Why we're getting poorer, and they're getting richer, all the time

 

That's the essence of a lengthy and very informative essay by Quoth The Raven.  Here are some extended excerpts.  They may look dauntingly long, but they're right on the money (you should pardon the expression) and are well worth reading.  If you're finding it hard to make ends meet, this is why.

The widening wealth inequality gap is the political third rail nobody in power truly ever wants to touch.

Politicians will scream at each other all day over taxes, healthcare, immigration, tariffs, student loans, climate policy, or whatever outrage is currently driving engagement on cable news and social media. But the second the conversation turns toward monetary policy, toward the machinery of money creation itself, the room suddenly gets very quiet.

That’s because monetary policy has quietly become the single most powerful force reshaping wealth distribution in modern America. And unlike the endless partisan theater surrounding fiscal policy, monetary intervention oddly enjoys remarkable bipartisan support.

Republicans and Democrats may pretend to be existential enemies on television, but when it comes to flooding the financial system with dollars, both parties reliably fall into line. And that support is precisely why this topic is politically radioactive: once people understand how the system works, the illusion of two competing economic ideologies starts to collapse. Republicans want less spending, Democrats want higher taxes…but both parties want the Fed to keep printing dollars.

. . .

Now we operate inside a permanently distorted financial system where trillions of dollars can be electronically created and injected into markets whenever instability appears. The market is no longer primarily driven by productivity or efficient allocation of capital. It is driven by liquidity. Price discovery has been replaced by intervention dependency and risk has been socialized while gains remain privatized.

And every time markets threaten to correct naturally, policymakers intervene to ensure asset prices do not fall far enough to inflict meaningful pain on the people who own the overwhelming majority of financial assets. And the consequences of this have been staggering.

While both parties bitch and moan about affordability, protecting the middle and lower class, and “equity”, one of the clearest signs of this Fed-created distortion is the explosive growth of the ultrawealthy class. According to The Wall Street Journal, there are now roughly 430,000 American households worth more than $30 million, including approximately 74,000 households worth over $100 million. The growth of these groups has dramatically outpaced overall population growth over the past several decades.

In other words, Fed policy, blessed by both political parties, is widening the wealth inequality gap both political parties claim to fighting against ... When it comes to purchasing power, we are literally taking from the poor, and giving to the rich.

. . .

Beneath the culture war circus exists a deeper bipartisan consensus: financial markets must remain inflated at all costs.

And the lower and middle class gets absolutely brutalized in this arrangement.

Historically, middle-class wealth accumulation depended on disciplined saving, stable employment, affordable housing, and gradual investment appreciation over time. But inflationary monetary regimes destroy the reliability of all of those pathways. Savings become punishment, cash becomes a melting ice cube, young people are forced into speculative assets (or outright becoming gambling addicts) simply to attempt to preserve purchasing power. Conservative investing gets punished while reckless leverage gets rewarded.

Entire generations now feel compelled to try and make quick money in markets not because they are greedy, but because monetary debasement has made traditional financial prudence nonviable. This creates an economy built less on productivity and innovation and more on asset inflation, debt expansion and outright speculation.

. . .

A market that cannot survive without permanent monetary life support is no longer a healthy market, it is a managed dependency system. A patient on hospice care. And every bailout pushes the reckoning further into the future while making the eventual consequences even worse.

There's more at the link.  It's a long article, but well worth reading in full.

My take-away from this article is that if every American took the time to read and understand it, we'd have a Second American Revolution almost overnight.  It's precisely because most Americans don't understand what is being done in their name by their political leaders (who are enriching themselves in the process, at our expense) that our current miserable monetary situation has been allowed to develop.  I fear that unless and until we kick out those responsible, it'll just go on until it collapses . . . but such a collapse would take us with it, and punish everybody, not just the guilty.

What can we do about it?  Elect a better class of politician, on both sides of the political divide.  Will we do that?  I fear too few of us care enough to make the attempt . . . and that's what our current politicians rely on to keep their place in the sun.

Peter

Memes that made me laugh 313

 

Gathered from around the Internet over the past week.  Click any image for a larger view.

Sunday morning music

 

Ever heard of Imad Fares?  I hadn't either, until I came across one of his video clips while surfing the Net.  On his YouTube channel, he writes:

I’m Imad Fares, a street musician based in Poland, sharing the passion of rumba flamenca, Latin rhythms, and soulful acoustic guitar.

