End the Fed

Suddenly, it has turned very cold in Paris.

The sky is grey. People wear coats and scarves. It almost feels as though it could snow.

Seeing the weather turn against us, we wonder what else might be coming.

A chilly Paris, as seen from our balcony

As we predicted, the Dow fell back below 17,000 yesterday, after Walmart warned that it was having trouble selling things to people with no money — at least online.

Its e-commerce efforts don’t seem to be paying off as quickly as it hoped.


There are about 100 million people in the US who earn about the same average wage as the people of Argentina, Estonia, or Bosnia-Herzegovina.

Here’s President Reagan’s former budget advisor David Stockman in The Markets and Money:

‘[A]ccording to the Social Security Administration’s wage records, there were 100 million workers who held any kind of paying job during 2013, who earned a collective total of just $1.65 trillion that year.

That amounts to the incredibly small sum of just $16,500 per average worker. And not for a small slice of the labor force but fully two-thirds of all Americans with a job.

A dismal share

And according to our old friend Jim Davidson, the US now has wealth inequality rivalled only by Russia.

There are a few people at the top earning a lot of money. And there are a lot at the bottom earning little money.

Jim elaborates in his soon-to-be-released book, tentatively titled The Breaking Point:

Evidence of how far the bottom 50% of America’s wealth distribution has fallen comes from Credit Suisse in its 2014 Global Wealth Report.

As interpreted by Mike Krieger, the data show that the bottom half of America’s wealth distribution ranks dead last among 40 major economies, with “just 1.3% of national wealth. Only Russia comes close to that dismal share, at 1.9%.”

At the Diary, how much other people earn is none of our business. And we have no truck with those who urge the feds to ‘do something’ — by which they mean take away money from rich Peter and give it to poor Paul.

The feds are not very good at it. Much of the money sticks to their hands. Also, Peter has friends in high places. Speaking fees, lobbying jobs, campaign contributions — when Peter talks, the feds listen.

Besides, we’re suspicious of the feds’ motives. The common critique of Fed policy is that it was a ‘mistake’ to push down rates so low for so long. And now, the poor federales are having trouble getting rates up off the floor.

Last month, Janet Yellen — supposedly in good faith — believed the world was not ready for it.

Larceny and fraud

At the Diary, we don’t believe the feds have committed an error; we believe they’ve committed a crime.

Larceny and fraud are the ones that spring to mind. Though we suspect a good prosecutor could tag them with counterfeiting and embezzlement, too. Throw in money laundering, conspiracy, and jaywalking — now you’re looking at 10 to 20 in the big house.

The essence of larceny is taking something that doesn’t belong to you without permission.

Imagine the poor retiree. He has saved his money all his life. Now, in his twilight years, is he not entitled to his recompense?

But instead of earning a decent rate on his savings, he gets the ultra-low rate that is fiddled by the feds. He gets almost nothing.

This is not just an abstract point to be argued by economists. It is theft.

Think of the aging person who had $100,000 saved in 2007. If he had earned 4% a year on his money, he would have earned $28,000 in interest since then. But if he got only 1% (or less), he would be short $21,000.

What happened to it? Who took it?

End the Fed

There are two parties to robbery — the taker and the takee.

We have seen what happened to the victims. They are too busy picking through trash bins to go to the Walmart website.

But what about the takers?

They are busy too — lobbying…eating foie gras and caviar…and offering to save the world with increasingly radical monetary policies. They are, of course, those who pay net interest, not those who earn it.

Who exactly?

The US federal government is the biggest debtor in the world (in terms of the total dollar amount owed).

Who gained the most from the federales’ policy?

The federales themselves.

And who else?

The cronies, of course — Wall Street and corporate America. They were rich before the massive intervention began in 2008. Now, they are much richer.

‘You complain about all this stuff,’ said one of the attendees on our investment cruise last week, probably speaking for thousands of readers.

‘But you never offer any solutions. What would you do about it?’

‘We would do nothing. We would undo a lot,’ we replied.

The first thing we would undo is the Fed’s control of the financial system. Let takees get the interest they are entitled to. And let the takers get what they’ve got coming to them.


Bill Bonner,

For Markets and Money, Australia

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Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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