Marc Faber On The Four Pillars Of Poverty

Tyler Durden's picture

Submitted by Marc Faber via The Daily Reckoning blog,

I think it is remarkable that, despite the growth the US has enjoyed since the 1960s, the poverty rate has barely changed. Writing for the Wall Street Journal last month under the title “How the War on Poverty Was Lost”, Robert Rector notes that: “Fifty years and $20 trillion later, LBJ’s goal to help the poor become self-supporting has failed.” He writes further:

On Jan. 8, 1964, President Lyndon B. Johnson used his State of the Union address to announce an ambitious government undertaking. “This administration today, here and now,” he thundered, “declares unconditional war on poverty in America.”

 

Fifty years later, we’re losing that war. Fifteen percent of Americans still live in poverty, according to the official census poverty report for 2012, unchanged since the mid-1960s. Liberals argue that we aren’t spending enough money on poverty-fighting programs, but that’s not the problem. In reality, we’re losing the war on poverty because we have forgotten the original goal, as LBJ stated it half a century ago: “to give our fellow citizens a fair chance to develop their own capacities.”

 

...LBJ promised that the war on poverty would be an “investment” that would “return its cost manifold to the entire economy.” But the country has invested $20.7 trillion in 2011 dollars over the past 50 years. What does America have to show for its investment? Apparently, almost nothing: The official poverty rate persists with little improvement.

My impression is that there are far more “poor” people today as a percentage of the population than there were in the 1960s, because lower middle-class and middle-class people have moved into the ranks of the poor. (Since 2007, the bottom 50% by wealth percentile lost more than 40% of their net worth and their debts are up 16%.) This may be a factor that explains the still muted consumer confidence at a time when stock investors’ sentiment is at its highest level since 1987.

In my opinion, the increase in poverty rests on four pillars: cultural and social factors, educational issues, excessive debt, and government handouts, which encourage people not to work. Other factors include: international competition, which keeps wages down; and monetary policies, which create bubbles and impoverish the majority.

As an example, social factors and government handouts led to a sharp increase in out-of-wedlock births. In the 1960s in the US, out-of-wedlock births comprised only 5.3% of total births; in 1980, 18.4%; and today, over 40%. Babies born out of wedlock are likely to have fewer educational opportunities than those raised in two-parent families.

This is one reason; educational standards have also slipped – certainly relative to the rest of the world – due to poor policies. Of course, by far the worst cause of rising poverty rates is monetary policies that have encouraged credit growth, enslaving poor people with debts and financing an increase in entitlement programs by the government.

According to Rector, “The federal government currently runs more than 80 means-tested welfare programs that provide cash, food, housing, medical care and targeted social services to poor and low-income Americans. Government spent $916 billion on these programs in 2012 alone, and roughly 100 million Americans received aid from at least one of them, at an average cost of $9,000 per recipient. (That figure doesn’t include Social Security or Medicare benefits.) Federal and state welfare spending, adjusted for inflation, is 16 times greater than it was in 1964. If converted to cash, current means tested spending is five times the amount needed to eliminate all official poverty in the U.S.”

It is no wonder, therefore, that with these generous social programs, largely financed now by the Fed, single women have been encouraged to have babies without the “inconvenience” of having a husband.

The problem, however, as I mentioned above, is that (again according to Rector) the Heritage Foundation has found in a study that “children raised in the growing number of single-parent homes are four times more likely to be living in poverty than children reared by married parents of the same education level. Children who grow up without a father in the home are also more likely to suffer from a broad array of social and behavioral problems. The consequences continue into adulthood: Children raised by single parents are three times more likely to end up in jail and 50% more likely to be poor as adults.”

Now, I realise that it would be unfair to place the entire blame on the Fed for the failure of entitlement programs. However, the Fed and other central banks around the world have been enablers of Big Government and poor economic policies. As John Taylor (a professor of economics at Stanford University, and one of the few economists who appears to be sane) opined in the Wall Street Journal about the various secular stagnation hypotheses:

In the current era, business firms have continued to be reluctant to invest and hire, and the ratio of investment to GDP is still below normal. That is most likely explained by policy uncertainty, increased regulation, including through the Dodd Frank and Affordable Care Act, about which there is plenty of evidence, especially in comparison with the secular stagnation hypothesis.

