Obama's Wealth Redistribution Takes It From Blacks and Hispanics

Never, ever assume that the proclaimed purpose of a Progressive Elitist is what he says it is.  Progressive elitists are thorough-going unprincipled pragmatists and they do whatever leads them to their desired results.  If it takes a lie to defraud others into giving them the power they want, they will not hesitate to lie.  A now classic example is the set of massive lies used to enact ObamaCare:

• If you like your health insurance plan you can keep it.
• If you like your doctor you can keep him.
• The cost of health insurance premiums for the average family will be reduced by $2500 a year.
• Most of the 47 million Americans said not to have health insurance will get it under ObamaCare.
• ObamaCare is not a tax.
• ObamaCare will cause few Americans to lose their jobs.

So, why would anyone believe that when Obama said his purpose was to redistribute wealth from the rich to the poor, that would be the result of his policies?  Well, some people are just that naive and that blind to the evidence of history.  Let us examine the evidence of the recent past.

Every three years the Federal Reserve publishes the Survey of Consumer Finances.  The Pew Research Center has produced a very useful summary of the results addressing the differences in household net worth for non-Hispanic blacks, Hispanics, and non-Hispanic white Americans.  Despite years of claims of "economic recovery" under Obama, the median net worth of all households was lower in 2013 than in 2010 and much lower than in 2007.  The median household wealth of 2007 was $135,700 in 2013 dollars.  In 2010, it had fallen to a mere $82,300, before falling further in 2013 to $81,400.  Median household wealth in the USA in 2013 had "recovered" to 60.0% of the median wealth of 2007!

But from 2010 to 2013, non-Hispanic white household income improved a minuscule 2.4%.  This is essentially stagnation in terms of normal wealth growth, let alone the growth characteristic of most economic recoveries.  This is a horror story by itself.

The worst horror story is that of American non-Hispanic blacks.  In 2010, black median household wealth was only 86.5% of what it had been in 2007.  So in 2010, blacks had lost 13.5% of their median household wealth compared to the 28.0% lost by whites.  But then instead of stagnation from 2010 to 2013, black median household wealth dropped precipitously to 57.3% of their 2007 wealth!  So under those much bally-hoed years of the Obama "recovery", non-Hispanic black median household wealth fell a further 33.7%, after the earlier three-year fall of 13.5%.  Black Americans lost more under Obama's "recovery" than they did in the early stages of the Great Socialist Recession!

By 2010, Hispanic American median household wealth fell to 67.8% of their 2007 wealth in 2013 dollars.  This loss of 32.2% was even worse than the 28.0% loss of non-Hispanic white households.  Once again, Hispanic Americans had further losses of household wealth during the Obama "recovery".  In 2013, median Hispanic household wealth was 58.1% of that of 2007 for a total loss of 41.9%, and an additional loss between 2010 and 2013 of 14.4%.

The period of time from 2007 to 2013 was a disaster for most American households.  White median household wealth fell from $192,500 to $141,900.  Hispanic wealth fell from $23,600 to $13,700, making their reserves razor thin.  Black household wealth fell from a median of $19,200 to $11,000.  Both the median black and Hispanic households now have almost negligible wealth. This means they have almost no protection against further economic shocks and almost no reserves for retirement.  Even before the Great Socialist Recession they were ill-prepared for either.

Obama's anti-business and anti-growth policies of higher business taxes, much increased and expensive regulations, ObamaCare, and an alarmist carbon-based fuel vendetta, have hurt the black and Hispanic Americans the most.  Their households were the least well-provisioned to survive these economic shocks to the private sector that madman Obama so much relishes delivering.  When Big Government takes resources away from the private sector where they are put to productive use and redistributes them to political uses, it is the poor and the least skilled and educated who are hurt the most.  Those who benefit are the politically connected and the poor are not usually well-connected.  They do not have the money to entice politicians and they are the least likely to devote the time or even to have the time for the study of the Byzantine workings of Big Government.

