BALTIMORE – Last Thursday, the Brits said auf Wiedersehen and au revoir to the European Union.
On Friday, the Dow sold off 611 points – a roughly 3.5% slump.
What’s going on?
In Europe and the U.S., the masses are getting restless.
Mr. Guy Wroble of Denver, Colorado, explained why in a short letter to the Financial Times:
The old liberal world order is dying because the cost-benefit ratio for the average person in the Western world is now negative.
The welfare state depends on three things: population growth, productivity growth, and credit growth. All three are either slowing… or are already negative. As a result, economies can no longer keep up with the costs imposed by the Deep State and its cronies.
The “Deep State” is shorthand for the many people, in and out of government – the “foxes,” as Italian economist Vilfredo Pareto called them – who control policy decisions and use them to tilt the playing field in their direction….
Taxes, regulations, and wars are not for the benefit of the electorate, but simply to pay off one special interest group or another.
People vs. Politicians
The “foxes” are expensive.
For instance, the median house nationwide sells for $180,000. In Washington, D.C., it’s more than $500,000. On Wall Street, the average bonus last year was $172,000 – six times the total median compensation of workers nationwide.
More important, the foxes set up a financial system that was fraudulent, pernicious, and bound to blow up.
Using credit instead of commodity-backed money, they distorted the entire economy, curtailed real capital investment, pinched off productivity, stopped income growth for 90% of the people, and slowed economic growth for everybody.
Now, the economy isn’t growing enough to make good on the politicians’ promises. After you factor in inflation, the average working man in the U.S. earns no more today than he did 40 years ago.
Almost all income growth in the last 10 years has gone to the rich. So, the only way the average voter could possibly benefit from the welfare state would be if he were able to tap into the income of the very rich.
And that isn’t going to happen, for one very obvious reason. That top 1%? Those are the foxes that control the system!
Vive la Revolution!
The appeal of the welfare state ceases when people get less welfare than they pay for.
The more wealth and power the elite sucks out of a stagnant system, the more the typical citizen feels trapped and robbed.
The Brexit vote was an attempt to escape.
And in the U.S., many see a vote for Donald Trump as another way to get parasites off the backs of the common people.
Mr. Trump has pledged as much. The presidential election this November, he says, will determine whether the U.S. will be “ruled by the people or the politicians.”
“I will end the special interest monopoly in Washington,” he promises.
The situation is not completely unlike France in the 1780s.
So many foxes had burrowed into the privileged, elite classes that it became impossible to get them out.
They lived on “rents” – such as the right to collect taxes, or tolls, or a percentage of harvests. They were 18th century cronies, not productive members of the economy. And generally, they were even exempt from paying taxes. This left the typical French royal subject with a chip on his shoulder.
Several efforts were made at reform. Assemblies were called. “Parlements” were convened. Elections were held. But the rich foxes wouldn’t give an inch. It took a bloody revolution to change things.
Similarly, today, the foxes have a sweet deal. Their money system gives them an almost bottomless source of credit. (Thanks to negative interest rates on bonds, many governments around the world now get paid to borrow money.) And they use this credit to fund their programs… their bonuses… their stock buyback schemes…
Naturally, they are desperate to keep it going. Bloomberg:
Central banks across the world offered the financial system fresh funds and intervened in currency markets, in an effort to reassure investors sent into panic by Britain’s vote to leave the European Union.
After a majority of Britons voted to end their 43-year membership of the EU in a referendum, the Bank of England, the European Central Bank and the Bank of Japan issued statements stressing the availability of liquidity to keep the banking system running.
But there’s a problem…
The Deep State can control Congress. It can control the state bureaucracy… Wall Street… and Big Business. It can even – usually – control the voters.