There’s been a lot to pay attention to this year; COVID, Lockdowns, George Floyd and Breonna Taylor, Black Lives Matter, the Election, Vaccines, Unemployment, and the Economy.
Despite your political views or opinions on most of these matters, there is one thing that we should all agree upon; Queens Gambit made us all think we could play chess. No, seriously - we should all agree that our government, all parties included, has let us down. And I’m not even talking about the jumbled response to the virus on both the state and federal levels that has led to over 320,000 deaths, which is beyond embarrassing and depressing. I’m talking about the increased disparity between the ultra wealthy and the rest of the world. A disparity that the government, the Treasury and the Federal Reserve are actively expanding through their monetary policy.
As I write this, nearly 20 million Americans are unemployed, 78 percent of Americans that are employed are living paycheck to paycheck, and food bank lines are growing at an alarming rate everyday across this country. Conversely, the stock market is at all time highs, company valuations are at levels not seen since the dot com bubble and the top one percent have gotten $1.9 trillion dollars richer this year.
Repeat after me: The stock market does not reflect the economy!
“But how is the government to blame for this?” you may ask. Remember in 2008 when the government bailed out the banks? At the time we were told this was needed in order to prevent a global depression. If the banks failed, the global economy would crumble. And so the phrase “too big to fail” was coined. And thankfully, due to our taxpayer dollars, we only went into a recession. The extremely risky and irresponsible investments of the banking sector were rewarded, and not one banker was punished. This led to larger corporations and industries believing they too were invincible. They no longer had to keep cash on hand for a rainy day; they could just receive a government bailout if things got bad. And boy oh boy did these companies fully embrace this idea. From 2009-2018, the 465 companies in the S&P 500 performed $4.3 trillion in stock buybacks and provided $3.3 trillion in dividends to its shareholders. 91% of the net income over that period was used to artificially inflate stock prices and reward shareholders. And in case you were wondering, employee salaries remained stagnant over that time. Trickle down economics at its finest (see https://www.bloomberg.com/news/articles/2020-12-16/fifty-years-of-tax-cuts-for-rich-didn-t-trickle-down-study-says).
Then what happened earlier this year? A black swan event - something no one could have seen coming, except the experts in virology that have been saying it for years, who have been warning the government we needed a pandemic plan and medical supplies on hand or else it would be catastrophic… but I digress. This black swan event led to the stock market crashing nearly 35% in less than a month. And then these companies who have been buying back stocks at unprecedented levels faced solvency issues after one month of turmoil. Let me repeat that - Companies with billion dollar valuations did not enough cash on hand to weather one month of turmoil.
So what do these companies do? They turn to the government and beg for a bailout. And what does the government do? They pass the CARES act and hand these companies $900 billion in free money - loans that do not need to be paid back, ever. And the average American received $1,200 dollars - $1,200 to bury the bailout headlines and hope you didn’t notice. To some extent, it worked. Most of us didn’t notice. But 9 months later, with stocks having fully recovered from the crash, 60% those who were laid off in March are still unemployed and that $1,200 is long gone. The American people are starting to get restless. But don’t worry, there’s a second stimulus package on the way. After teasing stimulus checks for 4 months, the government has finally come to an agreement and this time you will receive a whopping… wait for it… $600! That should last you at least 18 months this time around according to government calculations! Corporations, on the other hand, are getting another $325 billion of your tax payer money. Oh, and somehow language was slipped into the stimulus package that these businesses can write off 100% of their "working" lunches for tax purposes. Because that was absolutely necessary in these trying times. Keep in mind, these corporations have not only fully recovered from the market crash, but they have also continued to buy back stocks, pay shareholder dividends and lay off employees to cut expenses “due to the pandemic.” And just this past Friday, banks were given the okay to start buying back more stock (https://www.ft.com/content/16ec2a4d-b39a-4ecf-b0b6-af5f4469d18b), while airlines will be receiving their second bailout in 9 months.
