The Coming Great Wealth Transfer

Tyler Durden's picture

Via Charles Hugh-Smith of PeakProsperity.com,

In the past, I've warned about the coming Great Wealth Transfer.  But now we need to talk about it in the present tense, because it’s here.

And it will only accelerate from here on out. The Rich will get richer at the expense of everybody else.

This isn't personal. It's simply a feature of what happens near the end of a debt-based monetary system run by corruptible humans.

Of course, those in charge don't think of themselves as corrupted or villainous. I'm sure that Federal Reserve Chairs Greenspan, Bernanke and Yellen all think of themselves as good and decent people doing "God's work". But the truth is they've irrevocably harmed millions -- if not billions -- of innocent people. 

They and other central bankers have become the standard bearers of a system that can best be described as a reverse Robin Hood scheme, one that takes from the poor and gives to the Rich. It’s just that in this tale, the ‘poor’ means everybody not in the top 1%. 

So you need to understand this wealth transfer process -- how it works, who's perpetrating it, and what dangers to watch for. If not, you'll be a victim of it. And you'll probably live in confusion and shock by how hard just 'getting by' becomes going forward.

Realizing that you're being specifically targeted by a system determined to separate you from your wealth is the essential first step towards figuring out how to evade the predators and protect yourself.

The Great Wealth Transfer

What do we mean by a Wealth Transfer?

It isn't just some academic concept. It's a playbook that's been used many times in the past by governments to forcibly extract wealth from the public and use it for the benefit of those in power.

The first part of this Wealth Transfer process is called Financial Repression. It's an extremely effective -- and nefarious -- financial engineering scheme, which we've discussed here at PeakProsperity.com many times over the years -- notably here, here, here and here.

Financial Repression is enacted when governments take on too much debt (which they often do!) and find themselves with few politically acceptable ways of escaping that situation. So, in ways both overt and covert, they conspire to use the public's savings to dig the government out of its debt hole.

The formula for Financial Repression works like this:

  • Step 1: A government (or an entire nation) gets into trouble by borrowing too much.
  • Step 2: Rather than pay this debt down honestly via cutting spending (unpopular) or by defaulting (even more unpopular), the government conspires with the central bank to slowly liquidate its stack of obligations by forcing negative real interest rates on everyone -- that's when you get paid less in interest than the current rate of inflation. So if you're getting 0% on your savings, but annual price inflation for the things you need to live is more like 5% (sound familiar?), you lose. 
  • Step 3: But there’s a problem. Negative interest rates don’t work if people can dodge the Financial Repression by parking their money safely elsewhere. So a ring fence has to be built -- using capital controls and explicit interest rate caps on and across the whole spectrum of interest-bearing securities. Nobody can be allowed access to investments offering positive interest rates. And to prevent people from simply hiding their wealth under their mattresses, cash can be outlawed. (This is what the "war on cash" and the talk of moving to a "cashless society" is really about)
  • Step 4: Sit back and watch with glee as everyone with savings silently and steadily has their purchasing power transferred to the debtors, be those public or private entities. You see, lower real interest rates not only reduce the government's costs of servicing its debts, but they erode the real value the debts themselves. The government is deliberately killing the value of the money we've worked hard to earn and save, for the sole purpose of avoiding the consequences of its reckless borrowing. They get a hall pass; we get screwed.

This is theft, plain and simple -- engineered theft of the highest order. It takes from the many, without their consent. It's not openly debated, put up to a vote, or even openly admitted to. It's deliberately done behind the public's back.

This is what Janet Yellen and her merry band of thieves at the FOMC are carefully administering. Seniors who can't afford to live on their savings? Young adults who can't afford to buy a home? The central bankers ignore them, as well as the social pain and economic misery their policies are inflicting on hundreds of millions of people.

But make no mistake, the loss of income that the Financial Repression inflicted by these sociopaths has harmed the elderly, pensioners, savers, and the young. Plus inflated the biggest asset bubble in history, which will make 2008 look like a picnic when it bursts. All to prolong the government's out-of-control spending addiction a little bit longer, and to put even dollars into the pockets of the banks and the wealthy Elite. 

So Financial Repression is Act I of the Great Wealth Transfer. It’s happening now, and it will likely persist for a lot longer. Sadly, it will continue for as long as the banks, the Fed, and the politicians can get away with it -- until the economy collapses under all the debt and/or the impoverished public breaks out the torches and pitchforks. 