The miracle of wealth generation is well-known.  It is Capitalism with its emphasis on mutual cooperation and competition in the private sector that generates wealth.  Big Government is a very efficient consumer of wealth.  It takes wealth by force and destroys it in huge gulps.  Obama has proven that he is a particularly Big, Greedy Gulper of Wealth.  Where does that wealth come from?  It comes from American households.  The more government uses for political purposes, the less wealth American households have to pursue their own dreams and happiness.

Such are the consequences of allowing a Great Socialist Leader the power to redistribute wealth.  The story is always the same.  The socialist redistribution of wealth always reduces the total wealth of the society and it reduces that of most of the people of such a society.  A few politically well-connected people prosper, as we have seen with Obama's crony mercantilist friends.

Curious it is that mercantilism is usually described as the nature of the politically connected economies under monarchies and the accumulation of aristocrats hundreds of years ago.  It was the economic system before Capitalism.  It was the economic system of Medieval times.  Mercantilism, with its effective aristocracy of the politically well-connected is the economic system that Obama and the Progressive Elitists have turned America toward in their Transformation of America.  Theirs is a profoundly retrograde viewpoint that takes us back to the Divine Right of Kings, now the Divine Right of the Politically-Connected Progressive Elitist Aristocracy.  As in the feudal system, most of the people are not politically-connected.  Most of the people are made poorer and dependent on those who are politically connected.  Most of the people know almost nothing about what is going on in the government and have no effective control over its actions.

A vigorous and little-controlled private sector creates great wealth.  It may not produce it equally for everyone, but it does produce wealth for almost everyone.  Feudalism in its socialist or Progressive garb, destroys wealth for almost everyone.  When only partially implemented, it may only reduce the rate at which the people can acquire wealth.  When implemented as far as Obama and his Progressive Elitist allies have implemented it, it actually destroys wealth.  We see that in the reduced median household wealth figures above.

Yet, only a fraction of the implementation of wealth redistribution and socialist policies of the Progressive Elitists has been put in place.  There is much, much more wealth destruction that their policies are capable of doing.  Those who understand this should understand that a principled reduction of government powers and their scope of implementation is necessary.  We ought to return government to its legitimate purpose of protecting the equal, sovereign rights of the individual to life, liberty, property, the ownership of their own minds, bodies, and labor, and to the pursuit of their own happiness.

How is Obama's European Socialism Plan Working in Europe?

Europe started suffering from the oil price spike in early 2007 before we in the United States of America did.  Europe's energy prices, thanks to their socialist government's policies and taxes, were already much higher than those in the U.S.  In addition, the weight of the public sector on the private sector was even greater, making the private sector much more susceptible to the strain of the oil price spike.  As is very clear now, many of the countries of Europe are burdened with excessive debt.  In fact, Greece and Latvia are considered to be among the 7 governments in the world most likely to go into default.  Almost no one now believes the recent $1 trillion bailout of Greece is going to prevent that nation's default.  The regional government of Sicily in Italy is the 10th most likely governmental default.  Portugal, Spain, Italy, and Ireland are in very serious trouble.  Even Great Britain is said to be dubious.  There is now reason to believe that Germany is also.

As I noted in my last post, of the largest banks in the world to go under in this recession, one was a German bank.  The Sachsen LB bank had to be taken over by the Landesbank Baden-Wuerttenberg  with help from the Saxony government in December of 2007.  It turns out that there is reason to believe that part of the reason the German banks were so willing to help bailout little Greece with only about 2% of the GDP of the EU, was because many German banks are seriously over-extended.  Let us look at a bit of background history on what is going on in Obama's idea of a socialist utopia, socialist Western Europe.