If this isn't enough to get you riled up, the government has done even further irreversible damage to the wealth gap. Since the Great Recession, the Federal Reserve has been printing money at an alarming rate. They actually purchase Treasury Bonds (and as of late, corporate bonds and ETFs) using the zero dollars in their account, and magically the transaction goes through. In essence, making money appear out of thin air; the technical term is quantitative easing (QE), but the more sophisticated economists refer to it as “printer going brrrrr”. From 2008-2019, M1 money supply increased from $1.37 trillion to $3.97 trillion, meaning the supply of dollars in circulation increased 190% over 10 years due to this QE process. Simplified, more dollars equals less value for the dollar. And due to the pandemic this year, the printer has been in ludicrous mode (yes, Tesla reference!). The Fed has increased the M1 money supply to $6.58 trillion, an increase of 66% in just one year! They heard about the toilet paper shortage and printed enough money that we could use dollars to wipe our own asses.
“Ok, the government sucks, but how does this affect me, personally?” Between bailouts and the Fed printing money, the dollar has lost 14% of its value so far this year alone. And I believe this is only the beginning - I see far more downside in the future. We may get a bounce short term, but long term the dollar is going to fall drastically in my opinion. The loss of value has led to assets becoming extremely inflated; assets that the wealthy own aka the rich keep getting richer (see above; billionaires made $1.9 trillion this year). Meanwhile, the rest of us are barely making ends meet. Working two jobs just to put a roof over your head and food on the table. And that money in your savings account, if you are so lucky to have any, just lost 14% of its value. The rainy day fund isn't going to have the same buying power it did a year ago. Inflation is starting to creep in; gas prices are going to rise, groceries are going to get more expensive, homes are going to be untouchable, and don’t even think about bringing a child into this world.
So, to answer your question - how does the monetary policy affect you? You. Are. Fucked. Period. The rich are going to continue to get richer. The poor are going to continue to get poorer. And that gap is going to get wider than (insert yo momma joke here).
You and I are going to wake up in our tents on the coastline of Idaho in twenty years wondering how we got there. Well first, the ice caps melted, the San Andreas fault ruptured and California fell into the ocean. And second, the Fed kept printing money and hyper inflation set in; the Dow Jones is at 800,000, college tuition is $5 million per semester and a three-sided shack on .0001 acres costs $230 million. And I’ll look out at over the ocean and say “I told you so”, as I dig into my gourmet $100,000 can of beans. Ah, who am I kidding, the rich won’t let us see the ocean!
You still there? Or did you go out and start the revolution? No, you’re still here. A revolution is too much work. Leave that to the others - let’s just stare at our new iPhones, streaming Netflix, buying unnecessary things on Amazon and tweeting at celebrities, all while hoping things get better on their own. And I’m not judging by the way, I bought the new iPhone - it’s got 5G, whatever that means, and that Pacific Blue color was calling my name - I’m just speaking in generalizations. A majority of us are not willing to take action unless we can do it from our homes. But, unless we take action, this is our future - maybe not the Idaho thing, but certainly the wealth disparity aspect. And our elected officials are culpable in all of this. So, what can we do? More-so, what can we do from our homes? I think we have four options, three of which can be done in your pajamas:
Physical Revolution - I think we agreed it was too much work already. Only shooting we’re doing is in Call of Duty or for our Instagram pics.
Electoral Revolution - Vote out these assholes who use the government to line their pockets and only help the corporations and the uber rich. Stop voting along party lines and start voting for people who actually have your best interest at heart. Newsflash - the rich ones don’t care about you. I’m not telling you who to vote for, but I do believe you should do your due diligence and seriously look into candidate’s voting history and the policies they have endorsed and laid out. Otherwise, this political divide helps the rich and only the rich. It keeps your attention on blue vs red instead of rich vs poor. And that’s what they want, so they can pass their tax cuts and continue handing money to their “friends”.
Asset Revolution - If you can’t beat them, join them. Invest in assets like the stock market and housing. You may not have the purchasing power the wealthy do, but as Albert Einstein says, “compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” Let’s say you start with $1,000 in investments and every month you add $100 to your portfolio. If we assume a 10% yearly interest compounded over 20 years, you would have $75,519, not including my hyper inflation theory. Interest is your friend if you know how to use it. Limit your liabilities and expand your assets.
