I’m not a Millennial. I’m a Gen X-er if only just barely. That means I’m better than almost everyone else on this site if the “get a job” propaganda coming from the boomers can be believed. But the truth is that I was lucky. I hit the job market just after 2001 and landed a Federal job (which I no longer inhabit, that’s right, it was a job so good I just gave it up) at a time when the Federal government was surging and jobs with the government were everywhere if you had a good education and gave good interview. I have a very niche humanities degree and post graduate degree and I simply cannot imagine trying to get a first career job today with that same degree.
I feel for you guys, I do. It’s not right that you got sold a bill of goods about college and debt. It’s not right that professors continue to allow students to be uninformed about what degrees go with which jobs and whether those jobs even exist. They can’t help it, I suppose. Full professors have a lot of pressure to do anything but provide students with up to date career advice.
But, knowing that an entire generation of people are now facing a massive uphill climb armed, poorly, with expectations based on a world that no longer exists it seems like our State and Federal Governments would realize that we have to prepare. There’s been some of that. The crackdown on for profit colleges that guarantee quite literally nothing at all after you graduate is one of these preparatory measures. But, overall not much has been done to address the new economy where skills matter far more than degrees. Seriously, that’s the only thing I could think of.
In fact, the federal government by way of the Federal Reserve has been literally making Millennials poorer. Enter Liberal hedge fund manager and multi-billionaire Stanley Druckenmiller discussing U.S. monetary policy…(don’t you dare tune out right now! I will explain this and it will be glorious!). Druckenmiller is also the most charitable man in the country, having given away circa 700 million dollars to charitable and research organizations last year. He’s not a scammer or a bullshitter. He’s on the level.
The Federal Reserve isn’t just inflating markets but is shifting a massive amount of wealth from the middle class and poor to the rich, according to billionaire hedge fund manager Stanley Druckenmiller.
In an interview on “Squawk Box,” the founder of Duquesne Capital said the Fed’s policy of quantitative easing was inflating stocks and other assets held by wealthy investors like himself. But the price of making the rich richer will be paid by future generations.
“This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.”
“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”
Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”
Okay, you stuck with me here because you are a trooper. You are a soldier in the army of continuing to read. So, what did he just say and what does it mean?
Alright, so in 2008 the banks overextended themselves and crashed and consumer spending plunged. You quit going out. You quit buying new computers, couches, cars, all that. Most importantly you didn’t borrow any money from a bank because you didn’t have any money to pay the loan back with. Those things happened all at once so the Federal Government borrowed money (mostly from U.S. citizens living in the future, seriously) and gave that money to the banks and said “use this money until you start making your own.”
So, the banks did that and they’ve mostly paid that money back now however, however, the Federal government has basically continued this policy of giving banks money since 2008 in the form of a mystical unicorn process known as ‘quantitative easing.’ I’ll make this simple, quantitative easing is just giving banks money so that they’ll have money to loan to people who already don’t have any money (me and you). The entire reason the government has to give the banks money is because you and I don’t have any money and so the banks, hypothetically, can’t make any money off of loans (because of low interest rates) and deposits (checking accounts, etc). Banks need money to make loans so the government is giving them money in the hopes that they’ll loan it out more and yay we’ll all start buying and selling thus creating, eventually, wealth in your pockets and mine that can be spent and invested and so on.
Did you stick with me? Are you here? Am I all alone? I know this stuff is boring, I do. But, when you understand it you’re going to feel like you have superpowers, I promise.
So, what is Druckenmiller saying in the above quote? What’s he talking about? He’s saying that when the government pumps money into banks and financial institutions those institutions turn around and buy stocks with them and the value of those stocks goes up. However, since it’s basically free money being used to buy these stocks they don’t represent any actual growth in the economy. It would be like saying “boy, AT&T is sure doing great” even though they have zero customers but the government is giving them enough money to look like they have tons of customers. It’s a smokescreen designed to keep companies hiring and investing.
Now, let me ask you this. Do you think “AT&T” is hiring? Well, not them specifically, companies in general. Are you seeing a lot of hiring out there as a result of the government paying companies to continue existing? No? Me neither.
See, what’s happened is that these companies receiving this federal money via banks and financial institutions are simply holding the money as their stock prices rise. Why would they do that? Well, it’s cheaper and easier to simply hold on to this money and watch your stocks go up. It’s FREE money in two ways. One is government money and the second is inflated stock price money. Making money is always cheaper than spending it.
So what was that last part about “trickle down economics?” You’re asking that, right? Well, the thing is, you and I don’t own any stocks really. Only rich people own stocks in any meaningful quantity and since the federal stimulus (quantitative easing) money just goes to rich people to reinvest it somehow then the money stays with them. Why the hell wouldn’t it? What this means is that the Federal Government is literally paying rich people to keep their own stock prices high. It’s the illusion of stability. I’m not fucking with you and I’m not exaggerating. That’s what it means.
Why is the government doing this? Because the monetary system is the most important thing in the entire universe and the hope is that maybe some of these companies will have sooooo much of your money that one day they’ll have to actually hire people. But, mark my words, that will not happen until quantitative easing ends because there’s no motive for companies to spend money when they can make money doing nothing at all. That probably seems like evil, right? No one could be that evil. Well, it’s not seen as evil. It’s seen as the best and least disruptive way to get money into the economy without giving it directly to the people which, they believe, would be disastrous for our large banking institutions who count on people asking for money rather than having it.
So, here you are, a Millennial. You were screwed by being introduced into a system of job getting and career making that no longer existed and now the Federal Government is spending your money (oh, it’s all borrowed from you, did I forget to mention that?) on shoring up the accounts of the wealthy so that hopefully they might, at some point, loan YOUR money back to you or some company so that they can hire you with it.
Got that? Yeah, you should probably be more pissed off than you are. No one’s looking out for you, not even me.