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No one can deny that the Great Depression was a bad thing.
But in some ways, the kind of economy and society that our government has helped create — in order to avoid a depression — could actually be worse.
As I’ll prove to you in just a moment, we now have …
- The biggest concentration of wealth in 100 years; and at the same time …
- The worst political division and dysfunction since the Civil War.
- Plus, some of the most worrisome risks for investors in history.
The last time we saw a similar convergence of these extremes was in 1929.
And the only way that the nation’s balance was ultimately restored was with the Great Depression.
But is today’s situation really as extreme as it was in 1929? Are we truly destined to repeat the consequences? If so, how can investors prepare?
First, the proof …
Concentration of Wealth
The richest one-thousandth (0.1%) of America’s households owned …
- 7.1% of the nation’s wealth in 1978
- 22% of the wealth in 2012, and
- An estimated 24% of the wealth in 2015.
That means they’ve more than tripled their share of the nation’s assets.
But it goes beyond that. Zero in on the richest one-ten-thousandth (0.01%) of America’s families, and the changes are even more dramatic. This topmost tier controlled …
- 2.2% of the wealth in 1978
- 12% in 2012, and
- An estimated 14% in 2015 …
This means their piece of the asset pie is now more than six times larger. And it means these super-rich families control 14,000 times more than the average wealth-per-capita in the U.S.
Everyone else has much, much less.
But this is not just a problem for the poor. Nor is it an issue limited to the nation’s middle class. It also may be hindering hundreds of thousands of higher-net-worth investors from growing their portfolios.
With their controlling interests of the nation’s big corporations, with the companies’ massive stock buybacks that crowd out dividends …
The super-rich are now squeezing the rich!
All this data comes from an exhaustive study recently published by the National Bureau of Economic Research (NBER), capsulated in the black bars of the chart below.
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| Black bars: Wealth share of richest 0.01% of America’s households. Data: Emmanuel Saez and Gabriel Zucman. Red line: Distance between Republicans and Democrats in House of Representatives. Data: McCarty, Poole and Rosenthal. |
Look how the concentration of wealth reached a 100-year low in 1978 … and how it has grown virtually nonstop since then!
Plus, if you follow the chart through time, you’ll see four other, even more revealing, realities:
First, the last time wealth concentration was so extreme was back in 1929, just prior to the stock market crash.
Second, except for a brief interlude during World War I, there has been only one event in modern history that caused the super-rich to relinquish their stranglehold on the nation’s assets: The Great Depression of the 1930s.
The suffering of that period cannot be discounted. But that’s also when the groundwork was laid for millions of average investors to build substantial wealth after World War II.
Third, unlike the Great Depression, the Great Recession of 2008-2010 did nothing to stop the ascent of the super-rich.
Quite to the contrary, since 2008, the wealth-concentration trend has continued unabated.
Why didn’t the Great Recession stop the near-vertical rise of the nation’s billionaires?
One factor was TARP, the U.S. Treasury’s bank bailouts in the wake of the 2008 debt crisis, helping to perpetuate a quasi-monopoly among the nation’s top five megabanks — JPMorgan Chase, Citibank, Goldman Sachs, Bank of America, and Wells Fargo.
Indeed, according to the latest data provided by the Office of the Comptroller of the Currency (OCC), these five banks represent less than one-thousandth (0.1%) of all the commercial banks in the United States. But they control 46% of all bank assets and 94% of all bank-owned derivatives, or 940-times the average per-bank holdings.
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This has helped boost still further the fortunes of their CEOs, their largest shareholders, their highly bonused traders, plus those of their closest corporate clients.
Another factor is the Fed’s relentless, nonstop push for near-zero interest rates for seven long years, smashing income opportunities for average investors and retirees … facilitating high-profit gambits for those who could best afford the risk … and driving even more wealth share into the hands of the super-rich.
Fourth, the most shocking revelation of all: About five years ago, the wealth share controlled by the richest one-ten-thousandth (0.01%) in America matched that of 1929 almost to a tee. But with the bank bailouts and near-zero interest rates, it has now become even more extreme today than in that memorable year of the great stock market crash.
Political Division and Dysfunction
Most economists would argue that, in a capitalist society, some concentration of wealth is necessary, even desirable.
The question is: How much is too much?
