Our society is collapsing around us. Though in the spotlight, racial inequality is just a highly-visible symptom of a much larger disease that lies hidden below the surface of our collective society—economic (or wealth) inequality. The driver most responsible for the spread of this disease is the Federal Reserve. Yet, Jerome Powell recently lied about this fact, and then doubled down on his flagrantly false statement.
Wealth Inequality is the root of our problem—the disease that must be cured if the patient is going to survive. Human beings innately recognize and hate inequality. It’s in our proverbial DNA. The frustration and anger that is boiling up across our country and across virtually all demographics (except for the elites) is an undeniable reflection of this truth—and a harbinger of what is to come if we don’t address the problem.
The Federal Reserve, led by Jerome Powell, is almost entirely to blame for the spread and virulence of this disease. Its sole mission is to support the wealthy elites by (1) protecting them from downside risk and (2) increasing their wealth via asset inflation and redistribution from the commoners.
This unelected, unaccountable, and secretive body is the bastion of the elites—established to guard the proverbial gate and man the walls that separate the elites from the rest of the serfs. It is there to protect the class structure and ensure the wealthy maintain their elite status.
I can’t read Powell’s heart. He seems like a nice guy. However, I leave issues of the heart to God and, instead, focus on judging trees by the fruit they bear. In this case, he and the Fed are producing some really vile fruit—fruit that leaves them personally responsible for the skyrocketing economic inequality in America.
The Fed IS the problem. And the wealth inequality that it is intentionally and systematically fueling will lead to the coming collapse of our economic and financial system—and to our society as a whole.
Let’s take a look at Powell’s statement and why it is a lie—one knowingly and intentionally delivered by the Man who, more than any other person, holds our nation’s destiny in the palm of his hand.
Why Economic (Wealth) Inequality Matters in a Society
The Greek philosopher Plutarch wisely asserted that “an imbalance between rich and poor is the oldest and most fatal ailment of all republics.”
More recently, Motesharrei, Rivas and Kalnay (2014) argued that “Economic Stratification or Ecological Strain can independently lead to collapse, in agreement with the historical record.”
They contend that “economic stratification of society… the division of society into Elites (rich) and Commoners (poor)” is one of two broadly identifiable variables that has contributed to societal collapses stretching from the Neolithic period to the Roman Empire.
The researches posit that “collapse is difficult to avoid, which helps to explain why economic stratification is one of the elements recurrently found in past collapsed societies,” adding that “Elites’ consumption keeps growing until the society collapses.” Sound familiar?
However, they find that collapse can be avoided if the Elites recognize the problem and enact reforms to restore equitable distribution of resources (wealth).
Unfortunately, in an added wrinkle, it turns out that the very buffer that the elites’ wealth provides them with “allows Elites to continue ‘business as usual’ despite the impending catastrophe. It is likely that this is an important mechanism that would help explain how historical collapses were allowed to occur by elites who appear to be oblivious to the catastrophic trajectory.” Sound familiar again?
The truth is that people instinctively recognize inequality and rebel against it—in fact, most social animals exhibit that same behavior. This was illustrated by a recent study that found “monkeys invest less energy in a task if they see other monkeys receiving better rewards for the same effort.”
It turns out, monkeys—much like us—have a keen sense of fairness. When they saw a fellow monkey receive a grape (a highly desired treat) instead of a lame piece of cucumber for performing the same task, they got pissed and threw a temper tantrum! In other words, they felt wronged and protested the inequality—much like the growing civil unrest in America today. Here’s a brief video that shows their reaction:
Though it may be quite humorous to watch these monkeys, they didn’t find it funny in the least… and neither do we when it comes to our lives and futures. This is precisely why economic inequality matters… and why societies ultimately collapse when it reaches an excessive level. It turns out that it matters a whole lot!
Powell Shamelessly Lies about the Fed’s Role in Economic Inequality
Powell made his statement denying that Fed policy is the cause of economic inequality in response to renewed claims that its policies primarily serve the elites—criticism that has steadily grown since the last recession.
The fact is that the Fed policies absolutely DO add to inequality. In fact, they are the primary driver of it and specifically designed (like a virus) to accomplish that explicit task. Powell knows better. You just can’t make that statement without being intellectually dishonest and disingenuous—a polite way of saying he knowingly and intentionally told a bold-face lie.
