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Sorry, You're Not Allowed: Capital Segregation and Rising Inequality

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If capital is not treated equally, political equality is an illusion.

In a fully financialized economy, capital grows faster than earned income. We can quibble about the various rates of growth and measures of wealth, but none of this cross-talk/noise changes the fundamentals of a financialized economy: the ability to leverage relatively modest sums of real capital (i.e. cash and cash equivalents) into enormous financial positions that control the income and gains from vast amounts of rentier assets generates wealth for the few granted this privilege.

Earned income from wages has little leverage in such an economy, and wage-earners have little leverage in an economy in which low-interest, highly leveraged borrowed capital can buy labor around the planet at competitive prices.

This is capital segregation writ large: the few with access to the unlimited credit spigot of the Federal Reserve can accumulate assets, rentier income streams and political power that is unavailable to the lower social orders.

Those with access to the near-zero-interest credit spigot of the Federal Reserve have become what I call the New Nobility in a fiercely feudal division of privileges based entirely on capital rather than ethnicity, religion, etc.

The fish tank analogy I've been using this week helps us understand capital segregation. The middle class and lower classes are only allowed to swim in the financial tank where the pellets of gain/yield are scarce and quickly snapped up by those few who are first to the opportunity.

One Overlooked Reason Why the Middle Class Is in Decline

The Stock Market Is Like a Fish Tank

Once the gains have been reaped, all that's left for the majority are toxic risk and losses.

The New Nobility don't swim in that carefully limited pool: they control the distribution of food pellets (gain and yield in our analogy) to the masses thrashing about in the main tank. Regardless of who wins and loses the struggle for the few pellets tossed in the tank, the few who control the pellets profit.

The majority swimming fruitlessly around the barren main tank are unaware of the tanks and wild river beyond. Special tanks--dark pools and similar reserved havens for the wealthy--are off-limits to the middle class in the main tank. In these "New Nobility only" pools, risk is low and gains are plentiful.

The mass of those hungry for any kind of yield on their capital are unaware of the dark pools and the wild river beyond the tank--the untamed market that isn't controlled by the New Nobility and the central bank. Their world is a carefully controlled tank where risk is high and gains are meager and fleeting.

This blatant capital segregation is invisible to the masses starved for yield and gain. The majority are unaware of the pools and rivers they are not allowed to enter. This is part of the control mechanism: you can't question or resist what you don't even see.

If capital is not treated equally, political equality is an illusion, for capital buys political influence and power. Capital that can buy political power gains political protection of its extraordinary privileges to control rentier income streams, income which furthers its political power.

 

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Thu, 06/12/2014 - 17:30 | 4850259 kurt
kurt's picture

REVERSE CITIZENS UNITED

Thu, 06/12/2014 - 17:34 | 4850268 LetThemEatRand
LetThemEatRand's picture

And then free Corzine!

Thu, 06/12/2014 - 17:39 | 4850293 kliguy38
kliguy38's picture

be happy with what ya got

 

https://www.youtube.com/watch?v=i5dBZDSSky0

Thu, 06/12/2014 - 17:47 | 4850337 NotApplicable
NotApplicable's picture

GAAAAAH!

Some days CHS writes some damn fine articles. Other days, he shows that he still suffers from the mental illness known as statism.

WTF is "political equality" anyway? That we all get the same amount of abuse?

Politics is evil. Equally dividing it amongst the masses is not going to fix anything.

Thu, 06/12/2014 - 17:59 | 4850378 Frilton Miedman
Frilton Miedman's picture

 

 

 

" Politics is evil. Equally dividing it amongst the masses is not going to fix anything. "

 - King George III, after first reading the Declaration of Independance.

 

 

Fri, 06/13/2014 - 03:30 | 4851780 Ghordius
Ghordius's picture

GAAAAH! yourself for your "politics is evil". Humans engage either in war or in politics. Fighting is war, talking and finding agreements is politics. Which is preferrable?

meanwhile, in the article CHS points out that capital buys politics. Yet this is not a uniform phenomenon, worldwide. In some places, you get lots of politics for your megabuck. That's corruption, the true evil

Thu, 06/12/2014 - 17:40 | 4850295 wcvarones
wcvarones's picture

Ban free speech that criticizes politicians!

Thu, 06/12/2014 - 17:38 | 4850290 wcvarones
wcvarones's picture

I dig Chuckie Hugh, but dark pools are not an asset class.  They're trading venues.  Mom and Pop are not at a disadvantage buying 100 shares of Coca-Cola by not being able to trade in dark pools.