I know. You’re probably thinking this second topic is strictly for cocktail-hour chit-chat. Or maybe you’re wondering how I’m going to take this conversation beyond the typical tussles between Sanders and Trump supporters?
Read on and I’ll show you how.
First, as you’ve probably noticed by now, the same chart I just showed you also has a red line that measures political division and dysfunction in America …
- When the red line is lower, it means that Republicans and Democrats vote more by the issues: They cross party lines and draft legislation together.
- When the red line is higher, it means they more often disregard the substance of the issues: They vote strictly along party lines, get nothing done, and throw bricks at each other.
(The chart is based on an exhaustive study of voting patterns in the U.S. House of Representatives, courtesy of political scientists McCarty, Poole and Rosenthal. Similar data for the Senate shows essentially the same pattern.)
Second, what we’re witnessing now is even worse than Washington gridlock — that was just the passive-aggressive phase of America’s power struggles.
What we’re seeing is the beginning of outright political warfare that splinters the two major parties … tears apart the fabric of society … and may threaten future chaos in financial markets.
According to the Pew Research Center, in the last 20 years …
- The share of Americans expressing consistently conservative or consistently liberal opinions has doubled.
- Partisan antipathy and venom have soared. The proportion of Republicans with negative opinions of Democrats has jumped from 17% to 43%. And among Democrats with comparable anti-Republican sentiment, it has more than doubled from 16% to 38%.
- Worse, the vast majority on each side now views the opposing party as a threat to the nation’s well-being, almost like enemies of the state.
- Liberals and conservatives are even seeking to live in different communities: Liberals are far more likely to say they want racial and ethnic diversity in their area. Conservatives are far more likely to say they want to be with others that share their religious faith.
- The extreme believers on both sides are drowning out the moderates, participating far more actively in every stage of the political process. They speak louder, organize more, vote more often, and donate about double the money of the average American … and they do all of this far more today than in the past.
Has this ever happened before? Yes.
It was right after the American Civil War. And based on the measure I just showed you (of political division and dysfunction), it’s now even worse:
- Back in 1879, shortly after the post-Civil War Reconstruction years, the distance between the parties in the House of Representatives was a very high 0.79 (on a scale of zero to 1). That was bad.
- In 2010, it was 0.97. That was worse. And now, it’s probably even more extreme.
That doesn’t exactly give us much hope for resolving the nation’s massive deficits in the federal budget, Social Security, Medicare, or veterans’ benefits.
Nor is it going to facilitate much of the “change” that candidates for president are promising in their 2016 campaigns.
Quite to the contrary, it sets the country up for the kind of involuntary, market-driven realignment of wealth and power that struck in the 1930s.
You see, throughout history, economic wealth and political power have forever been intertwined.
And today, they connect in the realms of political donations and Washington lobbying … tax loopholes and tax policy … offshore investing and foreign policy. But those are just the visible, supposedly “legal” connections.
So when the bubble of economic power bursts, expect a similar outcome for the bubble of political dysfunction.
How can investors prepare for these kinds of frightening economic and political reversals?
Do you sell all your assets and put everything in cash that yields next to nothing? Or do you embark on a quest for profit and yield regardless of risk?
Do you hunker down in your home and withdraw from politics-gone-mad? Or do you jump in with both feet to help tip the scale?
I don’t give political advice. But for your investments, I have just two pivotal words: Caution and moderation.
Too vague? Then let me tell you exactly what I’m doing with my own money …
- I’m not selling everything, but I am accumulating an oversized pile of cash.
- I’m not reaching for impossible profits, but I do seek out the highest possible quality of investments cash can buy, waiting for sharp price declines to pick up big bargains.
- I’m not running in panic from the dangers, but I keep them firmly on my radar screen — not only dangers in the U.S. but also those in countries like China. (See The biggest Global Risk Right Now and The China Fallacy.
- I’m definitely not counting on the Fed to rescue my investments. The Fed has dug itself (and the economy) into an Eight Trillion-Dollar Trap.
- Instead, I’m building a protective wall of hedges around my portfolio, as I explain in My 7-Step Portfolio Protection Strategy and 5 ETFs for Protection in Another 2008.
No one can predict the future with certainty, and that’s especially true in this turbulent election year.
All the more reason for you to avoid risk and seek safety, financially and personally.
Good luck and God bless!
