On Wednesday, the International Monetary Fund (IMF) shared a troubling forecast regarding the U.S. economy. In its annual review, the IMF suggested that the current U.S. economic framework is failing to promote inclusive income growth.
On the same day, in a separate interview conducted by PBS Newshour, billionaire investor Warren Buffett echoed similar sentiments:
“The real problem, in my view, is this astonishing prosperity has disproportionately favored the extremely wealthy.
“Back in 1982, when Forbes first published their 400 list, those individuals had a collective net worth of $93 billion. Now, that figure stands at $2.4 trillion—a staggering increase of 25 times.”
Indeed, U.S. wealth has become increasingly concentrated in the hands of a select few over the past four decades. Simultaneously, the middle class has dwindled to a pale shadow of its former self. Wages remain stagnant, and well-paying jobs that used to support a family on a single income have vanished.
Meanwhile, asset prices, particularly in stocks and real estate, have surged. These escalating prices have amplified wealth for the affluent while excluding many, notably millennials burdened with low starting salaries and substantial student loan debts.
It is likely that asset prices will crash again, as they did during the years 2000-2002 and 2007-2009. However, such downturns won’t rectify middle-class earnings. So, what’s the solution?
Both the IMF and Buffett propose several recommendations…
Insider Claims to the Pie
The IMF has astutely identified detailed methods for rejuvenating the U.S. economy to “ensure a broad-based improvement in living standards.” Their suggestions even emphasize the “necessity of implementing reforms across several critical macroeconomic sectors.”
While the terminology might sound perplexing, the IMF has distilled it into a straightforward synopsis for enhancing living standards:
“[B]uilding a more efficient tax system, improving education and skills development, reprioritizing federal spending, enhancing regulatory effectiveness, and reforming the immigration and welfare systems.”
Sounds simple enough, right? Just a sprinkle of this and a dash of that, and before you’d know it, policymakers would concoct the perfect policy mix for elevated living standards for everyone.
However, this assumption neglects the reality that Congress is unlikely to disregard its commitments to lobbyists and special interests. These interests continuously chip away at the efficiency of reforms across taxation, education, and regulatory measures. For every proposed reform, there are vested interests vying for a slice of the pie.
Rather than streamlining the systematic impediments to economic progress, such reforms often exacerbate them. Insiders benefit while politicians secure campaign funding. Consequently, the general public—namely you—ends up footing the bill for ineffective programs that are unsustainable.
The truth is that the recommendations from the IMF are unlikely to be realized by the U.S. government in the 21st century. Moreover, as explored further below, they may even prove futile.
Work is for Idiots
Buffett’s suggestions, in contrast, are more aspirational. He advocates for the ultra-wealthy to part with their fortunes. Indeed, he and fellow billionaire Bill Gates are doing just that through their co-founded GivingPledge, which encourages rich individuals to voluntarily commit to donating at least half of their wealth.
The aim of the GivingPledge, as they state, is not only to assist those in need but to inspire others to follow suit, fostering a culture of philanthropy.
This certainly is a commendable initiative. For the super-rich, it may even cater to their sense of self-importance. But does it genuinely address the root issues at hand?
Does giving money to people without strings attached truly empower them, or does it perpetuate reliance? Furthermore, does it rectify the systemic injustices enforced by misguided—or perhaps malicious—monetary policies that hinder individuals from achieving self-sufficiency?
In essence, the recommendations posed by both the IMF and Buffett merely rearrange the deck chairs while the Titanic sinks. Even with flawless execution, these proposals will not prevent the impending disaster.
We observe that the U.S. economy is beset by a trifecta of challenges that undermine the rewards of hard work, saving, and personal responsibility. Simply put, the creation of fiat money by central banks, combined with fractional-reserve banking practices, leads to financial and economic instability.
Every new digital credit generated by the banking system diminishes value from the existing money stock, ultimately resulting in a covert expropriation of wealth from wages and savings while inflating asset prices. This paradigm diminishes the notion of ‘earning an honest day’s pay for an honest day’s work’ to a mere myth.
Thanks to the Federal Reserve, honest labor is now for fools. The safety net often proves more lucrative for many, prompting a shift toward gambling and other speculative endeavors.
Until the Fed’s detrimental practices are curtailed and Federal Reserve Notes are replaced with sound money, no IMF policy recommendations, philanthropic initiatives, or even increases in the minimum wage will genuinely reward hard work with just compensation. All attempts otherwise are merely superfluous noise.
Sincerely,
MN Gordon
for Economic Prism
