Wealth Inequality: My Candid Thoughts for a Good Friend …

Income and wealth inequality have always been, and always will be, a subject of intense debate. I think the roots of the debate come down to two sides of one basic idea: entitlement mentality.

I could speak to that idea in great depth. But I won’t so much today. Rather, I want to speak towards a perceived cause, as well as what I feel is the actual cause, of wealth inequality.

A friend sent me the following article from the International Herald Tribune (aka The New York Times):

What started as what I hoped would be a critique of what’s driven capital into the hands of a few holders of much capital, turned into a typical, oversimplified, finger-pointing at the rich-loving GOP. [Editor’s note: I am no fan of the GOP. But, for what it’s worth, I do believe they are more often than not the lesser of two evils. Yeah, it’s not worth much.]

The author’s explanation and argument for growing inequality, and the apparent trend towards oligarchy in the US, seemed to rest almost entirely on the GOP’s tax policy.

That approach is disingenuous at worst and misinformed at best, if you want my honest opinion!

The tax argument merely deflects attention away from the real cause of wealth inequality and back onto an age-old ideological talking point. [Heavy sigh.] Simply put: easing taxes on the wealthy and abolishing the estate tax are not the reasons we’re mired in this dilemma (except so far as the idea clouds the thinking of those involved in the debate.)

Oh … and the author attacks capitalism by tacking on the “patriarchal” prefix. Newsflash to all haters: The things you despise about “capitalism” are actually not naturally occurring in free enterprise and free markets (aka true capitalism). So drop the agenda, stop demonizing capitalism and start calling it what it really is: corporatism, fascism, whatever.

The real problem, which you’re probably hoping I address sometime today, is due to a less conspicuous invasion by government Oligarchs …

Most people call it monetary policy.

But to be more specific than to just say the Federal Reserve’s money-printing is going to bring hyperinflation [fyi, it’s not] and ruin us all [fyi, it might], let me say the dynamic is more about interest rates.

Interest rates represent the price of money — the cost/value of doing business. Interest rates are supposed to rise and fall based on the supply and demand of capital moving through the economy.

Guess what: The Federal Reserve and global central banks are manipulating both the price AND quantity of money. So what?

So … when the price of money does not accurately reflect the fair value perceived by savers and borrowers, they seek out ways to achieve what they perceive as fair or necessary.

Hence the financialization of economies.

Saving capital makes little sense when the yield is deemed to be too low.

Investing money in the real economy makes little sense when the potential ROI is deemed to be too low.

The result? Holders of capital seek returns on their wealth in the stock market, in mergers & acquisitions, in dividend income, etc. etc.

Why take on the risk of real economy investments that necessitate job creation and produce sustainable growth when the returns are more attractive in the financial economy?

Now think about that same question and add in the quantity of money central banks are pumping into the financial system. If it’s all going into the financial economy, then it’s all going to those who are already sitting on a big pile of money.

And guess what else: It’s not just the GOP who enables the Federal Reserve and the government’s monopoly on money. If you believe Democrats are not complicit in this monetary charade, then I have bad news — you’re going to need to have your head examined by a doctor on an approved Obamacare health plan.

If you want to read more about the seeds that have been sewn by policymakers and central banks focused on “financial stability,” then check out my article in Money and Markets from February 25th.]

Finally, let me bring one demonstrably embarrassing excerpt of the aforementioned article to your attention:

Why is this happening? Well, bear in mind that both Koch brothers are numbered among the 10 wealthiest Americans, and so are four Walmart heirs. Great wealth buys great political influence — and not just through campaign contributions. Many conservatives live inside an intellectual bubble of think tanks and captive media that is ultimately financed by a handful of megadonors. Not surprisingly, those inside the bubble tend to assume, instinctively, that what is good for oligarchs is good for America.
Despite the many logical fallacies littered throughout this closing paragraph, I can barely pick my jaw up off the floor upon witnessing the glaring hypocrisy of singling out the Koch brothers in order to 1) demonstrate how great wealth buys great political influence and 2) imply that conservatives are the group most subjected to such intellectually confining thought zones.

It makes me wonder: Has anyone ever heard of Warren Buffet or George Soros or Bill Gates or Mark Zuckerberg? I don’t think they are Republicans. Wealth has always bought political influence irrespective of party lines.

By the end of the International Herald Tribune article, if you think the author maintains even a shred of credibility then you might want to start walking around with a needle — we wouldn’t want your intellect getting trapped in a bubble, would we?

  • Daniel Miller

    It is clear you are a republican and are trying to justify your political position. Keep politics out of this. Stick to educating retail traders on how to trade foreign exchange successfully.

  • Mariela

    Why not this is the real dirty game, the money smear all the positive and humanitarian ideas for better future ,so one day the whole world will pay

  • Ian

    No surprise in this rubbish Jack has been consistently the worst blogger on babypips. Uses politics and emotions in place of reasoned thinking which can only lead to failure. I think it was about this time last year Jack posted a highly emotional piece about the EU “regime” and how it was all going to fail on soon. Even I a novice at that time could see it was all based on politics, emotion and wishful thinking you could practically see the spittle fly as he was typing. I did exact opposite of what was advised and it changed my life. When he wrote article EURUSD was at about 1.30025 it closed that month 1.35147, hardly the reality bite that Jack claimed was happening and as i said was a life changing moment for me. It’s a shame as the rest of the bloggers on here are earnest and as far as i can tell use reality rather than there own politics to inform their posts and trade ideas but JAcks are constantly based on politics and emotion and that is not a clever way to trade regardless of what your personal politics are. Reality trumps all convictions.