The other stuff about the privileged getting access to credit to use leverage to capture a bigger and bigger share of capital is spot-on.

Thu, 06/12/2014 - 17:49 | 4850302 TeethVillage88s
TeethVillage88s's picture

Repost:

Market Survey of the above comments:

1) Proliferation of Linkages in Credit between banks, 2008 Financial Collapse, system of system increases risk of black swan
2) Controlling Elite seem to use Dollar, seem to leverage the dollar, enjoy financial growth thru the dollar, emotionally invested in the US Dollar
3) Gold & Silver Exist in abundance in many countries, strong production world wide
4) Oil is a substitute for money, could be considered a bankable asset or a reserve, produced world wide, refining is a bottleneck as technology is not wide spread or requires lots of capital
5) Financial Markets characterized by "Gaming" (price fixing, fraud, corruption), large number of points in financial markets for individuals & cartels to fix prices, front run, counterfeit asset, or use insider info
6) Power & Control are exercised within our economy by insiders who can easily network with political leaders, law enforcement, and can change laws & Tax codes to suit there long term goals and reduce competition and costs
7) Military Alliances are in place to control markets, trade, and economics of the global situation, OPEC, BRICs, NATO, UN, WTO, UNESCO, DR-CAFTA, US-Saudi Arabia, US-Israel, US-Egypt, US-Japan, US-South Korea, US-Taiwan, US-UK-AU-CA,
8) Petro-Dollar added advantage & stability to world exchange rates, but this is being challenged
9)Trans-National Corporations have the same Economic & Military Power as whole Countries, Michael Snyder states that Elites (corrected) have $32 Trillion sitting off shore in banks
10) US Total Debt $60-$62 Trillion
11) China & Europe also have huge debt to GDP Ratios
12) Growing Divides between Classes partly due to Rising cost of Health Care (which will bankrupt you), Education Tuition (which will haunt you), Housing (Will keep you in debt), and Energy Cost (not being addressed & Rising)
13) Technology makes poor people & powerless people realize the differences between the classes, makes them restive
14) Piracy & Slavery are as old as we know, nothing new here, it is forgotten but rising in media
15) The oldest Laws carved in Stone contain details about divorce, social justice, social classes, slavery, property, land, contracts, and economics, we are still dealing with the same issues 4-5000 years later
16) Assets, debts, Liabilities, Freedom, Health, Food & Water, Energy, Money, War, Culture, Legacy
17) Commodities include things that all people need for survival, therefore prices can rise for food, water, energy, shelter
18) US Markets are wide open to foreigners, they can buy house hold debt, own mortgage derivatives, and now they own $28.3 Trillion in US Assets (Who are they, foreign bankers?)
19) US Treaties are seldom Read, not well understood, and put together by lawyers, politicians, and hidden wealthy interest groups, Treaties take power from Local & State Government when Sued in WTO, UN, UNESCO or where ever they go, So instead of being a First World Nation Citizen, I guess we are all like Indigenous American Indians with few rights or recourse against TPTB (Even Foreign Powers that Be)

Actually we used to have stronger regulations on Utilities as this was recognized as a special situation. We could have government stock piles, agricultural production, ranching, oil refining to prevent shocks, for National Security in Droughts, and to feed people who can't afford the higher commodity prices. Water problems & Energy problems seem better addressed by government to keep prices under control.

Thu, 06/12/2014 - 19:42 | 4850791 Raging Debate
Raging Debate's picture

TeethVillage88s - Outstanding and succinct commentary! On Seeking Alpha back in 2008 I came to the same conclusion about Americans being like indigenous Indians. My commentary was how it reminded me of the Buffalo traders. They would take the hides and tongues and leave the maggot infested meat for the Indians. Hey, it still kelt you alive but it tasted like shit!

Knowledge is still power. So if you didnt win the vagina lottery you have to learn how the world works to stand a chance at a decent life. No, you dont get to play in dark pools but yes, nohing prohibits you from finding out where Senators are putting THERE money and profiting.

For example. China is new reserve currency. Part of that job is policing global trade. Defense stocks are cheap but have to rise as China soowly but surely assumes the role. But... but can't have blood on my hands! Well, invest and then take a portion of profits and use media to argue against war which mitigates casualties. That is the best one can do... Sigh.

Slowly but surely mankind is reaching a balance. When that happens profits will become irrelevant anyways. We'll be evolving back to the garden, back to energy. Que up Crosby Stills and Nash (we are stardust blah blah blah).

