Investment is increasing but chiefs doubt a capex splurge is brewing
From the Slope of Hope: I’ve had a lifelong fascination with wealth and, more recently, wealth disparity (for proof, look no further than the SocialTrade stack on this very topic). I grew up in Baton Rouge, Louisiana in a happy, financially-secure, but very much middle-class family. We lived in this house:
Everyone I knew had the same situation. We all had pretty much the same kind of house, the same quantity of toys, the same simple vacations………everything was so equal, you’d think we were living in some kind of socialist paradise.
We weren’t, of course, and there was, naturally, one “rich kid” in the neighborhood. Everything about his life was just a little bit nicer, starting with the house he lived in:
Doesn’t look too much different, does it? Well, that’s kind of the point of this post.
As a youngster, I was acutely aware of many differences between the life I had and the one my friend Steven (AKA the rich kid) had. Although many decades have passed since then, I don’t have to even try hard to remember some of those contrasts:
The White Carpet
One of my most vivid memories was walking into Steven’s house and seeing stark-white wall-to-wall carpeting. In my house, we had four kids, and white carpet would have been just nuts to have. But in Steven’s, there it was, white and looking good as new. It helped, I suppose, that there was plastic runners, so you had to walk on them, as if it was a plastic sidewalk in the middle of the house. Even as a child, I thought it was kind of silly to carpet a house and then lay down a strip of plastic to protect it, but who was I to say?
In Steven’s back yard, there was the most gorgeous treehouse. His dad ran a Ford dealership, so I guess he could pretty easily afford a carpenter to come out and construct it for him. Now, when I say “gorgeous”, all I mean was that it looked good to my ten-year-old eyes. It was just a simple cube – – but it was made of high-quality wood, was obviously professionally-constructed, and conjured up much envy within me. I asked my dad every summer if I could have a treehouse, and the response was always the same: “I’ll think about it.” It never came.
As I mentioned, Steven’s dad had a dealership (well, at least he was the general manager there), and their family had a nice, new “luxury” car. It was certainly fancier than our station wagon, and I was amazed that it had this thing called “Cruise Control”, which to my young mind meant the car would actually drive itself. Steven and I were in the back seat, and he told me that the little windows were called “opera windows”, which likewise sounded like something far more elegant and expensive than I’d ever own personally.
I distinctly remember one conversation my friend and I had in which our father’s salaries came up. Now, I actually had no earthly clue what my father made, but for some reason I was feeling competitive and insecure that day, so I told Steven my father made $35,000 a year, which sounded tremendous to me. He countered that if MY dad made $35,000 a year, then HIS dad must make $50,000 a year. I shut up at that point, because I figured it must be true, given their apparently luxurious lifestyle.
The Boom Boom Cannon
This one seemed to sting the most of all: one Christmas, my “big gift” was a plastic UFO that could fly by way of a motorized propeller. Unfortunately, we couldn’t get the damn thing to fly, in spite of my father’s best efforts. So it was pretty disappointing. I visited Steven to see what he got for Christmas, and he was the proud owner of a tiny working cannon called the Boom Boom (yeah, safety concerns weren’t as prevalent those days……….this was actually a working cannon, with gunpowder, albeit very small). It was made of nice, heavy metal, and I’d never seen one before. It seemed like just about the best toy imaginable.
Looking back, it was as if my dad was 6 feet tall, just like everyone’s else’s dad, and here was my friend who had a dad that was 6 feet and 1 inch tall. Steven’s toys were just a LITTLE bit nicer. His house was a LITTLE bit cleaner. His vacations were a LITTLE bit fancier. But, in truth, the difference between his life and everyone else’s was really, really small. Back then, though, I always felt poor when I was with Steven.
These days, the difference isn’t between a 6 foot guy and someone 6’1″. It’s more like suddenly there are some people who are 900 feet tall – – 1500 feet tall – – 5000 feet tall. Their wealth is just as absurdly large as such heights would be, while at the same time the mass of humanity seems to be getting shorter by the week.
For decades – – mainly the 40s, 50s, and 60s – – wealth distribution in America was incredibly even. Someone very middle-of-the-road could still aspire to be “the rich guy” in town. If my father, for instance, got it in his head that he wanted to win the rat race in our neighborhood, it wouldn’t have been that difficult. It was totally feasible. That extra inch wasn’t unattainable.
Starting in the 70s, thought, and picking up speed in the 1980s, things started to change. Over the past third of a century, policy has clearly handed the wealth of the country over to the rich kids.