Remember, Powell isn’t telling Americans (viz., the commoners) that Fed policy isn’t the biggest driver of inequality. He isn’t even telling us it only drives inequality a little bit. No, he has the audacity to actually stand (or, in this case, sit) there and tell us it adds zero to inequality!
You can’t make this stuff up. (A shockingly common theme these days)
And (1) he does it with a straight face and (2) nobody even questions—let alone challenges—him on it???
He then reverted to the same old worn-out script of Fed talking points: We are serving all Americans by stabilizing financial markets.
In other words, we’re the heroes. We’re saving the world. Nothing to see here… just thank us for our wisdom and generosity—and move along.
When specifically questioned about fed policy driving inequality, he stated, “Everything we do is focused on creating an environment in which… those least able to bear its burdens… will have their best chance to keep their job or maybe get a new job.”
Translated, that means: If there’s inequality out there, it’s not our fault—it’s that darn job market fault.
Everything with the Fed is shrouded in the “jobs” message. This is a smokescreen—one they believe most Americans aren’t intelligent enough to see through. (And, in fairness to them, it has worked for a long time.)
Even the first Black president in the history of the central bank, Atlanta Fed President Raphael Bostic, in recent comments addressing the issue of racial inequality, stuck to the Fed line and refused to break ranks—focusing only on unemployment (jobs) in the black community. He never once addressed the Fed policies that are the real drivers of economic inequality for all commoners—including those in the black and Hispanic communities.
And if that wasn’t enough… Powell then doubled down on his lie by adding that monetary policy has nothing to do with our economic inequality???
For the love of all things cute and cuddly… What is Powell talking about? Monetary policy has everything to do with monetary inequality???
Especially when that policy is designed and utilized to pick winners and losers and transfer wealth from one class of citizens to another—in this case from the vast majority of Americans to the tiny class of uber elites (the top one percent… and really the top 0.1%).
Powell’s statement is the logical equivalent of arguing that the laws of physics have nothing to do with why one plane flies faster than another! No, you’re right Powell—inequality is just random luck (or bad luck).
[Note: LTCM is a story for another day!]
Unfortunately, truth is not on Powell’s (or the Fed’s) side. Our economic inequality is not driven by a poor job market (or random bad luck)—we’ve been in a strong job market for years. During the strongest and longest bull market in history, the wealth gap has only continued to expand exponentially—not contract.
Rather, the systemic inequality we are all experiencing is driven by Fed policies that (1) pick winners (the elites) and losers (the commoners) and (2) reward the elites by bailing them out when things go wrong (i.e., all reward and no risk), inflating asset prices (overwhelming owned by the elites), and lining their collective pockets with capital fleeced from the commoners (via monetized debt and low interest rates).
Wake up America! It’s not about jobs folks. If it was, we would have next to no inequality in our country.
No, don’t buy the BS anymore. It’s about a broken system that has turned a free-market, capitalistic system (the envy of and beacon to the world) into an impotent, cruel, quasi-socialist system of economic stratification—one where it’s capitalism for the commoners (survival of the fittest in a fight over the scraps) and socialism for the elites (illegitimately profiting off the shared labor and productivity of the commoner class).
Make no mistake about it… Fed policies—by design and at the hands of highly intelligent creators—absolutely increase economic inequality.
In the wake of Powell’s statements, Mary Daly, president of the San Francisco Federal Reserve Bank, appeared to acknowledge the truth, conceding that “Right now, not everyone gets the same chance to succeed in our country, and it’s not for a lack of trying—it’s for lack of opportunity. Our system, whether we meant it to be or not, is set up that way.”
However, the question remains… will the Federal Reserve reform its policies and system?
While I’m slightly encouraged that some elites may finally be waking up to the truth (albeit slowly and gingerly), I’m not even close to holding my breath on the prospect of real change (without outside force). Power and money are incredibly sticky. The elites have both… and they are not likely to do anything that will materially change their claim to it.
Let’s now take a closer look at the truth behind Powell’s falsehoods and expose why the Fed is the enemy of the people, the driver of systemic inequality, and the party that will be most responsible for the coming collapse (should they fail to change their ways).
Wealth Inequality: The Truth Behind the Federal Reserve & Its Policies
Now that we’ve examined the claims of Powell regarding Fed policy—that it “absolutely” doesn’t increase inequality in America, let’s examine the inconvenient facts… you know, those pesky little details that apparently don’t matter in our convoluted world anymore.