I don't know how many downvotes I get but frankly since I want to see my America. countrymen do better financially I don't give a shit. Think of America as Rome but an 80 year model based on human nature and failures. But in our time, splitting into Carthage is a premeditated plan. Since nations do still matter I find this a beat treasounous but from a realistic point of view all I can do is try and help us evolve forward toward balance and based on how mankind really operates NOT what I wish for.

Fri, 06/13/2014 - 18:57 | 4855192 TeethVillage88s
TeethVillage88s's picture

Raging Debate, thax, it is a wild ride. Did u mean Virginia Lottery, and yes, sounds good looking at congressmen's financial disclosure statements.

I could use a few bucks.

Yeah, I don't care much about the down votes either as I know some are agents, bots or provocateurs. You seem to have an open mind and maybe this is a survival skill. Many people seem a little too black & white in their views.

below is good (From Ellen Browns work):

In 2010, Section 13(3) was modified by the Dodd-Frank bill, which replaced the phrase “individuals, partnerships and corporations” with the vaguer phrase “any program or facility with broad-based eligibility.” As explained in the notes to the bill...

What programs have “broad-based eligibility” is not clear from a reading of the Section, but it isn’t individuals or local businesses. It also isn’t state and local governments…

Thu, 06/12/2014 - 17:48 | 4850340 Oldwood
Oldwood's picture

I had no idea the super rich had an advantage over me. I just assumed I was lazy.

Thu, 06/12/2014 - 18:22 | 4850489 JR
JR's picture

Attorney and author of Web of Debt, Ellen Brown, in her recent article Why Can't We Access the Fed's Free Money? had this to say about the Fed’s venture into commercial banking:

Except

In a 2002 article on the Minneapolis Fed’s website called “Lender of More Than Last Resort,” David Fettig noted that 13(b) allowed Federal Reserve banks to make loans directly to any established businesses in their districts, and to share in loans with private lending institutions if the latter assumed 20 percent of the risk. No limitation was placed on the amount of a single loan…

Section 13(b) was eventually repealed, but the Federal Reserve Act retained enough vestiges of it in 2008 to allow the Fed to intervene to save a variety of non-bank entities from bankruptcy. The problem was that the tool was applied selectively. The recipients were major corporate players, not local businesses or local governments. Fettig wrote:

Section 13(b) may be a memory, . . . but Section 13 paragraph 3 . . . is alive and well in the Federal Reserve Act. . . . [T]his amendment allows, “in unusual and exigent circumstances,” a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions.

In 2008, the Fed bailed out investment company Bear Stearns and insurer AIG, neither of which was a bank. Bear Stearns got almost $1 trillion in short-term loans, with interest rates as low as 0.5%. The Fed also made loans to other corporations, including GE, McDonald’s, and Verizon.

In 2010, Section 13(3) was modified by the Dodd-Frank bill, which replaced the phrase “individuals, partnerships and corporations” with the vaguer phrase “any program or facility with broad-based eligibility.” As explained in the notes to the bill...

What programs have “broad-based eligibility” is not clear from a reading of the Section, but it isn’t individuals or local businesses. It also isn’t state and local governments…

According to data released in 2011, the central bank had provided roughly $3.3 trillion in liquidity and $9 trillion in short-term loans and other financial arrangements to banks, multinational corporations, and foreign financial institutions following the credit crisis of 2008. Later revelations pushed the sum up to $16 trillion or more…

The Federal Reserve Act was drafted by bankers to create a banker’s bank that would serve their interests. It is their own private club, and its legal structure keeps all non-members out.  A century after the Fed’s creation, a sober look at its history leads to the conclusion that it is a privately controlled institution whose corporate owners use it to direct our entire economy for their own ends, without democratic influence or accountability. 

http://truth-out.org/opinion/item/20527-amend-the-fed-we-need-a-central-bank-that-serves-main-street

Thu, 06/12/2014 - 19:39 | 4850781 max2205
max2205's picture

Janet just said you are a less savvy investor....happy?

Fri, 06/13/2014 - 02:52 | 4851748 All Risk No Reward
Thu, 06/12/2014 - 17:51 | 4850349 MedicalQuack
MedicalQuack's picture

Right on the money here...its called "scoring" and once you are scored, "you're not allowed"and the data is getting more flawed all the time. 

The True Dangers With Corporate Obsessive Algorithmic Scoring of US Consumers - It Creates More Flawed Data For Sale And Makes Banks and Companies Wealthier As the Pace of Inequality Accelerates …

http://ducknetweb.blogspot.com/2014/06/the-true-dangers-with-corporate.html

Formula:  Scoring + Data Selling = inequality

Every time you get scored a query monster working for a bank, company has like money in their pocket to burn...ie sell that data and bring in the easy money, the data selling epidemic in the US and thus the more scoring that takes place the faster the speed of inequality grows...yes it sucks but that's the data mechanics of it. 

