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In this month’s initial Macro Analytics video newsletter we focused primarily on Financial Repression versus increasing Social Suppression. The conclusions I have drawn (besides those outlined in the video) was stated in the newsletter:
The bottom line today is that power rests with the PARTY, and the party bosses behind the scenes, dealing with campaign finance and powerful corporate lobbyists.
We need to fully appreciate that there is a great danger when the party bosses begin exercising too great a control. History is replete with horrific examples.
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When the party apparatus has the power to select candidates, allocate campaign funding, control the formulation of legislative bills as well as policy platforms, bad things happen. The party inevitably stops being rooted in the people of the party but rather controlled by outside powers. This has become blazingly clear within the US two party system with many alarming examples:
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- When: House Speaker Nancy Pelosi told the congressional legislature regarding Obama’s signature legislation on his Affordable Care Act: “But we have to pass the [health care] bill so that you can find out what’s in it….” (I naively thought our elected officials actually crafted the legislation?).
- When: recent Democratic Primary Presidential candidate Tulsi Gabbard expressed her startling dismay, regarding her Congressional Orientation session, when she was told by the Democratic House Whip how she was expected to vote and what she was allowed to to say and speak about. She was there to do as she was told ..or else! Frustrated, she subsequently considered running as a third party candidate when she asserted that the Democratic party is “not the party that is of, by and for the people,” (and traffics in “lies and smears and innuendo)”
- When: former long time US Senator Liberman lost his party campaign funding and was forced to run as an independent because he didn’t “tow the line”
- the examples go on and on. I fully suspect the Republican Party is similar but currently is possibly slightly less organized (as yet?).
As a Libertarian in belief, I have come to view the two US political parties as simply two heads of the same sinister creature. As a friend often reminds me, that as an immigrant I need to understand that in the US: “your choice is simply whether you want the Gambino’s or The Gotti’s to control your neighborhood!”. He is obviously a little cynical, but I have come to appreciate he is closer to the truth than I had initially imagined.
FOLLOW THE MONEY
As a contributing consequence of the above we now have developed a bifurcated Two Tiered System in America. How did this come about? The answer is pretty clear. As any criminal investigator will tell you, simply follow the money to find the root of corruption.
WE INCREASINGLY HAVE A CONCENTRATION OF CAPITAL AND POWER IN THE HANDS OF THE FEW AT THE EXPENSE OF THE MANY!
As Charles Hugh Smith writes: “The saying follow the money is only half-right–more importantly, follow the capital because income and power flow to capital. As this RAND report documents, $50 trillion has been siphoned from labor and the lower tier of the economy to the top-tier elites who own the vast majority of the capital: Trends in Income From 1975 to 2018“
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The following is extracted from some of the recent work of my video colleague, Charles Hugh Smith. We simply did not have time to explore the following in the video, but it assisted in drawing our conclusions regarding advancing statist:
Globalization and Financialization have richly rewarded the top 0.1% and the top 5% technocrat class that serves the elites’ interests. These elites and their capital are concentrated in urban counties, and the feedback loops are self-reinforcing: the capital in the urban counties attracts more capital and talent (skilled labor), bleeding the other 2,500 counties of skilled labor and capital.
The chart to the right is a map, courtesy of Brookings, showing the roughly 500 counties Biden won and the roughly 2,500 counties Trump won.
This might seem like a chart of political polarization, and superficially that’s clear, but the real polarization is economic-financial: there are two economies in America, and there’s very little commonality in the two economies.
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- 70% of America’s economy is generated in fewer than 500 counties; the other 2,500 counties are left with the remaining 30%.
- The nation’s productive capital is even more concentrated in a few hands and regions, and since income and political power flow to capital, the financial disparity / inequality far exceed the 70/30 split depicted in this political map.
- Ownership of capital is concentrated in the hands of the top 10%, as the chart of equity ownership reveals, but the concentration is actually much more limited: the top 0.1% control so much wealth / capital that they “own” virtually all the power.
America is now a rigidly two-tier society and economy.
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- If you’re an executive at a big Wall Street investment bank, you can rig markets and embezzle billions and you’ll never face any personal legal consequences such as being indicted for fraud and being imprisoned.