Asset Inflation—Fueled by… Wait for It… the Fed
What has the Fed’s quantitative easing (QE) policies accomplished? Answer: asset inflation.
Every dollar that is printed (i.e., debt monetized) means that currency is necessarily devalued. It is an inescapable natural law—one not even Super Man Powell can ignore. That money flows into the system and results in asset inflation—it requires more dollars to buy the same quantity of a given asset.
The stock market is screaming higher. The Nasdaq just hit a new record high and is priced significantly higher than it was a year ago. How in the world can that be? Asset inflation via quantitative easing—the result of Fed policy.
And then there’s the bond market…
Bond prices are screaming higher. Corporate bonds are at historically low rates—meaning prices are at a historic high (the two are inversely related). How can that be? Asset inflation via quantitative easing—the result of Fed policy.
See that tiny little spike… that was enough to panic the Fed and cause them to pour funny money into the bond market to bail its elite buddies out. Heaven forbid they lose money on their highly leveraged, high-risk investments! Thankfully, they have the Robin Hood of the Rich on their side to save the day.
Never mind that the “free” market did exactly what it was supposed to do—bond rates rose based on higher risk being priced in as the economy fell. However, that would mean big-time losses for the elites who hadn’t properly managed their risk (remember, the markets were priced for perfection). When we got a nightmare instead of perfection, they should have paid the price—that’s the nature of the risk-reward equation. But they had Powell manning the walls of the castle to protect them.
The Fed has even doubled-down and is now buying individual corporate bonds.
To learn more about the bond component of the Fed’s actions, we encourage you to read our article Fed Bails Out Rich & Fleeces Middle Class: A Bond Liquidity Crisis???
But that’s not all! Oh, no. Then there’s even this irrational, #MindBlown, “free” market atrocity…
Even a portfolio of absolute junk—an equal-weighted portfolio of all the listed US companies with a credit default swap of more than 1,000 basis points (as junky as it gets)—has rocketed to Mars in terms of value.
This portfolio includes the absolute riskiest (insanely risky) junk you could possibly buy in the market. How on God’s green earth—given how bad the real economy is right now—could a junk portfolio like this even post a gain… let alone outperform the market by an insane amount and post a 200% gain??? Asset inflation via quantitative easing—the result of Fed policy.
Prices are screaming higher across the markets… at the same time the real economy is collapsing under the weight of 30+ million unemployed Americans, a drop in GDP that is not just historic but biblical in size, speed, and scope, a pandemic with no visible end in sight, and a wave of social and political unrest like we’ve never experienced in our lifetimes.
This is what “stabilizing” the markets looks like—courtesy of Powell and the Fed.
This is the Fed buying trillions and trillions of financial assets (with printed money) solely to ensure that investors don’t take any losses.
This is a blatant example of driving up (inflating) asset prices and picking winners and losers.
However, it’s only half the story. By doing this (aka stabilizing the markets), the Fed—per their policies—is assuring that some Americans are going to become ridiculously, filthy, stinking rich… while others simply become more and more poor. This is the Fed’s dirty little secret—and the true source of our economic (wealth) inequality.
Furthermore, those that profit from the Fed’s action are doing so not based on real productivity or added value. Rather, they are doing so off monetized debt—meaning the rest of America (the losers) will be responsible for paying it back. In other words, it is a continuation of the greatest redistribution of wealth the world has ever witnessed… all thanks to Powell and the Fed.
This begs the question: Who are the winners of this immoral Fed lottery? Who owns the assets that are inflating in value?
Let’s find out…
Fed-Driven Wealth Inequality: Who Are the Winners & Losers?
So, we have the Fed funneling (redistributing) vast amounts of wealth to the Americans it selects to be winners. To understand the full story, we need to identify who those winners (and losers) are.
Who owns the assets?
It turns out that a very tiny group of Americans (the elites) owns nearly the entire pie of assets:
In other words, the top 0.1 percent of Americans (in terms of wealth) own nearly a fifth of household equity in the markets. The top one percent owns half of it! And, if you look at the top 10 percent of Americans by wealth, they own 92% of the very assets the Fed is inflating through their policies.
The bottom 90% of Americans (the commoners)? Well, they only own an 8% stake. And the bottom half of Americans… they basically own zero of the pie (0.3%)!