The middle class will experience this as a steady erosion of their financially security. It’s a drip, drip, drip style of torture. Every year, your income and savings will buy less. The value of your money will be in terminal decline. 

Those who don’t understand Financial Repression are probably still confused by Trump’s victory.  But if you realize that the vast majority of the people of the United States (and Europe and Japan) have been tossed under an economic bus to help serve the narrow interests of a tiny financial elite, and are barely hanging on to a middle class lifestyle as a result, electing an anti-establishment firebrand candidate suddenly makes a lot more sense. It explains the similar rejection of incumbents we're now seeing across Europe.

Virtually everybody in the bottom 95% is being economically and financially sacrificed to bail out the prior bad decision of the central banks and their associated governments. And as that’s deeply unfair, it breeds resentment. Psychology tells us that resentment breeds contempt. And once there, relationship are doomed to fail. Our leaders have broken their covenant with the governed, and the governed are increasingly pissed. Expect that simmering anger to boil over at some point.

But, as mentioned, Financial Repression is just Act I. Act II is a lot more ugly.

Financial Repression is a way to delay the day of reckoning. That day will still arrive, and be all the more destructive for the pent-up forces that have built up during the delay.

At the heart of the matter here is that too many debts, too many claims, have been created. There's a finite amount of "real stuff" in the world (productive companies, farmland, mineral ores, timberland, buildings, railways, waterways, etc). But with each new issue of debt, the claims on that real stuff multiply.

So what's at risk here is an inflection point where the world realizes its holding a lot of paper, but little of substance. At that moment, the value of nearly every financial asset -- stocks, bonds, mortgages, derivatives -- even and especially our own currency -- will be sharply, painfully reduced.

In Part 2: Winning The Great Wealth Transfer, we detail what that re-adjustment process will look like and where the carnage will be most extreme. More importantly, we explain that even though the paper losses will be staggering, the number of "real things" -- those factories, acres and commodities -- won't have changed at all. Merely their ownership will have changed. And that will make all the difference in determining winners and losers.

Click here to read the report (free executive summary, enrollment required for full access)

 

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Belrev's picture

Putin almost hits priest for trying to kiss him

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

Arrowflinger's picture

Bankers put a deadly kiss on us 8 years ago. Theft is old news but hardly fake news.

J S Bach's picture

The "Great Wealth Transfer" is the only purpose of usurious Central Banks like the Federal Reserve.  Their private share holders rule this world.  They must be overthrown at any cost and as soon as possible.

You Only Live Twice's picture

It is the private shareholders of these Central Banks that are indeed the most worrisome as they rule the world from the shadows. Yellen, Draghi and company and only the public figures that work for them.

hedgeless_horseman's picture

 

Financial Repression is just Act I. Act II is a lot more ugly.

I agree.

It's a crime for Americans to freely sell our raw milk, yogurt, and cheese to our friends and neighbors

 

 

http://www.zerohedge.com/news/2017-03-04/its-crime-americans-freely-sell...

This Might Hurt's picture

Precious metals and bitcoin complement each other in a crisis portfolio wonderfully as described in the video below.

http://www.themonetaryreset.com/2017/02/complimentary-precious-metals-an...

Escrava Isaura's picture

Step 2: forcing negative real interest rates

Why do we need interest rates? Isn’t interest “usury” the crux of the problem? Because it’s unsustainable and exacerbate the divide between the haves and have not. Enriching the old generation while impoverishing the young generation? Didn’t jesus, the conservative favorite philosopher, speak against usury?

Interest is a scam, don’t you get it?

So, the writer of this article doesn’t have a leg to stand on.

 

 

shamus001's picture

Interest IS a scam.  Yes Jesus DID speak out against it.  As far as Capitalism is concerned, everyone could/should own a portion of the company, and gain dividends on its success/growth.  

But as far as this article is concerned, the author didn't quote Jesus, just the transfer of wealth, the process through interest rates globally, and inflation.  I believe the author's leg is firm.

WallHoo's picture

Well there are two kinds of conservatives,those that crawl and those that walk.Here's youre answear!

Mini-Me's picture

Baloney.  Interest is merely the time value of money (actually of currency).  People would rather consume in the present.  Paying someone interest is the reward for forgoing present consumption.  In doing so, those savings are used to accumulate capital.  Without capital, the tools and machinery needed to make us more productive vanish, and with it any opportunity for a higher standard of living.

