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The "Massive Gift" That Keeps On Giving: How QE Boosted Inequality To Levels Surpassing The Great Depression

Tyler Durden's picture




 

A week ago, the official truth about QE, once upon a time mischaracterized as being a means to boost US employment (which is misreported in such an optimistically biased way that even the Fed now admits is ridiculous, and had to scrap its forward guidance as a result) and grow the economy, emerged when the Fed's Fisher admitted that "QE was a massive gift intended to boost wealth."

Fisher did not need to clarify just who the gift was aimed at - it was clear. But just in case there is any confusion, here is a chart confirming that all the events of the past 5 years have done, courtesy of the Fed's manipulation of the stock market to all time artificial highs, is to push the ratio of the average income of the "Top 10%" to the "Bottom 10%" to a previously unseen level, wildly surpassing the previous record inequality highs that culminated in the Great Depression, and which were subsequently rapidly "equalized" by WWII.

Still not convinced? Another way of showing this - the ratio of the net worth of the top 20% of households as measured by income relative to the bottom 20% rose to 9.3x in 2011 from 5.7x in 2005.

And another observation: when it comes to inequality between the top and the bottom, the US continues to be the most unequal country in the world, a distinction it first regained in the 1980s courtesy of Alan Greenspan's "Great Moderation." We point this out just in case there still is any confusion who the Fed truly works for...

Why? Thank the death of the US middle class, because that is precisely who Bernanke, and now Yellen, means to exterminate no matter the costs.

 

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Sat, 03/29/2014 - 17:11 | 4606073 q99x2
q99x2's picture

This is how financial pervert gene attempts to destroy its creator. Not unlike other unconscious processes.

Sat, 03/29/2014 - 17:17 | 4606095 DoChenRollingBearing
DoChenRollingBearing's picture

, fishez!!  For the 99% of us!!

Sun, 03/30/2014 - 06:20 | 4607339 GetZeeGold
GetZeeGold's picture

 

 

QE.....a cute name for stealing.

 

We just print trillions of dollars....and give it to ourselves. Of course....we did it for the chldren. We'll send them the bill later.

Sat, 03/29/2014 - 18:04 | 4606217 Cattender
Cattender's picture

it's a Recovery Bitches!!!!!!

Sat, 03/29/2014 - 17:15 | 4606083 malek
malek's picture

Looks more like a statistical goal-seeking exercise.

Sat, 03/29/2014 - 17:22 | 4606115 Tyler Durden
Sat, 03/29/2014 - 17:31 | 4606144 El Vaquero
El Vaquero's picture

It's always fun when one of the Tylers steps in.

Sat, 03/29/2014 - 17:45 | 4606167 LetThemEatRand
LetThemEatRand's picture

And weekend Tyler no less!   

And to think this is "after hollow point" net to the 2900 guys who have all the wealth.  I'm also guessing the figures above do not include things like asset appreciation of their real estate holdings, propped up by ZIRP.

Sat, 03/29/2014 - 17:46 | 4606184 max2205
max2205's picture

Adjust this for inflation and you won't be able to see 1920's

Sat, 03/29/2014 - 19:29 | 4606490 tickhound
tickhound's picture

I like this particular Tyler.

And where's all the grandpa hard-liners screaming "commie stats?" You know, those bitchez that think inequality is so good they RECOMMEND it.

Sun, 03/30/2014 - 00:02 | 4607086 TheReplacement
TheReplacement's picture

Inequality is natural.  The key to the American way (not the current 'system') is mobility from low to high and back.  You are supposed to earn your way.  If you work hard and have a good idea you should be able to make it.

Inequality as we have it in this system is natural as well.  We have a government and banking system that plays to the advantage of a very small group of people instead of acting (or better, not) as a neutral party only interested in the well being of all citizens.  Once the 'authorities' start deciding who to help and from whom to take you will inevitably see a distortion in wealth. 

Let's pose a question in order to determine just how valuable to very wealthy are to this country.  Who among the 1% can we not afford to lose?  I suggest that the nation would survive the loss of any of them.  If that is true then why are they do they have so much wealth, and so much of it taken by force from others by the government and central bank?

