historic proportions (the US just crossed $18T – another new high!), all in an effort to stimulate economies and avoid deflationary pressures. Total US Federal debt has more than doubled in five years, an increase of $9.5 trillion and counting.
Despite all of these efforts, the best that we have achieved is economic stagnation.
And now it is becoming clear that the overwhelming deflationary forces around the globe are starting to win the battle. The central banks have used up their ammunition and they still have not turned things around. In fact, as Ambrose Evans-Pritchard so eloquently put it recently, what we see all around us is “evidence of a 1930s-style depression, albeit one that is still contained”…
What is clear is that the world has become addicted to central bank stimulus. Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another.
These are astonishing figures, evidence of a 1930s-style depression, albeit one that is still contained. Nobody knows what will happen as the Fed tries to break out of the stimulus trap, including Fed officials themselves.
But will it still be contained once the next major financial crash strikes?
As I discussed yesterday, there has never been a time when conditions have been more ideal for a financial crisis since the last one happened in 2008.
So as bad as things are for the children of America right now, they are only going to get worse.
In the years ahead may we all have great compassion for these victims of our incredibly foolish economic mistakes.
Did you know that the number of gold bars being purchased by ultra-wealthy individuals has increased by 243 percent so far this year? If stocks are just going to keep soaring, why are they doing this? On Thursday, the Dow Jones industrial average and the S&P 500 both closed at record highs once again. It is a party that never seems to end, and there are a lot of really happy people on Wall Street these days. But those that are discerning realize that we witnessed the exact same kind of bubble behavior during the dotcom boom and during the run up to the last financial crash in 2007. The irrational exuberance that we are witnessing right now cannot go on forever. And the bigger that this bubble gets, the more painful that it is going to be when it finally bursts. Those that get out at the peaks of the market are the ones that usually end up making lots of money. Those that ride stocks all the way up and all the way down are the ones that usually end up getting totally wiped out.
To get an idea of how irrational the markets have become, all one has to do is to look at Twitter.
Would you value “a horribly mismanaged company” that is less than 10 years old and that has never made a yearly profit at 31 billion dollars?
Well, that is precisely how much the financial markets say that Twitter is worth at this moment.
Even though Twitter will probably never be much more popular than it is right now, it continues to bleed money profusely. On a GAAP (generally accepted accounting principles) basis, Twitter lost an astounding 145 million dollars during the second quarter of 2014…
Twitter’s GAAP net loss totaled $145 million, up from $42 million a year ago. On a GAAP basis, Twitter lost $0.24 per share. Investors, however, were not expecting Twitter to be profitable by GAAP measurements, so the loss isn’t too much of a drag.
Why would anyone want to invest in such a money pit?
Currently, Twitter (TWTR) is valued at $31 billion.That’s 18X revenue, but the catch is that the revenue in question is it’s lifetime bookings over the 18 quarters since Q1 2010.
When it comes to profits, the numbers are not nearly so promising! For the LTM period ending in June, TWTR booked $974 million of revenue and $1.7 billion of operating expense. That why “NM” shows up in its LTM ratio of enterprise value to EBITDA. It turns out that its EBITDA was -$704 million. In fact, its R&D expense alone was 83% of revenues.
Of course the truth is that Twitter should be able to make money.
And it probably would be making money if it was being managed better.
The following is what Silicon Valley venture capitalist Peter Thiel said about Twitter on CNBC the other day…
“It’s a horribly mismanaged company — probably a lot of pot-smoking going on there.”
But because Twitter is a “hot tech stock” investors are literally throwing money at it.
And there are many other tech companies that have similar stories. Off the top of my head, Snapchat, LinkedIn, Yelp and Pinterest come to mind.
Fueled by the quantitative easing policies of the Federal Reserve, U.S. stocks have enjoyed an unprecedented joy ride.
However, as David Stockman recently told Yahoo Finance, the subsequent crash is likely to be enormously painful…
“I think what the Fed is doing is so unprecedented, what is happening in the markets is so unnatural,” he said. “This is dangerous, combustible stuff, and I don’t know when the explosion occurs – when the collapse suddenly is upon us – but when it happens, people will be happy that they got out of the way if they did.”
