Pope Francis in the Eternal City, Bill de Blasio in the Big Apple, Obama in the White House…
From the pulpit to the Oval Office to city hall – capitalism is coming under attack in 2014.
Obama has made income inequality a central bugaboo for the last two years of his presidency. De Blasio is hot on it, too. A tale of two cities was his campaign theme. De Blasio figured there were more votes in the poor city than in the rich city. He gambled that the folks on the po’ side of town – in Brooklyn and the Bronx – were getting sick and tired of watching Manhattan folks make money. And he was right on both counts.
Nothing is more galling that watching a neighbour get rich, unless that neighbour is your brother-in-law. Then it’s intolerable.
In the present circumstances, the poor have a legitimate beef. They claim the rich are getting richer unfairly. They’ve got a point. Rich people own stocks and bonds. Thanks to manipulation by the government (through the Fed), US stocks are worth $3.7trn more than they were at the start of last year. With no effort, wealthy stock owners now have a huge additional claim to the world’s wealth.
Money is just a placeholder. It lets you know how you stack up against others. The amount of available goods and services is always limited, more or less if you gain wealth faster than general output increases, you must be taking it away from someone else. You have more. He has less.
Bill Bonner on markets, economics & the madness of crowds
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At 2% GDP growth, the US gains around $350bn in additional wealth. So, if stockholders gained $3.7trn, most of that has to have come from others. They gained $3.35trn more than GDP growth. In other words, they win. And others lose.
But someone has to be able to buy the nicest house on the block. Someone has to be able to buy the fanciest car or take the most luxurious vacation. Someone has to win the great game of economic life.
Well, the rich are not only ahead, they’re kicking butt. Look at every other income category. Only the top 10% of households made any real income gains over the last ten years. All the rest lost ground. And the top 1% has done even better – thanks largely to hefty increases in stock and real estate prices.
So what’s wrong with that? Nothing, except maybe that this sort of underhanded conniving with the feds gives capitalism a bad name. It’s not the capitalists who have got the most loot from the feds’ bail-outs, zirps and QE. It’s their cronies.
Too bad, but people think the rich are capitalists and that capitalists are rich. Not so. A real capitalist takes losses as well as gains. He makes mistakes and pays for them himself.
Sometimes it’s not about the money. Often, he doesn’t know how much he’s got and doesn’t care. It’s the journey he likes, not necessarily the destination.
The capitalist is misunderstood. So is capitalism. It is not so much a ‘system’ as it is what happens when there is no system. It is what people get up to when they are left to their own devices.
Is it good? Bad?
We don’t know, but it’s better than being told what to do by some jackass with his own agenda.
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