 

I suppose the emergence of the secular stagnation hypothesis shouldn’t be surprising. As long as there is a demand to pin the failure of bad government policies on the market system or exogenous factors, there will be a supply of theories. The danger is that this leads to more bad government policy

[emphasis added]

Concerning increased regulation it is clear that “Big Business” loves increased regulation. Take, as an example, the increasingly complex tax laws...

 

Large corporations can hire an army of accountants, lawyers, tax consultants, and lobbyists in order to reduce their tax burden. But, what about the small business owner?

He is at the mercy of some tax collector who can waste his time endlessly with repeated audits. The same goes for other regulatory requirements, which lead to less competition and favour large business groups.

Many of my friends who own independent small money management firms are being forced to close down their businesses, merge, or sell to larger financial institutions because of increased regulation. The more regulation there is, the more likely it becomes an inhibiting factor for innovation.

Furthermore, I am certain that the secular stagnation hypothesis is another attempt by the government to justify more interventions with fiscal and monetary policies into the free market.

The question is, of course, who are the governments? Will Durant opined in The Age of Louis XIV that the “men who can manage men manage the men who can only manage things, and the men who can manage money manage all”. In Lessons of History, he wrote:

...the bankers, watching the trends in agriculture, industry, and trade, inviting and directing the flow of capital, putting our money doubly and trebly to work, controlling loans and interest and enterprise, running great risks to make great gains, rise to the top of the economic pyramid.

 

From the Medici of Florence and the Fuggers of Augsburg to the Rothschilds of Paris and London and the Morgans of New York, bankers have sat in councils of governments, financing wars and popes, and occasionally sparking a revolution. Perhaps it is one secret of their power that, having studied the fluctuations of prices, they know that history is inflationary, and that money is the last thing a wise man will hoard.

[emphasis added].

I suppose that one solace for poor people, in view of this rather sobering fact, may be these words of Frank McKinney Hubbard:

“It’s pretty hard to tell what does bring happiness; poverty and wealth have both failed.”

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ArkansasAngie's picture

War on poverty

war on drugs

war on terrorism.

Bunch of dad gum warmongers.

Wedgies.  Keep people wedged apart so that they cannot form coalitions to throw the friggin bums out.

Ignatius's picture

War in the name of...  and achieves the opposite.

Shocker's picture

In the end the good middle class jobs go away, everyone falls into poverty... Sad

Layoff List: http://www.dailyjobcuts.com

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Newsboy's picture

Poverty, it's what's for dinner.

Troll Magnet's picture

I just want my personal liberty and privacy back.

economics9698's picture

Cut the crap, the war on poverty was a way to enrich the top 20% at the expense of the bottom 80% and create the utopia police state we have now.  Whatever benefits the tribe fascist is what our government does and fuck everyone else.

Pool Shark's picture

 

 

Funny how leftist progressive environmentalists always tell us that feeding wild animals reduces their ability/propensity to hunt/forage for food on their own until they become dependent on humans for their survival.

But they never seem to acknowledge the same phenomenon occurs with the FSA...

 [PS: The War on Poverty is over,...   Poverty won.]

 

realWhiteNight123129's picture

How about war on the Government? In a peaceful way but making sure it shrinks, it suffers and eventually is put in a small box so that it does not become a key career target for con artists, psychopath willing to do nothing for a leaving, vomit a lot of "political blah blah" and get paid for it with your money? 

Skateboarder's picture

The Ministry of Plenty never fails.

Gringo Viejo's picture

Speaking of poverty...a couple of North Korean Fun Facts:

1) Every household in the country is issued a government radio which cannot be turned off. However in fairness, it CAN be turned down to a minimal volume.

2) In 1994, the first time he ever picked up a club, Kim Jung Il shot a 38 under par at North Korea's only golf course.
All 17 of his bodyguards attested to this feat. He then retired from the sport.

