Welcome to the Biggest Transfer of Wealth in History

By Bill Bonner

Are we witnessing the biggest transfer of wealth in history? This writer thinks we are, so do I. America is now forced  to borrow billions of dollars just to pay for its food and energy needs!  And as the dollar continues to dive it is going to get much worse.

According to Associated Press, the “almighty” dollar no longer exists. America now has a currency with no purchasing power. Many Americans are using the last of their home equity lines and credit cards, which are fast evaporating.

As wages continue to fall families are forced to put more of their family members to work while giving up home-cooked meals and backyard barbeques in favor of dining out at fast food restaurants substituting cheap food for quality and consuming bigger and bigger portions as they watch their weight and health issues grow. One third of all Americans are overweight.

Now Americans are getting their super-sized desserts. Not because they haven’t been nice. But because they haven’t been good. That’s how free enterprise really works; it rewards virtue -- hard work, saving, investing, learning, taking risks, etc. As for those who spend too much and save too little -- it kicks them in the derriere.

Today, they need to borrow almost $3 billion per day simply to make ends meet. And half the national debt –- about $5 trillion –- is owed to foreigners. Much of that money is in the hands of central banks, as part of their $4.8 trillion in foreign reserves. Then, there is a mountain of dollars in the hands of Sovereign Wealth Funds.*

It’s the biggest transfer of wealth the world has ever seen. And it comes in many different forms. Billions are transferred from American motorists to oil-exporting countries. There’s also the billions transferred to the auto-exporters. When Americans buy cars today they’re more likely to buy one made by a foreign company than one made by the Big Three.

There are the billions shipped over to food exporters, too. America used to be the biggest exporter of food in the world. Even today, we’ve seen estimates that the entire world’s population could be fed on what America COULD produce. But when the United States got squeezed by high energy prices, Americans decided to squeeze energy out of their own food crops. Result: they pay record prices for energy AND food.

Of course, it wasn’t just money the U.S. was sending abroad. It was also know-how, technology, and habits. The habit of saving, for example, packed its bags in the early ’90s -- and moved to Asia. And foreign students filled America’s best universities and then often went back to Korea, or China, or Vietnam -- taking their equations with them.

Back at home, they set up newer, better factories – and ate America’s lunch! Back in the late ’90s, this loss of manufacturing seemed not to matter. Americans came to believe they could do something better than making things -- we could create, invent and finance. “They sweat; we think,” was the conceit.

But how do you like those foreigners? It turned out, they could think too. Not only that, but the combination of thinking and making things proved hard to beat. Like Japan before them, the exporting nations soon equaled U.S. quality…and then surpassed it. The United States is now a net importer – of energy…of food…and even technology.

At least, that’s what we hear. And finance? It’s collapsing…and will probably return to where it was before the credit bubble. Historically, the financial industry provided only about 10% of U.S. corporate profits. In the bubble, the percentage rose to 40%…and is now headed back down.

Wages are rising in China, India, Russia and Brazil…but they are stagnant or falling in the U.S. of A. We reported the staggering fact in these reckonings last week: Since ‘67, consumer prices are, officially, up seven times. Wages in America are up exactly the same amount. In other words, during your editor’s entire adult lifetime Americans’ per hour earnings have not increased a single penny.

Funny none of the presidential candidates mentioned it.

*From Wikipedia, the free encyclopedia --A sovereign wealth fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, or precious metals.