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“The Wealth Gap in the U.S. Continues to Grow”

Thursday, June 27, 2019 2:33

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“The Wealth Gap in the U.S. Continues to Grow”

by Teeka Tiwari

Editor’s Note: “As Bill recently said, there’s never been a bigger gap between Main Street and Wall Street. That’s because “the feds created fake money and lent it out at fake rates,” and all this money flooded into Wall Street. And our editor isn’t the only one connecting these dots. Palm Beach Research Group guru Teeka Tiwari sees a similar pattern playing out… crony capitalism has taken over. And while investment advice isn’t our normal beat here at the Diary, Teeka is always finding ways to make his subscribers money, while revealing secrets normally reserved for Wall Street. Below, he shows why it’s the average American that’s helped the elite get so rich, and exposes why Wall Street owes every U.S. taxpayer $35,460.”

“There’s capitalism… and then there’s crony capitalism. Now, I love capitalism. It allowed a 16-year-old kid from England – who arrived in the U.S. with only $150 in his pocket and zero connections – to become a self-made multimillionaire. American capitalism made that happen. But over the last 32 years, I’ve watched American capitalism morph into Soviet-style cronyism.

You’d have to be blind not to notice that something’s very wrong with our once-great capitalist system. For instance, why is the Federal Reserve thinking about lowering interest rates when unemployment is at a 50-year low… GDP is running at 3%… and inflation is hovering at 2%? What on earth would motivate it to cut rates other than kowtowing to Wall Street’s greedy demands? Well, today, I’ll tell you why…

Wall Street’s Good Times: It all started in 1998 with then Fed Chair Alan Greenspan. At the time, a small, Connecticut-based hedge fund called Long-Term Capital Management (LTCM) amassed a $1 trillion position in government bonds. But LTCM’s positions dropped, and its lenders were on the hook for billions in losses. And rather than let some of the banks go under, Greenspan lowered interest rates.

The rate cuts bailed out the banks and ignited a powerful stock market rally (which ended with the dot-com bust). And ever since then, Wall Street firms have known they could take outlandish risks and pocket massive fees. If it didn’t work, the Fed would simply bail them out.

Just look at what happened during the 2008 global financial crisis. Banks took insane risks. For every $1 in equity, banks lent as much as $35 (or 35:1 leverage). That’s insane. Yet when the proverbial spaghetti hit the fan, the Fed rode in for the rescue. This behavior has created a two-tier capitalist system. There are those who are part of the Wall Street banking elite – and then there’s everybody else. And the problem is: Everybody else is paying for Wall Street’s good times.

Crony Capitalism: Since the 2008 crisis, the Fed has kept interest rates artificially low. Now, this has been great for stock prices – and for the banks and brokers hawking them. Over the last 10 years, the finance sector has racked up $1.75 trillion in gross profits.

But what you may not know is, these bankers have been swilling champagne and chomping caviar on your dime. You see, the average U.S. household has lost an estimated $4,236 in interest income due to the Fed’s low interest rates (as opposed to a “normal” rate environment). In total, this has funneled $51.8 billion from the pockets of American savers into the coffers of Wall Street banks. So all the “wealth” the Fed has created over the last 10 years was simply transferred from everyday savers like you.

And this isn’t the only way the elite have diverted wealth from your pockets to theirs, either. According to a report from the People’s Policy Project think tank, the wealth of the bottom 50% is down $900 billion over the past 30 years. Meanwhile, the wealth of the top 1% has increased by $21 trillion. Digging deeper, we found that at least $5 trillion of this was taken away from average investors, like you and your fellow readers.

Without getting too deep into how this “theft” occurred, I can tell you that the financial elites created a private investment market. Then they restricted access to this massive market to only themselves, cutting the rest of America out of the deal. To put it in perspective: $5 trillion is enough money to give all 141 million U.S. taxpayers $35,460 each. It’s not chump change. And by right, it should’ve been yours.

And we aren’t the only ones in on this story… Last year, CNBC covered a high-profile “anonymous whistleblower” who held senior roles in the investment business. The whistleblower said he came across market manipulation by some of the country’s biggest trading firms. He claimed that a flaw in the Volatility Index (the VIX – also known as Wall Street’s “fear gauge”), “allows trading firms with advanced algorithms to move the VIX up or down” whenever and however they want. And the whistleblower said it was costing investors hundreds of millions of dollars per month.

I hope by now you can see navigating this world of crony capitalism requires a new approach. Old ideas of just buying and holding traditional stocks just don’t work anymore.”

- https://bonnerandpartners.com/

Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2019/06/the-wealth-gap-in-us-continues-to-grow.html

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