Socialists do not understand economics.  They cannot because economics deals with the very complicated interactions of huge numbers of individuals trading huge numbers of values for other values.  The socialist assumes that all economic activity can be dictated, controlled, regulated, and governed by a central planning authority in government.  A real economy is much too complicated for that, but socialists insist in living in a Platonic dream world of pure economic forms.  In this world, the complex multivariate interactions of a private sector are almost always shoe-horned into some simple-minded governmental industrial and trading policy such as mercantilism.  Usually, the controlling government selects certain industries for their export potential and controls its currency to keep it artificially low in value in comparison with that of other countries in order to help keep its exports low in cost.  The selected industries may also have many effective subsidies as well.  This is what happened to Japan and brought its post-war recovery to an end in the 1980s and has left Japan in the doldrums ever since.  China has shown recent problems with this also.  So too does Germany show similar problems with its mercantilism policy.

Germany has a large export surplus with respect to most of the world and this includes the rest of Europe.  What should happen in such a case is that the German currency should become worth more and go up in value relative to other currencies.  The currency is rather like the stock in a country.  When it proves itself to be productive enough to do well in the export market, its stock should go up.  Imports from other countries then start to look very inexpensive and the country with the export advantage both starts losing that advantage and starts importing more.  This tended not to happen in Germany even before the euro became the common currency of most of the European Union.  The Germans had little choice but to put their money into savings, since it was too expensive to spend it on imports.  The banks in turn had to find ways to invest that money.  The German banks did this by loaning it to their many trading partners who had trade deficits with Germany.  Many of these countries do not offer many good investments, so the German banks have become very good at losing the money that Germans save with them.  The banks are under-capitalized.

Once most of Europe went to sharing a common currency, there was no longer even a possibility that the currency of Germany might go up in value relative to the currency of its net importers in other countries of Europe.  The trade imbalance issues have actually become more acute.  One of the reasons Germany was willing to put so much money into the Greek rescue plan was because French President Sarkozy furiously threatened German Chancellor Merkel with abandoning the common euro currency.  The Greeks also had more leverage in negotiations than one would have expected.  It turns out that a mercantile economy can be very fragile.  How fragile?

The German government has put a ban in place on short selling.  The mandate calls for a short selling ban in particular on 10 large German banks including Deutsche Bank, Commerzbank, and Allianz.  It also banned the purchase of naked credit default swaps of European Union government bonds.  This can be expected to have some negative effects:

• Large fixed income investors will be less able to adequately hedge their positions or be faced with insufficient market liquidity in the future to exit their positions.  They will be driven to invest in other markets.  The almost immediate stock market drop attests to this.
• The ban is a signal to the markets and investors that more bad news is coming. Investors are likely to lose even more confidence in European debt markets.  Spain recently had to reduce the amount of national bonds it could sell due to too few takers, so this may already be manifesting itself.

Germany, just as Japan and China have found, is not really in the catbird seat by virtue of having an export surplus.  It is highly dependent upon the health of the many countries which are running a trade deficit with it.  The old saying that one should neither a debtor nor a lender be has some solid truth in it.  One's country's exports and imports should be in balance.  If they are not, then the country to which one is lending should be growing rapidly so that one's investment is good.  On the other hand, if one is a debtor nation, one's economy had also best be growing rapidly.  This is not the case in Western Europe, where most countries have so immersed themselves in socialism that the public sector is seriously weighing down the private sector.

Obama's socialist heaven, Western Europe, is not feeling well at all.  Yet, it and Obama continue to criticize the free market of ideas, goods, and services that at one time characterized the U.S. and enabled it to become the economic superpower of the world.  The U.S. became an empire of wealth, created by free individuals voluntarily trading values with one another as they wished with little governmental interference.  This proven engine for economic growth is not in fashion in socialist Western Europe where unemployment rates of 10 to 20% have long been common, along with slow growth rates.  Nonetheless, it is this model that our lying leader wishes to dictate that we adopt.  This last week, he made major in-roads on this effort with the Dodd Financial Institution Take-Over.  Obama sure knows how to use an "emergency" to take a firm grasp on ever more totalitarian power.