Of course there are other natural things.  Sure, most if not all of them worked pretty hard to gain the positions they hold.  The next generation tends to become decadent.  Meet Hilton, Kardashian, Corzine's suicided son, and all the rich kids who shower money on the latest cause celeb (immigration reform anyone?).  Being rich and living modestly will only prolong the good fortune.  Being rich and living like you know it and it can never end sometimes doesn't end well.  This is the part of being American that should set us apart - the built in right to revolt when the current situation is reality.  This was not meant to be.  We were not meant to live like this. 

 

Sat, 03/29/2014 - 18:33 | 4606313 malek
malek's picture

Uh-oh, now I stepped on a Tylers' toe!

Sorry I should have been more descriptive, goal-seeking by:
- Original article's graph shows "Top 10% / Bottom 90%"
- Original article's table shows "Top 20% / Bottom 80%"
- The oft-toted Gini coefficient automatically comes to mind...

And then the next usually not raised much less answered question is what is normal/acceptable...

What QE does is undisputed by me.
Actually I believe the simplest convincing argument was given here on ZH last week http://www.zerohedge.com/news/2014-03-24/whats-primary-cause-wealth-inequality-financialization:

"When investment returns exceed economic growth, the rich get richer, increasing inequality." 

Sat, 03/29/2014 - 18:57 | 4606400 EconomicGenocide
EconomicGenocide's picture

A non governmental private Unconstitutional entity counterfeiting money and laundering it through the stock market to enrich the RICH,,,,,,,,,,,,,,,,,,is not wealth attained by "investment gains". It is theft!!!

 

In a society with a rule of law, theft to the tune of trillions warrants hanging. But my guess is you are one of those people who despised the bankers in 2009, yet ride their coattails now!! You are the shyte they use to keep the fire burning!!

Sat, 03/29/2014 - 20:14 | 4606574 malek
malek's picture

Guess again!

But as you might can tell I do dislike deceiving with statistics - or by any other means.

Sun, 03/30/2014 - 01:26 | 4607187 Schmuck Raker
Schmuck Raker's picture

"What QE does is undisputed by me."

And that would be?.........

Sat, 03/29/2014 - 23:39 | 4607051 TheReplacement
TheReplacement's picture

Fighting Tyler.  Nice to see.

Sat, 03/29/2014 - 17:32 | 4606149 Schmuck Raker
Schmuck Raker's picture

An "US Income Inequality Denier"? That's fresh, at least.

Sat, 03/29/2014 - 18:52 | 4606384 EconomicGenocide
EconomicGenocide's picture

POS like you fear one thing more than anything, the masses becoming informed and then becoming angered. You can always tell when a Ziionist parasite approaches the board. Human cockroaches are not very stealth in the light!!

Sat, 03/29/2014 - 17:19 | 4606106 NOTW777
NOTW777's picture

and yet you have "rich" bankers killing themselves. what does it profit a man to gain the whole world and yet, lose his soul

Sat, 03/29/2014 - 17:36 | 4606165 buzzsaw99
buzzsaw99's picture

I'll sell you my soul for three fiddy cash.

Sat, 03/29/2014 - 18:49 | 4606373 EconomicGenocide
EconomicGenocide's picture

There aint no rich bankers killing themselves. There are a few soldiers that work for those bankers being offed by those rich bankers.

 

Religion is the cancer that will destroy mankind!!!

Sat, 03/29/2014 - 17:22 | 4606114 NOTW777
NOTW777's picture

death stares in the face of the top 10% the same as the bottom 10%; what you do in this life echoes in eternity

 

Sat, 03/29/2014 - 17:37 | 4606162 buzzsaw99
buzzsaw99's picture

Religion was invented to pacify and exploit the ignorant masses.

Sat, 03/29/2014 - 17:49 | 4606190 aka_ces
aka_ces's picture

hocus pocus !

Sat, 03/29/2014 - 20:30 | 4606660 Calmyourself
Calmyourself's picture

You then consider Muslims pacified? I'll spot you ignorant..

