April 28, 2014 at 8:12 am #17678
Piketty’s charge that the rich get richer is not a new concept and it is no fun being a poor debt slave. Earning capital by digging holes, or chasing cows (even if you can eat their brains), farming, mining, or making anything are very difficult ways to make money. I suppose a barber or hairdresser can become a millionaire by saving 10% each day in a compounding interest account at 5% but the trouble is that a safe 5% is hard to find when Treasuries offer such a low rate with high risk of money destruction Zimbabwe style and the added risk of political disturbance. Over the next thirty years those are real possibilities even if there is deflation first.
Taking higher risk on seemingly very safe bets, like Gazprom (mining from the earth) or Choada (farming from the ground) is anxiety producing and seems to slow down capital accumulation.
The stock market is rigged, not by fast boys (small fry), but by the Fed that allows the hedge funds, borrowing at low interest rates, to bid up the casino. If the market takes a 10% correction, or god forbid, a 20% correction, the Fed will be under the gun from the insiders to “fixit”. They will, because the government will not take the risk of political disturbance. Only when the rest of the world refuses to accept the reserve currency will this change. For now they go along with the gag. A 40% correction to the mean will get some attention and an overshoot to 80% is quite likely while de-leveraging. The Fed will not be able to prevent it … eventually.
Piketty’s observation is that accumulating capital is the way to get ahead of wage earners. Bravo! Discipline and sacrifice, encourage savings and “happiness”. Then the greater power of the Fed, regulators, and taxing authorities can steal it and make “misery”.
It seems like the better way to accumulate capital is to get out of the private sector and instead steal the taxpayers money. Work for Washington, become “disabled” or retire to get social security. With the alternative of losing everything in a rigged system, why bother? Okay, trying is better than not. You may get lucky … and writing about it keeps B&P busy (and us entertained). Food stamps is one way to keep the population from being hungry (and angry). Sending everyone with a social security number a check for a $1,000,000 would make T. L. Friedman happy (and he has influence). The Fed may comply under government orders. They have the mechanism for doing so, so why not? The NSA and IRS have everyone’s address.
The rigged system can go on for a long time. Japan has shown the way. China may hate to take reserve currency but not taking it is even worse and now the emerging markets are being crushed as the money moves to the relative “safety” of the US. Strange!
I think the underlying, inexorable natural force is the waning supply of oil (cheap energy), and rising cost, which is putting the world’s outdated growth model under pressure.
Piketty does not answer the question of HOW to keep our wealth as the price of assets declines, when cash lacks luster and interest rates are not only low, but rigged.
Cash now, gold later? Hmmmmmmmm. But definitely accumulate capital. It’s not as stupid as Pickett’s Charge.
On Apr 25, 2014, at 2:17 17PM, Bonner & Partners wrote:
Daily Market Briefing
For Members’ Eyes Only: A Better Way to Build Family Wealth
Friday, 25 April 2014
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