‘Were we directed from Washington when to sow and when to reap, we should soon want bread.’
The other day we were looking at ‘transfer’ payments. Today, we look closer. What exactly are we talking about?
Our developing hypothesis is that the furious money-shovelling in the last quarter was not just a ‘fluke’. It was part of a pattern, like the MO of a major thief. And it won’t stop until the criminal is behind bars.
A ‘transfer’ presumes a ‘to’ and a ‘from’. A transferor and a transferee. You may rob Peter, for example, to pay Paul. But there’s no net increase in income.
So, why bother? It doesn’t help the economy or make people, generally, better off. It just makes some better off and some worse off.
And with so much transferring going on, how come Peter doesn’t reach for his gun?
But Peter doesn’t seem to notice. The rich? The poor? The middle classes? All of the transferors seem unaware that their pockets are being picked.
The Peters must be anaesthetised. None of them seems eager to stop the transfers. Instead, they want more for themselves!
We saw that the level of ‘transfer’ payments hit a whacko high in the second quarter. Never before in the history of the nation had more people gotten more income from the government than they had made in honest income.
But how was that possible? If trillions were transferred to someone, they must also have been transferred from someone. The ledgers have to balance.
Like the sum of matter and energy in the universe…one must come at the other’s expense. You can’t fatten Paul’s wallet without purloining cash from Peter.
We’ll have to come back to that issue; it’s too much for us to deal with this morning.
Instead, we note that whatever is going on…it didn’t just start when COVID-19 arrived. This train has been grinding down the tracks for at least 50 years.
In the early 1970s, Americans earned almost 90% of what they spent. In the last quarter of 2019 — that is, before the coronavirus panic — people earned only 67% of what they spent.
Before 2020, the level of money flowing from the feds had already almost tripled (as a percentage of total wages and salaries) from the 1970s.
This had nothing to do with the culture wars…the economy…or the two-party system. Through Republican and Democrat administrations, boom and bust, the level of ‘transfer’ payments increased.
Typically, ‘transfer’ payments are meant to come from the prosperous taxpayers and go to the poor…the underprivileged…the masses of unfortunates huddled around the base of the Lincoln Memorial or defecating on the streets of San Francisco.
But it wasn’t just the poor Pauls who got wealth transferred to them.
Supporting the market
The Federal Reserve calls it ‘supporting the market’ or ‘providing credit’.
But it has been making transfer payments to Wall Street for 30 years…hesitantly at first, flagrantly more recently.
The total ran to some $3.6 trillion in the five years following the crisis of 2008–2009.
And in just a matter of days following Donald Trump’s panicked declaration of emergency on 13 March 13 2020, the Fed added another $3 trillion.
It lists the payments as ‘loans’. But the money is given out at preferentially low interest rates. And everybody knows it will only be repaid with more loans at even lower interest rates.
If Treasury yields were allowed to go whither, they wouldst, and speculators were forced to refinance at honest interest rates, a large number of the Pauls on Wall Street would go broke.
Meanwhile, even out on the plains and southern prairies, the feds’ money — like a noxious weed — has taken root. The St. Louis Post-Dispatch reports that the farming sector, too, has now become dependent on the federal government:
‘It was utterly predictable that once Trump slapped tariffs on China, America’s No. 1 agricultural buyer, China would respond in kind, devastating U.S. soybean and other farm markets.
‘America’s almost $20 billion in agriculture sales to China in 2017 dropped to $9 billion the next year. Even as federal farm bailouts sailed into the tens of billions, farm bankruptcies jumped almost 20% last year.’
Farmers, stockbrokers, factory girls, and baristas — rich, poor, conservative, liberal — all have come to rely on the generous feds.
This is no fluke. Just as the Trump team deprived the hayseeds of earned revenue, so, too, did it close the offices and restaurants that the proletarians depended on for their incomes.
Thus, did the ‘earned’ portion of Americans’ income fall to about $2.1 trillion in the second quarter, while transfer payments (mostly focused in that same quarter and now expiring) added about $2.4 trillion.
And that’s not including the wealth — as much as $10 trillion — that Wall Street gained from the Fed’s transfers.
For the first time in history, more people depended on the federal government for their daily bread than on the economy. Less money was being earned than not earned.
More fake money (from the printing press) was being spent than real money (from providing goods and services).
And more wealth was ‘transferred’ than was actually created by the sweat and toil of US workers.
But what is this strange ‘money’ that can be transferred from one pocket to the next…and yet, is never missed?
For The Rum Rebellion