Sat, 03/29/2014 - 20:41 | 4606697 NihilistZero
NihilistZero's picture

They're pacified against the real source of their oppression.  If Muslim extremists (the real ones, not the CIA puppets) had any sense they'd blow up the Saudi Royal Family...

Sun, 03/30/2014 - 01:18 | 4607175 Greenskeeper_Carl
Greenskeeper_Carl's picture

Exactly. As far as the head hajjis go, the Muslims are pacified, since the head hajjis still live in castles while their serfs live in tents and caves. And the ones at the too in those Muslim countries need the US and Israel to exist so they have someone for their serfs to blame and fear. Just like the US and euro govts MUST have the terrorist boogie man front and center to justify the sickening erosion of our civil liberties and the police state. What Buzzaaw said is correct. Religion is just a means to control, pacify, and subjugate. It amazes me there are so many on here that see through everything else so easily, yet still cling to the magical wish-granting sky fairy.

Sat, 03/29/2014 - 22:10 | 4606879 NOTW777
NOTW777's picture

everyone worships someone or something including you.  everyone will face the consequences of what he or she worships.  I choose to worship the one and only true God and he seeks a personal relationship not religion.

Sat, 03/29/2014 - 17:23 | 4606118 Calmyourself
Calmyourself's picture

The elites know the great reset is coming so they thoughtfully enriched their families, friends and cronies on our backs, simple..   Lets repay the favor by not playing their game.  I would get your house in order because this free internet thing is not going to last.

http://www.arrl.org/getting-your-technician-license

Sat, 03/29/2014 - 17:41 | 4606176 polo007
polo007's picture

http://www.safehaven.com/article/33279/gold-and-silver-they-are-money

Living in America, prior to the 1930s, if you went into a bank with a US Treasury Note of any denomination, you could exchange it for gold or silver, for all currency was specie-backed, even the Federal Reserve issue, which circulated side-by-side with US Treasury Notes, [those issued by the US government and not the private corporation known as the Federal Reserve].

After the elites forced the US into bankruptcy in 1933, when FDR declared a bank holiday and shut the system down for several days, when the banks reopened, it was the foreign-owned Federal Reserve that was in charge of the entire banking system, finally. [We add "finally," because that was the objective of the Rothschilds for over 50 years even before 1933, actually longer, but it gets too complicated to explain.]

A man goes into a bank, prior to 1933, and hands over a $100 US Treasury Note, or even a Federal Reserve Note, which also was specie-backed, at the time, and asks for $50 in gold and $50 in silver. No problem.

Sometime after 1933, a man goes into a bank with a $100 Federal Reserve Note and asks for $50 in gold and $50 in silver.

Banker: "Sorry, sir. There is no gold or silver backing for your $100. Would you like two $50 Federal Reserve Notes, instead?"

What happened?

When the Federal Reserve Act was passed, two days before Christmas in 1913, when most politicians were home on holiday, the Act was passed with no opposition by the remaining chosen politicians who stayed on, and were well paid to do so by the Rothschild-backed bankers. And so the most treasonous act against the Constitution was passed.

Here is how the rest of the plan was carried out: The Federal Reserve issued its own currency, also specie-backed, to circulate along with the US specie-backed Treasury Notes. This went on for a few decades, which is a short period of time for the Rothschilds. What happened was, people saw the new Federal Reserve Notes, along with Treasury Notes, but it made no difference because both were equally backed by, and could be exchanged for gold and silver on demand, at any bank.

After 1933, when the Federal Reserve took over control of the money supply, it began to slowly withdraw all US specie-backed Treasury Notes and had them destroyed! Nobody paid attention to the disappearance of the US Treasury Notes because Federal Reserve Notes were the same thing, in their minds, and in reality. This was all planned, decades in advance. It was a part of the Rothschild formula for well over a hundred years even before that.

