• Tag Archives Inequality
  • What Derek Carr’s Contract Teaches Us about Wall Street and Income Inequality

    Derek Carr has just signed the most lucrative deal in NFL history, receiving a five-year extension worth $125 million with the soon-to-be Las Vegas Raiders. At $25 million per year, Carr edges out Indianapolis Colts quarterback Andrew Luck (though Luck’s contract did reward him with over twice as much in guaranteed money). Carr also becomes a big winner in the Raiders’ taxpayer-funded escape from Oakland, with his contract scheduled so most of the money kicks in after the franchise moves to income-tax-free Nevada.
    While the structure of Carr’s contract offers another opportunity to discuss the ‘jock tax,’ it also serves to illustrate a more important issue: why Wall Street wins whenever the Fed expands the monetary supply.
    After all consider this: while Derek Carr has certainly proven to be a promising young player at perhaps the most important position in professional sports, he is by no means the most accomplished player at his position or in the NFL. He’s been selected to the Pro Bowl twice, once as an alternate. His career QB rating is beneath players such as Chad Pennington, Carson Palmer, and Colin Kaepernick. Meanwhile he’s led his team to the playoffs once, unfortunately breaking his fibula before he could make a start in the post-season.
    So why, then, is he being rewarded with the NFL’s largest contract?
    The answer itself is fairly obvious: he was due a new deal at a time when the salary cap has never been higher. As such, NFL salaries have more to do about the size of the salary cap when a contract is signed, than it is about the merit of the individual player. Of course, over time Carr’s yearly salary will be used as a starting point with other more accomplished quarterbacks, and the average for the position will gradually rise over time. Matthew Stafford, for example, is likely to sign an even larger contract in the coming months. Salaries league-wide will rise with salary cap inflation.

    This post was published at Ludwig von Mises Institute on June 23, 2017.

  • Albert Edwards: “Citizens Will Soon Turn Their Rage Towards Central Bankers”

    During the populist revolt of 2016, which first led to the “shocking outcomes” of Brexit and then Trump, we cautioned that these phenomena were merely the “silent majority” of the developed world’s middle class expressing their anger and frustration with a world that has left them – and their real disposable income – behind, while rewarding the Top 1% through policies that have led to a relentless and record ascent in global asset prices, largely the purview of the world’s wealthiest. More recently, we also noted that it was only a matter of time before this latest “revolt” fizzled, as the realization that changing one politician with another would achieve nothing, and anger shifted to the real catalyst behind growing global inequality (and anger): central banks.
    In his latest note today, Albert Edwards picks up on this theme to write “Theft redux: the citizens will soon turn their rage towards Central Bankers.” The core of his argument is familiar:
    While politics in the West reels from a decade of economic crisis and stagnation, asset prices continue to surge on the back of continued rapid growth in G3 QE. In an age of ‘radical uncertainty’ how long will it be before angry citizens tire of blaming an impotent political system for their ills and turn on the main culprits for their poverty – unelected and virtually unaccountable central bankers? I expect central bank independence will be (and should be) the next casualty of the current political turmoil.

    This post was published at Zero Hedge on Jun 22, 2017.

  • Hedge Fund CIO: “Why The Hell Did The Fed Hike This Week?”

    The start of another week is upon us, which means it is time for another excerpt from the latest letter to clients by One River Asset Management CIO Eric Peters, who today writes about last week’s Fed decision, the upcoming balance sheet unwind, the lack of inflation, and “disruptive” companies which may themselves soon be disrupted.
    We will have more from today’s letter shortly, but for now here is Peters on a topic still fresh on everyone’s minds: the Fed’s latest rate hike decision, and what it really means:
    ‘You make poor people richer, or rich people poorer,’ bellowed Biggie Too, global chief strategist for one of those Too-Big to Fail affairs.
    ‘Ain’t no other way to reduce inequality.’ The Fed had just fired off another .25 caliber shot – Pop! ‘Brexit, Trump, Corbyn,’ barked Biggie. ‘They all promised to make the poor richer.’ But in no time, they’re cutting healthcare for the most vulnerable. Wage growth remains subdued. Stocks are at all-time highs. And poor people don’t own any.
    ‘So maybe those central bankers finally think it’s time to make the rich poorer.’

    This post was published at Zero Hedge on Jun 18, 2017.

