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Up, Up and Away! March 21, 2014

Posted by hslu in Economics, Global Affair, Gold, stocks.
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Something is happening at a breakneck speed since 2003 and, yes, you’ve guessed it: the rich get richer, and that’s exactly what Bernanke wanted with his now infamous QEs: trickle down economy.

For trickle down mechanism to work, two things have to happen: First, the rich has to get richer and, secondly, the rich has to spend their riches.

Worldwide 2014 there are:

  • 1,682 billionaires:up 82% since 2003;
  • 37,104 $100-millionaires:up 62% since 2003;
  • 167,000 $30-millionaires:up 59% since 2003.

There is no doubt that the first part of the trickle down puzzle is in place but the riches haven’t spent their money as much as it is needed to move the US economy to break free speed.

That’s why QE3 is still in progress now.

In the mean time, wages for the middle-income population have mostly been stagnant and many of them haven’t benefited by the rising stock and real estate markets because they don’t own that much stock to begin with. The values of their homes have barely moved back to the pre- great recession levels.  Few of them own any gold.

US median Household Income Dec 2007 - June 2013

The US economy has been limping along at 2% for the last 5 years.

Can we call this progress?

Yes, it is for the riches and it is the natural progression of capitalism. It is wealth distribution from the middle class to the top. That’s what is supposed to happen when capitalism is the rules of the game of the society. This has been the rules laid by the United States for other nations to follow for many decades in the past.

Way back in my JH days, I learned in my 公民 classes that, according to 国父孫中山; Dr. Sun Yat-sen, that one of the ill effects of capitalism is inequality of personal wealth between the haves and have-nots. Sure enough, inequality is at its utmost extreme in the United States because the single most important objective of capitalism is the accumulation of profits. With unlimited hot money provided by Bernanke, the riches on Wall Street and other places in the world, sure had a good friend in the most important position in the world.

I kept wondering that when will the inflation time bomb explode?

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