Gold News

How to Mug the Masses

How do they cheat thee? Let's count the ways...
 
The FED "invested" more than $27 trillion between 1980 and today...in wars, bailouts, and boondoggles, writes Bill Bonner in his Diary of a Rogue Economist.
 
Return on investment = negative.
 
This is not to say that some people didn't make out very well.
 
Stock market investors (the 10% of the country with substantial stock holdings, in the Dow, for example) saw their wealth increase more than 35 times...even as the economy grew only eight times.
 
An investment in Raytheon, General Dynamics, and other war suppliers rose 10 times just since 2000, while the economy only doubled.
 
And the "educators" running the public school system in Baltimore never missed a holiday or a paycheck...even while, in one third of the high schools there, not a single student was proficient in math.
 
As for the faceless crowd, it ended up with $28 trillion in debt...and nothing to show for it.
 
Our theme: How the masses get the Afghan treatment from their own corrupt elite.
 
How do they cheat thee? Let us count the ways.
 
Schools that don't teach. Wars that can't be won. Regulations, rules, standards, licenses, controls, restrictions, punishments.
 
And most important, fake money, that makes the rich richer and everybody else poorer.
 
Our friend David Stockman tells us that over the last 25 years, federal policies have added $30 trillion to the net wealth of the top 1% – or $23 million per household. That works out at just under $1 million per household per year.
 
The bottom 50%, meanwhile, got a total of $1.5 trillion – $23,000 per household, which works out at less than $1,000 per year...a thousand times less than the rich.
 
Equality is a fraud and a myth. But we'd just like a little honesty. And perhaps, if it is not asking too much, a little integrity.
 
Last week the eviction moratorium expired. Some 3.5 million Americans are behind on rent and now face put-outs. Goldman Sachs predicts that 750,000 of them will get tossed onto the streets by the end of the year.
 
Who are these people? The CEOs and consultants...the stockholders...the professors...the reporters? Members of Congress? The rich?
 
Nah...Mostly, they are the uncounted heads, the wavering millions...the people the feds say they are trying to help.
 
Well...LOL and thanks a lot!
 
Since March 2020, their champions, Donald Trump and Joe Biden, have told them they don't have to pay their rent. And now, they need to come up with a big check.
 
Rent of $1,000 a month would mean they would need $17,000 to settle up. Do they have that kind of money to apply to back rent? Not likely.
 
And rents are rising sharply. According to the Yardi Index, monthly payments for renting a house are rising 13% year to year, and apartments are going up at an 8% rate.
 
Who is responsible for that? Did landlords suddenly become greedy? Nope again. Landlords don't create inflation; they just respond to it.
 
And what about owning a house? Here's our sidekick, Dan Denning, writing from Laramie, Wyoming:
"Home prices were up 18.6% in June from the same time last year, according to the S&P CoreLogic Case Shiller National Home Price Index. That's the largest annual gain in the history of the data set, going back to 1987. House prices in America are now 41% higher than they were at the top of the housing bubble in 2007."
Whose wages are rising at an 18% rate? Not those of the working class...
 
And here's another fine mess the feds have gotten us into. Here's economics writer Jeffrey Tucker:
"Large corporate buys of homes designed to be flipped into rental properties are rocking the financial markets. Two companies – Invitation Homes (INVH) and American Homes 4 Rent (AMH) – are up 38% for the year. In addition, one in five purchases of homes this year have been corporate, with the intention of turning them into rents. Goldman Sachs, Blackstone, and Investco have committed some $11 billion to the cause. And there is more money pouring into building new properties designed as rentals."
How come the big corporates are paying so much for houses?
 
Oh, Dear Reader, we can't believe you're asking us that question. It's the Fed.
 
Credit ratings agency Moody's tells us that the yield on an Aaa corporate bond – the highest rating – is about 2.5%...which is only about half the latest inflation reading.
 
Another big payday for the speculators. They can buy a house for $300,000, using money they borrowed at 2.5%. Already, they're making 2.5% on the financing, after inflation.
 
If they rent the house out for $2,500 a month...it gives them a gross yield of 10%, plus the 2.5% financing boost.
 
Then, thanks to the Fed's money-printing and interest rate suppression, house prices are going up at an 18% rate, giving them a total (very gross) return of 30.5%.
 
Of course, prospective homeowners can borrow, too. But the pros can borrow more cheaply...and they have a lot more money to work with. 
 
Say a prayer for the "salt of the Earth". They're going to need it.

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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