Drowning In The Money River

by | Jan 16, 2018 | Headline News | 18 comments

Do you LOVE America?


    This report was originally published by Adam Taggart at PeakProsperity.com


    It’s a big club and you ain’t in it.

    ~ George Carlin

    If you suspect society is unfair, that there’s a different set of rules the rich live by, you’re right.

    I’ve had ample chance to witness first-hand evidence of this in my time working on Wall Street and in Silicon Valley. Simply put: our highly financialized economy is gamed to enrich those who run it, at the expense of everybody else.

    The Money River

    A recent experience really drove this home for me.

    Having received my MBA from Stanford in the late 90s, I remain on several alumni discussion groups. Recently, a former classmate of mine, who now runs her own asset management firm, circulated her thoughts on how today’s graduating students could best access an on-ramp to the ‘money river’.

    What’s the ‘money river’? Good question.

    The money river is the huge tsunami of investment capital sloshing around the globe, birthed by the historically-unprecedented money printing conducted by the world’s central banks over the past decade. Since 2008, they’ve more than tripled their collective balance sheet:


    The $13+ trillion in new thin-air money issued to achieve this is truly staggering. It’s so large that the human brain really can’t wrap around it. (For those who haven’t seen it, watch our brief video How Much Is A Trillion? to better understand this.)

    But suffice it to say, all that money has to go somewhere. And it first goes into the pockets of those with closest access to it, and of those who direct where it flows.

    In the context of MBA graduates working in finance, accessing the ‘money river’ often follows this recipe:

    • Step 1: Get hired by a buy-side fund (asset management firm, hedge fund, etc)
    • Step 2: Make friends at other funds by investing part of your portfolio in their offerings
    • Step 3: Leave to create your own fund, which all your new buddies will invest part of their firms’ portfolios in
    • Step 4: Collect a fat annual salary of 2% of assets under management (regardless of how your fund performs), plus 20% of any gains

    Let’s put a little math behind this, with real-world numbers based on another classmate of mine who followed this recipe. After graduating, he went to work for a prestigious private equity firm, spending nearly a decade there as a fund manager. He then left to start his own fund.

    Since he had invested in scores of ventures and funds while working for the private equity firm, he had amassed plenty of industry insiders who knew they had to reciprocate when it came time for him to hang out his own shingle, because “that’s how the game is played”. You help me when I need it, and I’ll do the same for you.

    Only a few weeks after announcing the formation of his new fund, he had raised $100 million for it. At his 2% management fee, that gave him an annual salary of $2 million no matter how the fund performed. And with the standard carried interest percentage, he had substantial additional upside of 20% of any profits the fund may take in the future.

    Since forming this fund nearly ten years ago, the financial markets have been on a historic bull run, with hardly any corrections along the way. This is primarily due to the trillions in new money provided by the world’s central banks mentioned above. So, it’s little surprise that my former classmate’s fund now stands at over $1.1 billion in assets under management.

    That’s now a $20 million annual management fee. Plus 20% on (conservatively estimating) hundreds of millions of gains made along the way.

    Not bad work if you can get it.

    No Fund For You!

    But that’s a big part of my point here. The 99% don’t have a key past the velvet rope to access the money river.

    Look, I don’t begrudge this guy his success. Well, maybe I do; but it’s not personal — I know him well enough to say that for certain he’s extremely smart, bold and hardworking. But he’s benefiting from being in the Big Club that George Carlin railed about. The rest of us ain’t in that club, and won’t ever be. But our futures are being determined — or more accurately put, undermined — by it.

    All that liquidity being provided by the central banks? To keep that money flowing it needs to be cheap to those who want to borrow it, so the banks have concurrently driven interest rates down to the lowest levels in recorded history (going back over 5,000 years). Some extra-aggressive central banks have even pursed negative interest rates.

    What this has resulted in is a tremendous transfer of wealth to the already-rich at the expense of everybody else.

    Those with the means and access to borrow have been able to get essentially free money to do so; while savers and those dependent on fixed income have been starved of any yield whatsoever.

    The wave of global stimulus plus the low cost of borrowing has driven capital into nearly every asset market, rocketing prices higher. So those who have held those assets have become substantially richer, while those who have not have become increasingly priced out.

