The Grandest Larceny of All Time

Gold seems to be coming back fast. The Federal Reserve can’t keep it down.

Of course, the Fed’s monetary meddling doesn’t work. And it will most likely cause a financial disaster.

But the biggest scandal of today’s central bank policies is that it is essentially the grandest larceny of all time.

The normal way in which wealth is distributed may not be perfect, but it is the best nature can do. People earn it. They save it. They steal it. Or they make it on investments.

Or, they just get lucky.

Normally, wealth ends up being distributed in an unplanned and uncontrolled way. People do their best; the chips fall where they may.

But along come the central banks. They’re creating a whole new type of wealth. It is not wage income. It is not the product of capital investments. It is not the result of technology or productivity increases or hard work or self-discipline, or any of the other things that lead to wealth and prosperity.

Instead, it is created by the central bank ‘out of thin air’.

This new wealth is not like the regular kind. These chips don’t fall where they may…they get pushed around first. The Fed creates new money (not more wealth…just new money). This new money goes into the banking system, pretending to have the same value as the money that people worked for. And people with good connections to the banks use this money for financial speculation.

That’s what we’ve been watching in the financial markets for the last four years.

Chris Martenson:

The central plank of Bernanke’s magic recovery plan has been to get everybody back borrowing, spending, and “investing” in stocks, bonds, and other financial assets. But not equally so, as he has been instrumental in distorting the landscape towards risk assets and away from safe harbors.

That’s why a 2-year loan to the U.S. government will only net you 0.22%, a rate that is far below even the official rate of inflation. In other words, loan the U.S. government $10,000,000 (ten million) and you will receive just $22,000 per year for your efforts and lose wealth in the process because inflation reduced the value of your $10,000,000 by $130,000 per year. After the two years is up, you are up $44,000 but out $260,000, for net loss of $216,000.

That wealth, or purchasing power, did not just vanish: It was taken by the process of inflation and transferred to someone else. But to whom did it go?

Where do the chips come to rest?

 

While the Federal Reserve punishes honest savers, stocks and bonds rise every time a hint of more money printing is announced. And the yachts continue to rise as long as the Fed promises more.

The result?

Pew Research tells us:

A Rise in Wealth for the Wealthy; Declines for the Lower 93%

By Richard Fry and Paul Taylor

During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%, according to a Pew Research Center analysis of newly released Census Bureau data.

From 2009 to 2011, the mean wealth of the 8 million households in the more affluent group rose to an estimated $3,173,895 from an estimated $2,476,244, while the mean wealth of the 111 million households in the less affluent group fell to an estimated $133,817 from an estimated $139,896.

These wide variances were driven by the fact that the stock and bond market rallied during the 2009 to 2011 period while the housing market remained flat.

Affluent households typically have their assets concentrated in stocks and other financial holdings, while less affluent households typically have their wealth more heavily concentrated in the value of their home.

From the end of the recession in 2009 through 2011 (the last year for which Census Bureau wealth data are available), the 8 million households in the U.S. with a net worth above $836,033 saw their aggregate wealth rise by an estimated $5.6 trillion, while the 111 million households with a net worth at or below that level saw their aggregate wealth decline by an estimated $0.6 trillion.

Regards,

Bill Bonner
for Markets and Money

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From the Archives…

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How Central Planners are Committed to Ruining the Economy
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Bill Bonner

Bill Bonner

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 MoneyDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

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2 Comments on "The Grandest Larceny of All Time"

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shortchanged
Guest

The middle class get shafted, while the ‘elite’ get the cream. Time to switch camps I think, anyone know how?

slewie the pi-rat
Guest

me! me! i know!

you need a bankstering license or access to one, and ‘legal advice’ on how to not pay any taxes or get prosecuted for fraud.

this gives you access to free “money” coupled with not only the ability to use the “loopholes” like kissinger, himself, but you also get to collect tax “credits” and “paper losses” through the companies in your budding personal conglomerate, and your ability to swap YOUR assets among your OWN “shells”.

everything else is illegal, immoral, or fattening.

so: totally anal scrupulosity would be the way to go.

wpDiscuz
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