  • Richest Americans Will Control 70% Of Country’s Wealth By 2021, BCG Says

    Being rich is great. But being rich in America? That’s even better.
    With US stock benchmarks trading just below record highs, and Treasury yields not too far from the all-time lows reached last summer, the gulf between the world’s wealthy elite – those 18 million households worldwide with more than $1 million in assets – and everybody else is rapidly widening.
    According to a new study by Boston Consulting Group via Bloomberg, these households – with a total head count of roughly 70 million people, or about 1% of the world’s population – control 45 percent of the $166.5 trillion in wealth. By 2021, they will control more than half, suggesting that, while wealth inequality in the rest of the world is simply accelerating, in America, it’s gone into overdrive. Right now, 63 percent of America’s private wealth in the hands of U. S. millionaires and billionaires, BCG said. By 2021, their share of the nation’s wealth will rise to an estimated 70 percent.

    This post was published at Zero Hedge on Jun 17, 2017.

  • What Housing Recovery? Real Home Prices Still 16% Below 2007 Peak

    Since the financial crisis, home equity has gone from being America’s biggest driver of (illusory) wealth to one of the biggest sources of economic inequality.
    And while the post-crisis recovery has returned the national home price index to its highs from early 2007, most of this rise was generated by a handful of urban markets like New York City and San Francisco, leaving most Americans behind.
    To wit: home prices in the 10 most expensive metro areas have risen 63% since 2000, while home prices in the 10 cheapest areas have gained just 3.6%, according to Harvard’s annual State of the Nation’s Housing report. And while nominal prices may have returned to their pre-recession levels, when you adjust for inflation, real prices are as much as 16 percent below past peaks.

    This post was published at Zero Hedge on Jun 16, 2017.

  • The Dead Giveaways of Imperial Decline

    Nothing is as permanent as we imagine–especially super-complex, super-costly, super-asymmetric and super-debt-dependent state/financial systems. Identifying the tell-tale signs of Imperial decay and decline is a bit of a parlor game. The hubris of an increasingly incestuous and out-of-touch leadership, dismaying extremes of wealth inequality, self-serving, avaricious Elites, rising dependency of the lower classes on free Bread and Circuses provided by a government careening toward insolvency due to stagnating tax revenues and vast over-reach–these are par for the course of self-reinforcing Imperial decay. Sir John Glubb listed a few others in his seminal essay on the end of empires The Fate of Empires, what might be called the dynamics of decadence: (a) A growing love of money as an end in itself. (b) A lengthy period of wealth and ease, which makes people complacent. They lose their edge; they forget the traits (confidence, energy, hard work) that built their civilization.

    This post was published at Charles Hugh Smith on TUESDAY, JUNE 13, 2017.

  • Elliott’s Singer Warns System May Be More Leveraged Than 2008

    Billionaire investor Paul Singer said ‘distorted’ monetary and regulatory policies have increased risks for investors almost a decade after the financial crisis.
    ‘I am very concerned about where we are,’ Singer said Wednesday at the Bloomberg Invest New York summit. ‘What we have today is a global financial system that’s just about as leveraged — and in many cases more leveraged — than before 2008, and I don’t think the financial system is more sound.’
    Years of low rates have eroded the effectiveness of central banks to contend with downturns, Singer said at the event in an interview with Carlyle Group co-founder David Rubenstein. ‘Suppressive’ fiscal, regulatory and tax policies have also exacerbated income inequality and led to the rise of populist and fringe political movements, he added.
    Confidence ‘could be lost in a very abrupt fashion causing conceivably a ruckus in bond markets, stock markets and in financial institutions,’ said Singer, founder of hedge fund Elliott Management Corp., which is known for being an activist investor.

    This post was published at bloomberg

  • OECD: World Is Still Locked in a ‘Low-Growth Trap’ with Rising Inequality

    The Organization for Economic Cooperation and Development (OECD) just released its latest economic outlook which it sums up as ‘better but not good enough,’ noting that, since the financial crisis of 2008, global growth remains ‘below past norms and below the pace needed to escape fully from the low-growth trap.’ Projecting a modest pickup in global growth to 3.5 percent this year, the authors write:
    ‘After many years of weak recovery, with global growth in 2016 at the lowest rate since 2009, some signs of improvement have begun to appear. Trade and manufacturing output growth have picked up from a very low level, helped by firmer domestic demand growth in Asia and Europe, and private sector confidence has strengthened. But policy uncertainty remains high, trust in government has diminished, wage growth is still weak, inequality persists, and imbalances and vulnerabilities remain in financial markets. Against this background, a modest pick-up in global GDP growth is projected this year to 3 per cent, with an upturn in trade and investment intensity and improving outcomes in several major commodity producers.’
    The OECD’s outlook for the United States is GDP of 2.1 percent in 2017 with an uptick to 2.4 percent in 2018. That compares with OECD projected growth in the Euro area of 1.8 percent in both 2017 and 2018 while Japan is expected to grow at 1.4 and 1.0 percent, respectively, in 2017 and 2018.