Martin
Important note from Larry Edelson: We are on the cusp of the most profitable bull market of our lifetime. Stocks will be driven higher by powerful global undercurrents that Wall Street will either ignore or fail to understand. As the Dow doubles, some stocks will see explosive gains of 300%, 400%, 500% and more. Savvy investors who make the right moves will become very rich! Click here for my free report to find out how it could make you rich beyond your dreams.
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
{ 49 comments }
Dr. Weiss,
Very thoughtful and interesting piece. I wander where it will end up? The one thing I have heard is that the Federal Reserve has managed to drive the US dollar down by ninety seven percent since it was secretly set up in 1913, or so.
Basic factor being ignored is global population relative to resources to sustain expected standard of living. I personally feel critical mass of such is fast approaching. I fear efforts to reduce population will be high on the agenda of the power elite. They have a convient recipient of blame.
I agree that the basic, probably the only one in reality, factor is over population but I don’t think the power elite will be in much of a hurry to do anything about it. It was tried in China with dismal results. And the current economic theory relies on population growth. But it will “cure” itself as it has always done through tragic means such as revolution, war or plague. Not a bright future but since when was mankind particularly bright?
Your on the right track with population but not paying attention. The problem we have today is declining population in the age brackets that are high consumers (or in economist’s terms: demand) in the leading economies of the wold. Look at the narrow “waist line” of the age bracket 30-44 in the 2010 US data chart here:http://proximityone.com/chartgraphics_world.htm That “waist line” represents the cohort of the US population entering their “peak” spending years and since there are a lot less of them then the baby-boomers heading into retirement/death land, demand is falling. Europe is in a worse boat and Japan once again worse. Ironically, millions of Syrians coming into Europe is a resource that could help fix their economic problem if they could integrate them fast enough to become productive consumers.
Mr. Weiss,
If you are accumulating cash, why not part of it in gold, which with it’s appreciation will be better than dividends if things get really bad, like you predict? Please, an answer…
T.
Mr Weiss,
In your email of 2/29/2016 you stated that one of your favorite ways of betting on a decline in the Chinese Economy, which you believe will occur, was to invest in ProShares Short FTS china 50 [YXI].
Your 3/28/2016 Rating on YXI is D which places it in the Sell Category.
I’m confused – hold or sell?
Please advise.
The Big Five banks can only get bigger under the system they have undoubtedly had a hand in setting up. When a small bank gets into trouble, what happens? The government forces it to seek a buyout from another bank, often a bigger one. If that bank gets into trouble, it is also forced to seek a buyout – etc. Eventually, nearly all banking will be controlled by the biggest, strongest bully-banks. Can the individual or small business have any real control over his/her/its money in such a system? I think you know the answer.
THE NEW MONARCHS
Wealth has ALWAYS been concentrated. Today’s fetish on how unequal wealth is reveals a bit of ignorance or maybe misplaced nostalgia. I would suggest any periods when it has otherwise are the exceptions, not the rule. Back in the 1800’s, the Rothschild Banking Family is said to have controlled about 1/2 of the known world’s wealth ( assets ). In that era, their family tree was smaller and their wealth greater per capita. So, maybe today we can say the concentration of wealth today is spread out (dispersed) amongst more families and individuals than back then. However, technology is bringing them all closer together and keeping them in touch. Lets take a closer peak at the possibilities.
Today’s billionaires hail from most every country but in slightly different numbers. So, its a global class rather than one or two dominate family dynasties tied to one region or a single sovereign state. My guess is they have every reason to collaborate amongst some of their own kind ( peers ) to further their (mutual) global interests and prevent any sovereign changes that would threaten them.
Like the monarchs of old, it also means they have a tendency to intermarry within their social network to cement financial and political alliances. Gold Diggers can not penetrate the veil. In addition, they probably prefer if Trump is gone, tomorrow ( provided they share any interest in everyday politics ).
You are overlooking one major factor and its reflection today. During the Kaiser War the North American farmers were expected to feed Western Europe. They went into debt to buy mechanized equipment. The unexpected happened and in 1920 Europe had a bumper crop. Farmers watched their income fall during the 1920’s, in spite of the economic surge following the 1920 recession. When farmers no longer had the money to buy let alone pay for the loans on the equipment the banks started to go under, and the dust bowl in the mid west didn’t help matters. Farmers and farm workers were often employed in many of the factories that made the farm equipment in the non-growing season, those jobs disappeared making the situation even worse. The effects were felt all the way up the chain, less steel, less rubber, even less fuel. Today the middle class, what is left of it is, being put in the same squeeze. Wages not keeping pace, illegal immigrants stealing jobs, imported workers, terrorists, corporate greed, runaway government spending, take you choice.
