The Greatest Fraud of the US Economy

Tuesday, the Dow lost 119 points. Gold continued its progress back to where it was when the last dip began.

And we continued looking for the weak link.

A chain of deception, humbug and larceny has corrupted the entire US economy. From top to bottom, every financial decision has been twisted in one direction or another.

From student loans and payday loans, to the corporate borrowing binge and the stock buybacks it fuels – from link to link, money from nowhere leads to somewhere people want to go. Especially, to higher asset prices.

At the lower end, it doesn’t look so good. Students who graduate this year, and who took out government-backed loans, are saddled with an average of $33,000 in debt. They’ll spend decades paying it off…at best.

Homebuyers, too, find themselves not so much benefiting from cheap money as competing with it. Private equity firms with billions of dollars in ultra-low cost leverage have bid up the cost of homes in key markets.

The average buyer pays higher prices as a result…and then finds himself indentured to the lenders for most of his life.

The typical American household also finds itself with a major headache. Rising real prices press from the right (about which more in a minute). Falling real wages squeeze hard on the left. And its debt burden, though slightly smaller than it was in 2007, is still heavy.

A dear price to pay

But at the upper end people are delighted. Banks – with the happy connivance of the US Federal Reserve – create new money. Corporations use it to buy their own shares. Central banks buy shares too. (What else are they going to do with all the money they create?)

Besides, buying stocks seems to please everyone who matters. Investors are happy. Speculators are happy. Economists are happy. Politicians are happy, too.

After all, a rising stock market means the economy is getting better, doesn’t it?

But there is a heavy price to pay, dear reader. The financiers end up owning more of the real businesses…the real enterprises…the real houses…the real output of the real US economy.

Read the rest of this article at The Daily Reckoning