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

  • Want to Understand Rising Wealth Inequality? Look at Debt and Interest

    “Governments cannot reduce their debt or deficits and central banks cannot taper. Equally, they cannot perpetually borrow exponentially more. This one last bubble cannot end (but it must).”
    I often refer to debt serfdom, the servitude debt enforces on borrowers. The mechanism of this servitude is interest, and today I turn to two knowledgeable correspondents for explanations of the consequences of interest.
    Correspondent D. L. J. explains how debt/interest is the underlying engine of rising income/wealth disparity:
    Here is a table of the growth rate of the GDP.
    If we use $16T as the approximate GDP and a growth rate of, say, 3.5%, the total of goods and services would increase one year to the next by about $500B.
    Meanwhile, referencing the Grandfather national debt chart with the USDebtClock data, the annual interest bill is $3 trillion ($2.7 trillion year-to-date).
    In other words, those receiving interest are getting 5-6 times more than the increase in gross economic activity.

    This post was published at Charles Hugh Smith on FRIDAY, MAY 19, 2017.

  • Stocks and Precious Metals Charts – Mind the Gap

    “Starting around 1980, American society began to undergo a series of deep shifts. Deregulation, weakened antitrust enforcement, and technological changes led to increasing concentration of industry and finance. Money began to play a larger and more corrupting role in politics. America fell behind other nations in education, in infrastructure, and in the performance of many of its major industries. Inequality increased.
    As a result of these and other changes, America was turning into a rigged game – a society that denies opportunity to those who are not born into wealthy families, one that resembles a third-world dictatorship more than an advanced democracy.”
    Charles H. Ferguson, Predator Nation
    ‘When the system is rigged, when ordinary citizens are powerless, and when whistle-blowers are pariahs at best, three things happen:
    First, the worst people rise to the top. They behave appallingly, and they wreak havoc.
    Second, people who could make productive contributions to society are incented to become destructive, because corruption is far more lucrative than honest work.
    And third, everyone else pays, both economically and emotionally; people become cynical, selfish, and fatalistic. Often they go along with the system, but they hate themselves for it. They play the game to survive and feed their families, but both they and society suffer.’
    Charles H. Ferguson, Inside Job
    It was a risk off day in the markets. No doubt about it.
    The purported reason was the disclosure by the ex-FBI Director Comey that President Trump apparently asked him to forego the investigation of the ex-Security Advisor Flynn.

    This post was published at Jesses Crossroads Cafe on 17 MAY 2017.

  • IMF Proposed a Capital Levy – Tax on Money in Bank Accounts & Raise Property Taxes

    The International Monetary Fund (IMF) is always the cheerleader to raise taxes to support government. They are instructing Germany to raise taxes and also talking about just imposing a 10% tax on all money that deposits in banks throughout Europe. Yes – you read that one correctly.
    The IMF has told Germany it should raise its property tax, cut social welfare contributions and invest more to reduce income inequality. The demands are contentious in an election year. Once again the IMF has demanded higher taxes on savings deposits in Germany. Germany must do more for to raise taxes to impose more socialistic idea to somehow tax the rich to create a broader participation of all citizens in the fruits of economic growth, if somehow raising taxes actually ever creates economic growth. The IMF warns that there is a relatively high tax burden on lower incomes with a comparatively low burden on assets.

    This post was published at Armstrong Economics on May 12, 2017.

  • Getting Rich Is Largely About Luck (Just Don’t Tell The Wealthy)

    The UK suffers from the highest levels of income inequality in Europe – partly because of the delusions of its rich. In countries where the rich have less, they tend to be less delusional, about themselves, about other people, about what is possible, and about why some become rich.
    In the UK, it is unsurprising to read that an investment banker thinks 100m is a lot of money but ‘not a ridiculous amount of money’. In a report in The Guardian newspaper this week, we also heard that one particular banker is ‘fairly confident’ that a driven and passionate individual could ‘start from zero and get to 100m within 20 years’.

    This post was published at Zero Hedge on May 10, 2017.

