The Financial Singularity Cometh

More than two millennia ago Plutarch wrote these simple words:  “An imbalance between rich and poor is the oldest and most fatal ailment of all republics”.

The real zinger of a word there is “fatal“.

History has shown us time and again that a nation can not and will not survive once the disparity between rich and poor passes a dangerous tipping point.    Perhaps more importantly:  History is quite clear on what happens to the wealthy who ignore this lesson.

Which brings us to yesterday at around 10am:    Here is billionaire Johann Rupert (via Bloomberg), Executive Chairman of Richemont,  confiding that the thing that keeps him ‘up at night’ is how unfathomably rich he is relative to everyone else:

“We cannot have 0.1 percent of 0.1 percent taking all the spoils,” said Rupert, who has a fortune worth $7.5 billion, according to data compiled by Bloomberg. “It’s unfair and it is not sustainable.”

The founder and chairman of Richemont, whose 20 brands also include Vacheron Constantin and Montblanc, said he expects advances in technology to lead to job losses after having read books on the subject recently.

 “How is society going to cope with structural unemployment and the envy, hatred and the social warfare?” he said. “We are destroying the middle classes at this stage and it will affect us. It’s unfair. So that’s what keeps me awake at night.”

Oh bravo, Johann.   Are there points for public hand-wringing?   How might one return some of that wealth to society?   It’s a real Gordian knot, we know.   

But public hand-wringing seems to be the favorite response of the day:  At this years Money-palooza in Davos, “wealth inequality” was listed as the planet’s number one concern.   Unfortunately for 99% of Earth’s population, there is apparently a big difference between  “number one concern” and “action items“.

“The scale of global inequality is quite simply staggering,” says Winnie Byanyima, Oxfam’s executive director and a co-chair of this year’s Davos meeting. In 2014, the 80 richest people had a collective wealth of $1.9-trillion (U.S.) – a rise of $600-billion or about 50 per cent in four years. “Despite the issues shooting up the global agenda, the gap between the richest and the rest is widening fast.”

The applause which followed her speech was pure kabuki.

What wasn’t said, but should have been said, is that if no external forces intervene in the current rate and vector of wealth accumulation, a smaller and smaller percentage of the population will accumulate a larger and larger portion of all available wealth.

It appears the “singularity” does indeed “cometh”, but we dare say it’s not the singularity Ray Kurzweil is hoping for.

All talk and no walk

While merely discussing the problems of inequality may rank high on “gala conference” agendas,  actually solving the problems of inequality is clearly a non-priority.   Which is odd, actually.   Given that the issue at stake here is not simply “inequality”, but as history has proven repeatedly,   “whether or not our societies are viable” – one might expect the issue of wealth-disparity to share the same top-shelf status as national security.   After all, when one can say with historical certitude that passing the tipping-point of wealth disparity destroys nation-states, one might expect correcting this issue to be a higher national security imperative than say, groping old women in search of non-existent explosive devices.

Why then is wealth-disparity, even as a national-security issue so impossible to address?

 

There is no win-win.  To fix this problem, the rich must be relatively less rich.

Here we must risk saying what is perhaps too obvious:

There are two and only two ways to solve the problem of inequality.  

  1.   The richest among us must become less rich.
  2.   The rest must become richer.

There are no other options.  

There are quite a few ways of getting there, but ultimately that’s the gist of it.  And given the fundamental problems of economics inherent in option #2,  it is option #1 which represents the only viable option.  And that quite clearly is also the sticking point:  We don’t need any more proof that ‘moral reasoning’, ‘social stability’ and ‘basic humanist imperatives’ hold no sway among the 1% when it comes to the issue of (to put it bluntly) becoming less rich.   For the 1%, the issue of wealth depletion is simply a non-starter.    

This too is somewhat odd, given the preponderance of historical evidence that to ignore a rising state of wealth-inequality is often lethal to the wealthiest classes.

We have now reached the point where our regulatory agencies,  our politicians,  our media and our legal system have been captured.  We stand on the cusp of the TPP, which will elevate corporations to higher-than-sovereign status.  The 85 richest humans are wealthier than the 3.5 billion people who constitute the bottom half  – and their wealth is increasing at an accelerating pace.  The effects of too much wealth and power concentrated among too few of us are plainly visible.

Any policy which claims to address “inequality” which does not directly address how it will negatively impact the wealth of the very wealthiest is a red-herring.

There is only one possible, mathematical way to address the reduction of inequality:  Reducing the wealth gap.  Pretending that there is some other way, like “greater opportunity” or greater “affordability via access to debt” is an attempt to avoid the real issue.  And the issue is this:   The wealthy are dangerously wealthy beyond all modern measures.  That wealth is already having profoundly negative effects on our world.   And this trend is accelerating, not slowing.   This singularity also cometh. 

___________________

 

We leave you with this graphic depiction of wealth distribution in the USA:

...and money is power.

…and money is power.

 

  • Krypto Nite

    Word.

  • FD

    Exactly. In the US we “solve” inequality by making cheaper debt available. All that does is make bankers even richer.

  • Stephen Adler

    Terrifying stuff. How do we reverse this trend? If we can’t we are already defeated.

    • Tom kauser

      Absorb the Fed balance sheet into social security and eliminate the need to tax work because no one would work unless they felt guilty or could not make it on just the national dole payment alone!
      Everything would come out the fed balance sheet dividend and everyone would be too content to listen to the neocon small penis any longer?

  • redtroika

    He writes: “There are two and only two ways to solve the problem of inequality.
    1. The richest among us must become less rich.
    2. The rest must become richer”.
    Therefore: DEFLATION, DEFLATIO, DEFLATION is the answer?!?!?!? Come on, you know what I am talking about.

  • ThenewStorky

    The rich ain’t ever gonna just give it away, it must be taken . And that will not produce any positive results. Zbigniew Kazimierz Brzezinski said “It’s easier , today , to kill 1 million people than it is to control 1 million people.” What do you think he’s referring to there ?

    basically America as we all knew it, taught in school , is all but gone, gone , gone.

  • Bukko_Boomeranger

    We’ll know the Endgame is ON! when shit starts burning down. When the 10th Wal-Mart goes up in flames (coz one or two or five could be isolated incidents) then that will be a sign that the 99.9% have finally had enough of a Jimmy Choo stomping on their human faces. Killing people is not the answer. The rich bastards don’t care if their human minions die. Billionaires are sociopaths — individual human lives mean nothing to them. They can always hire more. And they’re confident that their security guards will protect them from the hoi polloi. Besides, aside from a few out-front richpigges such as Dimon, Blankfein, Buffet and Soros, do YOU know what the Masters of the Universe look like? It’s not like the average person could pick out a Mall-Wart heir to pitchfork. But if their PROPERTY is harmed, now that’s gotta sting!

  • Don’t Feed The Animals!

    Like most people, I don’t begrudge true, honest, hardworking success. What I have a problem with are the rules being used to tip the scales. Your QE/inequality article points out that most Americans earn less than 10% of their income from capital gains; but for the top 1% it’s nearly 2/3 of their income. Yet long term capital gains are taxed at 15% now? But restoring this rate to normal levels or even taxed equivalent to wages/labor would be opposed openly as a “tax increase” by the political class/media. Our system risks loosing (if not lost already) credibility with the majority of citizens when the top 1% (wealthy) average tax rates are well below those of the working class. We need to stop feeding the beast. It’s time for a diet.

  • Tom kauser

    Popcorn? I suspect that the 62 billionaire s become 31 which is two less than required for the world to continue!
    My last memory will be buttery