John_Coltrane's picture

I heard one of his bodyguards denied the feat.  Unfortunately, he subsequently died of lead poisoning so his claim can't be verified.

Keyser's picture

Could have been worse, he could have tripped on a nail gun and shot himself a dozen times. 

Chuck Walla's picture

“I'll have those niggers voting Democratic for the next 200 years. [Touting his underlying intentions for the "Great Society" programs, LBJ confided with two like-minded governors on Air Force One]”

Lyndon B. Johnson

FORWARD COMPASSIONATE STATISTS!

Oh regional Indian's picture

Modern day Supply side capitalism explained.

1) Make more crap

2) More and more and more....crap

3) Pay serfs a maintainence+ wage

4) Entice serfs to buy each others Corporate intermediated crap via advertising

5) Jerk that circle

Capacity utilization is secondary to capacity expansion in th emodern capitalist supply siders tunnel vision (a square tunnel at that).

Consumer is debtaddicted.

Corpse(oration)s own debt...

End of story....

..... 

Any ZHers in Bangalore... check thisout...

http://aadivaahan.files.wordpress.com/2014/02/wfw2.jpg

FlipFlop's picture

The problem about taking from the rich is that there is less investment.

Do you think the rich just have all wealth on checking account, ready to be distributed to the poor?

It is like cutting your own branch, money gets eaten and then no-one has it any more.

Socialism creates poverty, that they remedy by creating more poverty.

ArkansasAngie's picture

That would be true if moral hazard wasn't ground into the dirt by every insolvent 1%'er 

 

cynicalskeptic's picture

The problem is that the rich are NOT 'investing' in anything that creates job.  Look at the millions spent by the Koch Brothers to buy politicians and set policy which allows them to have LESS safety regulation, LESS competition and worse.  Crony Capitalism at its best.    The NFL is a 'non-profit' corporation.   WTF?  Individual teams get local municipalities to pay for stadiums and get tax breaks.  WHY?  These policies are paid for by every taxpayer to benefit already wealthy owners.  No-bid government contracts have a record of producing shoddy inferior goods and services - while making enriching those that hold those contracts.  GOvernment subsidies to agriculture have done little to preserve the 'family farm' while enriching agribusiness and costing consumers.

Corporations are not 'investing' in jobs in the US but sending more of them overseas.

This malappropriation of funds benefits the very rich and nobody else.  Truth is that the very rich are more likely to 'invest' in things that do NOTHING to create jobs.  They are the new rentier class - they own everythign and charge everyone else for the priviledge of living.

We're not talking about 'socialism' in calling for fairness but an end to Crony Capitalism where the wealthy use government to become even richer at the cost of everyone else.

 

I've worked on Wall Street - walked away while I still had my soul.  Those there will sell their grandmothers for a buck.  I've seen evp's screw clerks making $30,000 a year out of $2000 bonuses (a big part of their earnigns) so they themselves could keep their multi-million dollar bonuses.   A good friend in Securities Law bemoans his position - 'All I do is make rich people richer - they can't spend it as fast as they make it.'   He won't /can't leave with much of his net worth in firm equity, kids on college and a costly ex-wife.  But even he is aghast that 'people have not gone to jail'

When you're rich and getting richer through market manipulation - through screwing others..... well that does nothing to help create jobs.

sylviasays's picture

Look at the billions spent by George Soros and Warren Buffett to buy Democrat politicians and set policy which allows them to have more government regulation in order to limit competition and worse.  Crony Capitalism at its best.  

James_Cole's picture

set policy which allows them to have more government regulation in order to limit competition and worse

This is such a stupid canard. Was freedom industries 'over-regulated,' were they buying the senate?

http://www.businessweek.com/articles/2014-01-13/meet-freedom-industries-...

There is crony capitalism out there obviously, but there's also regular old shitty businesses - large and small. Not every billionaire is a devil and not every small business a saint. 

Americans have seemingly no clue at all how shit really works because they're locked into their own silly little battles on the peripheral (at best..). 

