In this article published by Zerohedge we can find a cogent explanation of the present process of wealth redistribution from poor to rich, a phenomenon felt everywhere. Whether this process is an intended one, a sort of conspiracy, or just “collateral damage” of unsound monetary and economic policies, is for the reader to decide. This is, in words of Stanley Druckenmiller, one of the most successful hedge fund managers, “the biggest redistribution of wealth from the middle class and poor to the rich ever”. Don’t miss the charts, they are self explanatory. As a summary, the aim of achieving this wealth redistribution is achieved thru several mechanisms:
A – “the rich hold assets, the poor have debt”
B – QE has resulted in a loss of purchasing power for the US dollar. Faced with this problem, consumers in the middle class are taking on more non-housing debt in order to maintain the same standard of living. In addition, the US government – which continues to run a deficit year after year – continues to accumulate debt. Due to these facts, total debt outstanding – aka credit market instruments for all sectors – is at all time highs. More debt means more interest payments and lower savings rates. These trends do not bode well for the middle class consumer.
C – On the other hand, QE has been great for the rich. QE has inflated the prices of assets such as property, bonds, stocks, and non-home real estate.
D – Taxes as a percentage of real disposable income have more than doubled since 1980. This trend has not been kind to the bottom 90%.
E – Median household income has been in a downtrend since the late 90s.
F – The entitlement problem is only going to get worse as more baby boomers leave the work force. Future generations will have to pay for the debt that the old and rich continue to take on.
In conclusion, QE, taxes, income disparity, and entitlements are contributing to “the biggest redistribution of wealth from the middle class and the poor to the rich ever” If things continue the way they are going, then millennials and future generations will pay the price: