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April 5, 2021 | What’s Ahead for Americans Who Aren’t Already Rich

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

YOUGHAL, IRELAND – All we have left is mockery. But in America, circa 2021, our sarcasm is dwarfed by the absurdities of real life.

Last week, we tried to mock the Biden administration’s conceits. No bridge is too far for the Biden team… even those built by God himself.

Alas, our sarcasm fell short. Scarcely had the ink dried on our April Fools’ issue, that Team Biden came out with more claptrap… leaving our cynicism far behind.

Here’s The New York Times:

Biden Seeks to Use Infrastructure Plan to Address Racial Inequities

…President Biden’s $2 trillion plan to rebuild aging roads, bridges, rail lines and other foundations of the economy comes with a new twist: hundreds of billions of dollars that administration officials say will help reverse long-running racial disparities in how the government builds, repairs and locates a wide range of physical infrastructure.

That includes $20 billion to “reconnect” communities of color to economic opportunity, like the Black residents still living in the interstate’s shadow along Claiborne [Avenue… In New Orleans].

Oh yes…

Can you imagine it, dear reader? We can’t. Not only do you need an extreme talent for mockery to make fun of the Biden team, you need a remarkable imagination to see how its fake money could cause a real boom… or how its boondoggles could help anyone but the elite, the insiders, and the cronies who control the money.

The Elite Excuse

To bring readers fully into the picture… at least as we see it… Government is always an excuse for the few – the elite – to lord over the many. They use government to keep the power, the money, and status headed their way.

In that regard, “racial inequalities” are useful.

There are two broad explanations for why some groups are richer than others. 1) It is their own fault… If they acted more like rich people – studying hard, saving their money, etc. – they’d soon be rich themselves. Or 2) It is the fault of other people… “racists” who hold them down and squeeze the air out of them.

For the elite, the second hypothesis is much more attractive than the first. It is easier to understand. The problem is easier to fix. And it gives many people a satisfying sense of indignation. After all, they’re not like those rednecks down in Georgia!

Most important, it offers the cronies and insiders an almost infinite range of opportunities to rip off the little guy. Today’s elite uses the poor the way the Bolsheviks used the proletariat – not as a cause, but as a tool, to help them gain power for themselves.

Like the War on Drugs… or the War on the COVID-19… or the War on Terror, there is little hope that a new “surge” in the War on Poverty (by reconnecting poor areas to economic opportunity) will help the public (Black or white).

But it is a great boon to the elite (Black and white), who administer its many programs, spend its billions of dollars, and thus attain power, status, and money for themselves.

The Diversity Issue

Here’s how it works. Bloomberg TV recently hosted its fourth annual “Inequality Summit.” Speaking on “diversity targets” was Kenneth Chenault, a Harvard Law School graduate… and former CEO of American Express. Mr. Chenault, an “African American,” says progress at getting more “diversity” on corporate boards has been disappointing.

But who gets on a corporate board? A poor person? One of the forgotten little guys? Nope.

What they want is a person like Kenneth Chenault… That is, one of the elite, an “African American,” who went to the same schools as the white directors… and someone who, therefore, acts like a rich person. Not the high-school dropouts from the wrong side of Claiborne Avenue, in other words.

Another example: Corporate boards are told it would be good PR to let non-white firms handle some of their investments. This, too, is advertised as a victory for “diversity.”

But who are these money managers? Not the homies from West Baltimore. Today’s Financial Times includes a portrait of one of them, John Rogers, the founder of Ariel Investments.

Where did Rogers go to school? Princeton!

Does this token do-goodism really help the poor man? Not at all; it just uses him… a useful excuse for more elite plundering.

The Multiplier Effect

As we saw last week, the “multiplier” effect used to mean that the feds could spend money – say, on interstate highways – and the country would “get back,” in the form of increased GDP, some four or five times its money.

We doubt that that was exactly cause and effect, but that’s what happened.

But today, the debt burden is so high… and each new dollar expended is financed with more printed money and more debt… and the economy is so mucked up with false price signals, thanks to the Federal Reserve’s merciless suppression of interest rates…

…so that now, when the feds spend money, the GDP return – according to a study by Lacy Hunt of Hoisington Investment Management – is negative. That is, each dollar spent by the feds subtracts about $1.20 from GDP over the next three years.

The more the feds meddle – with regulations, debt, price controls, and “infrastructure” pork – the more economic damage they do. So, if America’s honcho, Joe Biden, were actually to enact his new $2.3 trillion “infrastructure” program to “address racial inequalities,” we could expect GDP to contract by about $2.8 trillion by 2024.

Let’s see… Contracting output? Increasing money supply? What does that imply? Inflation!

And who would suffer most?

The “diverse” people on corporate boards? The directors of “anti-racism” programs? The politicians who vote for the boondoggles… or the apparatchiks who implement them?

Nope. The rich and powerful will be fine. They know the game. They have 535 members of Congress looking out for them, and 11,524 registered lobbyists on the payroll. They also have sophisticated financial advisors who will help them protect their capital.

Besides, the feds will pump up their stocks and real estate.

But the poor? They have only their meager incomes. And as prices rise, they will feel pinched… and betrayed.

The Russian Revolution overthrew the existing elite to put a new elite in command. They promised a “worker’s paradise.” But while the new elite prospered, the workers had to endure a dreary slavery for the next 70 years.

So, too, we predict… that America’s poor – Black and white – will suffer more or less equally in the paradise ahead.




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April 5th, 2021

Posted In: Bill Bonner's Diary

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