Gold News

QE, ZIRP & the Zombies

The rich get richer, the poor get nothing. All thanks to Fed policy...

AT LAST, here's something important, writes Bill Bonner in his Daily Reckoning, from The Economist:

"The most recent figures show that the top 10% of households own about 91.4% of outstanding stocks and mutual funds, up from 84.5% in 2001. The richest 1% own almost half of all stock and mutual funds.

"No surprise then that the recent jump in consumer sentiment recorded by the University of Michigan was led by the better-off; upper-income households (the top third) had a 15 point increase in sentiment, the bottom two-thirds rose just five points."

Damn! But don't worry. If you're among the rich, you'll get that other 8.6% of stock and mutual fund wealth. With Ben Bernanke on the case, it's just a matter of time until you have 100% of America's stock market wealth.

Of course, you'll also be turned into a zombie.

But you're probably wondering: How does that work, again? Simple. Think of it this way...

QE and ZIRP are essentially new forms of wealth. Whoever gets this wealth first gets richer. Everybody else gets, relatively, poorer.

Did you get this new money, dear reader? You may have, without realizing it. It feeds corporate profits and equity prices. The new money is not designed to create wealth. It just transfers more resources to rich people.

Small businesses create new jobs and new wealth. But small business can't borrow at today's low rates. They're lucky if they can borrow at all. Instead, almost all the new credit goes to banks, big businesses and the government.

In the normal course of investing, you win some and you lose some. That's what keeps the rich from always getting richer. Wealth goes both ways. But along comes the Bernanke Fed with zero interest-rate lending...and even bad businesses can refinance their mistakes. If they're big enough that is.

So you end up with an economy full of giant, lumbering zombies...protected by the government and nourished by the Fed.

Here's the Wall Street Journal on the subject:

"Companies add jobs more slowly, even in good times. Investors put less money into new ventures. And, more broadly, Americans start fewer businesses and are less inclined to change jobs or move for new opportunities."

Zombies to the right of us. Zombies to the left of us. Zombies everywhere. And they're getting richer all the time.

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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