    Along with asset prices, prices of nearly everything else have risen, too, dramatically increasing the cost of living:

    Price inflation since 2000


    But, as costs have risen, wages have not. Especially when measured in real (i.e. inflation-adjusted) terms.

    Real wages are now 7% lower than they were in 1973  — and that’s calculated using the official government-reported inflation rate, which we all know vastly understates the actual inflation rate. (Read our report on The Burrito Index to understand why the true price inflation households suffer is more like 5x greater than the official reported rate).

    So the rich see their assets shoot the moon, and they get access to the ‘money river’, to boot. While the rest of us see stagnant real wages and a skyrocketing cost of living.

    Is it any surprise that a tremendous and still-growing wealth gap between the 1% and everyone else has resulted?

    Real Wages Since 1980



    The Future Looks Dim For Those Sleepwalking Into It

    As we’ve written about at length in our recent report The Great Retirement Con, the average American worker is woefully unprepared to afford his/her retirement:

    Retirement Savings By Age Cohort


    And for those counting on a pension, odds aren’t bad it may get reduced/eliminated during a future economic crisis.

    Think that could never happen? Well, Governor Jerry Brown just announced this on Wednesday:

    California’s Brown Raises Prospect of Pension Cuts in Downturn (Bloomberg)

    California Governor Jerry Brown said legal rulings may clear the way for making cuts to public pension benefits, which would go against long-standing assumptions and potentially provide financial relief to the state and its local governments.

    Brown said he has a “hunch” the courts would “modify” the so-called California rule, which holds that benefits promised to public employees can’t be rolled back.

    “There is more flexibility than there is currently assumed by those who discuss the California rule,” Brown said during a briefing on the budget in Sacramento. He said that in the next recession, the governor “will have the option of considering pension cutbacks for the first time.”

    That would be a major shift in California, where municipal officials have long believed they couldn’t adjust the benefits even as they struggle to cover the cost. They have raised taxes and dipped into reserves to meet rising contributions. The California Public Employees’ Retirement Systemthe nation’s largest public pension, has about 68 percent of assets needed to cover its liabilities.

    Across the country, states and local governments have about $1.7 trillion less than what they need to cover retirement benefits — the result of investment losses, the failure by governments to make adequate contributions and perks granted in boom times.

    “In the next downturn, when things look pretty dire, that would be one of the items on the chopping block,” Brown said.

    And this is in California, one of the most pro-worker/pro-entitlement states in the Union. If California is already sending out warnings like this, you can be sure that the other 49 states are thinking of making (at least) equally-harsh cuts when the next recession hits.

    Potential cuts to promised pensions is just one of the many ways in which those running the system will act to preserve their share of the pie when crisis next arises. Those concerned about what other measures might be taken would do well to read our report Upon The Next Crisis, The Rules Will Suddenly Change.

    And for those who prefer their cynicism blended with hard truths and humor, watch this short video of George Carlin’s epic rant against the elite’s Big Club. I quoted Carlin at the beginning of this article for a reason, he really nailed the central point I’m trying to make (Warning: the language used gets quite graphic):

    Fighting Back

    So, what can the rest of us in the 99% do about it?

    Is this a lost cause? Should we just accept our fate and sink to the bottom of the money river, smothered by its high prices and low yields?


    The good news here is that there’s a clear set of strategies for keeping yourself afloat while the system continues to pursue these pernicious and deeply unfair policies. They take focus, effort and discipline — but anyone implementing them will have good chance to stay ahead of the rising cost curve, and have a real shot at financial prosperity.

    In Part 2: Winning Against The Big Club, we examine a number of strategies for offsetting the soaring costs of everything from housing to healthcare — with particular focus on the investments and actions you can take today, inside and outside of the markets, to preserve the purchasing power of your wealth from the nefarious “stealth tax” placed on your money by the kind of inflation discussed above.

    Click here to read Part 2 of this report (free executive summary, enrollment required for full access)


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      1. The rich elites want even more whilst the very poor lose more and more. Everyone else loses out marginally. They are psychopaths and they don’t care about anyone that’s not like them.

        Don’t fall for the tricks they deploy to get you angry with a low paid worker barely living – get angry with them as they are the ones taking the piss out of all of us through the rigged system that’s there to serve their interests.