For 3 years I have had a campaign to license ALL data sellers, banks, etc. and have them maintain information on a federal site where we can look up who sells what kind of data to who as we have no clue with all the proprietary scoring going on.  Heck FICO sells that all they need is your name and address and their proprietary scoring process will rate you from 0 to 500 on whether or not you will take your medications..huh!  yeah..that's the tune of this scoring to make money and you end up with with some stupid score from gosh knows where they pulled their data from. 

Thu, 06/12/2014 - 18:23 | 4850493 kchrisc
kchrisc's picture

Another benefit of quitting paying is the ability to mess with their databases on me and mine. It is called "packing," like "hacking" but you are putting bad info into their databases to make them less accurate and valuable--basically GIGO, "Garbage In, Garbage Out."

I fill out as many applications for credit as I can with a bunch of bogus info. I also fill them out with slightly modified data so that their system creates a new file with that info. I use many different incomes, etc. I also fill out those "survey" things one finds around with bogus info.

Basically anything that I can fill out and have linked to me I do with bogus info. The town I live in even asked a bunch of question before they would turn on my water, so I am now a doctor making 10 figures with another home in Florida. LOL

Believe me, the info they have on me is just about worthless.

Now my individual "packing" actions are probably inconsequential, but if more did it that would be the end of "data mining" and to their selling info on us.

Lots of ways to fight back before they make violence necessary.

 

The most powerful weapon the American people have is Rejection.

The system of fraud and theft that has been built up upon the backs of the American people is dependent upon our backs. Withdrew our backs, and the whole thing collapses. This is our greatest weapon.

Quit Paying--put it into food, steel and lead, and precious metals, etc. They stole what ever "debt money" they loaned you in the first place via fraudulent-reserve banking and soon you won't be able to pay them anyways, so just stop now.

Quit Obeying--If they are in violation of the Constitution then they are criminals and not legitimate.

Quit Playing--Quit being a tool for them to use.

The Four Rs
Rejection: Quit paying, quit obeying, quit playing
Revolution: It is inevitable, so prepare, as they are.
Retribution: The guilty must answer for their crimes against the American people and the Constitution.
Restoration: Restore the American people, country and Constitutional republic.

 

 

Thu, 06/12/2014 - 18:01 | 4850391 buzzsaw99
buzzsaw99's picture

being able to buy on margin isn't the kleptocrat's advantage. Bailouts and inside information make it impossible for them to ever take a loss. That's where the rubber meets the (looting operation) road. Protection racket bitchez. Free Corzine.

Thu, 06/12/2014 - 18:03 | 4850404 JR
JR's picture

More and more we’ve been hearing the phrase, End the Fed.

And with the damage that the banker cartel’s fiat system has wrought to the American economy, it’s important to add war to the agenda of its ability to print endless tons of currency. For it is the Federal Reserve that has made possible those Middle Eastern wars and the slaughter and sadness underway in Iraq today. And Ukraine, also, can be placed squarely at the feet of the Federal Reserve oligarchs.

It must be mentioned, of course, that these wars, Iraq especially, were fought for the interests of the State of Israel. And, now, with Citigroup banker Jack Lew in the Treasury (who profited off the housing collapse and financial crisis by investing in a hedge fund king), and Bernanke-clone Janet Yellen in the Fed, we have added as head of the Fed’s “shadow financial mafia’ Bernanke’s mentor and dual-citizenshiper, Stanley Fischer, who until just recently was head of the central bank of Israel.

For, as Charles Hugh Smith pointed out in February: “What is the shadow banking system other than a shadow financial mafia? The ‘too big to fail’ banking sector is a mafia of the cartel-crony capitalist sort, and the shadow banking system is a cloaked version of the same extortionist system that depends on the government for protection. In the shadow banking mafia, the government protects the racket by acting as if it doesn't exist.”

http://charleshughsmith.blogspot.com/2014/02/the-mafia-state-of-mind.html

Thu, 06/12/2014 - 18:08 | 4850425 ATTILA THE WIMP
ATTILA THE WIMP's picture

You are not allowed here either, peasant.

Over 2,600 Bilderberg attendees listed

http://beforeitsnews.com/conspiracy-theories/2014/06/bilderbergers-over-2000-names-2463390.html

 

 

 

 

Thu, 06/12/2014 - 20:32 | 4850924 TeethVillage88s
TeethVillage88s's picture

Interesting story on that website:

There is a video about breakdown of order in USA, and a plan to deal with social disorder or martial law.

