It's a toss-up which is wider:
the widening gap between the top 10% and the bottom 60%, or the gap
between the complacency of the top 10% and the reckoning that's
overdue. Call it karma, just desserts or the wheel of history, the
unfairness and inequality of a rigged system generates blowback, and
the longer it is suppressed, the greater the eventual swing of the
pendulum to the opposite extreme.
But really, who cares about
the bottom 60% being left in the dust by a system rigged to benefit
the top 10% because hey, the S&P 500 is going to 6,000 —yippee!
More free money for everyone who bought assets years or decades ago
before the Federal Reserve decided the best way to "boost
growth" was to inflate assets to generate "the wealth
effect" among those who already owned the assets being
inflated.
And once the fortunate few were awarded the vast
majority of the Fed's unearned largesse - the top 10% own 93% of
stocks - they have the wiggle room to ignore inflation. The bottom
60% living on wages - well, not so much.
Readers remind me
that many of Americans' financial ills are self-inflicted: poor money
management, instant gratification over making sacrifices for
long-term gains, getting into credit card debt with 22% interest
rates, buying vehicles they can't afford, paying $100 for an oil
change instead of learning how to change the oil themselves, and so
on - all of which indeed make modest financial circumstances much
more difficult.
Having been in the bottom 60% in terms of
earnings most of life, I constantly preach the virtues of frugality
and anti-consumerism, learning how to do things for ourselves so we
don't have to pay for them, and building networks of reciprocity - I
help you, you help me - that make all the difference between
financial security and insecurity. These are the fundamentals of
Self-Reliance.
But better money management doesn't erase the
rigged system that has sluiced the lion's share of the nation's gains
to the top 10% and left the bottom 60% in the dust. If the rising
tide raises all ships, then how is it the bottom 50% own a
rounding-error share of the nation's financial wealth - 2.6%:
The
bottom 50% own 11% of the nation's real estate value - a mere fourth
of the 44% owned by the top 10%.
The top 10% excel at a few
things they rarely receive full credit for: one is choosing their
parents wisely, another is believing that since they're doing great,
everyone is doing great - a self-serving delusion that doesn't
reflect reality: those who don't own a share of the $45 trillion in
stock market wealth weren't issued rose-colored glasses.
The
10% below the top 10% reckon they're "middle class," but
how can the top 20% be "middle class"? The reality that the
"middle class" has eroded into the top 20% haves and the
top layer of the have-nots who still harbor illusions is conveniently
obscured by economic cheerleaders lumping the fantastic gains reaped
by the top 10% in with the bottom 90% and declaring the entire
population is reaping splendid gains. But statistical trickery can't
obscure the systemic unfairness of a rigged game.
While many
finger the abandonment of the gold standard as the Original Sin, this
ignores an economic change of equal consequence: the collapse of all
societal values other than increasing shareholder value, which
optimized hyper-financialization (strip-mining the real economy to
enrich financiers and corporations) and hyper-globalization, which
strip-mined the nation to enrich the top 10% who own 93% of all
corporate shares.
These forces drastically eroded the
purchasing power of wages to the benefit of the owners of assets, who
skimmed the vast majority of the immense financial gains of
hyper-financialization and hyper-globalization. Those who depend on
wages lost out, those who owned assets enjoyed ten-baggers not from
genius but from mere luck.
So here we are, with a handful of
winners declaring the system is working great and high-fiving each
other, too busy congratulating themselves to see the tsunami of karma
racing toward shore.
Those of us who did nothing more than buy
a house and invest in index funds - the same common-sense steps taken
by previous generations to earn modest returns - and who through no
special effort reaped enormous gains thanks to the Fed's "wealth
effect" - might benefit from a bit of humility by admitting our
gains are the result of a system rigged to benefit all who bought
assets before "the wealth effect" rocket-launched the value
of our assets. The word few dare utter is "unearned."
In
the end, it won't matter what we think, like, believe or hope, for
reversal is the movement of Tao. Put colloquially, the pendulum of
inequality driven by a rigged system will swing to the other extreme,
and claiming that payback is somehow "unfair" won't change
the trajectory or the volatility.
by Charles Hugh Smith at oftwominds.com on August 25, 2024
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