X_mloclaM's picture

the regulation you love, never got the regulators you think we need more of, to check the tank farm over the courses OF FUCKING DECADES DO WE NEED MORE PAPERS, MORE STACKS OF LAWS NO ONE READS, MORE PPL ON THE JOB SIR?!

Do we need (5) five K-12 educators to aclass, NEIGH, fourteen ?

We NOT NINE regualtors in fin servs. WE NEED 16 !!!!!

Did you ever stop to think the best regulator for citizens and consumers, is private industry? Consider the alternative, zero regulators, rather insurers hire firms who verify compliance (and love their track record), where a polluted river is avoided as no business making money being the best, most pro-active, community-saving, innovative inspectors, ensuring safety will go decades without checking what they say they are.

The spill in this sociopolitical environment, would RUIN the inspectors business, sued by the insurer, and the horrid "regualted inspection services provided" (crony check-collecting liars), are OVER AND DONE WITH. The alternative is competing inspections, innovative testing (think corrosion) techniques offered to insurers (and in turn businesses via premums & passed to end consumers) that more efficiently economize scarce resources (such as chemicals, health bill/lawsuit reserves, or clean rivers) for the community

 

is this 'other world' really so hard for ppl to consider? is it simply a lack of trying to imagine ?

 

 

James_Cole's picture

Did you ever stop to think the best regulator for citizens and consumers, is private industry?

Nope. Because I'm not brain-dead. 

Want to see private industry self-regulation? Please visit India. 

rather insurers hire firms who verify compliance 

Lol, brilliant! Sir, hats off to you, your thesis is a work of genius! How'd no one think of this yet?? Wait'll the financial industry gets wind of it, will be cleaned up in no time!

One of the more amusing mea culpas in history (on this very subject no less!):

http://www.youtube.com/watch?v=bAH-o7oEiyY

AGuy's picture

"There is crony capitalism out there obviously, but there's also regular old shitty businesses - large and small. Not every billionaire is a devil and not every small business a saint."

Yup. but the government's answer is to shoot everything and hand-cuff the survivors. If they are in business for profit, they must be guilty of some crime some where.  Its too difficult for gov't workers to actually do their job, especially when there is so much porn to surf on the web! They Just use automated systems to send out penalites and retroactive fees. Its like those fake scam invoices  I use to receive to sucker accounts payable depts to pay a bogus invoice. Now the gov't has got in the act by mailing out bogus fees and fines, hoping you just pay it instead of filing the stack of paperwork needed to dispute it.

FWIW: As a small business owner, I am closing down this spring and going Galt, Regulations, bogus audits have worn me out! Uncle Sugar will have to find some else for wealth redistribution.

 

"Americans have seemingly no clue at all how shit really works because they're..."

too busy watching TV and playing Xbox to notice their liberty and money being stolen from them! If you walk or drive by any apartment or home their is one constant: The TV is on, and the occupants are checked out.

 

We need more of this:

Kick ass and Chew bubble gum:

http://www.youtube.com/watch?v=s1TcnQxV4BE

Instead we got this:

http://www.tvguide.com/top-tv-shows

lostintheflood's picture

silviasays...i down voted you because you mentioned democrat politicians when is it actually ALL OF THEM that have sold us out!

fedupwhiteguy's picture

yeah. and i downvoted you cuz, silvia was pointing out that same fact to the previous comment, sucka!

RaceToTheBottom's picture

There might be an argument against welfare programs that enable bad behavior, but what about the SAME or MORE money spent on WS Banksters? 

Do this calc 85billion/month * 12 months=1,020 Billion for Banksters and fake equity increases.  That is over a TRILLION dollars a year.

That amount is more than any welfare amounts and spread over a smaller group of SCUMBAGs.

I am way beyond hoping for jail for any of them, I am expecting and looking forward to violence.

Bring it on.

Banksters, its whats for dinner.

Fiat Envy's picture

Could you link the article that is supporting QE, I seem to have missed it?  I tend to think the majority here are opposed to all the handouts.

RaceToTheBottom's picture

"Could you link the article that is supporting QE, I seem to have missed it?"

