A Dismal Share

PARIS – Suddenly, it has turned very cold in Paris. The sky is gray. 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 room with a viewA chilly Paris, as seen from our balcony

Photo credit: fmh


The Dow fell back below 17,000 on Wednesday, after Wal-Mart 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. Why?


WMTA bad day for WMT on the heels of a bad year for WMT – neither do its customers have enough money to buy stuff, nor is WMT able to keep its margins intact while raising the salaries of low-skilled workers (which it has done preemptively to head off even greater demands) – click to enlarge.


There are about 100 million people in the U.S. 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 Daily Reckoning:


“[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.”


Employment rate working age populationEmployment rate of the working age population – everything is not alright – click to enlarge


And according to our old friend Jim Davidson, the U.S. now has wealth inequality rivaled 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.


Yellen_dove_09.17.2014_largeFOMC meeting

Cartoon by B. Rich


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?


crony_capitalismIt sure went somewhere…

Cartoon via rocklandvoice.com


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 U.S. 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.


3_Branches_of_Govt_Greed_Cronyism_PropagnadaEven Billy knows…

Cartoon byStan Fill


“You complain about all this stuff,” said one of the attendees on our Money Week 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.


Charts by: StockCharts, St. Louis Federal Reserve Research


Image captions by PT


The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.




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2 Responses to “End the Fed”

  • Kafka:

    Bill – good reading, as is normal.

    Ending the Fed means ending one of the most obtuse, but quietly effective tools to transfer wealth from working people to our self-appointed aristocracy. Stealing without having to deal with the messy end of a knife or a gun.

    I still don’t see where this ends without blood. Even billionaires need to eat, and any home they live in can be droned, so when this hot pot boils over, there is no where on this earth to hide anymore.

    I would venture a guess that most of our overlords have never read the Rise and Fall of the Roman Empire, so they would be blissfully unaware that Roman Emperors feared their bodyguards more than anything else; and as you know they feared them for good reason.

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