If you haven't yet read Mark Spitznagel's recent piece in The Wall Street Journal, "How the Fed Favors The 1%," it's well worth your time to check out and then pass on to your family and friends.
Over the past year, we've heard a lot from politicians, media outlets, and activists about the widening gap between the so-called "1% and 99%," yet Mr. Spitznagel argues that we're focusing on the wrong cause of the problem.
In a line that essentially summarizes his article, Mr. Spitznagel nails the real nature of what's driving us further apart:
The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power.
It's accurate to say it is "us vs. them." But too many people have focused on the wrong "them."
It's no surprise, though; for if there's one thing government is very good at, it's creating scapegoats.
Whether distracting us on foreign policy by claiming that anyone who would question our current practices is unpatriotic, or flat-out lying about concerns over spending by creating an image of deficit hawks as uncaring about the poor, career politicians point us away from reforming the status quo by locking us in personal arguments with each other.
When it comes to the "1% and the 99%," we've been told it's a battle between the haves and the have-nots.
And this is exactly where bureaucrats would love to keep our attention and our energy. If we're fighting each other over differences in our tax rates or how much everyone is taking home, we're far less likely to devote as much energy to reforming that code or abolishing it entirely. If we focus on each other as the source of the problem and become convinced that "getting the other guy to pay his fair share" is the answer to our woes, then we're more apt to ignore the behemoth that has caused these problems and now has us at each other's throats.
We'll look past the institution that has destroyed our dollar, stripped away over 95% of its value, and put us on the hook for trillions in secret deals to its buddies.
The bottom line is there will never be an "even" playing field until we get rid of the Fed.
But exactly how does the Fed tilt the economy in favor of its well-entrenched allies?
As the article points out:
The Fed doesn't expand the money supply by uniformly dropping cash from helicopters over the hapless masses. Rather, it directs capital transfers to the largest banks (whether by overpaying them for their financial assets or by lending to them on the cheap), minimizes their borrowing costs, and lowers their reserve requirements. All of these actions result in immediate handouts to the financial elite first, with the hope that they will subsequently unleash this fresh capital onto the unsuspecting markets, raising demand and prices wherever they do.The Fed, having gone on an unprecedented credit expansion spree, has benefited the recipients who were first in line at the trough: banks (imagine borrowing for free and then buying up assets that you know the Fed is aggressively buying with you) and those favored entities and individuals deemed most creditworthy. Flush with capital, these recipients have proceeded to bid up the prices of assets and resources, while everyone else has watched their purchasing power decline.
Those who are concerned about holding the "1%" accountable (and there are certainly genuine matters that need to be addressed) must first start with the enablers of the problem.
Thankfully, there is action we can take to do just that.
If you haven't yet signed our petition demanding Congress pass the first-ever full and complete audit of the Federal Reserve System, please do so today.
And you can read Mark Spitznagel's full piece here. As I mentioned above, be sure to pass it on to help others gain insight into the true nature of our economic woes.