Pres.Obama has a reality level well below zero.he doesn,t seem to want America to be the most admired nation on the planet. Also,the current political campaign is nothing but a cheap show.Is this the best America has to offer?My gosh,there has to be a fit person out there that can bring proper dignity to our highest office.Think a nationwide search should begin–now.
It appears that the spectacle now known as American Presidential Politics now adheres to THe Septic Tank Rule, as it relates to candidates.
In a Septic Tank, the “you know what” inexplicably rises to the top, where it floats around for far too long, stinking the place up until, finally, it sinks to the bottom where it belongs and rots away.
Substitute “politician” for “you know what” and you have the entire multimedia sensory experience.
Amen.
Consider all the media which use to give us the news and now gives us either right or left leaning views and their opinions. It is the media which is disgusting as no matter who you put up, they will be dragged down into the gutter.
Martin
You ask ‘What could be worse than the Great Depression?’ Answer: reliving it as if we have learnt nothing. Maybe this is what our citizens are trying to tell Washington.
Amen, brother. Let’s vote
WHAT DO YOU EXPECT ?
American voters knew well what Obama stood for as far as U.S. interests as he was quite vocal about it, wrote a book, and his associates were just as famous, as well. So, really, we have no excuse. We wanted free stuff and more cheap imports from Mexico and China. That meant a job drain as good jobs got exported overseas.
Stimulus, QE , and Too Big To Fail Bank POLICIES were begun in 2008 and continued right on schedule. It was more important to the Big Boys to keep the Big 5 U.S. Banks in business than to take care of the people (voters). Hillary Clinton will provide stability but not change. Status Quo, maybe.
On another subject, the appeal of Donald Trump, is that he is an outsider to the political insiders who have put our nation and people in the position they are in today. The mere fact that he is hated by those insiders, makes him palatable to the average person. He could be a total disaster as President (in large part because the insiders would still control government), but people would support him.
Then there is Bernie Sanders. He is something of a mole in the system – an insider, but one representing a socialist view opposed to the present monopolist/capitalist powers. He could still come from behind to represent the Democrats, if people become disillusioned with Hillary Clinton, who is, after all, just another of the old guard politicians. She offers nothing new for people to become attached to, except that she is a woman – the first of her sex to have a serious chance at the office.
There will have to be a complete turnover in government. A total wipe out. We need to put everyday people in office. You know. The ones who live the dream!!
Let’s not overlook Hilary’s pet tune of “bringing down the barriers”. If she practiced what she preaches, she should first bring down herself.
Superb article, thanks Dr. Martin.
Better still; recommend remedies for the greater good.
The wealthy population in the US got there because they saved, invested, and watched compound interest go to work for them. This, in some cases occurred over multiple generations. Educated, analytical, and frugal individuals can do the same today, however, they must stay focused and not succumb to Madison Avenue’s view of the world. Over extending based on wants and not needs, ultimately resulting in the 2008 recession is the root of the problem. John Q. Public needs to separate the needs from the wants and focus on savings. Although it may take a couple of generations, wealth is an opportunity for all who seek it. Otherwise, we have a segment of our population consumed with envy without a good reason for it. Also, remember, the top 10% pay the majority of the taxes.
Thank you,Hal…My late Father was a Factory worker and my parents were some of the most frugal people you can imagine.When he passed away,we were amazed at all he accomplished–My mom is set up very well,and all I can tell you is simply that I have not done 1/4 of what he did,because I was not frugal when I was young(We are Now!).
Wealth IS there for all who are willing to make the hard choices,and,as you say,put needs over wants—and to any young people reading this,I let the better part of $1 million(!) slip through my fingers during most of my working years,so don’t imitate ME–SAVE,SAVE,SAVE!!
But don’t fall for the popular trap of “saving while spending”!
The only reason the top %10 pay the majority of federal taxes is they have the majority of the money.
Dont forget, the 90% pay local, state, school, city, county, etc taxes also.
It is the non workers who pay zero federal income taxes and those who live off food stamps.
