Another fine mess

Friday, 3 September 2021 — Youghal, Ireland

[6 min read]

‘When I search the faceless crowd

‘A swirling mass of grays and black and white

‘They don’t look real to me

‘In fact, they look so strange’

‘Salt of the Earth’, The Rolling Stones

We saw yesterday that the feds ‘invested’ more than US$27 trillion between 1980 and today…in wars, bailouts, and boondoggles.

Return on investment = negative.

This is not to say that some people didn’t make out very well.

Stock market investors (the 10% of the country with substantial stock holdings, in the Dow, for example) saw their wealth increase more than 35 times…even as the economy grew only eight times.

As we showed a few weeks ago, an investment in Raytheon, General Dynamics, and other war suppliers rose 10 times just since 2000, while the economy only doubled.

And the ‘educators’ running the public school system in Baltimore never missed a holiday or a paycheque…even while, in one-third of the high schools there, not a single student was proficient in maths.

As for the faceless crowd, it ended up with US$28 trillion in debt…and nothing to show for it.

What equality?

Our theme this week: How the masses get the Afghan treatment from their own corrupt elite.

How do they cheat thee? Let us count the ways.

Schools that don’t teach. Wars that can’t be won. Regulations, rules, standards, licences, controls, restrictions, punishments.

And most important, fake money, that makes the rich richer and everybody else poorer.

Our friend David Stockman tells us that over the last 25 years, federal policies have added US$30 trillion to the net wealth of the top 1% — or US$23 million per household. That works out at just under US$1 million per household per year.

The bottom 50%, meanwhile, got a total of US$1.5 trillion — US$23,000 per household, which works out at less than US$1,000 per year…a thousand times less than the rich.

Equality is a fraud and a myth. But we’d just like a little honesty. And perhaps, if it is not asking too much, a little integrity.

Out on the street

Yesterday, the eviction moratorium expired. Some 3.5 million Americans are behind on rent and now face being put out. Goldman Sachs predicts that 750,000 of them will get tossed onto the streets by the end of the year.

Who are these people? The CEOs and consultants…the stockholders…the professors…the reporters? Members of Congress? The rich?

Nah…mostly, they are the uncounted heads, the wavering millions…the people the feds say they are trying to help.

Well…LOL and thanks a lot!

Since March 2020, their champions, Donald Trump and Joe Biden, have told them they don’t have to pay their rent. And now, they need to come up with a big cheque.

Rent of US$1,000 a month would mean they would need US$17,000 to settle up. Do they have that kind of money to apply to back rent? Not likely.

And rents are rising sharply. According to the Yardi Index, monthly payments for renting a house are rising 13% year-to-year, and apartments are going up at an 8% rate.

Who is responsible for that? Did landlords suddenly become greedy? Nope again. Landlords don’t create inflation; they just respond to it.

And what about owning a house? Here’s our sidekick, Dan Denning, writing from Laramie, Wyoming:

‘Home prices, for example, were up 18.6% in June from the same time last year, according to the S&P CoreLogic Case Shiller National Home Price Index. That’s the largest annual gain in the history of the data set, going back to 1987. House prices in America are now 41% higher than they were at the top of the housing bubble in 2007.’

Whose wages are rising at an 18% rate? Not those of the working class…

Another fine mess

And here’s another fine mess the feds have gotten us into. Here’s economics writer Jeffrey Tucker:

‘Large corporate buys of homes designed to be flipped into rental properties are rocking the financial markets. Two companies — Invitation Homes (INVH) and American Homes 4 Rent (AMH) — are up 38% for the year. In addition, one in five purchases of homes this year have been corporate, with the intention of turning them into rents. Goldman Sachs, Blackstone, and Investco have committed some $11 billion to the cause. And there is more money pouring into building new properties designed as rentals.’

How come the big corporates are paying so much for houses?

Oh, dear reader, we can’t believe you’re asking us that question. It’s the Fed.

Credit ratings agency Moody’s tells us that the yield on an Aaa corporate bond — the highest rating — is about 2.5%…which is only about half the latest inflation reading.

Another big payday for the speculators. They can buy a house for US$300,000, using money they borrowed at 2.5%. Already, they’re making 2.5% on the financing, after inflation.

If they rent the house out for US$2,500 a month…it gives them a gross yield of 10%, plus the 2.5% financing boost.

Then, thanks to the Fed’s money printing and interest rate suppression, house prices are going up at an 18% rate, giving them a total (very gross) return of 30.5%.

Of course, prospective homeowners can borrow, too…but the pros can borrow more cheaply…and they have a lot more money to work with.

More on Monday…in preview: Say a prayer for the ‘salt of the Earth’. They’re going to need it.

Regards,

Bill Bonner,
For The Rum Rebellion

The mania attached to non-fungible tokens (NFTs) shows no signs of abating. There are many in the space who claim the sector is just getting started.

While the exuberance leading people to pay (what I consider to be) crazy prices for pixelated art needs is one aspect of it, the big picture needs to be considered in the context of ‘frame’.

These NFTs are priced in terms of cryptocurrency (usually Ethereum [ETH]) and my report merely translated the crypto price into something we can all understand — dollars.

However, dollars or trash tokens, as many crypto enthusiasts refer to them, have little interest to the crypto rich. They may own tens of thousands of Ethereum (current value AU$4,779 each) which cost them next to nothing.

Hence spending 10, 20, or 50 of them to buy some digital art is of no real consequence.

That’s the reality of the brave new digital world we are entering.

But there is also a much broader perspective to consider.

As the global asset register becomes digitised, tokens will represent indisputable proof of ownership.

Eventually, you’ll have a token that represents your house. When you want to sell your home, you’ll simply transfer the token to the purchaser who will remit an acceptable form of payment through the blockchain.

This could be a government authorised currency or Bitcoin [BTC], Ethereum, or anything else you are choosing to accept as payment.

This will all be managed through a smart contract with no middleman involved.

To the uninitiated it all sounds terribly complicated, but it actually opens up incredible opportunities.

Consider, for example, education records. Loads of people gild the lily on their resume to claim training, degrees, or certificates that they haven’t actually got. They know that few employers can be bothered doing the extensive checks while physical ‘proof’ can be cooked up on any home PC with some Photoshop skills.

In the future, a candidate will simply provide a link to their blockchain ‘wallet’ where every achievement will be stored. These will be NFTs too and the records will be immutable.

My point being that the crazy tulip pic and cartoon prices aren’t what NFT technology is all about. The ultimate utility is in the contracts and it is coming our way much faster than many people think.

This leads me to a reader question about why I am trying to educate readers about bitcoin, Ethereum, and other cryptocurrencies. He wrote:

‘I find your constant promotion of Bitcoin a bit strange.’

It may be strange if you don’t accept or understand the seismic shift that is coming our way on the back of crypto and blockchain technology.
It is the future and every single one of us needs to prepare for that future.

Those that do will be in control of their own lives while the rest will be rendered government serfs.

Confidential readers who embraced the ideas we discussed 12 months ago have made multiples of their initial capital since then.

I think we are just getting started.

We are only at the very early stages of massive societal change. One of the subscription newsletters I subscribe to in this space used this image to convey how we are currently situated in respect to other contemporary matters:

If he’s correct, there’s a heck of a lot more upside in the crypto-technology space with a 10-fold move (or more) possible.

Of course, I don’t know if that’s what will happen or not.

However, given my understanding of what is going on right now, I know I want to be part of whatever is to come.

Regards,

Cory Bernardi,
For The Rum Rebellion

PS: To sign up to Cory’s free weekly email, Cory Bernardi Confidential, click here.