Saturday, July 17, 2021

Fixing Inequality. The Hard Way

There are two ways to fix inequality - the right way which is raising the living standards of everyone. And the wrong way, which is ignoring rampant inequality until "the system" explodes. Guess which way was chosen...

There are many reasons why this society doesn't see this coming, however the main reason is because they are conditioned to ignore inequality in both the economy and in markets. At this late juncture inequality has reached biblical proportions and hence will be resolved the hard way. Among other things, this historically illiterate society doesn't know what happens from a political standpoint when inequality becomes too excessive and extreme. It's called revolution, and I predict that at the very least from an ideological standpoint, we are on the cusp of a paradigm shift in thinking.

To date, the obedient sheeple don't question "the system", because they are blithely unaware as to their role in this overall enterprise. Similarly, Madoff's investors considered him an investing genius until they found out the hard way that their gullibility was the sole secret to his success. Up until that time they never once questioned the outsized gains he was magically racking up.

Therefore, it's highly fitting that this Ponzified society is willing to ignore the chasmic inequality in this economy because they are solely fixated on bidding up their own assets. The market is now basically an analog of the underlying economy - a handful of massively wealthy and overvalued Tech oligopolies reaching record valuations aided and abetted by Fed socialism for the rich. And then the rest of the market, which is disintegrating in broad daylight.

The chart of the week is this one showing the Dow attempting a breakout to new all time highs (failed). And then NYSE market breadth which is deja vu of the 2020 collapse. And in the lower pane, I chart the inverse - % of stocks BELOW the 50 dma which is the worst since the October 2018 collapse:

This inflation hysteria created by the rabid right has been very useful in directing the Idiocracy's attention away from the economic inequality issue and instead towards the Walmart effects of Biden's policies. And yet not even one GOP governor canceling unemployment benefits has warned that monetary socialism for the rich is a major risk. Not one. That will be their undoing. In ignoring the greatest market and economic risk they have put the entire "system" at risk. One thing I've noticed is that the right loves protests when they take place in other countries. However, they don't like them as much when they take place in the U.S. This Ponzi market has set the stage for the biggest protest in U.S. history, and it won't be pro-capital.

All of today's "inflation" is not due to final demand, it's caused by central banks bailing out the wealthy. The effects of which are always transitory:

Recently I asserted that the world will always be mired in extreme deflation as long as there is extreme poverty. One of my Twitter trolls threw out Venezuela as the counter-argument. Venezuela has inflation precisely because they do not abide by the rules of Globalization which means they do not put capital markets first. And they've been poorly managed no question.  BUT to compare a country whose economy is a rounding error on global GDP, is like saying a spark on a glacier is going to lead to a wildfire. The world could never do what Venezuela is doing without first collapsing financial markets. Under the current paradigm we are slaves to the bond market and hence slaves to global deflation. Our leaders have no plan for how to get us out of this poverty trap. Japan has been trying for 30 years straight.

Nevertheless, I predict this politically motivated inflation hysteria and its attendant belief in higher prices, will move the ideological ball more than any left wing protest could ever hope for. And who can we thank for that but the very con men and denialists who don't want the change to happen.