The Year of Our Lord 2014 - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 6 January 2014
The Year of Our Lord 2014 A  A  A

Baltimore, Maryland

Pope Francis in the Eternal City...Bill Di Blasio in the Big Apple... Obama in the White House... From the pulpit to the oval office to city hall -- capitalism is coming under attack in 2014.

Obama has made income inequality a central bugaboo for the last two years of his presidency. Di Blasio is hot on the theme, too. "A Tale of Two Cities" was his campaign theme. Di Blasio figured there were more votes in the poor city than in the rich city and that the folks on the po' side of town in Brooklyn and the Bronx were getting pretty sick and tired of watching the folks in Manhattan make money. He was right on all counts.

Nothing is more galling that watching a neighbor get rich...unless the neighbor is your brother in law. Then, it's intolerable.

In the present circumstances, the poor have a legitimate beef. They claim the rich are getting richer unfairly; they've got a point. The rich own stocks and bonds. Thanks to manipulation by the government (through its central bank), US stocks are worth $3.7 trillion more than they were at the start of last year. Through no effort on their part, wealthy stock owners now have a huge additional claim to the world's wealth.

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Money is just a placeholder, after all. It tells you how you stack up against other people. The amount of available goods and services is always more or less limited. If you gain wealth faster than the general increase in output, you must be taking it away from someone else. You have more. He has less. At 2% GDP growth, the US adds about $350 billion in additional wealth. So, if stockholders gained $3.7 trillion, they had to take most of the money from others. They gained $3.35 trillion more than GDP growth. These are new claim against old wealth. In other words, they win. Others lose.

Someone has to be able to buy the nicest house on the block. Someone has to be able to buy the fanciest car or take the most luxurious vacation. Someone has to win the great game of economic life.

Well, the rich are not only ahead. They're kicking butt in every other income category. Only the top 10% of households made any real income gains over the last 10 years. All the rest lost ground. And the top 1% has done even better - thanks largely to the big increases in stock and real estate prices.

So what's wrong with that? Nothing, except maybe that this sort of underhanded conniving with the feds - gives capitalism a bad name. It's not the capitalists who have gotten the most loot from the feds' bailouts, zirps and QE. It's the cronies.

Too bad, but people think the rich are capitalists and that capitalists are rich. Not so. A real capitalist takes losses as well as gains. He makes mistakes...and pays for them himself. Sometimes it's not about the money. Often, he doesn't know how much he's got...and doesn't care. It's the journey he likes, not necessarily the destination.

The capitalist is misunderstood. So is capitalism. It is not so much a 'system' as it is what happens when there is no system. It is what people get up to when they are left to their own devices. Good? Bad? We don't know... but it's better than being told what to do by some jackass with his own agenda.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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