David Brooks had an interesting article on Marcy 25, 2016 in the NYT.
“The Post-Trump Era.” It seems that some Republicans are finally coming to realize
what Democrats have always known. That Republican partisans have been, sadly,
sociological illiterates. This has been hugely important in the devolution of our nation
since 1980.
ORIGBLESS, You are reading to many Liberal Rags like the NY Times. It isn’t the Republicans who are primarily “Sociological Illiterates” but the Democrats. After all the Socialism represented in the Democrat Party today by Bernie Sanders seems to be a General Theme of the Democrats. And you should know that the Progressive/Socialist/communist philosophy brings on dictatorships and human suffering. Dr. Weiss has it correct in his analysis but your analysis is sadly delusional.
Our European friends self-identity as Democtatic Socialists. If you called them Communists you would get an earful! Bernie does not believe in state controlled businesses. He does believe in a society that respects and works for all its members. To try to connect his values to a dictatorship or communism is pure fantasy!
While I agree with the thrust of this article, I would probably quibble on some of the details. But the most important area that should be noted is over reaction. It took fifty years to wring out the worst excesses of Roosevelt’s actions during the depression. Obama’s attempts at redirecting the country will probably take a long period also, if we are lucky. The financial gaps are real and have real effects but the most significant is mobility among the income bands. Until recently, this mobility negated the worst negative affects of income stratification. The leveling tendency in the US over the past fifteen years has turned this around. Until it is restored, we are in great danger of losing our most important quality: opportunity.
Dear Martin,
Please explain the form in which you are accumulating cash, e.g. money market, green backs in a private safe, bank account, privately held gold, etc.?
Very good insight Dr Weiss, thank you.
Dr Weiss. Lazslo said it – very thoughtful! America has a big problem that few have thought about. The mass has lost its ability to peacefully change our government. We are now a Fascist State w/ the individual States & Supreme Court rejecting their Constitutional duties.
All my life I have tried to learn as much as I could about as many subjects as possible, because I considered that the only way to really understand the Universe in which we live. This includes the sciences, the arts, history, and, of course economics, which many people regard as eek-onomics. We are in several crises now which actually threaten the future existence of our species, several of which are not being discussed. All those who read these publications know about our ongoing financial crisis, but the following crises, which are at last as important include;
1. Overpopulation. the world population is doubling about every 50 years. When will we go beyond our capacity to support the world population?
2. The desertification of important farmland. The melting of the glaciers during the past 8,000 years have provided irrigation for so much of our farmland. Remember reading about the “fertile crescent” of 4,000 years ago? That area is now desert. The same thing seems to be happening in California. We read about the water shortage for homes, but it is also affecting the farmland, which provides about 50% of our food.
3. Converting the tropical rainforest to agricultural land. Most of the nutrients in the tropics are held in the plant and animal life. There is very little left in the soil, and the trees there live for centuries. Only when something dies is more nutrition available for life. And 800 years ago the Kmer culture in Cambodia collapsed because when they took down the rain forest to grow food, the soil laterized (turned to stone).
4. Massive extinction. This is just beginning now, but the amphibians are being seriously affected. There is a lot of talk about the use of insecticides and how it is causing a sharp decline in honeybee populations, but there are also the hundreds of species of wild bees, which are also being affected. These insecticides are nerve poisons, and since the insect nervous system is biochemically very similar to ours is it also possible that our exposure to these chemicals is also bringing about an increase in the nerve problems we are experiencing now?
5. Global climate change. This has also been going on for 8,000 years, but the increase in our use of fossil fuels is also increasing the rate at which it is taking place. CO2 traps heat in the atmosphere, and one of the greatest forces in keeping this more under control over the entire world is the tropical rain forests.
6. Rising sea levels. So many of the world’s most populous cities are in coastal and other low lying areas, and those cities will need to move to higher areas. What will be the effect of
all of this on land use.
These problems need to be discussed, because so much is at stake now, and these problems will be much more difficult to disregard in the future, and the problems will be much more difficult to solve in a few years.
Ken,
Every last one of these problems which you have noted is and has been diiscussed, many of them for quite a long time. Non-governmental organizations (NGOs) have proliferated, petitons to various governments and multinatinal industries, movies and political commentaries are all easy to find. The problem is that none of these groups wants to change a d–n thing, because they are making too much money from the status quo, or are utterly corrupt in accepting the bribery / lobbying (is there a significant difference?) of the insanely rich cadre. The average human has ZERO influence on the paths of decision making.