The behavior that we are observing in the stock market simply does not reflect what is happening in the economy overall whatsoever.
In many ways, U.S. economic fundamentals just continue to get even worse. Small business ownership in the United States is at an all-time low, the labor force participation rate is the lowest that it has been in 36 years, and the U.S. national debt has grown by more than a trillion dollars over the past 12 months.
But on Wall Street right now, there is very little fear that the party is going to end any time soon.
The following is how Seth Klarman recently described the market complacency that he is seeing at the moment…
To put it a bit differently, writer and investor John Mauldin is right when he says that there is “a bubble in complacency.” Fear has effectively been banished. The members of the Fed know it. Stock traders who chase the market to new highs almost daily know it. Implied volatilities (and realized volatilities) are historically low (the VIX Index recently hit a seven-year low), and falling. The Bank for International Settlements recently cautioned that financial markets are euphoric and in the grip of an aggressive search for yield. The S&P has gone over 1,000 days without a 10% decline, according to Birinyi Associates. Dutch and French 10-year government bond yields are at 500 and 250 year lows, respectively; Spain, 225 years. Spanish debt yields were recently inside of U.S. levels.
But as Klarman also observed, just because “investors have been seduced into feeling good” does not mean that this current bubble is any different from what we witnessed back in 2007…
It’s not hard to reach the conclusion that so many investors feel good not because things are good but because investors have been seduced into feeling good—otherwise known as “the wealth effect.” We really are far along in re-creating the markets of 2007, which felt great but were deeply unstable when shocks started to pile up. Even Janet Yellen sees “pockets of increasing risk-taking” in the markets, yet she has made clear that she won’t raise rates to fight incipient bubbles. For all of our sakes, we really wish she would.
Meanwhile, the ultra-wealthy are making moves to protect themselves from the inevitable chaos that is coming.
For example, the Telegraph recently reported that sales of gold bars to wealthy customers are up 243 percent so far in 2014…
The super-rich are looking to protect their wealth through buying record numbers of “Italian job” style gold bars, according to bullion experts.
The number of 12.5kg gold bars being bought by wealthy customers has increased 243 percent so far this year, when compared to the same period last year, said Rob Halliday-Stein founder of BullionByPost.
“These gold bars are usually stored in the vaults of central banks and are the same ones you see in the film ‘The Italian Job’,” added David Cousins, bullion executive from London based ATS Bullion.
Do they know something that we don’t?
The ultra-wealthy are able to stay ultra-wealthy for a reason.
They are usually a step or two ahead of most of the rest of us.
And any rational person should be able to see that this financial bubble is going to end very, very badly.
The global economy is structured to systematically funnel wealth to the very top of the pyramid, and this centralization of global wealth is accelerating with each passing year. According to the United Nations, 85 super wealthy people have more money than the poorest 3.5 billion people on the planet combined. And 1.2 billion of those poor people live on less than $1.25 a day. There is something deeply, deeply broken about a system that produces these kinds of results. Seven out of every ten people on the planet live in countries where the gap between the wealthy and the poor has increased in the last 30 years. Despite our technological advances, somewhere around a billion people go to bed hungry every single night. And when our fundamentally flawed financial system finally does collapse, it will be the poor that will suffer the worst.
Now, let me make one thing clear at the outset.
Big government and more socialism are not the answer to anything. Big government and more socialism almost always result in increased oppression and increased poverty. If you want to see where that road ultimately leads to, just look at North Korea.
What we need is a system that empowers individuals and families to work hard, be creative, build businesses and to take care of themselves.
But instead, we have a system where all power and all wealth are increasingly controlled by giant banks and giant corporations that are in turn controlled by the global elite. The “financialization” of the global economy has turned almost everyone on the planet into “deft serfs”, and the compound interest on all of that debt enables the global elite to constantly increase their giant piles of money.
As I have written about previously, the total amount of government debt in the world has increased by about 40 percent since the last recession.
And when you consider all forms of debt, the grand total for the planet is now up to a whopping 223 trillion dollars.
