… The income of the top 0.1% grew 15 times faster than the incomes of the bottom 90% because that’s the only possible output of America’s distorted financial system. The same can be said of the rising asymmetry of wealth: the top 10% own 2.5 more wealth than the middle class (51% to 90%) and 34 times the wealth of the bottom 50% as a result of the asymmetric structure of our financial system.
In a truly market economy, risk avoidance is rational as risk can wipe you out.
In a financial system rigged to reward the biggest and most aggressive speculators, risk avoidance is irrational because all the gains generated by the economy go to the biggest and most aggressive speculators rather than to the most productive workers or enterprises.
The Federal Reserve has stripmined savers and the risk-averse to funnel all the gains to its predatory, parasitic cronies–Wall Street banks, financiers and global corporations, turning rational risk aversion on its head: it’s now rational to gamble in the rigged casino, as that’s the only avenue left to protect one’s stake.
For 12 long years, savers have been eviscerated while gamblers have been ceaselessly backstopped and bailed out by the Fed. In the Fed’s rigged casino, it’s not only rational to make high-risk bets, it’s rational to borrow as much money as you can to increase your stake and leverage your bets–because the Fed has our backs and so every wager on markets lofting higher will pay off.
It’s crazy not to max out credit and leverage because the Fed has guaranteed every punter will be a winner. I explained the feedback loop this creates–the more the Fed guarantees markets will never be allowed to decline, the greater the incentives to borrow and leverage ever riskier bets in the Fed’s casino–in my post The “Helicopter Parent” Fed and the Fatal Crash of Risk.
The middle class has finally surrendered the last of its rational risk-aversion and gone all-in on bets in the Fed’s rigged casino. Big players don’t use margin accounts in brokerages; they have immense lines of credit and tools to leverage their bets. It’s the so-called retail traders who use margin, and so the unprecedented highs in margin debt are evidence that the middle class has gone all-in on bets markets will only loft higher forever. (see chart below)…
The question which is never asked in congress or the media is why the fed is deliberately destroying the economy and setting us up for mass starvation?