"War of the Worlds"
by Nomi Prins
"In 'The War of the Worlds', H.G. Wells evokes a species - humanity - rendered helpless in the face of a force greater than itself and beyond its control. His depiction of the grim relationship between the Martians and the humans they were suppressing (meant to remind readers of the relationship between British imperialists and those they suppressed in distant lands) cast an eerie light on the power and wealth gap in Great Britain and around the world at the turn of the twentieth century.
The book was written in the Gilded Age, when rapid economic growth, particularly in the United States, bred a new class of “robber barons.” Like their twenty-first-century counterparts, they also made money out of money, while the economic status of workers slipped ever lower.
It was an early version of a zero-sum game in which the spoils of the system were increasingly beyond the reach of so many. Those at the top ferociously accumulated wealth, while most of the population barely got by... or drowned.
A crisis of inequality had been sparked by the Industrial Revolution, which started in England and then crossed the Atlantic. By the late nineteenth century, America’s “robber barons” were insanely wealthy. According to economist Thomas Piketty, there was a steeper increase in wealth inequality during the Gilded Age than ever before in American history. In 1810, the top 1% of Americans held 25% of the country’s total wealth; between 1870 and 1910, that share leapt to 45%. Today, the top 1% of Americans possess more wealth than the whole of the middle class, a phenomenon that has held true since 2010.
By 2018, about 75% of the $113 trillion in aggregate U.S. household assets were financial ones; meaning, they were tied up in stocks, ETF’s, 401Ks, IRAs, mutual funds, and similar investments. The majority of nonfinancial assets in that mix were in real estate.
Even before the pandemic, only the richest 20% of American households had recovered fully (or, in the case of the truly wealthy, more than fully) from the financial crisis. That was because fewer households had participated in the stock market or owned real estate since the crisis, so they didn't have a chance to capitalize on increases in the values of either.
Much of the appreciation in the stock market and real-estate values has been directly or indirectly related to the Fed’s actions. By the end of December 2020, its balance sheet had increased by $3.164 trillion, reaching a total of $7.35 trillion, 63% more than its book at the height of the decade following the 2008 disaster. Its ultra-loose policies made it cheaper to borrow money, but not as attractive to invest in low-interest-rate, less risky securities like Treasury bonds. As a result, the Fed incentivized those with extra money to grow it through quicker, often riskier investments in the stock market or real estate.
That’s not free market capitalism at all. It’s more like a casino where the games are rigged. The Fed is doing the rigging.
By 2020, urbanities were engaging in cash-only bidding wars for suburban homes that would provide refuge from coronavirus-stricken cities. These all-cash offers were beyond the reach of most traditional buyers.
Congress passed two much-needed Covid-related stimulus packages that extended unemployment benefits, offered two one-off payments, and instituted a Paycheck Protection Program to support smaller businesses. However, the impact of those acts paled in comparison to the tax breaks and investment power the stock market provided to the well-off and corporate kingpins.
While markets leapt to record highs, poverty in the United States also rose last year from 9.3% in June to 11.7% in November 2020. That added nearly eight million Americans to the ranks of the poor, even as America’s 659 billionaires held double the wealth of the 165 million poorest Americans.
The Martians Are Here: The gap between incoming and outgoing federal funds rose as well. The U.S. deficit increased by $3.3 trillion during 2020. The size of the public debt issued by the Treasury Department reached $27.5 trillion. Total federal revenue was $3.45 trillion, while the corporate tax portion was just $221 billion, or a paltry 6.4%.
And though many larger and mid-size corporations filed for bankruptcy protection due to coronavirus related shutdowns, the brunt of permanent closures affected smaller, local businesses the most. Restaurants, hair salons, and health and wellness shops were the hit hardest, only exacerbating economic disparity at the community level.
In other words, the real problem when it comes to inequality isn’t the total amount of taxes received versus money spent in a time of crisis. The greatest issue is that the composition of federal revenue is wildly out of whack (something the pandemic has only made worse).
Take the defense sector, for example. The U.S. government doled out $738 billion to the Pentagon for fiscal year 2020. The contracts to defense-related private companies in 2018, the most recent year for which data was available, totaled roughly 62% of a full defense budget of $579 billion, or $358 billion. Now imagine this: that amount alone dwarfed the total of all corporate taxes flowing into the U.S. Treasury in 2019.
Inequality is about the disparity between people and countries with respect to income, wealth, or power. There will never be perfect equality in a free society, and I’m not saying we should attempt to create it. That would be totalitarian, and it’s been a disaster wherever it’s been tried. But a strong middle class has been America’s backbone. When inequality reaches such extreme levels, it creates an unstable society and invites social unrest. And the more that corporations keep relative to their bottom line when compared with ordinary citizens, the more the stock market rises relative to the real economy. That just perpetuates the cycle.
The more that individuals, rather than corporations, shoulder the burden of tax revenues, the greater the inherent inequality in society. The more that financial assets appreciate and money seeks to multiply itself in the quickest way possible (think of it as like a virus), the greater the distortion created. It’s speculation, not investment in the productive economy.
The Fed can focus on its inflation-versus-full-employment dual-mandate all it wants. But if it continues pushing policies that distort the value of the real economy compared to financial assets, then we are headed for disaster. The reality is that the more those Fed-inflated assets grow relative to real ones, the greater the inequality gap. That’s plain math, and it’s the ugly essence of the United States of America as 2021 begins.
The market doesn’t care about politics. It’s a creature that acts in accordance with the goals of its largest participants. The real economy, on the other hand, requires far more effort -planning, prioritizing, and executing programs and projects that can produce tangible profits. We’re a long way from a world that puts investment in the real economy ahead of those soaring financial markets. That gap, in fact, might as well be like the distance between Earth and Mars. In the midst of a pandemic, as billionaires only grow richer and the markets soar, can there be any doubt that we’re experiencing something like a Martian invasion?"
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Nomi Prins is an American author, journalist, and public speaker. She is the editor of 'Nomi Prins' Dark Money Millionaire' and contributor of Jim Rickards' 'Strategic Intelligence.' She has worked as a managing director at Goldman-Sachs and as a Senior Managing Director at Bear Stearns, as well as a senior strategist at Lehman Brothers and analyst at the Chase Manhattan Bank.
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Theme related:
Jeff Wayne, "The War of the Worlds"
Richard Burton's narration.
"This is the Jeff Wayne musical version of "The War of the Worlds." I have edited out all of the songs in order to have the incredible voice of Richard Burton's narration of the story in one continuous flow." - Stuart Ward
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Jeff Wayne, "War of the Worlds" Complete
An astounding achievement! Highest recommendation!
Treat yourself, close your eyes, and unleash your imagination!
Please view on YouTube, with auto-play on, here:
"Never before in the history of the world had such a mass of human beings moved and suffered together. This was no disciplined march, it was a stampede, without order and without a goal, 6 million people, unarmed and unprovisioned, driving headlong. It was the beginning of the rout of civilization, of the massacre of mankind."
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