Escrava Isaura's picture

You post has many flaws, I am sorry to say.

First: Our wealth, for the most part, was acquired through debt, meaning, these savings wouldn’t be there, because these so called wealth is a debt scam.

For business expansion what is needed is a window at the fed that business can borrow from, then, pay it back plus a service fee, say, of 1 or 2 percent.

Growth is energy. Energy cannot be saved otherwise growth ends. So, savings has nothing to do with growth. Actually, it hurts growth. Savings also has an even worse affect on the economy, because it generates corruption through speculations.

“Wealth is a flow. Spent it must be to produce future wealth.”Frederick Soddy, 1921.

https://www.amazon.com/Cartesian-Economics-Physical-Stewardship-Classics/dp/1616407395/ref=pd_ybh_a_47?_encoding=UTF8&psc=1&refRID=MQ602PFFHPJKAA14P8BM

 

WallHoo's picture

SShhhh,if you stack enough gold and dollars in your back yard the economy booms...(dont wake them up)

hairball48's picture

Baloney.  Interest is merely the time value of money (actually of currency).  People would rather consume in the present.  Paying someone interest is the reward for forgoing present consumption.  In doing so, those savings are used to accumulate capital.  Without capital, the tools and machinery needed to make us more productive vanish, and with it any opportunity for a higher standard of living.

 

Precisely right mini-me

 

Escrava Isaura's picture

For every saver who spend less because of higher rates, there is a borrow who spends more, so the two effects cancel out. This is naïve nonsense.

If you have money and lend, with interest, two things are happening:

1) you’re killing demand because you no longer have the money to spend

2) while you’re inflating the prices unnecessarily

So, if you’re not consuming, business, especially small business, go bankrupted, meaning, high unemployment.

And, if the prices goes up to cover higher rates that compounds with time, then there’s a gap, where the wages cannot keep up, meaning, the workers cannot afford what they produce.

These savers are unaware of these simple factors: Interest means slow growth, no expansion. Less income, less consuming.
So, savers would be stealing society blindly, especially the younger generation while not giving a shit, if they could get away with higher rates.

 

Not My Real Name's picture

Escrava, I still can't wrap my head around how somebody who has been reading ZH for almost seven years has failed to learn anything at all about economics. Unbelievable.

 

 

 

WallHoo's picture

Its because he reads other staff also...

gumby1129's picture

When the SHTF happens can you tell me what the difference between a handfull of 1/2" washers from the hardware store and a handful of bitcoins will be? Hint: Nothing......

peippe's picture

well, 

washers go with nuts & bolts.

bitcoin not so much.

Stuck on Zero's picture

And there is the question: Can you own bits as in computer bits?

SeuMadruga's picture

Who knows !

But right now, it's BTC itself that's almost hitting the fan of my ceiling...

max2205's picture

One day Charles will actually say something 

Not Goldman Sachs's picture

Remind me again of what DJT is doing to change/fix this.... Nadda. It will continue and accelerate. Donny is no friend of the 99%, new snake, same swamp.  So many on this site are so euphoric about the lack of Shillary, I agree, but most seem to have forgotten the mantra on one party, the party of money.  Wise up.

hedgeless_horseman's picture

 

Trump could reduce regulations for the people, too, not just the corporations.

Like I say in this article, though, I wouldn't bet on it.

http://www.zerohedge.com/news/2017-03-04/its-crime-americans-freely-sell...

Boris Alatovkrap's picture

ZIRP, Capital control, Ban of cash as primary form of settlement,… this is not already 10 year past?

FreddieX's picture

http://ichingfortune.com/hexagrams/41.php

41: Decrease

This hexagram represents a decrease ...
What is below is decreased to the benefit of what is above. This is out-and-out decrease. If the foundations of a building are decreased in strength and the upper walls are strengthened, the whole structure loves its stability. Likewise, a decrease in the prosperity of the people in favor of the government is out-and-out decrease. And the entire theme of the hexagram is directed to showing how this shift of wealth can take place without causing the sources of wealth can take place without causing the sources of wealth in the nation and its lower classes to fail.

A. Boaty's picture

Ask the Book what the Book tells the ChiComs to do.