Bitcoin Revolution - I’m not advocating or endorsing Bitcoin, but if you truly believe my hypotheses and this blog has opened your eyes to the government’s shortfalls, then Bitcoin is absolutely a viable option. Just like other assets, bitcoin is rewarded by inflation and loss of buying power due to the Fed’s money printing. The argument I always hear is “Bitcoin is made up internet money. It is not backed by anything.” Well, I have some news for you. The dollar is not backed by anything; we were taken off the gold standard in 1971. A dollar a piece of paper that is worth what you and I agree upon. Same for Bitcoin. Only difference is there will only be 21 million Bitcoin in circulation, EVER. No government or entity can come in and print more Bitcoin. It is not possible. So, if you don’t trust the government and believe the printing of dollars will continue, why not take the risk of buying a little Bitcoin using a percentage of your savings? Your dollars are already losing their value just sitting in your bank account. What do you have to lose?
There you have it. The government sucks, but we do have options. I sincerely hope this blog has opened your eyes. And I sincerely hope we can all agree on one thing this year; the monetary policy employed by the Fed/government over the past 12 years has significantly widened the wealth gap. And the actions performed this year have exponentially added to that gap. We can no longer stand idly by. I implore everyone to take a stand. Take action today. Educate yourself. Call your representatives; tell them $600 of stimulus isn’t going to cut it. They don’t agree? Vote. Them. Out. Vote in every single local, state and federal election. Put people in power who will speak for you, not for the rich. Invest in stocks, homes, Bitcoin, anything that will level the playing field. Avoid debt at all costs. Buy only what you can afford. Put your money to work. Stop working for for money that you have repay the rich… with interest.
I would like to leave you with a quote from the late, great George Carlin from his special “Dumb Americans.” Keep in mind, this was released in 2006 and I think it still perfectly outlines what we are against as a society.
“But there’s a reason. There’s a reason. There’s a reason for this, there’s a reason education sucks, and it’s the same reason that it will never, ever, ever be fixed. It’s never gonna get any better. Don’t look for it. Be happy with what you got. Because the owners of this country don't want that. I'm talking about the real owners now, the real owners, the big wealthy business interests that control things and make all the important decisions. Forget the politicians. The politicians are put there to give you the idea that you have freedom of choice. You don't. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the senate, the congress, the state houses, the city halls, they got the judges in their back pockets and they own all the big media companies so they control just about all of the news and information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying, lobbying, to get what they want. Well, we know what they want. They want more for themselves and less for everybody else, but I'll tell you what they don’t want: They don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. Thats against their interests. Thats right. They don’t want people who are smart enough to sit around a kitchen table to figure out how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago. They don’t want that. You know what they want? They want obedient workers. Obedient workers. People who are just smart enough to run the machines and do the paperwork, and just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and the vanishing pension that disappears the minute you go to collect it, and now they’re coming for your Social Security money. They want your retirement money. They want it back so they can give it to their criminal friends on Wall Street, and you know something? They’ll get it. They’ll get it all from you, sooner or later, 'cause they own this fucking place. It's a big club, and you ain’t in it. You and I are not in the big club. And by the way, it's the same big club they use to beat you over the head with all day long when they tell you what to believe. All day long beating you over the head in their media telling you what to believe, what to think and what to buy. The table is tilted folks. The game is rigged, and nobody seems to notice, nobody seems to care. Good honest hard-working people -- white collar, blue collar, it doesn’t matter what color shirt you have on -- good honest hard-working people continue -- these are people of modest means -- continue to elect these rich cocksuckers who don’t give a fuck about them. They don’t give a fuck about you. They don’t give a fuck about you. They don't care about you at all -- at all -- at all. And nobody seems to notice, nobody seems to care. That's what the owners count on; the fact that Americans will probably remain willfully ignorant of the big red, white and blue dick that's being jammed up their assholes everyday. Because the owners of this country know the truth: it's called the American Dream, because you have to be asleep to believe it.”
Time to wake up.