The Burden of Riches

Do we need a 'wealth tax' to reduce inequality?

(Source: Getty Images)

Bill Bonner, reckoning today from Youghal, Ireland...

"Fascism is capitalism in decline."

~ Vladimir Lenin

We watched an interview, last week, with Robert Kennedy Jr., now a candidate for president.

His answers were good. But on one subject, he seemed to be caught off guard.

“You’re from one of the richest families in America,” began the examiner. “What do you think of Sen. Elizabeth Warren’s proposal of a wealth tax to reduce inequality?”

“I don’t know…I’d have to look at that,” said Kennedy.

In the next few words, we’ll do some looking too.  

Primary Trends

For the benefit of new readers, we take a much broader view than most investment research firms. We look for the deep currents in markets – and history – that help to explain the curious things we see on the surface. As far as your wealth is concerned, it is being in the right place at the right time – not being smart – that really matters. Had you been born in the USA after WWII, for example, you would have lived through the most remarkably cushy period in human history. And had you caught what we call the ‘Primary Trend’ in the US stock market, after 1982, you could have put your investment portfolio on autopilot and enjoyed 40 years of growth.

And yes…like the smell of turmeric in an Indian restaurant, there’s a whiff of fatalism hanging over our pensée. Because, once you discover the primary trend, you see that it is part of a larger pattern – a chapter in a longer story…a piece of a bigger puzzle. The story, of course, has a beginning and an end; it doesn’t matter what you think or what you want. The puzzle…well…it is what it is.     

Which is why all those ‘opinion’ pieces you read in The New York Times and elsewhere are nonsense. We need to do this…you need to do that…Biden should do this…Putin should do that – as far as we know no significant Primary Trend has ever been interrupted by the conscious efforts of well-intentioned meddlers. The deep currents ignore the surface chop.

‘Army Talks’

But let’s begin looking at the issue from the perspective of a series of 1943 War Department pamphlets entitled ‘Army Talks.’ It was propaganda, of course, designed to help soldiers see things the way the Pentagon wanted:.  

‘We’re the good guys, because we favor democracy.’

‘They’re bad guys. They are fascists.  

‘Got it?’

For the benefit of soldiers who may not get it immediately, the thought shapers at the Pentagon went on to describe fascism as “government by the few and for the few…The people run democratic governments, but fascist governments run people."

A regular theme of ours has been the way in which the US government has degenerated since WWII, especially after 1971. It has become an ‘Empire of Debt,’ as we put it on one our book covers. As we will see, debt favors the few, not the many. Meanwhile, growth rates have gone down…along with virtually all the markers of a robust, free, healthy society – wage gains slacked off, productivity dropped below zero, debt soared far beyond the real economy that supported it.  Over time, the US has come to look more and more like a ‘fascist’ regime itself.  Laws were passed. Regulations, taxes, exceptions, tariffs, sanctions, penalties, and prohibitions were imposed. And more and more…legislation, taxation, monetary policy, foreign policy – all seemed to be done for the benefit of the few with paid lobbyists, not for the benefit of the many without them.

Inflation, for example, falls much more heavily on the middle classes and the poor than on the rich. The rich spend less of their income on consumer items. And their assets – property, bonds, stocks – tend to rise with inflation.

Inflation is not just something ‘that happens.’ It is government policy, a way of financing excess government spending. It begins as debt. Then, since it cannot be repaid, it is inflated away. That’s why a ‘deal’ on the debt ceiling was a foregone conclusion. Both political parties wanted to continue borrowing and spending without limit. It didn’t matter that ‘the people’ would be much better off if government squandered less of their output.

The Many and The Few

The wars, too, pay off for the insiders. We invariably lose them, but our weapons and kick-butt attitude are still a source of pride and prejudice to the masses. They salute our ‘warfighters’ at football matches, without troubling themselves about what or whom they are fighting. The real gains, however, go exclusively to the few – the know-it-alls in think tanks, the empire builders in government agencies, the weapons suppliers, and the politicians who get campaign donations, speaking fees and retirement sinecures from them.

Ms. Warren is a politician too. Where does she fit into America’s 40-year-long primary trend (rising stocks, bonds, and debt)…or into its 50 years of ‘financialization?’ What role does she play in America’s 100+ years of empire building…or its 20 years of decline?   

She aims to solve what she says is a problem – the rich are too rich. They should share their wealth with the rest of us, by means of a tax on their wealth. Of course, there is plenty of firepower aimed at them already. Their income is taxed. Their real estate is taxed. Their purchases are taxed. Their estates are taxed. A tax on wealth is just another addition to the arsenal. And she may or may not succeed in getting it passed. Will it matter?  Or is it – like the debt ceiling – just more political theater?  

Is Ms. Warren working for the many…or the few?

Tomorrow…we keep looking.

Regards,

Bill Bonner