        • Fun Fact:

          If you took the annual earnings of the top 1% and “socialized” them, that is, split them equally between every man, woman, and child, in the good ‘ole USA, every one of us would bring home a shade over $700,000.00 (seven hundred thousand) dollars per year.


        • You want to know how you fight back?

          Take advantage of the first major world wide humanity crushing event (even if it is caused by the elite) and then destroy the elite and the bankers.. Its you only hope of survival. (mic drop)

      2. I love George Carlin! He was so far ahead of us and dead on. He knew about the Matrix before we knew the word existed. Long live George Carlin.

      3. Trump’s new tax policies only benefit corporations and the wealthy. If you are experiencing the opposite effect, and can’t see that right now, the day will arrive when you can see it and are impacted. Sooner than later. It’s all an illusion.

        • Bull Trump lowered the corporate tax to 21%. that’s in line with the tax rates in those other places where our manufacturing went. That at the very least gives the manufacturing places we have left a leveler playing field. maybe stem the tide of job loss. doubling the tax exemption helps the middle class. No poor person no matter how pious they might be has ever been able to provide a good job to anyone. Marie if your so smart and the corporations and wealthy have it so easy. Why don’t you start a corporation and show us how it should be done? Everyone be in business for themselves at least once. Then they will actually know how difficult it can be.

          • An excellent point, Old Guy.

            Leveling the field for new start-up companies who care about keeping jobs. We need to see more products 100% made in America.


      4. Well, unless I miss my guess – ain’t a one of us an ‘elite’. So, back to work boys and girls. Keep stacking, racking and no slacking. We’ve got a long ways to go. A long long ways. Consider this right now to be the good times you’ll all look back on.

      5. Build more prisons because of the exploding homeless population who think they can live outside exposed to the elements without paying. What a sick nation facing forced extermination without a peep.

      6. As good as this article is, I HATE articles where to read Part 2 you have to ENROLL, which probably will set me up for emails, spams, or fees.

        Mac, with respect, if they can’t supply part 2 with part 1, it’s not worth reading. It’s a ploy.

        – the Lone Ranger

        • Lone Ranger, I’m with you. It’s like those infomercials online where you sit through 30 minutes of ‘evidence’ only to find that for only 19.95 in four easy payments you can be part of their ‘insider’ club, newsletter, special publications, etc.

          With some sleuthing, most of their ‘special’ information is out online somewhere anyway.

      7. With no degree in economics, finance, or accounting, I still make these generalized opinions:

        The minute humans left the hunter-gatherer nomadic life (which did not require a very high IQ) and migrated to colder climates, then new disruptive technologies such as farming were introduced after Neanderthal, despite a very large brain capacity (bigger than Homo sapiens) had a tough go of it as a hunter-gather in more cruel/extreme climates.

        The minute farming occurred, man (Homo sapiens) could become more stationary. He no longer had to forage and be constantly on the move for food, and he could live in colder climates. By necessity, he developed tools and members became more specialized. Some were farmers, some were blacksmiths, gunsmiths, shoemakers, carpenters etc. This specialization introduced the need for more than just items of barter for trade. More formalized money emerged, to act as a medium of exchange and store of value, not only within the community but across communities as trade flourished. As long as money was a perceived asset, whether gold, silver, salt, shells, animal pelts, musket balls, knives, etc., it was fine. However, it became impractical to rely on pure barter, such as bringing a flock of sheep to trade for several blocks of salt.

        The problem started in Italy when paper was issued instead of coinage sometime in the 15th or 16th century?

        Real money (gold, silver etc.) allowed the emergence of fiat paper currency after it was realized that even gold and silver, somewhat cumbersome, required safekeeping and storage. As long as paper certificates were backed, this was OK. But when the paper no longer was backed, then this was the beginning of the moneychanger treachery which has evolved to unbelievable levels of corruption seen today.

        Bankers no longer have to do any productive or value-added work. They can devote their lives to exploiting the fiat currency via loans, fractional reserve lending, and lending to central bank lwhereby they collected interest from loaning something they did not create in the first place. The rest of the people did all the value added productive work-growing the food, building the roads, and houses that supported these bankers.

        Meanwhile, if you are one of the productive workers, you didn’t have time to guard your wealth from these bankers who bite the hand that feeds them.

