Will Super Intelligence save us?
That is, sadly, the religion that is spreading through Washington as any conventional analysis of a country that will be $43Tn in debt by the end of 2027 with rapidly rising borrowing costs and an exhausted, frustrated Consumer Base, that is fighting an unwinnable war heading into the last quarter of the year – seems to be completely F’d otherwise…
It’s true – the Oiligarchs see all the numbers and there’s nothing they can do to turn things around at this point (5% interest on $43Tn of debt is $2.15Tn per year in interest alone – 1/3 of what is currently being collected by the Government and more than twice as much as all discretionary spending.
So the Oiligarchs decided (back in 2016) to take over the Government and plunder what’s left of America and, over those past 10 years, they’ve DOUBLED the National Debt (by $20Tn) and transferred $20Tn to themselves – that is NOT a coincidence, is it?
Those same Oligarchs are now spending TRILLIONS of Dollars to eliminate the need for human labor (this only concerns you if you are human) so that they can transfer THAT wealth to themselves and you say to yourself (in an attempt to rationalize your diminishing value) that they won’t do that because then there would be no one to buy things but – THEY DON’T CARE! They already have $55Tn and you (the Bottom 99%) have $100Bn and if you lose half your money and they don’t – then the Top 1% have already gone from 35% of the Wealth to 50% of the Wealth – THAT is how they keep score.
It’s already working as the Bottom 99% already can’t afford housing and rich people LOVE to buy LAND. Less competition for them as they turn homeowners into renters (income streams!) in the exact way Jefferson warned they would 225 years ago:
Imagine if Jefferson knew they would also figure out how to control your thoughts AND then put a meter on thinking! That’s the magic trick they celebrated on Tuesday and, if you want to get really mad – read Robo John Oliver’s “Live at Trump’s “Super Intelligence” Luncheon.” And yes, it’s ironic that RJO is, himself, a Super Intelligence – but it was a lot of research – and my brain was tired…
Fortunately, many of us are in the Top 1%, which begins at an average of $561,523 in annual income and net worth of about $12M. Notice that 5% interest on $12M is $600,000 – which is how it works – the rich do not like to touch their principle – so they demand a rate of return that allows them to draw an income without dipping into their savings.
And, as you can see from this chart, the Top 1% need to keep up with inflation, so their demand goes up as inflation goes up. Even if we assume inflation is just 3% – that’s another $18,000 the Top 1% need next year and $18,000 is 0.15% of $12M – so rates MUST go up to accommodate our masters and, where does that $18,000 come from – why it comes from the borrowing costs charged to the bottom 99% – it’s a closed loop!
That 5.29% is not a market outcome – that number is a political requirement! It is enforced through the specific channels the Top 1% owns – the lobbyists, the think tanks, the campaign donations, the CNBC segment where the Hedge Fund manager explains why rates “need to stay elevated to combat Inflation” without ever acknowledging that his personal preference is identical to the policy he’s advocating.
The Fed is SUPPOSED to be independent but, in practice, when every major asset holder is screaming for 5%+ risk-free rates, the Fed has three options: provide the rates (which crushes the bottom 99%’s borrowing costs), refuse to provide the rates (which triggers a specific capital strike in Treasury auctions until the Fed capitulates) or try the specific Warsh-style ambiguity dance we watched two weeks ago (which delays the capitulation by a quarter or two).
Three options and all three take us to the same place. The rates stay high enough to feed the Top 1%’s demand because the alternative is a Treasury market dysfunction that nobody in power is willing (or able) to accept.
The federal budget line item called “interest on the debt” is the specific line item that moves money from Americans who earn wages to Americans who earn interest. $2.15Tn per year – and growing…
When the Fed keeps rates at 5%+ to feed the Top 1%’s income demand, mortgage rates sit at 7-8%. A $500,000 house at 7.5% is a $3,500/month payment (plus taxes, repairs, etc). The Median Household Income for the bottom 90% in America is roughly $75,000 – which supports a $2,000 mortgage payment at traditional debt-to-income ratios.
The gap between what the median household can afford and what the median house costs is now the widest it has ever been. Which means the median household cannot buy a home. Which means the house goes to someone who can – a cash buyer, an investor fund, a Blackstone, an institutional landlord… Those people then rent the house back to the median household at rental rates that have risen 40% since 2020, when Covid accelerated the wealth transfer dramatically (chart above)!
The mechanism by which rising interest rates transfer housing wealth from the bottom 90% to the top 1% operates in exactly this way, in real time, in every zip code in America, every month, without requiring any individual actor to be aware they are participating in it.
The invisible-hand language Adam Smith used to describe markets producing collective benefit from individual self-interest – THIS is the SAME mechanism running in reverse, producing collective extraction from individual rational action.
IN PROGRESS
