"Remaking American Society"
By Bill Bonner
YOUGHAL, IRELAND – "We suggested yesterday that, while the Biden administration’s “net zero” climate change project itself is unlikely to affect the world’s climate, Biden’s proposals will almost surely take a few weeks off our economy’s growing season. Today, we elaborate.
You’ll recall that when the money goes funny, everything goes funny. First, things get weird. Then, they get nasty. But that is all still ahead – the consumer price inflation… the financial controls… the depression… the crack-downs… and the crack-ups. We are still in the delightful, delusional, weird stage.
Good Intentions: Ordinary people, for example, are beginning to hallucinate that old-fashioned working and saving is a mugs’ game. They can make as much money in one hour trading Dogecoin as they can in a whole month stocking shelves… So why not? Dogecoin rocketed upward after Elon Musk signalled via Twitter that it might be important. Now, the coin – which began as a joke in 2013 – has a market cap of nearly $36 billion.
Or they believe the government can take care of them, by cancelling their student debt and sending them regular stimmy checks. Here’s CNBC: "In early April, President Biden asked the U.S. Department of Education to see if his executive authority gives him the ability to enact massive student loan forgiveness without congressional approval."
Some even think the feds should control the world’s temperature. Why not? The sky’s the limit! Others want to turn the entire U.S. into a “safe space,” where people are not allowed to voice any opinion that others might find offensive… And we all must be vaccinated and continue to wear triple masks, just in case.
Good intentions? Maybe. Power unchecked by real, limited money? Surely.
Green Agenda: The Biden Administration is enjoying a heady brew – a clear majority in the House and an edge in the Senate… widespread relief after four years of Trumpismo… and a national credit card with no apparent limit. So it has set out to remake American society… remold its economy… and reshape its politics to give the liberal wing of the Deep State unchecked control.
Just last week, we saw the Biden team unveil two major initiatives. First, its Green Agenda. From CNN: "Climate is a big focus of the President’s roughly $2 trillion infrastructure proposal. He has said his proposal would create hundreds of thousands of jobs while tackling the climate crisis, reducing emissions and building a “modern, resilient and fully clean grid.”
You can put people to work doing anything you want. They could generate power, for example, by tending thousands of caged hamsters running on wheels. But letting politicians decide how you generate electricity and allocate capital – as the Soviet Union proved – is more likely to result in a poorer society than a richer one.
Reducing Inequality: This climate change boondoggle is supposed to be paid for, at least in part, by raising taxes on the rich. It seems to bother no one that the “rich” – the top 5% of taxpayers – already pay more than 60% of the money collected by the feds. The bottom 50% of the population pays almost nothing. Fair? You decide.
But this is just another of the new administration’s conceits. It knows what the weather should be… and how much money we should have. The rich have too much, it believes; the poor have too little. And so what if the numbers don’t add up… The “facts” are only guesswork… and the Green Agenda doesn’t really alter the world’s climate? At least we’re trying! And the collateral benefits – reducing inequality, creating jobs – will make it worth it.
Wealth Shift: Most people will be pleased to hear about higher taxes on the rich. They think wealthy people are getting away with something. Perhaps they are. But it has nothing to do with loopholes and not paying their fair share. Instead, they are on the receiving end of a $30 trillion wealth shift – thanks to the Federal Reserve.
Total financial wealth (most of it owned by “the rich”) averaged about 350% of GDP from the end of World War II to the end of the 1980s. Now, it’s about 500%... or an extra $30 trillion. Where did all that extra wealth come from?
The Fed prints money. It buys Treasury bonds. The rich own bonds. Bond prices go up. And the “rich”… now joined by basement-dwelling, knuckle-dragging millennials… put their money into stocks in order to get a little yield (the Fed has pushed the real rate of return on savings down to under zero… where it has been for most of the last 11 years).
Fake Wealth: And since March of last year, the world’s central banks and governments have pumped some $27 trillion into their economies, supposedly to offset the damage done by COVID-19 shutdowns. What were people supposed to do with this money? They couldn’t go out and have a good time – bars, restaurants, cruise lines, theaters, et al. were closed. And there was no point putting it in a savings account, either; it would earn no interest.
But the investment markets? There’s the ticket! And guess what? The markets went up. And the rich got richer. The S&P 500 is up 45% in the last 12 months. Tesla (TSLA) is up more than 4 times. And bitcoin (BTC)… are you ready for this?… is up 7 times!
Any similarity between this and properly functioning, honest asset markets is purely coincidental. Real companies do not become four times as valuable in a single year. Real money – which bitcoin claims to be – does not go up 7 times. It does not go up at all. And governments do not create trillions of dollars out of nothing.
Even Weirder: But those are just some of the things that happen in the weird stage. And rather than curtail the weirdness… the Biden Administration is proposing to make them even weirder.
As for the stock market riches, the Democrats are in on the scam as much as the Republicans. They own stocks, too. They have their political “Big Daddies”… They have their lobbyists… And they, proportionally, are richer than Republicans. From the Washington Examiner: "Democrats are the party of the wealthy, a flip from decades ago when it was the party of the poor and middle class. Democrats represented 65% of taxpayers with a household income of $500,000 or more in 2020, according to IRS data, while 74% of taxpayers in Republican districts have household incomes of less than $100,000."
As you get wealthier, the “declining marginal utility” of money means that higher tax rates are not that significant to you – especially if you didn’t actually earn the money. The extra social value – from appearing to want to help the poor… or make society fairer – may have relatively more value.
Huge Gap: In any case, the tax increases to pay for the climate change boondoggle, such as they are, are likely to include big headline numbers, which will get moderated somewhat before rich Democrats have to pay them. That will leave a huge gap that will have to be filled – as usual – by printing more of the money that made the rich so rich in the first place. So, most likely, none of the goals will be reached. Temperatures will go whither they want… productive jobs will be destroyed so that the resources can be redeployed… the new jobs will be time wasters… and the rich will get richer.
Tomorrow, we will look at Biden’s more ambitious proposals. Not only do they aim to transfer trillions of dollars to unworthy causes, but also, to give the fantasists almost permanent control of Washington."