Sadly, since I try to be a Christian and abhor violence, I’m thinking that the French took the only path to the solution of their dysfunctional state in 1789 which we in the modern world may find to be our only path to a return of sane governance and economics to-day.
Sorry, I have to disagree with the comment that if the congress would work together we would prosper. 99% of republicans are RINOs. Look at PA’s Pat Toomey. He consistently crosses over the aisle. The democrats like Schumer, NEVER cross the aisle since the RINO’s kiss his NYS butt, over and over again. The Republicans have approved every single liberal justice, who was chosen by the democrats. Welfare expenditures are through the roof. Trillions are wasted on feel good education schemes, to enforce counter economic schemes like compliance with global warming while third world counties increase there tonnage of coal consumption. Toss away all those pseudo intellectual theories out the window, into a compost heap. The FED is the primary reason the top .01% citizens are hording all of most of the wealth creation. We are still in a recession since the working class incomes have not even kept even with “REAL” inflation not academic inflation. The former heads of the FEDs end up working for the same industry that their policies enriched. Really very simple. We do not see Greenspan or Bernanke dedicating their lives after retirement to humanitarian causes, do we???? P.S. do not worry Yellen is cut from the same cloth, she will never support any changes that will help heal this distorted economy if it harms her chance of a sweet assignment at an investment bank like Goldman when she retires.
I totally agree with you. I grew up among these people, in fact I have a family full of them. None of them will have anything to do with me any more, because I don’t belong to their religion. I haven’t visited them for more than ten years. I have come to the conclusion that there are essentially two groups of people in this country. One group totally believes that God will provide, while the other believes just as fervently that the government will provide. They are both delusional.
This country was built on the idea that self-sufficiency is one of the most important human qualities. That is what I learned from my father, and I have endeavored to follow his lead,. but we have so many parasites among us that it is becoming increasingly difficult.
Very few people think about who winds up paying for their lack of basic intelligence.
I have spent my life trying to learn as much as I could, but the world has become so irrational that now at 75, I am beginning to realize that I have wasted my time. Every time
I earn a dollar, there is someone with their hand out to take it from me. The government grabs everything they can from me so that they can give it to the parasites. I worked manual labor jobs, because in graduate school, I witnessed the ignorance of the professors, who were there supposedly to help me gain an education. Note that the word “professor” is derived from the verb “to profess.” And the Harvard professors I knew only professed to know anything. I was criticized for the breadth and depth of my interests, and then called me a “stupid southerner” to my face. I tell you this so that you can better understand the likes of Larry Summers, who encouraged congress to repeal the Glass-Steagal Act which was voted into law in 1933 with the intention of preventing the big banks from gambling with depositors’ money. This helped bring about the collapse in 2008. The Dodd-Frank bill was passed in 2010 to help rectify the problems created by the collapse, but it is like putting a Bandaid on a gunshot wound. This was followed in 2012 by “Resolving Globally Active, Systemically Important, Financial Institutions. A joint paper by the Federal Deposit Insurance Corporation and the Bank of England.” An interesting item in paragraph 11 reads “A resolution strategy for a failed or failing G-SIFI (international banks) should assign losses to shareholders and unsecured creditors,” which I understand to mean depositors. This all sounds eerily like the banking crisis that was taking place in Cyprus at about the same time. This suggests to me that our government has already failed and that the news simply hasn’t percolated down to working people yet. Other commentators I read have stated that the gambling by bankers has increased rather than decreased during the past eight years. The politicians have done nothing to decrease the chances of another collapse, which, it would seem, makes the chances of a followup more likely. This would seem to endow certain financial institutions with greater risk, until substantial measures are taken to reduce the risk to ordinary investors. To my knowledge, none of the current presidential candidates have lived up to their positions and candidly informed us as to what they would do to lessen the risks in the future.
A historical note here. Rome used inflation to finance centuries of wars, which produced nothing. The gold content of the solidus was reduced during that time from about 100% to about .5%, at which time the Empire collapsed, and there was nothing the German “invaders” (immigrants) could do to save the day. Since 1913, when the Fed was established, the dollar has lost 98% of its value, I am informed. When Rome “fell” the governments of Persia and India collapsed and the economies of China and the Arabic countries (both of whom were then leaders in technology and science) collapsed. Only the Byzantine Empire survived this economic carnage, because in 1092, Emperor Alexios restored 95% gold coinage, and the empire lasted for more than 350 years, when it was conquered by the Ottoman Turks. If only our government could learn from that example.