I have no idea what you are talking about.

I was responding to a post comment, though I realize it is hard to track replys back to original comments.

X_mloclaM's picture

down arrow over "might"

too stupid to realize incentives are real?

as for hand-outs, bankers, like regualtors, take their cash from the power of the State.

 

What you seem to hate is written as "human nature", yet ignores the natural incentives setting that up.

So you'd keep the bailouts for the few (entitlements), so as to perpetuate the system, rather than cut humanity free, to the open plains of responsibility ?

 

Lemme guess, lock the boarders down, scan IDs and eyes, e-verify, and yes, you are permittd to access centralcare/cronybux/EBTLobsters

Then, after we ship out the extra people to Lincoln's lands, we can do this entitlment thing FUCKIn right !

RaceToTheBottom's picture

I am tired of dealing with the fucking mental misfits here.

I said if you deal with one type of Handout you need to deal with them all.

Just go fuckyourself until you learn how to use your brain

Offthebeach's picture

Everywhere the elites conspire by color of law to steal from the humble laborer to the industrious professionals.

And when threatened by working class and physical investors, they start or involve themselves in a war to tie up the young males and bribe the businesses men.

The names change but the game is the same.

discopimp's picture

Thats why das gubermint loves suburbia America, no concentrated population density.   its to far spreadout for really any oposition to happen, now if it where Paris..1 million people can roll onto the street in hours!  

 

aleph0's picture

Translate "The war on" ...  as being  ... "The war for"

War = Force = avoiding an intelligent discussion to solve the problem.

Keyser's picture

As always, follow the $$$. Who profits from the war on _______________? Here's a hint. It's not you or I. 

 

duo's picture

There are probably more people on food stamps now than there were full time wage earners when LBJ created the Great Society.

no life's picture

The ones that were really pernicious were those goddamn Fuggers out of Augsburg... hate those pricks with a passion..

SoberOne's picture

Damn those mother Fuggers!

Seize Mars's picture

Central banking creates poverty because it makes it impossible to accumulate real savings.

John_Coltrane's picture

True, but the root problem with any cartel like central banks is the removal of competition from the equation of economics. Without competition and the  creative destruction necessary to eliminate the incompetent (or sometimes just unlucky), there can be no evolution.  Violation of the laws of either thermodynamics or evolution can only occur as a transient effect.  Long term, they can never be ignored.

buttmint's picture

...the darkest moment is always just prior to dawn

FredFlintstone's picture

Is that true? I would think it would be midpoint between dusk and dawn.

JohnG's picture

Nope, it's always darkest right before it turns pitch black.

Dingleberry's picture

The "war on poverty".

Funny.....both war and poverty will be eternally with us.

The consequences of this "war" is so diabolical that Machiavelli would blush.

 

Oh regional Indian's picture

Given what has been done in his name, I'm sure his enernal soul regrets having incarnated at all...

discopimp's picture

Beelzebub's Tales to His Grandson - Chapter 43 - Beelzebub's Survey of the Process of the Perodic Reciporcal Destruction of Men, or Bellzebub's Opinion of War  (vs 1950)

no life's picture

Eat your Peas... or your Alpo, whatever the case may be.

Spastica Rex's picture

If people weren't lazy from benefits, they could all take out loans to learn how to be smartphone app developers. They could then sell these apps to one another, ad infinitum. Better phone apps forever, plus everyone goes back to being middle class and buying/selling houses all the time, plus big profits for debt holders.

GeorgeHayduke's picture

Since most economists, and the vast majority of 'Mercans, have no concept of thermodynamics your idea may have high potential for play on most mainstream financial networks. Even though perpetual motion goes everything we scientifically know about nature, it's still a good seller.

Spastica Rex's picture

We Americans must just regain our positive outlook and then we can pull ourselves out of the mire.

BigJim's picture

You may need to append a '_' to your name before people get you're being satirical.

Oh regional Indian's picture

Haah...great minds etc. Our posts (see mine above) are chiral mirrors.

Mine is of course a tad more con-voluted.

;-)