So, when the Fed inflates asset prices in the name of “stabilizing” the markets, it is necessarily and inescapably inflating the wealth of a tiny fraction of Americans—the elites. The elites are the winners and the rest of the country (the commoners or serf class) is the undisputed losers.
Now, Powell knows this—he’s a very bright guy. Thus, he is knowingly and willfully lying to the American people when he makes factually absurd claims that Fed policy has zero impact on wealth inequality in our country! It is THE source of the rampant and expanding inequality.
Unfortunately, it gets even worse. There is a much darker side to his lie.
There is an undeniable racial component to this Fed-induced inequality. This is clearly visible when we look at the racial dimension of asset ownership.
First, let’s look at net worth in general to verify that there actually is a racial component to wealth inequality:
What we find is that there is a disproportionate amount of black and Hispanics at the low-end of the wealth spectrum… and a disproportionate amount of whites at the high-end.
One interesting thing that needs to be noted and emphasized is that wealth in the middle class (and even the upper middle class) is actually distributed very equitably. This points out that those getting angry at middle class Americans and unleashing their frustrations toward them are barking up the wrong tree. The middle class is not the problem—it is actually an example of what we all want to see across all segments of our population.
Rather, the problem lies with the elites. Let’s see how this inequality relates to assets and the Fed by looking at who owns the assets Powell is inflating:
[Data Source for Above Graphics: US Census Bureau, 2016]
As you can see, asset ownership belongs to a highly compressed group of Americans—the elites.
Racial inequality is real. However, it is a merely a component (a visible symptom) of a much broader, deeper, systemic problem in America—economic inequality that is negatively impacting ALL commoners.
The Fed is undeniably picking white households over black and Hispanic households. This truth cannot be denied or minimized—nor should it be.
Again, all commoners are being hammered by the Fed—but there is a race component within that broader inequality.
In actuality, the Fed is choosing elite white households over everybody else—including black and Hispanic ones.
Horowitz, Igielnik and Kochhar in their research for the Pew Research Center (2020) find that “The wealth gap between America’s richest and poorer families more than doubled from 1989 to 2016. In 1989, the richest 5% of families had 114 times as much wealth as families in the second quintile, $2.3 million compared with $20,300. By 2016, this ratio had increased to 248.”
But they too recognize that our inequality disaster isn’t just a lower-income problem–it’s systemic. The middle class is getting crushed by Fed policy as well. The researchers noted: “Upper-income families were the only income tier able to build on their wealth from 2001 to 2016, adding 33% at the median. On the other hand, middle-income families saw their median net worth shrink by 20%.”
They added, “From 1983 to 2016, the share of aggregate wealth going to upper-income families increased from 60% to 79%. Meanwhile, the share held by middle-income families has been cut nearly in half, falling from 32% to 17%.”
This is not the Fed versus low-income folks… no, it is the Fed versus the entire commoner class! It is a systemic inequality willfully and intelligently designed to insulate and reward the elites. So much for MAGA and rebuilding the middle class—it’s more like an elite-backed demolition project than a revitalization one!
We can’t solve racial inequality without curing the underlying economic inequality. If we cure the economic inequality, then we will resolve 99% of the racial inequality. We must come together and solve the real disease—the one that is causing a cornucopia of secondary symptoms.
We don’t just need equality for minorities… we desperately need to restore equality for all. It is critical that Americans understand this. Or, we will just continue to (1) bang our collective heads against a brick wall constructed by the elites and (2) fight amongst ourselves—something the elites love to see (and encourage at every opportunity), as it mitigates the risk that we will come together and focus our efforts on the real source of the problem (them).
To be crystal clear: When the fed inflates asset prices and redistributes wealth, it is inflating the wealth of elites. Period. End of story.
Powell’s claims to the contrary utterly fail the truth test—and he knows that. The elites don’t care—they are the winners and we are the losers.
And this is what we all get thanks to Powell and the Fed:
And this was in 2016—the exponential growth of the wealth gap (economic inequality) has only gotten worse since. Imagine what it looks like today (post-Covid) after Powell has just pumped $4+ trillion into the markets to inflate those same underlying assets!
This system is entirely unstable and our path wholly unsustainable—no society can avoid collapse with a house of cards built on a foundation like this.
And it just continues to worsen. This is what the growth in inequality looked like from 1989 to 2018:
Matt Bruenig notes that “From 1989 to 2018, the top 1 percent increased its total net worth by $21 trillion. The bottom 50 percent saw its net worth decrease by $900 billion over the same period. In 2018 dollars.”