As a retiree,and a life-long student of Byzantine history,I find your analysis of our current state of affairs absolutely brilliant .
I am also 75 and the daughter of a former Harvard business school graduate who helped set up American businesses in south America during the ’50’s and became chief advisor to UNIDO in the ’70’s. The last thing he told me was to watch the cycles and as I was a life long history student I have. Ken is so correct it is quite appropriate to add to his soliloquy by stating that when King Solomon died the Egyptian client state of Israel/Judea collapsed due to the youngsters didn’t want to follow the advice of the elders and keep from exploiting their own people. They were money hungry for what the Egyptian temple bankers were getting and wanted to tax the people of Abraham more and deeper to make what the Egyptians had-razzle-dazzle. So within 500 years they were a lost and scattered nation. God help those who listen and are guided by God’s wisdom not man’s.
When a highly complex system such as our economy begins to wobble out of control, there is no one elected or appointed individual or action or any elected or appointed group of individuals or actions that can be taken to prevent the wobble from ultimately going out of control because the opposing elected or appointed individuals or groups cannot reach an effective solution due to their opposing, uncompromising and entrenched ideologies. They never eliminate the real cause of wobble, they can only temporarily apply their respective forces in an attempt to constrain the wobble, however; the forces which created the wobble in the first place continue and eventually overcome those constraints until the system finally collapses. That’s when a system solution can be found – but not before it breaks! Not being pessimistic, just being realistic based on current facts!
Probably the best thing that people can do to address income inequality and Wall St. excesses is to support Bernie Sanders for president.
This may be the best article from Dr. Weiss yet. The big problems I see are that we have allowed the elites to move from healthy capitalism to cartel capitalism through deregulation. Airlines, banks, insurers, healthcare, food, utilities, telecom, cable, drugs,etc. We should go back to busting them up. The other problem is the structural knee capping of our democracy in the form of gerrymandered districts creating a climate where extremists needn’t engage in good faith problem solving–instead devolving into hostage taking. Shutting down government, failing to fill SCOTUS because lobbyists tell them not to. Lobbyists are the fourth branch if not the only branch. They subvert democracy at every turn. Push button hate merchants want voters to hate and scapegoat rather than engage in rational policy discussion.
It almost seems as if one candidate is promising a big terrorist event here at home if that is what it takes to get elected, kind of like the Pearl Harbor/911 the neocons prayed for to lie us into war. Doing democracy is difficult when 15-20% of Americans celebrate ignorance, not understanding how a very few powerful forces play them for fools every cycle. Get out the dog whistles.
Why did the President shut down the government? Who told Barry, Joe and Chuck that a SC nominee shouldn’t be voted on in the final year of a president’s term?
If Trump gets finagled out of the nomination by the GOP, all hell might break loose. Many of Trump’s supporters are extremists and might stage an armed rebellion.
Whatever, there’s never a dull moment in this election cycle.
Very good analysis. Extreme wealth disparity has become the bane of capitalism and may ultimately cause its demise. The culprit here may not be capitalism itself, but a small percentage of rich and super-rich who have used capitalism’s gaping loopholes to their advantage and ensured that others do not even have a fair chance. The central banks have only aggravated the situation by their mindless policies which are pushing even the middle-class to poverty.
Dear Dr. Weiss
I have been a subscriber with your firm for over thirty five years appreciably of course.
my recommendation for investors who are “not students of the stock market”
and wish to improve their bottom line”, is to “play it safe” by learning patience.
which will/should pay off when “obvious trends” are coming into being” Of course, the Safe Money Report and other reports of your company should coiincide with what I am saying.
People should not “try to second guess” the market unless they “have the right feeling, the socalled “gut feeling” that many professionals have developed over the years.
learn “patience” wait for the “right time” which means wait until the “trend is in “full swing” which means, “patience”.
sincerely
mrothman
The moral issue we, as a sociwty, need to address, is whether people are obstructed from creating new wealth. If it is lawful to create value, where none existed, that is good. If it is unlawful, that is bad.