Something else happened very gradually, over time, and almost immediately after 1933. All Federal Reserve Notes that were specie-backed were also withdrawn from circulation. All of the US Treasury currency issued by the United States government had already been removed and destroyed. All that was left were Federal Reserve Notes, backed by the full faith and credit of the United States. Fiat. Again, people had come to accept Federal Reserve Notes in circulation at the same as Treasury Notes, so when all that was left were the Federal Reserve Notes, it did not matter because people could still buy and sell whatever they wanted and did as in times prior to the financial bait-and-switch.

All the gold and silver owned by the United States government was stolen, taken by the elite-owned Federal Reserve central bank. The central bank controlled the government and the media. The public was fed the kind of news that never let on to what happened during those decades, and the public has since been dumbed down even further in all the other decades to date.

Sat, 03/29/2014 - 18:52 | 4606385 UselessEater
UselessEater's picture

So the next elite currency must be PM backed in some way otherwise stealing the gold and silver seems pointless?

Sat, 03/29/2014 - 17:41 | 4606177 disabledvet
disabledvet's picture

"The Great Equalizer cometh."

And it all comes back to you.
And you knew it would.

Sat, 03/29/2014 - 17:45 | 4606183 xamax
xamax's picture

We see attractive valuations across the board and thus see S&P500 touch 2400 by year end., as there are no alternative to stocks.

Sat, 03/29/2014 - 17:51 | 4606192 LetThemEatRand
LetThemEatRand's picture

USA.  Number one again.  America.  Fuck yeah!

Sat, 03/29/2014 - 18:45 | 4606359 EconomicGenocide
EconomicGenocide's picture

The ID says all you need to know!!  We are in the beginnings of the second holocaust. And this time the people committing economic genocide worldwide are the Zionist who constantly use the word to disguise their agenda!

Sat, 03/29/2014 - 18:51 | 4606364 MedicalQuack
MedicalQuack's picture

Compared to the past add on technology today and math models and algorithms perpetuate this and it's hidden from view and access of the average consumer.  I'm not an economics person but have seen it in healthcare and where it intersects with the financial world.  Dr. Sean Gourley, a physicist and smart guy did a video about how we need algorithms to control the complexities out there today, but the question is, who's are they and will I benefit?  No as the ones who have the money control that too, so system is rigged.

Two years ago 51% of the traffic on the web was bots and the rest humans.  Last year it grew to 61% so what's next year 71%?  Our value as humans there is pretty bad too as we the new techno serfs for the bot and why Facebook wants those drone out there, so internet access for who?  The bots are the ones that are going to win here again.

http://ducknetweb.blogspot.com/2014/03/algorithms-that-exploit-sean-gour...

All of this is directly related to inequality as well as bots are money.  How do they keep it moving, very smart marketing that keeps the gray areas of virtual worlds and the real world vague.  I watch and sit back and it's a slow process but sometimes you don't even know when you have been duped in the real world with some stuff created in virtual worlds. 

http://ducknetweb.blogspot.com/2014/03/virtual-worlds-real-world-we-have...

Inequality is all modeled with math formulas and algorithms.  I'm looking forward to 60 minutes too on Sunday and see how they display the new book that is out about the Flash Boys who are exposing secret code running on exchanges.  Heck unless someone demands opening up the proprietary code for expert to view, we have no clue. 

So in other words, the grayer they keep us and hyped on virtual world values, well us in the real world that don't have money are the cheap techno surfs that serve their bots that make the wealthier richer. Totally amazing story here too with inequality as United Healthcare thought nothing of kicking out a check to  a wealthy New York doctor for a $175k hammer toe procedure too.  At the same time United Healthcare has fired many doctors who are taking care of Medicare Advantage patients in New York. Just one more in the inequality department.  I do have to say at least it ticked off the rich banker enough to where this became news as even he and his wife got pissed off over that bill. 

http://ducknetweb.blogspot.com/2014/03/17509880-to-fix-hammer-toe-billed...

 

Sat, 03/29/2014 - 18:50 | 4606375 29.5 hours
29.5 hours's picture

 

 

" Thank the death of the US middle class, because that is precisely who Bernanke, and now Yellen, means to exterminate"

Slander. They intend no such thing.

Better said:  The rich and their kind will be defended in holy war, no matter the cost. Working people in the middle are simply collateral damage.