Josh Hammer and Todd Stein captured this exact “fundamental truth” last spring when they wrote:
“The totality of the Fed’s post-2008 actions has resulted in a historic regressive wealth transfer from the less well-off to the well-off. Low rates and quantitative easing programs help the ultra-wealthy because they artificially boost asset values, especially for riskier investments, and allow for cheap leverage. The ultra-wealthy can take advantage of record highs in the stock market while the asset-poor working class gets by on relatively stagnant hourly wages. Even risk-averse middle-class retirees are forced to buy bonds with artificially low interest rates just to make ends meet.”
Houston, we have a problem. That problem is economic inequality and the fundamental, driving source of that contagion is the Fed—led by Powell.
Conclusion: Will We Check the Fed or Face Collapse?
Peter Turchin, who has researched and written extensively on the collapse of societies, aptly noted several years ago (2013):
“Because complex societies are much more fragile than we assume, there is a chance of a catastrophic failure of some kind… Of course, catastrophe isn’t preordained. History shows a real indeterminacy about the routes societies follow out of instability waves. Some end with social revolutions, in which the rich and powerful are overthrown… In other cases, recurrent civil wars result in a permanent fragmentation of the state and society. In some cases, however, societies come through relatively unscathed, by adopting a series of judicious reforms, initiated by elites who understand that we are all in this boat together.”
We are spiraling out of control as the direct result of economic inequality in our nation. The greatest single driver of this deadly disease is the Fed—led by Powell.
Do we see the elites advocating for judicious and material reforms to the real systemic mechanisms that are the drivers of our economic inequality?
What type of outcome do you think we are on the path too? Revolution? Civil war and fragmentation? Or, will we emerge relatively unscathed by fixing our broken system?
I’ll let you be the judge of that.
However, in my humble opinion, it seems all to apparent that social revolution or indefinite civil war (a fragmented society) is becoming more and more likely as our ultimate outcome.
Wealth and economic inequality are a very BAD thing—they ultimately lead to societal collapse.
The elites—backed by the Fed—want a grossly divided country and have predetermined who will be on the winning and losing sides of that inequality.
As the Fed buys trillions and trillions of financial assets in an effort to make sure investors don’t take any losses—picking winners (elite) and losers (the commoners), we the people are suffering under the growing and suffocating burden of unequal distribution of financial assets. And it is Powell and the policies of the Fed that are driving asset prices higher and further expanding the gap.
Powell is lying through his teeth—and the great sleeping bear is awaking, full of anger and growing rage.
Growing economic inequality (unfair wealth distribution) is “corrosive” to society.
Powell and the Fed deny it, lie about it, and double-down on their falsehoods.
The free market no longer decides our collective and individual fates—the Fed does.
Will the elites wake up in time to realize we are all in this boat together? Will they implement the judicious reforms that are needed to restore our future?
Or, are we witnessing the early stages of a massive revolution or fragmenting civil war?
The only thing we know for certain is that the disease is not going to go away—we are in the terminal stage. An outcome will be determined shortly… one way or the other. Like sand through an hourglass, our opportunity to change our future is slipping away.
As we noted in our article Exposing the Wealth Gap: Economic Inequality Is Driving Civil Unrest, avoiding collapse is hard to avoid, difficult for the elites to recognize, and occurs rather quickly—without much warning. There is an invisible “event horizon” that, once crossed, represents a point of no return… where collapse is inescapable.
We are very close to crossing that indiscernible line… and it does not appear that the elites (or their support network) have recognized the severity of our predicament. I am not hopeful that we will be able to avoid a negative outcome over the course of this decade—whether revolution/collapse or endless civil war and further societal fragmentation.
This is why we prep. We can’t see or know the future, but we can prepare for potential outcomes—constructively managing our risk and mitigating as much of it as possible.
We encourage you to take every step you can to be as prepared as conceivable—it’s all about putting yourself in the best, most “defensible” position.
Don’t procrastinate. Prep now and prep hard. The time is coming—possibly very shortly—when the opportunity to prepare will be gone and you will rise or fall, sink or swim, based on whatever preps you have developed. The time to make your stand is now—not once the SHTF… that will be too late.
As always, we encourage you to hope for the best, plan for the worst, and—in all things—pray.