The implications, for measures of wealth concentration, are obvious: It could be a sign of good (Leland Stanford got filthy rich building two railroads to San Franciso and average Americans got California citrus fruit into our diet. Stanford’s excess money built a university that exists today.), or it could be a sign of bad (Wal-Mart founder Sam Walton created jobs at which welfare recipients could earn pocket money and get some exercise, then squeezed all competing small businesses out. The competitors were forced to pay taxes to provide the welfare recipients an income to live on, Wal-Mart buys the tax-subsidized welfare labor for less than it costs Society, and uses it to concentrate wealth earned by retailing.). So the question we need to address, Dr Weiss, is not the concentration of wealth, but rather, it’s source.
Corporations like Wal-Mart, that use politics as a means of squeezing out all competition, grow the coercive, political sector of our economy and make us all less free and less wealthy. Ultimately, as happened in Soviet Russia in 1993, they consume all available wealth until there is literally nothing left to steal, and then they implode.
There needs to be a tax on corporate lobbying. Everyone coming to Washington, seeking to buy influence, has the potential to do vastly more harm, than good. Washington’s suburbs enjoy a phenomenally-high standard of living, because all of that lobbying money being spent there.
While Dr. Weiss has written this article to make it sound like “All we need to do is get along and work together, in my opinion, the truth is really far different……
I would point out that the period prior to 1929 and 2007 were BOTH periods of Republican Majority Domination where the 3% were represented and disaster was brought for the 97% as the Depression of the 1930’s and the Depression of the 2000’s…
I would farther point out that the incredibly successful period of 1932-1981 was a period of Majority Democrat Domination when the 97% were represented at cost to the 3%….
Why is it slower this time? Two reasons: 1) Citizens United which allowed a right wing court to allow the 3% to spend billions trying to convince the 97% that the people that brought the Depressions were not really the cause and 2) Republican in Congress were not completely thrown out as Cheney/bush were only in office for 17 months after the 2007 Crash began as opposed to 3 years under Hoover and the market only lost 60% as opposed to the 90% lost after 1929. Because of that the minority Republicans allowed the repairs for the Banks, Brokerages and Insurance controlled by the 3%, but stopped the repairs to Main Street that would have benefited the 97%….
When Americans realized that they have been snookered by the 3%, they will throw the Republicans out in big enough numbers that the legislation that will help (like the 1930’s) and economic success will again return…..
My bet is that 2016 will bring that change thanks to the Donald……
I agree with most of what you say, till the end. I think republicans and democrats have their district locked up.that’s why you can rarely get rid of your congressman. Therefore we get zero cooperation between the parties. No one needs to compromise because they have no fear of getting voted out of office.
Having read all of the above comments about factors that affect and effect our economy, I see no words of concern about the Greatest threat to our way of life and means of earning a living, even our very life! That factor being Obamacare, a never-ending law! If you have not yet had time to read Beating Obamacare by Betsy McCaughey,Ph.D. Who is said to be the Only person to have read this law, then grab a copy and learn for yourself how it is hurting our economy and all citizens regarding of age! You each probably have a Seniour in your life who needs you to find out just what a diabolical scheme lies in wait for Seniours! You will probably be shocked that any one in our America could devise such a scheme intended in taking the country finally into single payer system…..and that would really turn our economy upside down? Again I say we have lost control of all elected employees from top to bottom of rank who were given responsibility to preserve and promote our economy toward prosperity! Something has gone so Bad wrong and we must find good leaders who know how to fix things per the constitution and instructions of the people, their employers! Thanks for listening.
ULTIMATE GOALS? 1. Canada & Mexico become 51, 52 States? 2. “Outlaw” lobbyists?
3 Reduce GMO foods? 4. Increase tax % as income escalates? 5. Establish maximum
amounts that “billionaires”, may pass on – MUST – donate to public health education,
global problems? 6. “Reduce” population growth, pills, condoms, surgery, et. al. ways?
7. Universal health programs? 8. Redirection: “firing squads”; “legal” death penalties; “eager”suicides? regional organ banks to harvest/provide life saving organs to qualified children/adults? 9. Household “nature preserves” providing suet, seed, table scraps etc. for birds, squirrels, other native wildlife. SAVE THESE – Lets hear some other ideas? Paul
I’ve always thought that the Democrats were evil,they have consistently increased the size and cost of government and increased the power of government over people.