  • How Fed-Enabled Zombie Companies Crush Productivity Growth

    When lagging firms don’t go bust, they hog scarce resources and drag down productivity.
    The global economy is picking up steam, but that’s deceptive. The foundations of expansion are soft, marked by weak productivity growth and inequality. The two are related.
    The productivity problem confronting the world’s advanced economies predates the financial crisis more than a decade ago. When we look beyond the headline statistics, patterns emerge. Advanced economies have become less dynamic and are at risk of becoming sclerotic unless the ambition for reform is revived.

    This post was published at Zero Hedge on May 9, 2017.

  • “Technology Has Changed The Game”: Why The Rise Of Robots Will Be A Permanent Deflationary Force

    Back in 2015, BofA put together a simple equation trying to explain the pervasive deflationary wave around the globe when it said that “Deflation = Debt plus Disruption plus Demographics.”
    In his overnight take on recent events, Bloomberg macro commentator Mark Cudmore took another look at this underlying assumption, and specifically the “disruption” part, or the role played by technology, and machines, both of which are reducing the need for labor (and implicitly pressuring the global labor force growth), and concluded that “while those with specialized skills can continue to earn more in a wealthier world, the rise of robots provides a significant disinflationary force on the median wage globally. This effect will be most extreme in developed economies where labor costs are already elevated. (And as an aside, is the reason why increasing inequality and populism isn’t going away any time soon).”
    Adding demographics into the mix, Cudmore notes that “the growth rate of the global population continues to slow, further relaxing consumer demand pressures over the long-term. All this means that, excluding isolated and idiosyncratic flare-ups, consumer prices won’t ramp higher in real terms” even and as “a lack of CPI growth doesn’t prevent financial-asset inflation.”

    This post was published at Zero Hedge on May 2, 2017.

  • Stocks and Precious Metals Charts – Dear Mr. Fantasy – Precious Metals Option Expiration

    Stocks and Precious Metals Charts – Dear Mr. Fantasy – Precious Metals Option Expiration
    Another ‘risk on’ day after the French have seemingly chosen a populist neo-liberal businessman with little policy experience for their front runner.
    And our own US version of this new breed, with considerably more panache, has signaled as intention to cut the US corporate tax rate to 15%.
    If that 15% was like an Alternative Minimum Tax for corporations it might be a good idea, since so many of the big multinational corporations game the system and pay little to nothing in taxes almost every year.
    Somehow, I don’t think it is going to work out that way.
    Rumor has it that the wealthy will also be enjoying a personal tax cut.
    Trickle down tax cuts for the wealthy and their corporations do not produce broader growth and consumption. Spending huge sums on projects designed to benefit a wealthy few, while shifting the burdens of bloated monopolies like healthcare and control frauds like TBTF banking to the middle and working class, in the face of record income inequality, is a policy recipe for disaster.
    The ridiculous proposition is going to meet the unbelievable farce.

    This post was published at Jesses Crossroads Cafe on 25 APRIL 2017.

  • Past few days a fractal event for the gold market — Mike Kosares, USAGold

    ‘In the absence of a credible monetary standard, we expect no escape from the treadmill of rising debt, both US and globally, that outpaces economic growth. Income inequality, wage stagnation, overvaluation of financial assets, and speculation instead of productive investment are likely to be prolonged under the current monetary regime. Whether or not policy makers take a proactive approach to address monetary reform, the fact remains that gold is massively underpriced in all paper currencies. It would be preferable if the necessary adjustments could occur without a repeat of a 2008-like financial crisis. We give this possibility a chance, albeit slim. In any event, we expect a significant repricing of gold higher during the current administration, either by design or because of market events. Whenever a repricing happens, we expect broad grassroots support for that outcome.’ – John Hathaway, Tocqueville Funds
    The gold price is determined in the futures markets, but the effects of that determination are in the physical market, i.e., the price for bullion, coins, jewellery, etc. Those who feel that the gold market price is controlled solely by forces within the paper market do not fully understand the constraints on paper imposed by physical supply and demand.
    In a nutshell, if the paper market is successful in suppressing the price for too long and at too low a rate, the physical demand globally will eat up the physical supply and threaten the existence of the primary source of the metal – the mines. That is why top-level analysts like John Hathaway (Tocqueville Funds) often talk about the inevitability of one-off repricing events. As long as gold can be freely owned, the market at some point finds the real price of gold, reconciles the books and exposes the power of price manipulators for what it is – a temporary, staying action rather than a successful long-term program. It is the time period before that happens which presents the best buying opportunities – times like the present. The events of April 19th through today illustrate the point in a microcosm.