        Fast forward to today and my point. This fiat system has enabled a complexity of the currency system that is so difficult to navigate that the money changers have effectively created new financial killing fields.

        Derivatives, collateralized debt obligation, securitization of mortgages, financial contracts that are so convoluted and difficult to understand (by design) that the wage earner/productive worker has to devote half of his life to decipher them. These are not for the implied purposes of creation of new industries, technologies, or skills, rather to enable the moneychangers to extract wealth.

        Some of these financial vehicles may have made sense long ago. The most obvious one was the farmer who relied on the futures market (guaranteed a price for his corn at harvest) or crop insurance whereby he would not fall into bankruptcy (and thus be unable to plant next years harvest to feed the population) if he didn’t have some form of guarantee or insurance that he would at least be able to sell his crop for enough money for him to live on and plant next season. Futures and insurance made sense under these circumstances and were appropriate.

        Nowadays, however, futures almost do the exact opposite. They can destabilize and manioulate the markets They are not used for necessary insurance. They are devised and employed as stealth wealth transfer machines by these useless moneychangers, often fraudulently, to transfer money from productive people to themselves.

        Not only that, but capital gains from this “unearned income” is taxed at preferential rates. Even worse, the greater your income, the greater the tax deduction. If you are earning a million a year and take out a 2 million loan, your mortgage has been deductable, sometimes up to 40-50%, whereas a worker making only $30,000 a year? Well, his deduction is worth only 12% max. He is paying nearly full freight.

        The system has been rigged, and it started the minute we went off the honest money standard. Once politicians saw they could get reelected by making promises for free stuff to voters and that fiat, which allowed deficit spending as a consequence which then, in turn, allowed them to pay for it, whereas honest money would act as a brake on this, they realized they could collect influence money from corporate donors and get rich, and corporations, in a quid pro quo, could favorable legislation in return. Fascism (duopoly of control by government and corporations) was born. Now we are screwed. There are no longer any political, constitutional, or legal methods to dig us out of this situation.

      8. So this article is a money making scheme too eh? Ya’ll just have been duped again. You know when you hit bottom when you have to go apply for food stamps and you actually qualify. Welcome to the American dream.

      9. Btw/ Chelsea Clunton was slamming Trump for his Sh!thole comment about Haiti, and James Wood replies to Chelsea back with this comment below. Keep in mind the Clintons ripped Haiti off for a Billion dollars they collected via the Clinton Foundation for disaster relief for Haiti but then renigged and kept all the money for themselve stiffing Haiti. And part of that money was spent on Chelsea’s own extravagant wedding.

        James Woods moved in with a kill shot and responded, “Tell your dad, the bagman, to give the dough back to Haiti that you all pocketed. Then maybe we can discuss this other malarkey you’re trying to peddle.

      10. Btw/ Chelsea Clunton was slamming Trump for his Sh!thole comment about Haiti, and James Wood replies to Chelsea back with this comment below. Keep in mind the Clintons ripped Haiti off for a Billion dollars they collected via the Clinton Foundation for disaster relief for Haiti but then renigged and kept all the money for themselve stiffing Haiti.. And part of that money was spent on Chelsea’s own extravagant wedding..

        James Woods moved in with a kill shot and responded, “Tell your dad, the bagman, to give the dough back to Haiti that you all pocketed. Then maybe we can discuss this other malarkey you’re trying to peddle.


        Figures the article is hid behind a paywall with the catchy headline “Fight Back”….

        I can tell you what the “fight back” part is ..its a SCAM TO CONTINUE PLAYING ALONG!!!

        How do you fight back? The ONLY way you can win..?


        If you wont do that, you aren’t fighting back, at all…End of Story.


      12. Life is unfair, boo hoo, go find a safe space Adam. Hey Adam, take all the wealth on the planet minus the total debts, now divide that by the number of people on the planet… you’ll discover the majority of the people have more wealth the way things are that to divy up all the debt/assets up equally. I suppose you piss and moan that the rich aren’t paying their fair share when half the population mooches. God you make me sick with your socialistic penis envy.

      13. Another way to access the money river:

        “Join over one million monthly readers and receive breaking news, strategies, ideas and commentary.”

        Sell monthly subscriptions!

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