This enables the super wealthy to constantly become even wealthier. It is like a giant vacuum cleaner that sucks wealth out of all of our pockets and transfers it to them.
Nearly 21 million people are working as modern day slaves, falling victim to trafficking, forced labor and sexual exploitation, a new UN report finds. The illicit market in exploited people generates billions of dollars in profit worldwide.
The report by the International Labour Organization (ILO), which draws on information gathered in a 2012 survey, also found that annual profits stemming from forced labor are three times higher than previous estimates.
“Put into perspective, the 21 million victims in forced labor and the more than US$150 billion in illegal profits generated by their work exceeds the population and GDP of many countries or territories around the world,” the ILO says.
Dialu Nial’s life changed forever when he was held down by his neck in a forest and one of his kidnappers raised an axe to strike.
He was asked if he wanted to lose his life, a leg or a hand.
Six days earlier, Nial had been among 12 young men being taken against their will to make bricks on the outskirts of one of India’s biggest cities, Hyderabad.
During the journey, they got a chance to escape and ran for it – but Nial and a friend were caught and this was their punishment.
And yes, he did end up losing his hand.
Fortunately, most of us are not facing that kind of oppression.
But that doesn’t mean that we aren’t slaves. The borrower is the servant of the lender, and over the past four decades the total amount of debt in America has gone from about 2.2 trillion dollars to nearly 60 trillion dollars. Many of us work as “debt serfs” our entire lives, and we never even know the names or the faces of those that we are making rich as we slowly pay off our debts.
And all of this debt is one of the primary factors destroying the middle class in America. Just this past week, the New York Times reported that the wealth of “the typical household” in the United States has declined by 36 percent over the past decade…
The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially.
The Russell Sage study also examined net worth at the 95th percentile. (For households at that level, 94 percent of the population had less wealth and 4 percent had more.) It found that for this well-do-do slice of the population, household net worth increased 14 percent over the same 10 years. Other research, by economists like Edward Wolff at New York University, has shown even greater gains in wealth for the richest 1 percent of households.
Does that upset you when you read that?
And the outlook for the next generation is even worse. Most of our young adults are absolutely drowning in student loan debt and other forms of debt, and wages for new college graduates are terrible.
Sadly, most people don’t even realize how the global financial system works or why the gap between the super wealthy and the rest of us continues to grow so rapidly.
It has been estimated that the wealthiest one percent currently have 110 trillion dollars.
That is 65 times more wealth than the bottom half of the global population combined.
They are hoarding wealth as we approach some of the most unstable days in all of human history.
So how do you think all of this will play out? Please feel free to share your thoughts by posting a comment below…
Everywhere you look, Americans appear to be extremely obsessed with wealth and money. These days, networks such as CNN endlessly run “news stories” with titles such as “Best cars for the super rich“. We have television shows where people proudly show off how wealthy they are, and it seems like Hollywood is putting out an endless parade of movies that glorify the lifestyles of the elite. We have hordes of motivational speakers and “life coaches” that will teach you how to be “more successful” in life, and every small movement in the stock market is carefully monitored by the mainstream news media. Even in the world of faith, we have an entire class of ministers known as “prosperity preachers”, and many of those ministers wear that label quite proudly. Yes, those that grew up in the 1980s may have been the “greed is good” generation, but the truth is that they didn’t have anything on us. As a society we love money, and we are not ashamed to admit it. In fact, there are times we absolutely revel in it. For example, Time Magazine published an article this year entitled “Science Proves It: Greed Is Good” and hardly anyone even raised an eyebrow. But where will America’s sick obsession with wealth and money end? Could it end up destroying us?
I got the idea for this article when I was browsing through CNN’s website. The following are eight “news stories” about wealth that were featured on CNN just on Thursday alone…
It has been said that we tend to talk about the things that we are obsessed with.
And CNN is clearly obsessed with wealth.
Not that there is anything wrong with having money.
If none of us had any money, we would all be homeless and starving. So the truth is that money can be very useful. But when it becomes an idol, that is when it becomes a problem.
