Financial Injustice ... and Ignorance

The politicians would rather talk, and the press would rather run stories, about “financial inequality” than tackle the question of “financial injustice” in America. Why? Because anyone can blather about the symptoms of sufferers … it makes good politics and great news … all you need is a bias and a favorite interest group to vilify or validate.

So it is not surprising to see a new study [reported by BloombergBusiness] telling us that [forgetting Social Security for the moment] the combined retirement savings by the top 100 American CEO’s is equal in amount to the combined retirement savings of 116 million everyday Americans representing 41% of American families.

This is a truly astounding statistic that [if it persists and even systematically increases in severity] will have profound socio-economic ramifications for generations to come. Indeed, it is hard to see how such a massive, accumulated imbalance could be “righted” short of some seismic shift in everything we have come to know and expect as normal in our economic lives.

You will hear 1001 explanations of what happened to bring us to this point … and 1001 proposed solutions to the problem … but not a single one of them will deal with the simple and solitary underlying cause of this devastating condition.

“Financial wealth” [the static function of money] has been consciously and intentionally detached from “real productivity” [the dynamic function of money].

And even if somebody dared to explain this, very few of the 41% would even remotely understand … because almost all Americans are financially ignorant [not stupid … just ignorant]. But you can be assured that all 100 of the CEO’s understand this very well.

The Great Disconnect

The sad fact is that nearly anyone who takes the time to think about it can grasp the symptoms caused by and imagine the consequences resulting from “counterfeiting”. The counterfeiting criminal literally “makes fake money” instead of “earning real money” through

• honest labor [the worker]
• honest investment [the capitalist] or
• honest tax collection [the government].

The symptoms and consequences arise because the static status of “fake money” cannot be distinguished from that of “real money” … which causes the two to be treated as equals in the dynamic stream of common commerce … resulting in the transfer [gradual or rapid] of scarce and valuable real things from everyone to the criminal … and the equivalent but reverse transfer of abundant and worthless fake money from the criminal to everyone else.

To put this another way, money always functions in two continuous stages.

• First money permits individual economic participants to unilaterally assign relative values to things [both present and future] that are scarce … labor, goods, assets, services, promises … let’s call this the static function of money.
• Second, money permits those same individuals to freely exchange [and thus reallocate] things of lesser value for those of greater value in a win:win marketplace transaction … let’s call this the dynamic function of money.

Counterfeiters simply skip the first stage … the static function of money … because fake money is not “scarce”.  And so when their fake money “changes hands” in a dynamic marketplace transaction, the dynamic function of money fails to properly reallocate the scarce real resources in the real economy. If unchecked, the counterfeiter ends up “owning” everything of real value … while everyone else is left with increasing amounts of the fake money which the counterfeiter does not value, since for him it is not scarce.

If the counterfeiter has guilt pangs or thinks somebody suspects him, he may stop counterfeiting for awhile … but the damage has been done … and real wealth has been unjustly transferred within the community. But worse yet, even if this criminal is caught, how do you begin to “unwind” all the injustices done as a result of this crime?

We can add natural extensions [deviations?] to the basic crime of counterfeiting … such as the counterfeiter making extravagant cash gifts to relatives, voters or even charities … or making loans to others [even interest-free].  But you cannot expect any just results to arise from the unjust manipulation of the supply of money. All that such extensions do is confuse those trying to “follow the money” to find the criminal and exacerbate the injustices already accumulating.

Financial Fracking [aka Gush Up Economics]

There is only one counterfeiter capable of causing financial injustices on the scale we see today: our federal government … or, to be more precise, the Federal Reserve branch of our federal government. For those of you who object to calling the Federal Reserve a branch of government, please understand that the Federal Reserve is unelected, owned by banks and independent of Congress, the President and the Supreme Court. It has unlimited and unchecked power over our money.

And in the last few years, the Fed has unilaterally and dramatically increased the amount of money in circulation … by multiple trillions of dollars. As this tsunami of fake money has been forced [not trickled] down into the real economy, a massive amount of real wealth has gushed up in reverse. Think of it as “financial fracking”.  The Fed pumps massive amounts of toxic fake money down into the middle class foundation of the economy until it cracks under the extreme pressure and releases its real wealth to gush back up towards the Fed.

But it is a little more complicated. The Fed merely “loans” all this fake money to others [at ZERO or NEGATIVE interest rates] … such as the government, commercial banks, GSEs, multinational corporations and even foreign central banks … and let’s them do the dirty work of forcing it down into the environment of the real economy to crack the middle class. And it is dirty work … which can only be done by those lacking any real conscience.

However, the fact that the Fed uses third parties to force its toxic brew into the real economy explains why the real wealth which gushes back up never reaches the Fed … but stops in the pockets of those third parties [and their CEOs] … and they have deep pockets that can be endlessly filled without overflowing. All the Fed has is a drawer full of IOUs from those third parties which it can never collect … because if it did, those third parties, including the government [which is already bankrupt], would be catastrophically exposed as spectacularly insolvent plunging the real economy into the Sudden Destruction [forget the Great Recession and even the Great Depression]. Checkmate … game over?

What To Do?

“OK”, you say, “I get it”. But do you?

Do you understand that ending this reign of financial injustice will mean deserved pain equal to the undeserved gain … but without any guarantee that it will fall, solely or even largely, on the guilty instead of the innocent? Then again, if you have not gained much, perhaps, you may not have much to lose. In fact, some who have lost a lot might just stand to gain substantially. The middle class would certainly find itself in a position to begin re-accumulating the wealth it lost … but, truth be told, this will take many years of patient work.

However, as bleak as the prospect of “coming clean” financially is for America, the alternative of continuing along our current deviant path is worse.  If the American “way of life” is to be saved from destruction, everyday Americans must do it. Are we collectively up to the challenge? If so, there are honest and principled men and women who can and will quickly deal with the Fed and lead us through the hard times ahead. If not, there are plenty of criminals and liars who will gladly conspire to lead us into what they will claim are America’s “best years” … just ahead. So whom do you believe? That’s the only real question isn’t it?

In the meantime, forget about retirement … keep working and pray for a miracle … unless you are among the unjustly privileged few … in which case you should pray earnestly there is never a return to financial justice in America.