Income Inequality: The Silent Killer

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Reckoning today from Paris, France…

We’re sitting in our favorite café in Paris. On the corner are two security guards trying to look inconspicuous. One speaks into an ear-mounted telephone. The other stares straight ahead. What are they looking for? Who are they meant to guard?

“They’re still guarding Carla,” [Sarkozy’s wife…who lives in the area…] said a bar patron.

Maybe. But we’re always surprised by how much people think they know that ain’t so… Our friend Dylan Grice told us about a study where people were asked a simple question and then asked how sure they were about their answer. Those who were 100% sure were only right 70% of the time.

After a few minutes the undercover cops disappear…

Dear Readers looking for investment advice should know better by now. If you think we know something about investing you’ve mixed us up with someone else. Besides, when it comes to the markets nobody knows anything.

We don’t even believe in investing…not the way most people think of it.

What we do know is that you can’t expect to get something for nothing…not in the world of finance and investment. So you can’t expect to earn a lot from your investments…unless you are lucky, or smart, or the feds rig the system in your favor. Which, of course, is what they’ve done for the last 40 years!

No kidding. In the early ’70s, the feds created a new kind of money. Dollars…with nothing behind them other than the feds themselves. If they wanted, they could destroy the dollar. Or keep it solid. It was entirely up to them.

In the event, they destroyed it slowly. In the early ’70s, we recall buying gasoline for 25 cents a gallon. Now, it was over $3 when we left the US a week ago. It’s lost more than 90% of its value!

But this destruction had consequences that were different for the “rich” than they were for the working classes. Financial assets rose with the inflation of the money supply. The price of labor did not. Stocks went up 13 times. Consumer prices (excluding gasoline) went up about half as much.

No wonder the rich got richer!

And now the same dumbbell economists who encouraged the feds to mess up the monetary system are whining about ‘inequality.’

Here’s Brian Fung kvetching in The Atlantic. He says income equality is not just an economic problem; it’s a matter of life or death. No kidding:

Growing income inequality in the United States has Americans talking about justice and economic fairness, but a new study suggests the burgeoning wealth gap is threatening more than just our pocketbooks. It might be raising our risk for an early death.

In one of the few studies to track the health effects of income inequality over time, one Ohio State University (OSU) researcher has discovered that an increase in inequality leads mortality rates to begin rising after five years. Inequality-linked mortality peaks about two years later, before tapering off five years after that. All told, even a modest increase in American societal inequality more than doubles an average individual’s cumulative risk of death over the next 12 years.

Drawing data from the US National Health Interview Survey for the years 1986 to 2004, the study found that for every 0.01 increase in the Gini coefficient – a standard measure of a country’s economic disparity where 0 represents perfect societal equality and 1 represents maximum inequality – an average person’s cumulative risk of death increased by 112 percent in the next dozen years. Hui Zheng, the OSU sociologist who ran the study, replicated the results using three different measures of inequality across a sample of more than 700,000 Americans aged 30 and older. He then ran the same test on 18- to 25-year-olds, with similar results.

Does income inequality itself cause you to die young? If some guy in your town gets filthy rich, will your life expectancy go down? What if some guy gets extremely poor…like Mike Tyson, said to be the poorest man in the world, because he has such a huge debt to the IRS? Will that take years off the lives of the rich?

We don’t know exactly what insight Mr. Fung is discovering. But we are pretty sure that he doesn’t either. Income inequality in itself is not going to shorten anyone’s life…unless he gets depressed about it and blows his brains out.

Even then, we’ll never really know why he did it.

Nobody knows anything. Especially economists.

Regards,

Bill Bonner
for The Daily Reckoning Australia

From the Archives…

The US Deficit of Deceit
2012-06-22 – Greg Canavan

How Nice to Have Friends At the Fed
2012-06-21 – Bill Bonner

Deep in the Stock Market Trenches
2012-06-20 – Murray Dawes

In Praise of the Eureka Rebellion
2012-06-19 – Dan Denning

What Could Possibly Go Wrong With Infrastructure Investment Bonds?
2012-06-18 – Dan Denning

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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