On December 30, Market-Watch reported Charles Hugh Smith’s blog post of the day, “The Top 10% Bubble is about to burst”.
Mr Smith has been hailed by CNBC as one of the Internet’s best alternative finance bloggers. In this article, Mr. Smith describes a disturbing outlook for 2021 — “When the top 10 percent, their bubble bursts in 2021, security and wealth illusions will be lost, shatters all who believe in opportunistic wealth and illusionary wealth.”
According to Mr. Smith, “Virtually all of the growth in income and wealth over the past 20 years has gone to the richest 10 percent of Americans. This group is living in a bubble that they think is unbreakable, and whatever goes wrong, their personal income and wealth will be paid for by the government and the central bank.”
In other words, no matter what happens, the top 10 percent are confident of their place in the wealth pyramid. Any decline in stocks, bonds, real estate, futures, etc., can lead to a decrease in personal wealth (horror!). But these will be bought immediately, because the Fed will print another trillion dollars.
“Anything that stops the top 10 per cent from making a quick buck will be swamped by trillions of dollars borrowed or printed by the Treasury or the Fed. Top 10% refers to, the local and state governments, universities, big technology firms, large pharmaceutical companies, the department Of defense, Wall Street, hedge funds, risk investment, “Mr Smith in his” (Of Two Minds) Two hearts “blog wrote,” no matter where in trouble, solution is printed on the trillions Of dollars, and that only need to knock down a few keyboard is done.”
The richest 10% have absolute confidence in the magic power of the Treasury and the Fed’s solutions, and with the Fed’s intervention it is impossible for asset valuations not to bounce back within three weeks.
The top 10 per cent of wealth is largely the result of a web of privilege; But, in their bubble, their wealth, status, reputation and income were the result of hard work. While this is true for some, it is not true for all of them, and even those who have struggled to reach the top do not realise that their success over the past 20 years (the last 50, so to say) is largely the result of the rising tide of finance. In the bull market in almost everything except commodities, everyone is a hard-working genius who has achieved everything through labor.
Indeed, this has been the case for many years; Yet Mr Smith points out the folly of such systems and ideas.
According to Mr Smith, the poorest 60% have little illusions about the inequalities and predations prevalent in the real world, and the richest 10% have bubbles of 90% fantasy plus 10% absolute delusion.
Mr. Smith continued: “We cannot print wealth into reality, nor can we lend wealth into reality.” “What we can print and borrow is only the opportunism and illusion of illusory wealth, and all of this will disappear, because this way of creating ‘money’ is the reverse.”
According to Mr. Smith’s blog post, the current American system focuses on process rather than results, with trained professionals following needlessly complex procedures and compliance procedures. But once printing/borrowing trillions of dollars becomes a problem rather than a solution, costs must be cut, results focused, unnecessary complexity discarded and many professional classes replaced by automated software. The rest are reused in various ways to achieve results.
The top 10 percent are the renters and the technocrats, and they find that the bottom 90 percent can no longer afford the rent, the insurance, the services that make the top 10 percent richer. Put another way, the loss of unproductive complexity ends up in the top 10 per cent. Finally, liquidity will no longer solve the problem of bankruptcy, deflation will squeeze the ownership of the top 10% of assets, phantom wealth will disappear wherever it comes from, and the top 10% of assets will become unbought.
Ultimately, Mr Smith envisions a radical change to the status quo, in which draining the Fed of funds is just one element of a larger scheme.
“Not only do the top 10 per cent have a myopic view of success on their own, but they are also blind to the pernicious consequences of wealth/income inequality. Benefits wealth/income inequality in the minority, for most people to sacrifice, “he wrote,” the wave will not always in one direction development, to be sure, the top 10% of support rich, is unprecedented inequalities, to strongly against this phenomenon is not absolutely impossible, that’s for sure.”
Soon, he speculates, the bottom 90 percent will demand a more equitable distribution of wealth, a system that benefits more people, rather than a system in which “parasites” and “vampires” cling to the purse strings.
Smith’s judgment of the future is that “not only will the lifeboats of the wealthiest be unstable, but almost all forms of income and wealth will be affected by a tax surge that will be collected by all levels of government.” “Live comfortable, will experience some life uncomfortable, and this kind of uncomfortable is already the bottom 60% of People’s Daily life, from the richest 10% of the number of 30%, they still longing for the safety of the middle class fantasy, more and more of them will experience this uncomfortable, more and more people will find that social mobility is declining. “
As things stand, it will take some time for that sentiment to play out in the stock market, with the Dow Jones Industrial Average up 0.64% on Wednesday, the Nasdaq composite up 0.03% and the S&P 500 SPX up 0.60% on the penultimate business day of 2020.
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