02/02/11 Baltimore, Maryland – It’s still the same old story
A fight for love and glory
– “As time goes by”, By Herman Hupfeld
Dow up 148 points yesterday. Gold rose $5.
And look at the euro. It’s back up to $1.38. Or, looked at from the other direction…the dollar is headed down again.
All that new money is having the effect Ben Bernanke wanted – sort of. It’s boosting asset prices. People feel richer. So, they spend more money. Trouble is, they’re not really richer. And after they spend more…they have less.
Here’s a subject you’re going to hear more about: wealth inequality. The rich have gotten richer. The poor have gotten poorer. People don’t know why. But they don’t like it. And they figure it has something to do with the rich rigging the system. They’re right…but not in the way they think.
But who cares if some people are richer than other people?
People obviously have a need for wealth. That is, they must eat. They need shelter, clothing… They don’t really need much more than that.
But there’s more to it, isn’t there? People have a desire for wealth. For status. For power. These things are more important than wealth itself.
Why? After a bare minimum, wealth doesn’t really affect a person’s survival. You don’t need more than the basics for that. Arguably, anything you eat more than what you actually need has a negative effect on your life.
And clothes? You can go to Wal-Mart and get all the clothes you need for $100.
Maybe less.
Shelter? Well, that’s a bit more expensive. But there’s a guy we see everyday who lives out on the street. He stands in the entrance to the abandoned Greyhound bus station in Baltimore, next to a mattress and a sleeping bag. He is always standing when we come by. And he is always facing south. He never turns his head, neither right nor left, neither up nor down…but he just looks straight ahead to the south.
Arguably, you don’t need more shelter than that. He seems to stay there…at no cost whatsoever. Not that we’d recommend it. But you could get a perfectly comfortable trailer for practically nothing.
What’s our point? That you don’t really NEED much money.
So why bother with it? And why do people care if you have a lot more than they do?
Humans seem driven to fight for wealth, power and status. Partly, you can explain it as a survival mechanism. No, you don’t need much money to survive. But for thousands of years, the person who was able to store up a little extra grain…or hunt a little extra meat…was the one who, in time of famine, might survive.
Of course, this is just theory…but you can imagine too that women would want to be close to the fellow who could get food when no one else could. She would want to have his children – fit and able – rather than the children of say, a tax collector or TSA inspector. First, because she might have a better chance of survival. And second, because her children might have a better chance of survival. He might keep them fed – after all, they’re his children! Not only that, they might be genetically well suited for survival anyway.
So, the kids that survive are likely to have the same survival instincts as the parents…which is to say, they’re likely to be good hunters/providers…or want to hook up with one.
There, anything else you want to know about socio-biology?
No? We didn’t think so.
So, let’s keep moving. Why did we bring this up?
Just to show that the relative wealth or status of people is very important – even though it is not directly related to their own survivability. Everyone wants to be rich, famous, and an Olympic rower – like the Winklevoss twins!
Naturally, they’ve got their eyes open all the time – sizing up the competition. They want to know where they stand. So, they spend a lot of time and effort not only trying to get ahead – trying to become rich, famous, and an Olympic rower – but also trying to bring the other fellow down!
Yes, dear reader, we’re sorry to have to tell you this. But jealousy, envy, resentment, backbiting, backstabbing, and income redistribution are just natural human instincts too.
And here’s another important point. Since more wealth is only interesting from a RELATIVE point of view…that is, it is only useful when it gives you higher status…a normal, healthy human being cares more about “fairness” than he does about absolute wealth. Of course, fairness can mean practically anything you want it to mean. It can mean fairness of opportunity – as in, we all play by the same rules. Or it can mean fairness of outcome – as in, we all end up in the same place.
In an up and coming economy, with limited government and low taxes – like the US in the early part of the last century – people care more about fairness of opportunity. People are making money. They’re creating status for themselves. Things change fast. You are responsible for creating your own wealth, power and status.
Later, as the economy matures, fairness of outcome becomes more important. New wealth is harder to get. It’s harder to move “up” in society. People get a hold of the government and turn it into a zombie-protector. They use it to make sure the rich get richer and the poor stay poor.
That is when people become very interested in “equality of income.” They think it is not fair. And, they’re often right. Because, by that time, the elites, the privileged, and the zombies have usually been able to rig the system for their own benefit.
As we put it in this space a week ago, when government meddling plays a bigger role in an economy, having access to the meddlers becomes more important.
The fight for love and glory continues…but the battlefield moves to the government.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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My Experience with this recession has been a 25% pay cut in April 2008. I work for a third generation family owned manufacturing company in Western Kentucky. Our sales were actually up by $.6 million by the end of 2008, down by $.8 million in 2009 but back up over by $.8 million last year for a total of $4.1 million. However, the 2 owners have increased their compensation to over $400,000 each last year from less than $200,000 annually in the previous years. We have steadily raised our prices upwards of 5% per year on every part that we manufacture. We the employees have asked when our pay will be restored but we get no reply. After reading this article it appears that they have rigged the system…..
