You Can’t Print Real Wealth

You Can’t Print Real Wealth by Bill Bonner – Bonner and Partners

Bitcoin rose another $1,000 in the last 24 hours. Whoopee!

And whoa…

What’s going on? Yesterday, we described an Extremely Simple Pattern (ESP).

You put “money” into an economy and prices float up. Take it away, and prices fall.

Prices float on a sea of liquidity. Which prices rise depends on where the money flows.

Open the dikes into the consumer economy, as Lyndon Johnson did with his Vietnam War and Great Society programs, and consumer prices tend to rise. Direct the money to Wall Street – by buying bonds from big banks and other financial institutions via QE, as Greenspan, Bernanke, and Yellen have done – and it tends to drive up asset prices.

Either way, there is no reason to believe that just adding “money” – dollars, euro, or bitcoin – adds to real wealth. Real wealth must be earned… by someone.

It can’t be printed.

Lower-Income Lifeline

Nobody complains when asset prices are rising… at least not the people who own the assets. But here’s another important ESP: When fake money causes Wall Street to go up, Main Street goes down… and vice versa.

Real wealth is a win-win for everyone. But fake money is win-lose; you only gain wealth by taking it from someone else.

The consumer price inflation of the ’60s and ’70s caused a selloff in stocks and bonds, reaching a bottom in 1982. Main Street “won.” Wall Street “lost.”

Now, the situation has reversed. The money flows to Wall Street… we’re near a top for stocks and bonds… and Main Street sinks. The “One Percent” build their palaces in Aspen, Colorado, and Greenwich, Connecticut… while in the mill towns of Ohio and the hill towns of Missouri, people get poorer.

We have it on the authority of The Wall Street Journal:

Dollar General is expanding because rural America is struggling. With its convenient locations for frugal shoppers, it has become one of the most profitable retailers in the U.S. and a lifeline for lower-income customers bypassed by other major chains. […]

The more the rural U.S. struggles, company officials said, the more places Dollar General has found to prosper. “The economy is continuing to create more of our core customer,” Chief Executive Todd Vasos said in an interview at the company’s Goodlettsville, Tennessee, headquarters.

Well, God bless the bubble economy! It’s creating more customers for low-end retail stores.

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Bonner and Partners

Bill Bonner founded Agora Inc. in 1978. Since then, it has grown into one of the largest independent newsletter publishing companies in the world. Bill also co-wrote two New York Times bestselling books, Financial Reckoning Day and Empire of Debt, In his latest book, Hormegeddon, Bill describes what happens when you get too much of a good thing in the sphere of public policy, economics and business. This new newsletter is unlike anything else published in America today. Now in this industry, Bill Bonner has agreed to share his secrets and insights every month. It’s like having a super-wealthy uncle share his best ideas, insights and wisdom about business, relationships, investments, trends, developments, ideas and more.