- But we are letting all of these kids in through Mexico
- We are feeding kids on the boarder & in Military bases
- We are probably inoculating these kids for Disease
- But there are a lot of questions about what is in the Vaccines and Shots provided by Military

Perhaps the Disease angle is how we get martial law.

This open border policy has just morphed into Steroids, it is just like taking away privacy, due process, right to an attorney, search and seizure, stop & frisk.

Thu, 06/12/2014 - 22:58 | 4851351 TeethVillage88s
TeethVillage88s's picture

Interesting that Communists only allow certain big brands/corporations into their Polit-Buro Hotels and Shopping Stores in the Duty Free Area.

- Planned Retail in communist States
- Planned Communist Leaders agreed to by Western Elites
- Planned Debt Expansion in the USA where in 1970 there was like none or little

- There is no free trade
- US Corporations don't have free access
- Third World Countries don't want complete Free Trade since their Industries have yet to bloom or fully develope
- All countries want some free exchange of currency & Goods, but mostly they want Energy, Refined Petroleum in both Gasoline & Diesel, and they want Trade of Agriculture, Mining Products, and manufactured goods to circulate currency
- Slave Labor Exists with the addition of an inadequate level of worker rights or minimum wage
- Question is how to Audit Labor Practices from a Global Perspective & How to Audit International Contracts to bring transparency to Trans-Nationals

What did I miss

- Opaque International Treaties including with the OECD
- Is it possible that Wealthy Interests are taking advantage of Communist Labor to Increase Western Profits??

Is it possible that the Wealthy have planned out Transfer of US Technology, Manufacturing, Capital... all after putting Chairman Mao in place to Kill 50 Million Chinese People... Just to secure good profit margins & Experiment with propaganda, education, and Labor Practices???

Thu, 06/12/2014 - 18:11 | 4850426 ATTILA THE WIMP
ATTILA THE WIMP's picture

Double Post Sorry 

 

Thu, 06/12/2014 - 18:18 | 4850475 ejmoosa
ejmoosa's picture

Seems the problem is the Federal Reserve and NOT capitalism.

 

Without the Federal Reserve, Capitalists would have to rely on their OWN capital formation and production.

That would be better for all.  The risk would lie with those seeking the higher returns.

What a concept.

Thu, 06/12/2014 - 18:20 | 4850488 NOTaREALmerican
NOTaREALmerican's picture

Socialism only works when a few have access to the benefits.

Thu, 06/12/2014 - 18:46 | 4850599 Flakmeister
Flakmeister's picture

R > G, Bitchez....

Thu, 06/12/2014 - 19:07 | 4850676 Kirk2NCC1701
Kirk2NCC1701's picture

Speaking of "rigged everything", even the 2014 FIFA World Cup is rigged -- judging by today's game (Brasil, Croatia).  Notice the blatantly bad call from the Japanese Referee, that resulted in a Penalty Kick and goal for Brasil?  I thought the Croatian goalie totally sucked, though the team played well.

I think I'll just watch the highlights, and use my time for something more useful and constructive.  Even a nap is more productive.  - bored Kirk out.

Thu, 06/12/2014 - 19:21 | 4850736 Last of the Mid...
Last of the Middle Class's picture

Insead of a society iving well on the backs the working class by controlling the flow of money and thus inflating them to death everytime they get into trouble we how have a complete civiization doing so. Our ever growing bloated government has allowed this to happen and it will not be pretty when the worm turns. 

Fri, 06/13/2014 - 02:23 | 4851722 jack stephan
jack stephan's picture

http://www.youtube.com/watch?v=Nx3xcDmJ9dE&sns=em

Jack stephanovich, no jaaaack Stephan

Jack stephonski.....no, jaaaaack Stephan

Jack stephanopolous.......no salmon shirt wearing crispy tanned spineless fuckhead

Jack Stephan ...we're in the white pages, dipshit.

Fri, 06/13/2014 - 08:02 | 4851996 AdvancingTime
AdvancingTime's picture

Today a big topic is the huge growth in inequality. Those who look closely understand that it is not the 1% at the top stealing the icing off the cake, but the much smaller .1% or .01% that are skewing the numbers and overreaching.

I contend this goes hand in hand with the massive growth in crony capitalism and corruption. Much of this can be attributed to the ability of those in control "changing the rules" and positioning themselves to benefit at every corner. In our busy and complex world we have found it impossible to watch all the moving parts. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/05/how-empires-collapse.html

Do NOT follow this link or you will be banned from the site!