Pope Francis in the Eternal City…Bill De Blasio in the Big Apple…President Obama in the White House…
From the pulpit to the Oval Office to City Hall – capitalism is coming under attack in 2014.
Obama has made income inequality a central bugaboo for the last two years of his presidency. De Blasio is hot on the theme, too. ‘A Tale of Two Cities’ was his campaign theme.
De Blasio figured there were more votes in the poor city than in the rich city…and that the folks on the po’ side of town, mainly in Brooklyn and the Bronx, were getting sick and tired of watching the folks in Manhattan make money. He was right on all counts.
Nothing is more galling that watching a neighbour get rich…unless the neighbour is your brother-in-law. Then it’s intolerable.
In the present circumstances, the poor have a legitimate beef. They claim the rich are getting richer unfairly. They’ve got a point. The rich own stocks and bonds; the poor don’t.
Thanks in no small part to manipulation by the Federal Reserve, US stocks are worth $3.7 trillion more than they were at the start of last year. Through no effort on their part, wealthy stock owners now have a huge additional claim to the world’s wealth.
Money is just a placeholder, after all. It tells you how you stack up against other people.
The amount of available goods and services is always more or less limited. If you gain wealth faster than the increase in output, you must be taking it away from someone else. You have more; your neighbour has less.
At a rate of GDP growth of 2% a year, the US economy adds about $350 billion in wealth. So, if stockholders gained $3.7 trillion, they had to take most of the money from others. They gained $3.35 trillion more than GDP growth. These are new claims against old wealth.
In other words, stockholders win. Others lose.
Someone has to be able to buy the nicest house on the block. Someone has to be able to buy the fanciest car or take the most luxurious vacation. Someone has to win the great game of economic life.
The rich are not only ahead in capital gains, they are also kicking butt in every other income category.
Only the top 10% of households made any real income gains over the last 10 years. All the rest lost ground. And the top 1% has done even better – thanks largely to the big increases in stock and real estate prices.
So what’s wrong with that?
Nothing. Except this sort of underhanded conniving with the feds gives capitalism a bad name. It’s not the capitalists who have gotten the most loot from the feds’ bailouts, ZIRP and QE. It’s the cronies.
Too bad, but people think the rich are capitalists and that capitalists are rich. Not so. A real capitalist takes losses as well as gains. He makes mistakes…and pays for them himself.
Sometimes it’s not about the money. Often, he doesn’t know how much he’s got…and doesn’t care. It’s the journey he likes, not necessarily the destination.
The capitalist is misunderstood. So is capitalism. It is not so much a system; it is what happens when there is no system. It is what people get up to when they are left to their own devices.
We don’t know…but it’s better than being told what to do by some jackass with his own agenda.
for Markets and Money