FreddieX's picture

https://en.wikipedia.org/wiki/Dream_of_the_Red_Chamber

Truth becomes fiction when the fiction's true;
Real becomes not-real where the unreal's real.
—?Dream of the Red Chamber, chapter 1

A favorite of Mao's wife - Jiang Qing :
https://ichef-1.bbci.co.uk/news/560/media/images/61552000/jpg/_61552667_...
After the fall:
http://www.sacu.org/pics/gs718.jpg

And it ain't just Nixon:
One month before China's punitive invasion of Vietnam:
https://d3obzbnzikmki9.cloudfront.net/3102159f8b514e89ad13517e953cb32c/p...
"Some historians stated that the war was started by Deng Xiaoping to keep the army preoccupied while he consolidated power."

p.s. typo, should be
LOSES
http://deoxy.org/iching/41

This hexagram represents a decrease...
What is below is decreased to the benefit of what is above. This is out-and-out decrease. If the foundations of a building are decreased in strength and the upper walls are strengthened, the whole structure loses its stability. Likewise, a decrease in the prosperity of the people in favor of the government is out-and-out decrease. And the
entire theme of the hexagram is directed to showing how this shift of wealth can take place without causing the sources of wealth in the nation and its lower classes to fail.

petroglyph's picture

To bad they cut that right there where Putin was balling up his fist. Some people don't like being kissed by strangers, let alone priests. Good catch.

flaminratzazz's picture

"from the barrel of a gun"

 

FreeShitter's picture

Should have happened immediately after JFK's death.....

Logan 5's picture

Step 5 ~ A barter economy is created. Sorry central planners!

flaminratzazz's picture

Dream on, i tried to run a chicken through the card reader for gas..fvked up the reader and pissed off the chicken and yet..no gas..

Logan 5's picture

You're doing it WRONG!

 

Besides ~ what the hell do you need GAS for anyway? To travel to the store & fucking buy some chicken?

 

I re-iterate ~ YOU'RE DOING IT WRONG.

flaminratzazz's picture

that is what the wife said!  So I had to beat her. You would think that after 42 years she would get a clue?

But no!! She had to open her mouth right when i was under massive stress. Fvked up reader, squawking chickens, barking dogs and a yapping wife.. I tell ya, it was more than I could handle,,

i need the gas to run my chainsaw to cut my way in to the old folks home to get some jello

now i'm fvked

PoasterToaster's picture

You're probably one of those weirdos who likes the lime jello with the shredded carrots.  You aren't going to do well in the barter system.

flaminratzazz's picture

Weirdo? Shit man i sneak into hospitals @ dinner time for that! It is addicting.. I need MOAR!

lasvegaspersona's picture

Barter systems are really debt based systems. "I'll give you a chicken for some gas but I need that gas now. Can I give you the chicken later....thanks you know me and I'm good for it....btw if you decide you don't want a chicken you can pick something else from my wealth stack....or I'll give the chicken to Joe for the bread he gave you yesterday...whatever you like."

True barter societies are rare. Debt based or 'gift' societies are common.

SeuMadruga's picture

That's what true money is for. It enables us to settle transactions immediatly (speacially through currently available technologies like the web and blockchain, plus potential "game changer" companies such as Goldmoney.com, Vaultoro, etc). It's up to all of us to kick start those death blows against the " system" !

crossroaddemon's picture

You don't see where you fucked up?

Mistake #1: getting married

Mistake #2: staying married

I only made mistake #1.

flaminratzazz's picture

yup, I shoulda learned to cook..

crossroaddemon's picture

I got lucky... I already knew how to cook, and I got the kids. I will NEVER EVER get married again...

flaminratzazz's picture

if you knew how to cook, wtf you get married for?

Are you stupid or something?

crossroaddemon's picture

My friend, you have a point...

Deplorable's picture

Buy a solar powered chainsaw, or better yet, a big assed lumberjack whipsaw and put the wife to work on the other end.

FlKeysFisherman's picture

Is this a repost from ten years ago?

indygo55's picture

Ten, nine, eight years and counting, and so on. And you'd have to pay to get all of it so they regurgitate it over and over. Yes, we get it. Peddle your wares on some site where people don't have a clue. Maybe you do already. I love your stuff Chris but I've heard it enough. We are all waiting for the big collapse. With Trump we finally see the end, thank God!

Not Goldman Sachs's picture

Dream on. Trump will not save you. He has rich friends to save first.