And because we have taught entire generations of Americans that becoming wealthy is one of the primary goals in life, it is creating a tremendous amount of envy, jealousy, frustration and anger among those that have not been able to become wealthy.
In recent years, the level of bitterness and resentment that the rest of the nation has toward the very wealthy has risen to an unprecedented level. It has become exceedingly apparent that the system is designed to funnel wealth to the very top of the food chain, and many of those at the bottom of the food chain are starting to become extremely upset about this.
Since the last financial crisis, almost all of the income gains have gone to the top one percent of all income earners. The following comes from a recent Huffington Post article…
Economic statistics show that incomes for the top 1 percent of U.S. households soared 31 percent from 2009 through 2012, after adjusting for inflation, yet inched up an average of 0.4 percent for those making less. Many economists are sounding alarms that the income gap, greater now than at any time since the Depression, is hurting the economy by limiting growth in consumer spending.
And income inequality has become such a hot topic that it has even produced a New York Times bestseller by a French economist named Thomas Piketty. This is what CBS News recently had to say about his book…
His book has landed on that debate like a bomb. Piketty’s thesis: that the rate of return on capital, such as real estate, dividends and other financial assets, is racing away from the rate of growth required to maintain a healthy economy. If that trend continues for an extended period of time — if wealth becomes ever more concentrated in the hands of a few — then inequality is likely to get worse, says Piketty, 43, who started his academic career as an assistant professor at the Massachusetts Institute of Technology and who now teaches at the Paris School of Economics.
Another reason “Capital” has caught the public’s attention is that inequality is evident in what are by now a host of familiar symptoms. Stagnant pay, except among the super-rich. Soaring health care and education costs. The diminished expectations commonly found in young, especially those lacking college degrees, and old alike, as retirement becomes something to endure rather than to enjoy.
On a global scale, the wealthiest one percent now have 65 times more wealth than the entire poorest half of the global population does.
That is an astounding figure.
Most people don’t realize this, but the ultra-wealthy have approximately 32 trillion dollars (that we know about) stashed in offshore banks around the planet. That amount of money would almost be about enough to pay off the entire U.S. national debt and buy every good and service produced in the United States for an entire year.
Meanwhile, the poorest half of the world’s population only owns about 1 percent of all global wealth, and about a billion people throughout the world go to bed hungry every night.
If greed was going to save the world, it would have done it by now. At this point, the wealthy have accumulated more wealth than they ever have before. For example, according to Zero Hedge the total amount of wealth in the U.S. has just hit a brand new record high…
Earlier today the Fed released its latest Flow of Funds report, which showed that in the first quarter household net worth rose from last quarter’s $80.3 trillion to a new record high of $81.8 trillion, driven by a $1.5 trillion increase in total assets while household liabilities were virtually unchanged in the quarter. And since the Fed is onboarding all the liabilities why should households bother with debt: that’s what the central bank balance sheet is for.
As for the proceeds, they go to the mega rich: of the $81.8 trillion in net worth, 70.4% of the total amount or $67.2 trillion, was in financial assets: the higest it has ever been courtesy of just one person: Ben Bernanke, and to a far lesser extent Janet Yellen who however is tasked with picking up Bernanke’s pieces.
But of course most people who are rich are only rich on paper.
As noted above, 67.2 trillion dollars of the total of 81.8 trillion dollars of wealth in this nation is made up of financial assets.
Did you know that the 85 richest people in the world have about as much wealth as the poorest 50% of the entire global population does? In other words, 85 extremely wealthy individuals have about as much wealth as the poorest 3,500,000,000 do. This shocking statistic comes from a new report on global poverty by Oxfam. And actually Oxfam’s report probably significantly underestimates the true scope of the problem, because Oxfam relies on publicly reported numbers. At the very top of the food chain, the global elite are masters at hiding their wealth. In fact, as I have written about previously, the global elite have approximately 32 trillion dollars (that we know about) stashed in offshore banks around the world. That would be about enough to pay off the entire U.S. national debt and buy every good and service produced in the United States for an entire year. These elitists live on an entirely different planet than the rest of us do. In fact, according to Oxfam, the richest one percent of the global population has 65 times more wealth than the bottom half of the global population combined.