Nothing to disagree with there. A rich man gets more and better “reproduction opportunities”. That is more than enough motivation to get rich.
Bill said: “People feel richer. So, they spend more money. Trouble is, they’re not really richer. And after they spend more…they have less.”
Yes the peron who spends his money has less. But now someone else has his money. Strangely enough money is not used up as it is spent, it just circulates.
Wealth can be used up such as by smashing up cars (can you believe the moronic government actually did that in cash for clunkers?). Wealth can be used up by bull-dozing the excess of new houses. (Which some dozy people recommended). But money is not wealth and money is not used up by wasteful spending. We measure wealth in money but still wealth and money are not the same thing.
I will leave Bill to think about the implications of this and enlighten us.
Not sure a rich man has better reproduction opportunities. Where are birth rates highest in the world? Who has the highest fertility among Americans? The rich? Nope. They may produce higher quality offspring however.
And regarding primitive humans, men have always hunted in groups, working together. People who wandered off too far on their own apparently didn’t survive. Also, there seems to be a perfectly natural tendency to take down a leader who gets too powerful or too rich. Probably favors the survival of the rest of the group.
You can’t just cherry pick the lessons of evolution to suit your needs.
Burns me up when some Ivy league rich kid slashes my wages to put even more money in his pocket. Maybe we can follow what the people in Egypt are doing and lay a little smack down. Just a thought.
“Cancel the debts. Redistribute the land”. Mao Zhe Dong
Bill
I’m not sure when the music will stop…or when the jig will be up, but what I do know is that the word is out… and thanks to your insightful articles we can all have a little laugh now and then at the politicos as they fiddle and fumble “our” way toward the economic abyss.
But alas it is my opinion that the Arab insurrections are going to act as cover in achieving what Ben, Tim, Barrack and company have been trying to do unsuccessfully for some time now … to have energy costs necessarily skyrocket ergo to stage a platform for plausibly (un)deniable hyper-inflation.
Thanks for your wit
James
Its not that rich men have better repro ops. It is men with skills that most women want. Others may just want to be with someone who is connected/rich, lest their child, or children have to compete for an outcome.
My twins are good baseball players. They were born with the instincts and skills necessary to be good at the game. People all around us spend hundreds of $s on equipment, camps, etc. trying to be better than them and it doesn’t work. Can’t make a fat kid fast with $ and a $100 glove is going to help them judge the ball in order to catch it. They would be better served just giving up or to work with the child themselves through repitition, but that requires hard work. So they kiss the right ass and demand rule changes to aid their children.
The above applies to everything in life in this time from everything to little league to big gov defense contracts. It is why our country and others are staring castrophy in the face.
Can’t we all just be happy with who we are and what we have? No We Can’t!
Love the socio-bio stuff Bill. You da man!
People today are acting just like the gov. Misallocating resources and misusing their time trying to gain an advantage to get something they didn’t earn.
I blame soap operas and reality shows for all the back biting, envy, etal.
Concentration of wealth can actually hurt people’s survival. Think of grain. When affluent meat eaters create demand for fodder, grain crops get diverted from providing a poor man’s bread, even though there’s a lot less net food energy available that way.
Mr. Market doesn’t care if everyone gets a chance to eat. If the meat eaters bid up the price of grain and the bread eaters can’t match, tough luck for them.
Then when affluent car drivers want to assuage their eco-conscience, they divert even more food crops for ethanol. If people go hungry so politicians can pretend to be “green,” once again Mr. Market just shrugs.
Of course, economics is really named political economy. Political markets are also markets, and when they go too far in one direction, they correct.
A rapid correction in the political marketplace is when things get interesting!
I wish it were that easy. Are you talking about living survival style or actually taking part in life ?
So no TV, Phone or computer?
No utilities ?
No insurance of any kind ?
No paying out of pocket for whatever isn’t covered ?
No unexpected expenses of any kind ?
No maintenance on your property ?
No cleaning bills because even your best suit does not need to be dry cleaned ? (Just because you’re retired doesn’t mean you wouldn’t want to dress nicely at times)
No travel anywhere at any time ?
Staying within a 5 mile radius of your home to avoid paying for gas ?
No eating out or entertainment at all?
No cosmetics or personal care items for women (even the drugstore brands cost money)at all. Just put a bowl on your head for haircuts–both sexes.
No more socializing because somehow it always directly or indirectly costs something unless you are the host
Never doing the little things like buying Girl Scout cookies ?
No charitable contributions ?
Nothing but rice and beans, because we don’t know how much food will cost ?
(actually rice might be expensive.)
No gardening–(it does cost money?
No gifts for grandchildren or for weddings or Christmas or at any other time ?
No pets ?
No recognition of the fact that when you get really old and possibly need help with daily life, it will cost money ?
I agree with what you say if you are talking about mere survival, but if you plan to lead more than an obviously primitive,bare-bones, austere, middle to lower middle class life, it will cost money. Unless everyone else is living the same way.