Here’s the Real Reason the “Rich Get Richer”

Posted by Bill Bonner - Diary of a Rogue Economist

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“Today’s money,” says economist George Gilder, “tries to cheat time. And you can’t do that.”

It may not cheat time, but it cheats far easier marks – consumers, investors, and entrepreneurs.

It took us a moment to understand what Gilder meant. Then we realized he’s right. 

Time is the ultimate limitation… the ultimate truth… the ultimate fact. 

Time the Taskmaster

You’ll recall. There are facts and there are myths. The facts are true no matter what you think. Everything else is opinion, conjecture, or claptrap. 

Elizabeth, your editor’s wife, has a different relationship with time than he does. He sees it as a taskmaster… strict and unyielding. 

The sun rises. It sets. If you goof off during the daylight hours, the opportunity will be gone forever. That part of your life will evaporate, like the morning dew, never to be seen again.

Elizabeth takes it personally. If she is running late, she expects time to slow down and wait for her. She thinks the sun ought to linger a little longer before saying goodnight… giving her time to finish her email before starting dinner. 

She is annoyed when it doesn’t. 

Elizabeth treats time like a movie she is watching on her computer. When the telephone rings in the middle of it, she wants to put time on hold, until she is ready for it to resume… or even push a button to make time back up, so she can relive particularly interesting segments.

“The party starts at seven; it’s already quarter after; we’re late,” we say grumpily, after waiting in the car.

“Well, maybe you could drive a little faster so we could get there on time.”

UnknownNo More Real Money

Alas, time does not cooperate. 

Time is a “fact,” not a myth. It does not back up. No matter how much you wish it would slow down… or what you think about it… time moves on.

Real money is similarly indifferent to the wishes of tardy commuters, cash-short consumers, and manipulating Fed chiefs. 

Like the ancient Greek Moirai, the goddesses who measured out the thread of life, real money is beyond the control of man. 

The last of the three goddesses, Atropos, was known as “she who cannot be turned.” It was she who cut the thread when your time came to an end.

Real money, like real time, cannot be jigged or jived. It can’t be stretched or compressed. It is what it is.

But that was then… pre-1971. This is now. 

Now, we have no more real money. Instead, the world has a gaggle of imposters – the dollar, the euro, the yen – all stage managed by benighted central bankers.

The miracle of real modern money – which has been around only for a few thousand years – is that it could function across time and space. It allowed people to trade with others far away who they didn’t know, often crossing language, cultural and religious barriers. 

Money in hand, the deal was done. It made no difference what they thought or what happened to them later.

Money made it possible to accumulate wealth (capital), too. 

A crop of tomatoes or lettuce might be worthless in a few days. But with money, the farmer could hold the real value of his past work far into the future. Using money, he could also invest the fruits of his labor in new and more fruitful projects.

Rigged System

The new money substitute, which we’ve lived with for 45 years, is a fraud. 

A dollar in 1971 is worth about 17 cents today. In other words, it has lost roughly 80% of its buying power. Had you been counting on it to preserve the value of your work from the previous decade, it robbed you of everything from 1960 to 1968.

The phony dollar has misled an entire generation into spending money it didn’t really have… doubling or tripling its debt-to-earnings ratio… and shifting more and more of its real wealth to the least productive people – the Parasitocracy.

In 1971, the financial services industry was just 1.25% of GDP. Today, it’s more than three times that much. In terms of real output, finance is still tiny. But that’s now where the money is! 

Here’s an item from Monday’s paper: The biggest six banks in America raised their CEO pay by 7.6% last year – about three times faster than GDP growth. 

The “Big Six” executives now earn an average of $13.1 million a year. JPMorgan Chase boss Jamie Dimon is in the lead with a $27.6 million pay package.

The richest 1% of the population, meanwhile, has increased its share of national wealth from 25% to 40%. And the richest 1/10th of 1% has done even better – going from 10% of national income in 1971 to 20% today.


Not really. The system was rigged with the new money.

More to come… as we continue connecting the dots between our money, our economy, and our Parasitocracy. 

Stay tuned… 




The U.S. stock market is gracing all-time highs, but look abroad and you get a very different picture… 

As you can see, many foreign markets are in or near bear market levels (defined as a drop of 20% or more from the high). 

Screen Shot 2016-07-20 at 10.37.19 AM

Bear markets are a great time to pick up great assets on the cheap. So if you want to find good value for your dollar, you should look abroad.

In Bonner Private Portfolio, we currently own just five stocks. One is Swiss and one is French. Thanks to Europe’s troubled markets, we were able to purchase these stocks at about half their all-time highs. Yet they are global companies that do most of their business outside of their home countries. 

You can buy these stocks just as easily as you would buy IBM or Microsoft. No fancy brokerage account needed. The public disclosures are in English. They are not hard to follow. And they have a long history of paying dividends and are rock solid financially.

My senior analyst and I continue to fish in these beaten-up markets for more Private Portfolio bargains…

We just returned from a ten-day trip through Italy. Italy is one of the cheaper stock markets in the world, based on a weighting of various factors like price to earnings. 

The Italians often get unfairly pegged as lazy Southern Europeans who don’t want to work. In Milan, we visited the stock exchange. The sculpture in front of it probably doesn’t help this image:


“The Finger,” by Maurizio Cattelan, was donated to the city of Milan in 2010. It stands before the Italian Stock Exchange.

But the truth is, the Italians put in more hours than the Germans. (As one of my friends joked, “The Italians love capitalism. Look at the mafia.”) And Northern Italy is on par with Germany in terms of productivity. Moreover, there are some great companies and brands in Italy, all based in the north: Luxottica (maker of Ray Ban sunglasses), Ferrari, and Giorgio Armani to name a few. 

Right now, we’re investigating a basket of Italian stocks with fantastic, undervalued assets. And our field trip yielded some interesting insights about the broader markets as well… We’ll be sharing these with our partners in the next issue of Bonner Private Portfolio.

The recommendation I leave you with today is this: The U.S. stock markets are at all-time highs. If you want to find bargain stocks, go abroad.


Check out the two stocks from Tyler Bollhorn’s Strategy of the week – Stockscores Weekly Perspectives