 

 

 

Sat, 03/29/2014 - 18:55 | 4606394 EggSlayer
EggSlayer's picture

So who does the Fed "really work for"?

Sat, 03/29/2014 - 23:07 | 4607005 FredFlintstone
FredFlintstone's picture

The Fed works for themselves.

Sun, 03/30/2014 - 07:10 | 4607364 GetZeeGold
GetZeeGold's picture

 

 

Winning answer.

Sat, 03/29/2014 - 19:21 | 4606474 no more banksters
no more banksters's picture

"Banksters : First: if more money were going to the market, then they would lose much of their value and we would lose profits because we are the ones who print money! That's why we invented inflation, to keep governments in fear and directing money back to us through the so-called Quantitative Easing Policies."

http://failedevolution.blogspot.gr/2013/12/an-imaginary-dialogue-between...

Sat, 03/29/2014 - 19:34 | 4606509 venturen
venturen's picture

imagine if you included the hidden offshore wealth....

Sat, 03/29/2014 - 19:59 | 4606583 ATG
ATG's picture

Time to liberate America and the world from QE

http://usnvrepcan.blogspot.com/

Sat, 03/29/2014 - 20:39 | 4606672 Mediocritas
Mediocritas's picture

It often pays to draw a line at ~1980 and look at before and after. These graphs (including the one provided by the weekend Tyler in the comments) are fine examples. This was the time that the neoliberal agenda (re)achieved global dominance and it's been all downhill ever since.

Seems the lessons learned by two world wars were completely forgotten by TPTB. If you kill labor share of income (demand side) in favor of capital share of income (supply side) in an environment where the problem is lack of demand, then you create inequality, class tension, declining standards of living, societal breakdown, riots, government instability, international tensions and, eventually, war; exactly what happened the last time economic liberalism ruled the world.

In a world with nuclear weapons, these neoliberal, rent-seeking clowns are the most dangerous people in history. Nothing about their Act is funny.

A related side note: the primary driver of innovation is the ability to tinker freely, experimenting in the garage or on the farm with free time and available (or cheaply sourced) equipment. Companies like Google, Microsoft and Apple were born this way. Consequently, a strong middle class and avoidance of rent-seeking IP policy is essential for innovation that drives economic growth as more kids have access to more garages with more of Dad's tools and materials to play with and little IP bullshit to stop them in their tracks.

Kill off the middle class in favor of rentiers and innovation goes into a hole, taking the economy with it. It's no surprise that nations with the highest patents per capita have the strongest middle classes [http://m.iam-magazine.com/blog/Detail.aspx?g=3cadcdf9-c6e7-47a2-84b0-7ca...].

Sat, 03/29/2014 - 20:41 | 4606695 The_Prisoner
The_Prisoner's picture

Well said, Mediocritas.

Patent trolling is rampant in the US and also Australia, where I live.

In "developing nations" there are some relative liberties due simply to government lack of resources to fully police everyone. However innovation is stifled by extremely high levels of taxation on everything, from tools and equipment, to books.

As a producer myself, I am really at a loss for a place to go where I can reap the fruits of my efforts.

 

Sun, 03/30/2014 - 01:09 | 4607161 Mediocritas
Mediocritas's picture

If you're a producer of real stuff then you have my support. One thing I should clarify is that the supply-side bias favored by the current powers contains within itself a bias towards producers/suppliers of FINANCE. Outside of finance, you're up against it because people have less disposable income with which to buy products and services thanks to a heavy debt load to the financial sector.

Case in point would be Australian real estate. One would assume that because prices are booming, that builders and suppliers of building material are doing well, but when factored for inflation it can be seen that building prices haven't increased that much over the decades. It is the land price that has boomed.

So consumers, having to service enormous debts on LAND, have much less income left over to spend on quality building materials or any other products for that matter meaning Australians are spending megabucks to build increasingly shittier houses (relative to current quality materials) on smaller and smaller blocks.