Notice the change that took place in 1982. Interestingly, that was exactly the same year that the original Forbes 400 list came out. Their timing couldn’t have been better, because the very existence of such a “rich list” was the equivalent of ringing in an era of plutocracy. But read what the list was like in the inaugural issue………
In the first Forbes 400 list, there were only 13 billionaires, and a net worth of 75 Million USD secured a spot on the list. The 1982 list represented 2.8% of the Gross Domestic Product of the United States. The 1982 Forbes 400 had 22.8% of the list composed of oil fortunes, with 15.3% from manufacturing, 9% from finance and only 3% from technology driven fortunes.
Being a billionaire was a big, big deal. Only 13 entries! These days, just to on the list at ALL, you need a net worth of at least $1.7 billion, 23 times higher than the original list. Amazingly, there are nearly 200 people who are billionaires that don’t even make it on the list at all, because they don’t have enough! So the 1982 list seems absolutely quaint in the modern era.
Life tends to move in cycles, and I doubt the scenario in which this massive disparity exists is a permanent feature of life. However, it will take many decades – – and probably more than a little social pain – – to share the wealth again.
All I can say to my younger self regarding my rich friend……….it really wasn’t so bad, and Boom Boom Cannon notwithstanding, financial life was a lot more evenly-balanced back then than it is now. And I still don’t have a treehouse.
It’s another week in Washington and another horror show. This time it was Attorney General Jeff Sessions being grilled by Senators on whether, when, and how he might have met with certain Russians, or any Russian, or someone who might actually know a Russian. In addition to fishing for any inconsistency that could be used to support an accusation of obstruction of justice or perjury – the usual sleazy methodology of politically motivated investigations here – the transparent aim was to further poison the well on any possible initiative to improve ties with Moscow.
The strategy appears to be working. The Russian Embassy in Washington confirms that for the first time since the Russian Federation’s founding the State Department did not send pro forma national day greetings. Perhaps the bureaucrats were afraid they would be tainted and themselves become targets of multiple investigations into «collusion» with the Kremlin. (Luckily, this intrepid Washington analyst has no qualms about such associations.)
Or more likely, they themselves are part of the Russophobic mob undermining the White House. It has been reported that soon after the inauguration Trump sought to open dialogue with the Kremlin and set an early summit with President Vladimir Putin. This produced a hysterical counteraction from the Deep State. As reported by conservative columnist and former presidential candidate Patrick Buchanan:
«The State Department was tasked with working out the details.
«Instead, says Daniel Fried, the coordinator for sanctions policy, he received ‘panicky’ calls of ‘Please, my God, can you stop this?’.
«Operatives at State, disloyal to the president and hostile to the Russia policy on which he had been elected, collaborated with elements in Congress to sabotage any detente. They succeeded.
«‘It would have been a win-win for Moscow,’ said Tom Malinowski of State, who boasted last week of his role in blocking a rapprochement with Russia. State employees sabotaged one of the principal policies for which Americans had voted, and they substituted their own».
So much for constitutional government and the rule of law…
But now it gets even worse. This week Congress moved legislation designed to codify in statute sanctions imposed on Russia by Barack Obama over Ukraine and evidence-free charges of Russian election interference. Provisions for a presidential waiver, which are standard in any sanctions legislation, are unusually narrow. Congressional proponents are clear that their aim is to take the matter out of the president’s hands. Democrats, seemingly devoid of any other policy agenda or ideas, vow to keep banging the Russia drum through the 2018 Congressional elections.
When all is said and done, there are lots of reasons the political class hates Trump. His heresies on immigration and trade are near the top of the list. But make no mistake: for the Deep State and its mainstream media arm, demonizing Russia and Vladimir Putin personally is a dangerous obsession. (There is reason to suspect «Russian collusion» figured in the thinking of a fanatical Leftist’s shooting attack on Republican Congressmen: «The shooter also signed a petition calling for an investigation into Trump-Russia ties, confirming he was radicalized by the mainstream media’s obsession with conspiracy theories about Russia interfering with the election».)
It remains to be seen whether Oliver Stone’s extended interview with Putin on the Showtime network will have any impact. So far the commentary seems to be divided between descriptions of the substance of the discussion and attacks on Stone for talking with such a bad, bad man: «Speaking after the interview, Stone refuted allegations that he became an unwitting messenger of pro-Putin propaganda or of dishonest information given by the president».
