The Warren Buffet Economy: How Central Bank Enabled Financialization Divided America

David Stockman's Contra Corner ^

[ameribbean expat]

During the 29 years after Alan Greenspan became Fed chairman in August 1987, the balance sheet of the Fed exploded from $200 billion to $4.5 trillion. Call that a 23X gain.

That’s a pretty massive increase—so let’s see what else happened over that three-decade span. Well, according to Forbes, Warren Buffett’s net worth was $2.1 billion back in 1987 and it is now about $73 billion. Call that 35X.

***

Further down the Greenspan era rabbit hole, we have the average weekly wage of full-time workers in inflation adjusted dollars. In constant 1982 dollars that was $330 per week in 1987 and is currently $340. Call that 1.03X.

[ameribbean expat]

Good read.

[dp0622]

This one looks like it’s worth opening up. Gonna give it a read.

Warren That ####.

[Chgogal]

Interesting! Thanks for the post.

[Ray76]

Funny that “financialization” is mentioned, I was thinking about it this morning in relation to Trump being “Main Street” and how “Wall Street” has taken over.

Now to dive in and read it! Thanks for posting

[KarlInOhio]

Interesting little trick there, comparing 1987 vs now in nominal dollars for each year for the Fed and Warren Buffet's assets but doing inflation adjustment on the payroll figures. If you inflation adjust the others they would be 11x and 16.7x. Sure, still huge, but using different rules for them is a sign that Stockman is cheating. He may have a point, but my antennae are up.

[Toddsterpatriot]

but using different rules for them is a sign that Stockman is cheating.

He seems to do that a lot.

[Ray76]

Saved

[ameribbean expat]

Stockman’s no vestal virgin, as evidenced by his affiliation with Bill Bonner. Nonetheless, he’s playing to the old saw that whomever is closest to the bank (read: fed) wins, and his broader point about interest rate policy is on target.

[PGR88]

David Stockman is completely nailing it with his last few articles - he explains exactly how the Fed’s money printing is distorting our economy, destroying the middle class, and blowing bubbles.

I would also add - the Fed is also the only supports under the leftist nanny state. Without all that government debt in unbacked, fiat currency - the Left and Democrats would be destroyed.

That is exactly why I view the Fed as a direct enemy of conservativism - it directly supports our enemies.

[gattaca]

ping

[major-pelham]

I believe the 1.03x wages multiplier is the only number that matters, the ones you reference are a shiny object. Particularly, since the article isn’t really about that but about tFED policy funding no risk speculation.

Back to your numbers, if you can just concentrate a second on the productivity gains since 1987 and imagine there’s a .03x in renumeration increase for the constant 40 hour labor input - it’s a crime against humanity. Against CPI it’s .8x. I am a firm believer there’s no excuse not to get ahead in the USA but these numbers show workers never seem to. There is movement amongst strati, we all know that, but there’s no rising tide that lifts all boats according to Stockman. The sheeple are probably not smart enough to undesrtand it but this is why they are revolting. Our oligarchy must be brought to heel.

[wastoute]

Saying the Fed backed libtards 8 years ago was considered tinfoil hat territory. After 8 years of QE, no longer. Look for interest rates to go up in January after Trump wins. In the past the MSM would have gotten away with blaming Trump, too. I don’t think it will work anymore.

[PGR88]

Saying the Fed backed libtards 8 years ago was considered tinfoil hat territory.

Wrong. You need to think. When the Fed "buys" (ie. prints money for) $4.5 Trillion in government debt, and suppresses 10 year Treasury rates to near 1% - what is the effect? It grows government. It pays for massive entitlements, it pays for "stimulus" (bailouts to state governments) it pays for Obamacare, it pays for Planned Parenthood, it pays for every global warming research project, etc. etc.. This is where progressives live and thrive. And your elected representatives aren't needed - they have turned over fiscal responsibility to the Fed.

Take away all that massive debt support - and what happens to the nanny state?

[PGR88]

imagine there’s a .03x in renumeration increase for the constant 40 hour labor input - it’s a crime against humanity.

You are correct - massive Fed money-printing and debt simply allow government (and its cronies) to steal very large productivity gains from wage-earners, consumers and the economy as a whole.

[wastoute]

In any case there is certainly no question today.

[Toddsterpatriot]

When the Fed "buys" (ie. prints money for) $4.5 Trillion in government debt, and suppresses 10 year Treasury rates to near 1% - what is the effect? It grows government.

Do you think that if 10 year rates were 4% that Obama would say, "Oh my goodness, we can't afford all this spending, we need to cut the size of government, immediately!!!"?

Seriously?

[PGR88]

Do you think that if 10 year rates were 4% that Obama would say, "Oh my goodness, we can't afford all this spending, we need to cut the size of government, immediately!!!"

NO. But an extra $600 billion in Fed.gov interest payments might cause the markets to react - and that's the ultimate discipline on spendthrift politicians, who can never be trusted - Obama or otherwise. Thomas Jefferson was very wise to the evils of central banks and its also why he said gold is the currency of democracy. It enforces discipline that governments will never have on their own.