Producers and consumers of real products for the real economy have been denied a healthy level of economic activity thanks to the double whammy of reduced labor share of income and higher amounts of money being sucked into the unhealthy fantasy land of speculative investment. As entire govts get dashed on the rocks by the FIRE sector, their only response is to run up more debt, sell assets, impose higher taxes, etc, a process that again tends to favor the financial sector and punish the real economy disproportionately by reducing disposable income further, a real economy that is already suffering.

Then TPTB scratch their heads and wonder why the real economy isn't recovering as well as the rentier class. Go figure. Well, in truth, they likely know all too well because they're rent-seekers themselves.

The newly elected oz govt seems hell-bent on making things even worse (signed the TPP yet?) at the maximum rate. Good luck mate.

Sat, 03/29/2014 - 22:32 | 4606931 moneybots
moneybots's picture

The Nasdaq bubble was a record.

The housing bubble was a record.

The boom was a record.

Sat, 03/29/2014 - 23:02 | 4606983 moneybots
moneybots's picture

"Seems the lessons learned by two world wars were completely forgotten by TPTB."

 

No lessons have been forgotten.  The same game is played over and over again, by those who take advantage of the lessons.

"If you elect me, I will root out waste and fraud." How many times has that lie been said by politicians?

Chuck Prince said we have to keep dancing while the music is playing.  He could not have said that unless he knew the music was going to stop. 

Every time a war situation comes up, the opponent is defined as another Hitler. 

 

If you kill labor share of income (demand side) in favor of capital share of income (supply side) in an environment where the problem is lack of demand, then you create inequality, class tension, declining standards of living, societal breakdown, riots, government instability, international tensions and, eventually, war; exactly what happened the last time economic liberalism ruled the world.

 

Every cycle has an up phase and a down phase.  Every empire, every company, every marriage, etc., has up phases and down phases.

In the Bible, every 50 years there was a year of jubilee.  A 50 year cycle.

Boom to boom is a cycle.  Depression to depression is a cycle.

It isn't if you kill off one in favor of the other, it is that the up phase turns into the down phase.  Reaganomics coincided with the peak in price inflation.  The cycle would have turned down, whether or not Reagan had ever lived.  There is no perpetual anything which has a cycle.  When the U.S. became producer to the world after WW2, it was inevitably the peak of a cycle, as eastern Europe and Japan were destined to rebuild and become producers again.  it was also inevitable that China would become a producer again.  Even North Korea will become a producer again at some point in the future.

Sun, 03/30/2014 - 03:17 | 4607242 Mediocritas
Mediocritas's picture

Nowhere did I deny cyclicality. What I take issue with is the amplitude being artificially increased through a combination of neoliberal incompetence and what appears to be deliberate shafting of the masses. Using the marriage analogy, I accept the inevitability of ups and downs, but the amplitude of those swings should be regulated with behavioural management because an excessive downswing that leads to a knife in the back means an end to the marriage.

Ed Lambert's work on labor vs capital share of income is worth reading. He makes a compelling case that the balance between labor and capital share is the one of the most powerful endogenous factors driving the business cycle. Marx was already onto this years ago, but where he failed badly was in his proposed method to address the problem (his observations were sound though).

http://www.effectivedemand.typepad.com

As I've mentioned from Ed in the past, this isn't black and white, winner-takes-all. It's an optimisation problem. At this moment, US capital share of income is far too high. US monetary policy is stimulating capital share when the opposite is required, pushing the system into a more and more dangerous state and ensuring that the next reversion to mean will be far more disruptive than it needs to be. Sad and avoidable.

Sun, 03/30/2014 - 00:57 | 4607149 Son of Loki
Son of Loki's picture

"Sodomization of Merika" by Ben Shalome...the next nyt best seller.

Sun, 03/30/2014 - 01:14 | 4607166 bh2
bh2's picture

http://howestreet.com/2014/03/when-inequality-isnt/

It depends on how and what you measure.

Sun, 03/30/2014 - 06:14 | 4607338 Jean Lazard de ...
Jean Lazard de Rotschild's picture

Tyler, I am not buying the china statistic. I know for a fact that wealth inequality in China is probably even greater than in the US...

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