Morning Commentary
Today, the Fed will officially grade the economy and in effect, their own handiwork. They've created an easier path for wealth to grow, but their method of using banks and the federal government as conduits is greatly flawed, resulting in a tale of two nations. Some blame capitalism itself for this kerfuffle, while others think the system is okay as a wealth generator, but not as a distribution mechanism.
Redistribution remains the dream. By any means necessary, it takes cash from those who have it, to give to those without who continue to be unemployed. There are a few new ways of trying this version of smash- and-grab. However, the ideal plan involves lies, guilt, and intimidation against a poor economic backdrop.
Household Wealth
The percentage of household net worth as a percent of the GDP is within striking distance of an all-time high, paced largely by a rebound in the stock market.
The pace of this wealth varies at different levels, but it echoes something a friend of mine told me years ago. With nothing but the clothes on their back, he came to America from China with his dad.
I asked him how hard it was to become a millionaire and he told me: “Charles, the first stick is the hardest." A 'stick' being one million dollars and, apparently, that's still true. He continued, “Once you've crossed that hurdle, the money flows quicker.”
2014 High Net Worth Household Trends |
||
$5,000,000 + |
1.31 million |
+5.6% |
$1,000,000+ |
10.1 million |
+4.9% |
$500,000 |
15.9 million |
+3.9% |
$100,000 |
39.6 million |
+2.5% |
The super rich are different than you and me because of the following:
Income Inequality
Don't look now, but the progressives have lined up a series of books, leading up to the 2016 election. All of the books focus on the unfair nature of capitalism. On the heels of Thomas Piketty's "Capital" and Michael Lewis’ take on high-frequency trading, there's still the hope of Robert Putnam's "Our Kids: The American Dream in Crisis," which will say the good old days were fair and there wasn't a big gap between the rich and the poor.
The problem is that the solution is to focus on income inequality. It is a false notion that higher taxes are the fix; it's more of a punishment. If you tax someone earning $2 million a year 50%, they will net $1 million; their income will not change, nor will the income of someone earning $40,000.
Perhaps, this explains why Washington, DC has by far the highest (average student debt) loan per person at $40,855, which is ten thousand dollars above number two, Georgia.
Yet, DC sports the highest unemployment of any state at 7.7%. That is significantly above the less- educated and the chronically poor state of Mississippi.
This is a classic result of Progressive-led states and cities where things keep getting more unfair by the moment.
America should focus on the same tide that lifts all ships instead of trying to torpedo the most seaworthy ships out of envy or misguided notions; it's the only solution for leaky, sinking ships.
If the twist on this is to first hike taxes on income and assets, followed by even more drastic measures, people should know the facts; high taxes are a main ingredient in a rampant income inequality.
Today’s Session
I know all the world is focused on America's central bank and today's decision on interest rates, but all the fireworks, literally, happened at the European Central Bank (ECB).
There, police in Frankfurt had to arrest more than 350 people against austerity programs instituted in Europe since the onset of the Great Recession. I'm a proponent of austerity, but it's not a good look when you tell regular people they have to suck it up for a while and then build a billion dollar building.
The target for protesters who call themselves Blockupy is the new $1.3 billion, 600 feet tall, tinted glass tower temple to house the ECB.
Protesters say it's a sign of capitalism which only enriches a few while improverishing the masses.
Do they have a point? On my show, Making Money with Charles Payne -Fox Business, we'll demonstrate how the super-rich have gotten richer faster than anyone else.
While the ECB has no shame in their new, more physical presence, Janet Yellen is on a mission to make the Fed more incognito …at least when it comes to showing their hand.
The debate over "patient" language was missing the point that from here on out, the market won't be hooked on guidance because even the Fed will play it data point to data point.
Can those Wall Street babies handle this brave new world?
Hedge fund giant Ray Dalio penned a letter warning and begging the Fed to promise to either not knock over the apple cart or promise to pick it up when it does using 1937 as an example.
In 1937, the US economy took a massive nose-dive and many economist point the finger of blame at the Fed tightening the money supply beginning in 1936. The damage was so vast it took four years to rebound. While this has been a horrible recovery, the backdrop is different than 1937. I will say the turmoil was used to pass more government programs and extend the progressive agenda so everyone from Wall Street babies to conspiracy theorists are going to be upset if "patience" is removed from Federal Open Market Committee (FOMC) language.
Here's the betting.
Comments |
Banging on drums, burning up police cars does not produce or redistribute wealth, only hard work does that. Something the European Socialists have yet to learn..... Tom Wayne on 3/18/2015 10:27:38 AM |
Most do not even know what Capitalism really is! Capitalism is based on a key premise. That premise is that the person mentioned above with an income of $2,000,000 is the one that creats jobs, not the worker. Capital is what is left after living expenses and TAXES! If taxes are less, there is more left to invest. That is as long as it is SAFE to invest, and investment is not being attacked through mores taxes and onerous regulations. Under Reagan we added over 1.7 million jobs in one month with 30 million less people!!! How shocked would we be if we had a jobs figure like that? Does anyone in government even know what capitalism is and how it works? I think not. Ray Weldon on 3/18/2015 10:53:04 AM |
On your show, Making Money, you and your gurus wonder why retail spending is not up for the middle class. I suspect one reason is that the requirement for required health insurance plans has reduced the amount of money available for spending. Rodman Johnson on 3/18/2015 2:00:16 PM |
Supposedly smart Ray Dalio became an alarmist (we have way too many of these) when he made it sound like the Fed was on a concerted mission to raise interest rates a number of times -- they haven't even raised them once yet -- who said they would raise them multiple times? I hope the Fed raises rates in June (.25%) just to show the world that one raise will not topple the market (unless the Wall Street "babies" act like "babies") -- say, see -- we can raise rates and the world doesn't end -- then sit on rates and wait for real sustained growth before hiking again. Dick Denecker Dick Denecker on 3/18/2015 6:24:45 PM |
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