With regard to substance, relatively little attention has been accorded in American media to Putin’s flat accusation that U.S. «special services» have supported terrorists, including in Chechnya. Of course anyone paying attention would know that arming jihadists is a standard part of U.S. policy, going back at least to Afghanistan in the 1980s and repeated in Bosnia, Kosovo, Libya, and today in Syria. Indeed, as early as the 1950s the U.S. had established a very close relationship with the Muslim Brotherhood and its terrorist elements as a weapon against Egypt’s Gamal Abdel Nasser and Baathists in Syria and Iraq, who Washington thought were a little too cozy with the Soviet Union and far too socialist and secular for the taste of our pals in Saudi Arabia and the Gulf.
There is a real symbiosis between the anti-Russian imperative in American foreign policy and support for radical Islamic elements. It did not end when the Soviet Union and communism collapsed but rather was intensified. This is why Moscow’s constant calls for a common front against terrorism are always rebuffed. Such cooperation doesn’t make any sense for anomenklatura whose number one goal is hostility to Moscow and for whom jihadists are at worst «frienemies» – people who may be troublesome but useful.
We can only imagine how completely different the world would be if the U.S. were to recognize that Russia is a country that in many respects is not that different from the United States or Europe and that we had common interests. But for the U.S. Deep State, that would amount to switching sides in a global conflict, where we see jihadists essentially as «freedom fighters» against a geopolitical adversary. These same clueless «elites» are then puzzled when their carefully nurtured, cuddly, «moderate» jihad terrorists attack us back here at home.
This irrational pattern is at the root of the hostility of American policymakers toward Russia and any prospect of normalizing bilateral ties. In large part, it’s what underlies the «soft coup» being directed against Trump, of which the Sessions pillorying was an episode. (A late report based on unreliable, unverified sources suggests that Special Counsel on the Russia probe, Robert Mueller, is expanding his investigation to include potential obstruction of justice by President Donald Trump. Mueller, a close personal friend of ousted FBI Director James Comey, has already packed his team with partisan Democrats.)
Those behind this attempted coup think we can continue to treat Russia as though it were a minor power of the magnitude of Serbia, Iraq, Libya, or Syria, or even Iran. They think if we just keep pushing, pushing, pushing, either the Russians will collapse or back down. They will do everything possible to box Trump in and prevent him from pursuing any path other than the disastrous course laid out by Bill Clinton, George Bush, and Barack Obama. They can see no other outcome than removing Putin and returning Russia to the condition of a Yeltsin-era vassal state – a term Putin used in the Stone interview – or, better yet, its territorial breakup along the lines suggested by the late Zbigniew Brzezinski.
Will the Oliver Stone interview change any minds? It’s too soon to tell. But if the soft coup against Trump succeeds, it might not matter, since then America could not be considered a self-governing constitutional republic even in a residual sense. We may have already passed our own Rubicon and just don’t know it yet.
Being rich is great. But being rich in America? That’s even better.
With US stock benchmarks trading just below record highs, and Treasury yields not too far from the all-time lows reached last summer, the gulf between the world’s wealthy elite – those 18 million households worldwide with more than $1 million in assets – and everybody else is rapidly widening.
According to a new study by Boston Consulting Group via Bloomberg, these households – with a total head count of roughly 70 million people, or about 1% of the world’s population – control 45 percent of the $166.5 trillion in wealth. By 2021, they will control more than half, suggesting that, while wealth inequality in the rest of the world is simply accelerating, in America, it’s gone into overdrive. Right now, 63 percent of America’s private wealth in the hands of U.S. millionaires and billionaires, BCG said. By 2021, their share of the nation’s wealth will rise to an estimated 70 percent.
“The share of income going to the top 1 percent in the U.S. has more than doubled in the last 35 years, after dropping in the decades after World War II (when the rich were taxed at high double-digit rates). The tide shifted in the 1980s under Republican President Ronald Reagan, a decade when “trickle-down economics” saw tax rates for the rich fall, union membership shrink, and stock markets spike.”
In its report, BCG puts the global rate of wealth creation in 2015 and 2016 at 5.3 percent, though the consulting firm expects it to accelerate to about 6 percent annually for the next five years. Those gains will accrue almost exclusively to the wealthiest Americans, while wealth held by everyone else is just barely growing.
Of course, there’s a caveat: In America, most of these gains exist only on paper. More than 70% of new wealth creation is derived from the rising value of rich investors’ portfolios. The rest is what BGC describes as “new wealth creation” aka real money earned by workers and entrepreneurs. Globally, the share derived from asset valuations falls to about 50%.