- But try being an employee at a local credit union and embezzle $5,000–a prison sentence is very predictable.
- If you’re one of the 500,000+ people busted for possessing cannabis in the U.S. every year, then you’re not rich and powerful, because when the spoiled-rotten child of the rich and powerful gets busted, the charges are quietly dropped, or cut to a modest fine and a misdemeanor, etc.
- “Justice” is for sale in the U.S., along with rigged markets, political power, healthcare and everything else. Why should we be surprised that the economy is also two-tiered?
- The lower tier of the U.S. economy has been decapitalized: debt has been substituted for capital. Capital only flows into the increasingly centralized top tier, which owns and profits from the rising tide of debt that’s been keeping the second tier afloat for the past 20 years.
THE GREAT DIVIDE
What’s missing from the political map is the staggering percentage of residents in the wealthiest 500 counties who are precariats living paycheck to paycheck, the ALICE Americans: Asset Limited, Income Constrained, Employed.
There’s a lot of big talk about rebuilding infrastructure and the Green New Deal, but our first question must always be: cui bono, to whose benefit? How much of the spending will actually be devoted to changing the rising imbalances between the haves and the have-nots, the ever-richer who profit from rising debt and the ever more decapitalized debt-serfs who are further impoverished by rising debt?
The controlling distributors of ‘profits’ to the elite are increasingly the PARTY bosses.
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“America has no plan to reverse this destructive tide. Our leadership’s “plan” is benign neglect: just send a monthly stipend of bread and circuses to all the disempowered, decapitalized households, urban and rural, so they can stay out of trouble and not bother the elites’ continued pillaging of America and the planet.
That our “leadership” reckons bread and circuses is what the strip-mined bottom 90% want is beyond pathetic. This map dictates our future, which is the pendulum of wealth and power being concentrated in the hands of the greediest, most rapacious few reaching an extreme and then reversing to the other extreme. How that plays out is anyone’s guess, but the pendulum swing to an extreme at the other end of the spectrum is already baked in: the way of the Tao is reversal.”
OUR FRUSTRATIONS RUN FAR DEEPER THAN COVID LOCKDOWNS
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The reality is the roulette wheel is rigged and only chumps believe it’s a fair game.
It’s easy to lay America’s visible frustrations at the feet of Covid lockdowns or political polarization, but this conveniently ignores the real driver: systemic unfairness. The status quo has been increasingly rigged to benefit insiders and elites as the powers of central banks and governments have picked the winners (cronies, insiders, cartels and monopolies) and shifted the losses and risks onto the losers (the rest of us).
We now live in the world the 19th-century French economist Frederic Bastiat so aptly described: “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
As I noted in The One Chart That Predicts our Future, ours is a two-tier society and economy with a broken ladder of social mobility for those trying to reach the security of the technocrat class and a well-greased slide for everyone who trips and slides from relative security down to the ever-expanding ALICE-precariat class: assets limited, income constrained, employed.
As Bastiat observed, those rigging the system to benefit themselves always create a legal system that lets them off scot-free and a PR scheme that glorifies their predation as well-deserved rewards that are the natural due of their enormous appetite for hard work and innovation.
You know, hard work and innovation like this:
Embezzling a couple billion dollars also earns you a get out of jail free card: none of the perps in Wall Street’s skims, scams and frauds ever gets indicted, much less convicted, and none of Wall Street’s legalized looters ever goes to prison.
And this is a fair and just system? Uh, right. Meanwhile, the reality is the roulette wheel is rigged and only chumps believe it’s a fair game. Those who know it’s rigged have essentially zero agency (control / power) or capital to demand an unrigged game or finagle their way into the elite class doing the skimming.
The key takeaway in my view is the unfairness isn’t limited to the economy, society or politics– it’s manifesting in all three realms. It isn’t just frustration with domestic issues–the global economic order is also a source of unfairness and powerlessness.
We each drew up a list of specific drivers of unfairness / frustration.
Here’s my list:
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And here’s Gordon’s list:
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There is much more in our presentation. These are the dynamics that are tearing apart our social cohesion and that will soon start destabilizing the economy–regardless of how much “money” the Federal Reserve prints.
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