Different elites fight for control of the government, by taking wealth from one group and giving it to another. With control of the machinery, they use it to move even more wealth in their direction.

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“As resources committed to benefits decline, resources committed to control must increase.”  

Joseph Tainter  

We’re trying to get to the bottom of it. Why do so many policy decisions turn out to be mistakes? Why are the mistakes not random, but always erring in one direction? 

And what can we expect next? To frame the question in cartoonish form: Why don’t they hit the brakes before driving off a cliff?  

We have seen that the political system is a fraud. We don’t have a real democracy; we have a DINO... democracy in name only. Our elected representatives do not really represent us; they represent the special interests who provide them campaign money (and jobs... speaking fees... etc). It is not a government ‘by the People,’ in other words... it is one of elites, competing to control our political system. 

Today, we’re looking at how it got that way and where it likely leads. 

In today’s news, Politico reports: 

Harris, Trump see votes in not taxing tips 

All citizens are to be treated equally, or so it says in the Civics textbooks. But today, politicians bid openly for votes by promising... what else?... other peoples’ money. Any taxes not paid on tips will have to be made up by taxes (including the inflation tax) on others. College loans, too, when not repaid by the borrower, will have to be paid by someone else.  

Different elites fight for control of the government. They do it, largely, by taking wealth from one group and giving it to another.  Then, with control of the machinery, they use it to move even more wealth and power in their direction. 

Over time, they become more brazen. Ripping off the voters becomes more routine, more accepted. Resources are put to use not to increase benefits (by investing in new factories and so forth), but to control the distribution of existing benefits (by making campaign contributions, etc.) Then, it is not just the individuals who are corrupt... but the system itself. And as disaster approaches... the elites are paid not to see it coming. 

Why else has no major candidate — Kamala, Walz, Trump or Vance — mentioned that the US is going broke? 

You might think that the feds make ‘errors.’ What else could you call George W. Bush’s $8 trillion War on Terror? Or how about Donald Trump’s $1.9 trillion tax cut (with no corresponding cut in spending... it simply increased the nation’s debt... passing along the bill to the next generation)... and what about all those ‘stimmy’ checks? When did it ever make sense to shut down the real economy and pass out trillions in printed-up credit money?  

Congress and the Fed err consistently. Congress has produced only four balanced budgets in the last fifty-six years. And the Fed errs too. Pricing credit too low, it causes debt to grow from just $1.4 trillion in 1968 (the last year you could change your dollars for gold at a fixed rate)... to over $94 trillion today.  

These mistakes aren’t random. Congress doesn’t underspend sometimes and overspend others. Instead, for every annual surplus since 1968, there were thirteen deficits. And for every dollar of surplus there were seventy eight dollars of deficit.  

Why the lopsidedness in the nation’s most important ledger? Why not balance out the spending/borrowing with taxes, surpluses and budget cuts? Wouldn’t ‘we, the people’ be better off if we were debt free? The US now spends more on interest on the national debt than on defense; wouldn’t we all be better off if that money were available to meet today’s challenges, rather than paying for the errors of the past?  

Gold Medal Spenders

Of course, politicians favor spending rather than saving. But so do the voters. At home, it means more money for pensions and medical care. Abroad, it means the US team rides roughshod over adversaries; voters’ hearts swell as if they had won an Olympic medal themselves.  

Democrats and Republicans have both pledged not to cut transfer payments (pension and medical care, primarily) ‘by a single penny.’ And both promise more money to the Ukraine and to Israel. It’s not hard to see why. Giving away money buys votes. And the firepower industry and Israel have the richest, most powerful lobbies in the country.  

The ‘political caste’ uses its resources to control the distribution of wealth. As it becomes more powerful, the society becomes more corrupt... with more and more wealth going to favored groups. The top 1% makes out, well, like bandits. Since 1990, when the Fed began backstopping the stock market, the wealth of the top 1% of US households has increased by $31 million each... 680 times more than the wealth increase for the bottom half of all households. 

Even in real estate, the tippy top of the wealth pyramid sees most of the benefits. In the ten years, 2010-2020, those with average household income of $180,000 gained $6 trillion in housing ‘investment.’ Those with average incomes of $29,000 gained only $330 billion — not even enough to keep up with inflation during that period. 

But wait... there’s more. 

Why let them wreck the nation’s finances... load up the next generation with debt... practically guarantee inflation... and make almost everyone poorer?  

What perverse madness is this? 

Stay tuned. 

Regards, 

Bill Bonner 

Market Note, by Tom Dyson

Important recession indicators are starting to light up. We've been covering the Sahm Rule, which triggered two weeks ago, and the yield curve recession indicator, which is on the verge of being tripped, in our BPR columns for paid readers. 

Here's another one: the credit spread recession indicator.

When the economy is booming, lenders aren't fussy about who they lend their capital to. Risky borrowers get access to capital on almost the same terms as the safest borrowers. But as the economy moves into the bust phase, and bankruptcies multiply, and liquidity tightens, lenders become far more cautious.

In the markets, this caution manifests as a higher interest rate spread between rates that riskier borrowers pay and rates that safer borrowers pay. This chart shows this credit spread. We can now add last week's dramatic widening of the credit spread to our list of flashing recession indicators...
 

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