On this channel, you’ll find powerful guitar covers, street performances, and short videos filled with rhythm, feeling, and fire.

My mission? To bring the magic of the Spanish guitar to the world — one performance at a time.

His video clips are mostly of him "busking" (playing on the streets of various cities), and his audiences' reactions to them.  Here are a few for your entertainment.

Foot-tapping stuff.

Peter

Not your average pizza joint

 

Foxes In Love strikes again!  Click the image to be taken to a larger version at the cartoon's Web page.

In my younger days (much younger...) I can recall competing with my squad mates to see which of us could come up with the most revolting combination of pizza toppings.  Needless to say, we never actually ordered them, but it had its lighter moments.  Limburger and pufferfish, anyone?

Peter

Technology restrictions: a strategic move that's falling short

 

Joseph Assad explains the conundrum.

There is a moment from my time living in Abu Dhabi that I have never forgotten. During a tense negotiation over a defense technology sale, talks had stalled — not over price, not over capability, but over American export control regulations that prevented us from delivering the full system the UAE needed. During a coffee break, a UAE Brigadier General pulled me aside and spoke to me in Arabic. Holding up a phone charging cable, he said quietly: "The U.S. wants to sell us this wire for $100. China will sell it to us for $20. We said we will pay the $100, but now your delegation says we must wait two years. We can have the Chinese wire tomorrow." 

He paused, then added with a resignation that still stings: "And when we say we will buy from China, the U.S. accuses us of betraying our friendship. What are we to do?"

That question deserves an honest answer from Washington. So far, it hasn't gotten one.

American export controls on semiconductors and related technologies were designed with a single adversary in mind: China. The logic was sound — deny Beijing access to advanced chips powering artificial intelligence, and you slow its military modernization and geopolitical ambitions ... [but] Overzealous and inflexible application of these controls has swept up trusted allies and strategic partners — particularly in the Gulf — leaving them locked out of American technology they are willing and able to buy.

. . .

China is responding to U.S. and allied export controls with a whole-of-nation effort to make itself independent of Western semiconductor technology. In 2019, the first Trump administration cut off Huawei's access to U.S. technology, a move that appeared to consign the company to irreversible decline. Instead, Huawei launched an effort to wean itself from reliance on U.S. technology — and by 2024, it had launched new products featuring advanced semiconductors and was developing 5G mobile network infrastructure.

There's more at the link.

It's a very real problem.  Mr. Assad suggests that the USA is moving in the right direction, trying to free up access to its latest technology in return for verified commitment from customer nations.  However, there will always be the problem of supplies filtering through from third parties.

I saw this at first hand in South Africa during the years of the mandatory UN arms embargo.  South Africa couldn't obtain major items, such as warships or fighters, from major powers, but still bought or made almost everything it needed.  Sophisticated nations such as Israel and Taiwan, and political allies such as Chile or Paraguay, could act as third party channels through whom much could be obtained.  Other nations such as West Germany and Portugal simply ordered more of some materials than they needed for their own armed forces and manufacturers, and sold the surplus to South African agents.  Romania, at the time behind Warsaw Pact lines, nevertheless defied its Communist principles (?) to sell carbon-fiber helicopter fuselage components through third parties to South Africa, which was able to obtain elsewhere (or make itself) the engines and avionics needed to build them into fully operational aircraft.  Thus, even though the whole world was technically obliged to restrict South Africa's access to high technology, it really wasn't that hard to bypass most of those restrictions.

(It helped that at the time, South Africa was the single largest producer of gold in the world.  Gold coins and bars make an untraceable and very acceptable medium of exchange when wanting to disguise the origin and/or destination of a shipment of high-tech gear.  Paperwork?  What paperwork?)

America's trade and technology war with China is simply running headlong into the same conundrum.  Despite restrictions, China was able to buy enough advanced US chips to study their design, and are now building their own equivalents - and apparently refusing to buy more from the USA, despite the lifting of the US technology embargo.  As for preventing other nations from buying Chinese technology, it all boils down to economics.  Charge too much, delay delivery enough, impose enough restrictions, and the customer will look somewhere else.  If someone's prepared to pay enough, or wants independence of supply strongly enough, there are always ways to get around restrictions.  Low-balling an opponent's price is another very popular way of gaining access to a market:  and, once gained, it can be maintained in all sorts of ways.

Peter