“In the U.S., the creation of “new” wealth is a minor factor, making up just 28 percent of the nation’s wealth increase last year. It’s even lower in Japan, at 21 percent. In the rest of the Asia Pacific region, meanwhile, two-thirds of the rise is driven by new wealth creation.”
The richest Americans could receive an additional bump if/when President Donald Trump pushes the fiscal agenda on which he campaigned through Congress – an agenda that includes tax cuts, deregulation and trillions of dollars’ worth of new infrastructure projects. However, since the exact details of these policies are not yet widely known, it’s difficult to predict their specific impact, BCG says.
“’No one knows’ what kind of tax changes will become law, said BCG senior partner Bruce Holley. However, “this could buoy the [growth in U.S. wealth] that we are predicting.”
America remains home to the highest concentration of millionaires and billionaires in the world, and their ranks are growing fast: Today, about 7 million Americans are worth more than $1 million. BCG expects that number to balloon to 10.4 million by 2021 – an annual growth rate of 8 percent, or about 670,000 new millionaires each year.
China has the second most millionaires and billionaires, at 2.1 million, though its population is four times the size of the US.
Within the US, glaring disparities exist from region to region. As Fortune reported back in 2015, roughly two-thirds of America’s millionaires and billionaires live in 12 metro areas, mostly wealthy enclaves along the coasts.
Meanwhile, according to the Federal Reserve’s latest survey of household economics and decisionmaking, a quarter of American adults can’t pay all their monthly bills, and 44% have less than $400 cash on hand in case of an emergency.
U.S. Geological Survey (USGS) seismology reports conclude that a massive swarm of earthquakes swept through the park on Friday triggering more than 60 separate events in which seismographs spiked to magnitudes of up to 5.0.
Experts fear that the supervolcano is long overdue for an eruption capable of wiping out a vast amount of human, animal, and plant life in the Continental United States.
Scientists currently believe that there’s a 10% chance that a “supervolcanic Category 7 eruption” could take place this century, as pointed out by theoretical physicist Michio Kaku who appeared on a segment for Fox News.
The grey haired physicist told Shepard Smith that the “danger” we are now facing with the caldera is that it’s long overdue for an eruption which Kaku said could “rip the guts out of the USA.”
Kaku said that a “pocket of lava” located under the park has turned out to be twice as big as scientists originally thought.
Scientist concur that the last eruption of the caldera took place some 640,000 years ago.
The U.S. is currently under contract with at least 4 countries all of which have agreed to house displaced U.S. citizens in the unfortunate event the Yellowstone supervolcano were to erupt. Hundreds of billions of dollars were paid to foreign governments to facilitate the agreement which spans a ten year period from its signing, ending in 2024.
An excerpt from an article I authored in April of 2014 titled: “Report: Brazil, Argentina and Australia sign contracts worth hundreds of billions of dollars to house displaced U.S. populace when Yellowstone supervolcano erupts” reads:
The U.S. plan for relocation was formulated after a recent scientific analysis of the park revealed that Yellowstone’s supervolcano has the potential to violently erupt within the next 10-years as noted by others including the famous astrophysicist Michio Kaku.
In fact, Praag, a Pakistani publication, recently reported:
It may take up to ten years for pressure in the magma chamber of the super volcano to build. According to Dr. Jean-Philippe Perrillat of the National Centre for Scientific Research in Grenoble, France, “it is the difference in density between the molten magma in the caldera and the surrounding rock big enough for the magma from the chamber to the surface to increase “.
“The effect is the same as the extra buoyancy of a soccer ball under water fill with air, after which it rises to the surface because the surrounding water poet,” said dr. Perrillat. “If the magma volume is large enough, it should go to the surface to rise and explode like a champagne bottle that ontkurk be.”
According to Dr. Sipho Mathetwe, the South African government “sympathy for the American challenge (challenge) to Yellowstone, but we have our own challenges in South Africa. There are 200 million white people in America, and if too many of them to South Africa flights, it is a big problem, even though there is enough housing and infrastructure available. It will destabilize the country and may even bring back apartheid. South Africa is not for sale.”
However, according to the report, “Brazil, Argentina and Australia” jumped on the bandwagon, accepting the request from Washington.
The calm before the storm started a few weeks back when researchers noticed a downtick in seismic activity before Friday’s swarm struck.
Earthquake expert “dutchsense” chimed on Yellowstone in a video posted to YouTube on June 15, one day before the swarm occurred, to warn of future activity in the region…