It is interesting to watch the ongoing collapse of crony capitalism that will play out in the months and years ahead. The markets have become a complete joke after March 2009 when former Federal Reserve Chairman Bernanke implemented QE1 to save the stock market and protect America's privileged class that own large equity portfolios.
The wealthy politicians, CEO's, corporate executives, billionaires and millionaires have raped America for all its worth over the last five decades. Capitalism is dying. The United States is best described as a faux free market crony capitalism financial system. The wealthy control the legislation and direction of the nation and always ensure that their wallets receive big chunks of cash.
The democrats and republicans are two sides of the same coin. Keystone often describes them as demopublcans and republocrats. They only care about their reelection. President Trump promised to help the little people but instead gave a tax break to the wealthy class. The reason for this is to build a war chest of money for his reelection. The individuals in the privileged class that each received about $25K for the tax cut immediately donated one-third to one-half of it to Trump's reelection campaign. This is the way the crony capitalism game is played. President's Obama, Bush and all the rest did the same thing.
As John Dalberg-Acton proclaimed, "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
Trump continues to publically denigrate Chairman Powell for several months and the attacks are becoming more abrasive and ignorant. The reason is simple. If the economy turns south, Trump needs someone to blame. None of this is rocket science. Trump is the one who hired Powell and the president says he only hires the best people. The president is a walking contradiction which is creating increased market angst.
The chart above tells the market story for Friday. China imposed more tariffs pre-market which sinks the US futures. The Trump tariff and trade war escalation creates the gap-down open for the benchmark S&P 500 (the stock market). Comically, Powell is the one who rides to the rescue saving the day with more dovish talk. Then, Trump hastily tweets his anger at China and at Powell even spelling the chairman's name wrong. Powell commented during his Jackson Hole speech that he is accountable to Congress and the American people. Trump demands loyalty and butt-kissing adoration from everyone so this non-acknowledgement of the president's importance increases his anger.
Humorously, King Trump orders all companies to no longer do business with China. His decree is bazaar especially since products from Trump's own companies are made in China. Stocks collapse. It is the Trump trade war escalation that sinks the markets on Friday.
The central banks are another sick reason for the ongoing demise of capitalism; they created the income inequality problem. Their obscene Keynesian money-printing monetary policies, for over one decade, have inflated all asset prices around the world including stocks, bonds, real estate, vineyards, art, collectibles, antique cars, etc.... No one knows what any asset is truly worth anymore and humorously, the world remains awash in liquidity. Easy money encourages stupid investment. The Federal Reserve, and other global central bankers, have destroyed all price discovery.
Officials at the Federal Reserve and other central banks perform the bidding of the large Wall Street investment banks since they are rewarded with lucrative token speaking engagements once they resign from public life; a quid pro quo for their dovish loyalty to the privileged class. This is Crony Capitalism 101.
One-half of Americans do not own a single share of stock. The wealthy class are rewarded with riches far beyond their wildest dreams (due to the central banker Keynesian money printing schemes) while common folks suffer through one-decade plus of structural unemployment and high debt. Interestingly, the number of people holding three jobs is at an all-time record high. It takes two or three jobs for people to make the same income they did before the 2008-2009 financial crisis; dubbed the Great Recession.
Protectionism increases around the world as central bankers race to the bottom (competitively debase their currencies to gain an economic advantage but in the end only serve to slit each other's throats). Protectionism extended the Great Depression through the 1930's.
Capitalism is failing in the US for two main reasons; humans are corrupt and no transparency. That is all there is to it. The privileged class operate by a different set of rules than the common people. They are privy to all the insider information on legislation and companies and make money in securities effortlessly. Wouldn't you like to know how the game ends before it begins? You too could make a lot of money in a corrupt rigged system if you were one of the chosen ones.
Most people do not know that Congress is actually allowed to trade on insider information. That is why a lowly representative will go to Washington, DC, wanting to do good for his constituency, but in a very short time becomes corrupted as money is shoved into his pockets and leggy women whisper sweet nothing's in his ears while playing with his necktie. Why do you think nearly all of the representatives and senators inside the corrupt beltway are millionaires?
Typically, all governments and financial systems fail within 200 to 250 years or sooner due to human corruption and lack of transparency so America is overdue for a change/revolution of some sort. The 2020's may look a lot like, and rhyme with, the 1960's. Once the recession begins, it will likely quickly morph into a class war.
The divide between the rich and poor is at a five decade high and basically a one-century high. Payback will be a b*tch. The huddled masses are going to want to blame someone for their decade of misery which will have no end in sight once the recession begins and the wealthy privileged class will have bullseye's printed on their backs. The class war will likely become very ugly with violent individuals targeting CEO's, politicians and anyone that has the appearance that they are wealthy. There is a sad future over the horizon created by greedy humans. The wealthy will likely seek out gated communities for their own protection as the class war intensifies.
JPM CEO Jamie Dimon is now touting a line that companies should care more about people than profits. That is hilartious. Dimon is smart enough to see what is coming down the pike as well and he is getting out in front of it all. When the ugliness begins, and protesters begin showing up at McMansions, Dimon will be telling everyone that he feels their pain and has been on their side from the start; of course trying to save his and his crony buddies' skin. These people are so predictable. Dimon filled his pockets with money over the last 10 years and likely now worries that they all got a little too greedy. That is the thing about greed; even when you start to realize you are greedy, you cannot help yourself and you continue being greedy.
Starting a couple years ago, China placed limits on what any rich citizen could flaunt in public. They obviously see class war problems on the horizon and know that someone walking around in expensive jewelry and furs, driving a $100K Mercedez-Benz, will not be viewed nicely by a person scrounging for some bread to eat. It is all fascinating to watch. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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