There is certainly nothing wrong with making money. In fact, the founders of the United States intended for this nation to be a place where free markets thrived and where everyone could pursue their dreams. Unfortunately, this country (along with the rest of the world) has moved very much in the opposite direction. Today, we have a debt-based global financial system which is dominated by gigantic predator corporations and big banks. Working together with national governments, these corporations and banks have constructed a system that I like to call “Corporatism” in which the percentage of all global wealth that is being funneled to the very top of the pyramid steadily grows over time.
The Founding Fathers were very correct to be very suspicious of large concentrations of power. In the early days of the United States, the federal government was very small and the size and scope of corporations was greatly limited. Our nation thrived and a huge middle class blossomed.
Sadly, over the past several decades the pendulum has completely swung in the other direction. Today, our society is completely and totally dominated by big banks, big corporations and big government.
And of course this is also happening in virtually every other nation on the face of the planet. The global elite have rigged the game to send just about all of the rewards their way, and it is working. The following are facts taken directly from Oxfam’s latest report…
•Almost half of the world’s wealth is now owned by just one percent of the population.
•The wealth of the one percent richest people in the world amounts to $110 trillion. That’s 65 times the total wealth of the bottom half of the world’s population.
•The bottom half of the world’s population owns the same as the richest 85 people in the world.
•Seven out of ten people live in countries where economic inequality has increased in the last 30 years.
•The richest one percent increased their share of income in 24 out of 26 countries for which we have data between 1980 and 2012.
•In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.
Starting on Wednesday, several thousand members of the global elite will gather for the World Economic Forum meetings in Davos, Switzerland. The following is how USA Today described this conference.
For several days at the end of January, presidents, prime ministers, monarchs and corporate titans jostle with actors, rock stars and major influencers for top billing at the annual meeting of the World Economic Forum. The confab takes place in the Alpine village of Davos, about 90 miles southeast of Zurich, and for a brief spell each year the pristine ski resort half-sheds its Graubünden roots and becomes a ground zero for the political and business elite.
Unless you are independently wealthy, you can forget about going to this conference. A ticket to Davos is going to cost you about $30,000, and that is on top of the $55,000 that it costs to join the organization.
Needless to say, it is an organization of the elite, by the elite and for the elite.
It’s time to press the “reset” button on the world, the founder of the World Economic Forum said Wednesday, addressing media ahead of the WEF’s much ballyhooed annual meeting in Davos-Klosters, Switzerland, that gets underway in a week’s time.
“The world is complex, it’s fast-moving, it’s interconnected, and we in Davos want to provide a mirror to the world as it is. It is not a meeting devoted to one set of issues. It’s a meeting that address the complexity of our world,” said Klaus Schwab, the WEF’s founder and executive chairman.
At first glance, that sounds pretty good.
Personally, I would love to hit a “reset” button for the global economy.
But what the elite mean by “reset” is much different from what most of the rest of us would mean.
“At an international level, the formal architecture for global governance was not designed for the interdisciplinary challenges and collective action problems of today. As a result, international cooperation has yet to fully enter the information age and capture its associated productivity gains.”
For the global elite, the answers to our problems always involve more centralization and more “global governance”. In other words, the answers to our problems always involve giving them more control and more power.
The elite never actually want the pendulum to swing back in the direction of the “little guy”. The elite are generally pleased with how the game is being played because they are winning.
Most people don’t even realize that they are participants in a debt-based neo-feudalist system in which money is being used as a form of social control.
As I have written about previously, there is about 190 trillion dollars of debt in the world, but global GDP is only about 70 trillion dollars.
There is no way that all of this debt could ever be paid off at one time. It is mathematically impossible. Over time, all of this debt transfers the wealth of the planet away from us and to the global elite. If this game was allowed to go on long enough, eventually they would have nearly all of it.
And some would argue that we are already getting close to that point. A study by the World Institute for Development Economics Research discovered that the bottom half of the global population only owns approximately 1 percent of all wealth, and at this point about a billion people throughout the world go to bed hungry every night.