Yellen – it’s an Oligarchy? During a hearing on Capitol Hill this past week, Sen. Bernie Sanders (I-Vt.) asked Fed Chairperson Janet Yellen about a Princeton study on wealth inequality. The question was, is the US political system a democracy or an oligarchy? She basically dodged the question – click here. After her bumbling response, a lot of media pundits concluded that the answer is – yes the US is now an oligarchy.
The reason Yellen dodged the question, is that she knows that the Fed and the world’s modern fractional reserve money systems, are at the core of why the US and other developed economies are all pretty much oligarchies. In 1971, when the world basically went off the gold standard, money supply has grown exponentially. Most of this new money creation has gone to the rich, as they can obtain credit easily, while the poor can not. It has created wealth inequality mathematically over time. The more credit leverage (i.e. money creation) the wider the wealth gap, leading to these oligarchies. It has been called the biggest dirty little secret in the world.
To describe the basic unfairness in our money system, we could draw upon an analogy of a football league of teams. If the yearly team winner always gets the first round draft pick for the next year, what you would find is that over a few years, mathematically one or two teams would float to the top and stay there, as the rest of the teams would go by the wayside. The unfairness in this, is that a team may have won (earned) within a certain year, but that should not give the team the right to future draft picks in subsequent years. Draft picks should be given out on an equalized basis, or the league would get so lopsided that it eventually becomes uninteresting and collapses. This pretty much describes our economy.
The solution? Ensure that as a new year starts, draft picks for new talent is obtained under a new talent neutrality mandate within the league system. Most modern sports leagues have figured this out, but not the politics that drive our money system. Applying this same concept to our current monetary system, a Fed mandate change would be required, to ensure it observed a credit neutrality mandate. This means everyone would have equal access to the set of new money created within a set period of time. Those who wanted more access to credit, than others, would have to go on the open market and buy other people’s credit allotment if they choose not to use it. Sort of like, every team gets a shot at a first round draft pick, unless one team buys the opportunity from another team.
This Fed mandate change would have the effect of equalizing wealth, much like equalizing talent in the football league example. In the end, a more vibrant activity, where everyone has opportunities to win. It is not a redistribution plan, rather getting people to pay for what they owe and eliminating the rich person’s special advantages. People know the our current economic system is rigged, they are just not sure how. If only people understood better the money system, they would understand how they are being robbed every day by the Fed under our current fractional reserve system. Oligarchies will continue until people understand this basic unfortunate money system unfairness, and rise up to demand change
Blue Point Trading, William Thompson