    This post was published at USA Gold

  • Visualizing The Collapse Of The Middle Class In 20 Major U.S. Cities

    When future historians look back at the beginning of the 21st century, they’ll note that we grappled with many big issues. They’ll write about the battle between nationalism and globalism, soaring global debt, a dysfunctional healthcare system, societal concerns around automation and AI, and pushback on immigration. They will also note the growing number of populist leaders in Western democracies, ranging from Marine Le Pen to Donald Trump.
    However, as Visual Cpitalist’s Jeff Desjardins notes, these historians will not view these ideas and events in isolation. Instead, they will link them all, at least partially, to an overarching trend that is intimately connected to today’s biggest problems: the ‘hollowing out’ of the middle class.
    The fact is many people have less money in their pockets – and understandably, this has motivated people to take action against the status quo.
    And while the collapse of the middle class and income inequality are issues that receive a fair share of discussion, we thought that this particular animation from Metrocosm helped to put things in perspective.

    This post was published at Zero Hedge on Apr 22, 2017.

  • Past few days a fractal event for the gold market…

    ‘In the absence of a credible monetary standard, we expect no escape from the treadmill of rising debt, both US and globally, that outpaces economic growth. Income inequality, wage stagnation, overvaluation of financial assets, and speculation instead of productive investment are likely to be prolonged under the current monetary regime. Whether or not policy makers take a proactive approach to address monetary reform, the fact remains that gold is massively underpriced in all paper currencies. It would be preferable if the necessary adjustments could occur without a repeat of a 2008-like financial crisis. We give this possibility a chance, albeit slim. In any event, we expect a significant repricing of gold higher during the current administration, either by design or because of market events. Whenever a repricing happens, we expect broad grassroots support for that outcome.’ – John Hathaway, Tocqueville Funds
    The past few days illustrate an important event in the gold market that both beginning and accomplished investors should try to understand thoroughly. I say that because by such an understanding you will become a more educated, patient and successful gold owner.
    On April 19th, over $3 billion in paper gold was sold in the London over-the-counter market instantaneously dropping the gold price by $14 per ounce in a matter of minutes. Just as quickly, the cries of foul play rose among gold punditry across the internet. Just before the ‘hit’ gold was trading in the $1286 range. It plunged to $1272. Since early this morning’s AM London Fix, gold has been recovery mode and it is now trading again in the $1286 range. Except for those who took the drop as a buying opportunity, these events will be seen essentially as a sound and fury signifying nothing. At the same time, quietly the notion of gold’s indestructibility has been reinforced, not so much with respect to its physical qualities, but with the place it occupies in the minds of investors across the globe. The recovery today in a certain sense is a fractal event in both amplitude and duration – a hint of a greater manifestation that might be coming down the road in the not too distant future.

    This post was published at GoldSeek on Friday, 21 April 2017.

  • Creative Destruction Versus Government Fixes

    Authored by Valentin Schmid via The Epoch Times,
    Macquarie strategist Viktor Shvets explains overcapacity, debt, and government intervention
    Despite the temporary injection of confidence in the American economy brought about by the election of President Donald Trump, major structural problems continue to lurk beneath the surface. These trends, decades in the making, are so entrenched and intractable that even Trump’s boldest plans may not be able to resolve them.
    For many Americans, this is the economy: rising prices for necessities, schooling, and health care; high competition for jobs that don’t pay much; negative interest rates; and the accumulation of increasing influence and power by financial institutions.
    It’s no wonder so many feel disenfranchised and upset. The system of capitalism is usually given the blame for income inequality; last year, many identified with Bernie Sanders, a self-described socialist who promised that the government would be able to fix (almost) everything.

    This post was published at Zero Hedge on Apr 4, 2017.

  • Stocks and Precious Metals Charts – Lack Hawk Down

    The Richmond Fed’s noted rate hawk and serial dissenter Jeffrey Lacker resigned today as a result of an investigation into a leak in 2012 of confidential information to an analyst that sells hard to get information to wealthy subscribers.
    The guest commentators, talking heads, and spokesmodels were attributing this resignation, or faux pas if you will, to an inadvertent slip by one of their own who is burdened with managing the finances of the US.
    They kept mentioning that they do not wish this incident to diminish the public’s confidence in the FED. I guess fomenting serial asset bubbles and enabling historic financial inequality through hare-brained policies is not enough. LOL
    Stocks finished largely unchanged.

    This post was published at Jesses Crossroads Cafe on 04 APRIL 2017.