In a recent article, I pointed out that the election year cycle “rich-versus-poor” fight is being ramped up by the media in an effort to get people thinking once again in terms of “us-versus-them,” “left-versus-right,” etc, etc.

PIMCO’s El-Erian had this to say about income inequality:

“The Federal Reserve and other central banks may have increased income inequality with policies that boosted prices of stocks and other assets without having a commensurate effect on the economy,” said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co.

In a lecture prepared for delivery at the Fed Bank of St. Louis today, El-Erian said central banks may be nearing the limits of their ability to spur growth and suggested that the “collateral damage” their policies are having on the economy and financial markets may soon outweigh the benefits.

[By “collateral damage” may I assume he means skyrocketing gasoline and food prices that are destroying the middle class, which have already destroyed the working poor, but about which the rich care little? One may only wonder, but it seems obvious, doesn’t it? I am just a little troubled by being referred to as “collateral damage.”]

The unusual activism of central banks may, at the margin, have worsened further wealth distribution,” said El-Erian, whose company is manager of the world’s largest bond fund. “To the extent that such policy activism succeeds in bolstering asset values, but not the real economy, the rich benefit disproportionately.

“Unusual activism” is a polite way of saying “market distortions.”  Markets work, unless they are interfered with.  So the Fed’s policies benefit the owners of capital, at the expense of labor. How shocking to find out who the Fed serves.  BTW, the reason the Soviet Union collapsed was economics.  It was a direct result of their managed economy.  They manipulated their markets by bureaucratically controlling prices, and guess what?  The economy collapsed.  WHEN WILL WE LEARN?

Zerohedge weighs in on the labor-capital situation (chart at link):

Back in June 2011, Zero Hedge first pointed out something very troubling: the labor share of national income had dropped to an all time low, just shy of 58%. This is quite an important number as none other than the Fed noted few years previously that “The allocation of national income between workers and the owners of capital is considered one of the more remarkably stable relationships in the U.S. economy. As a general rule of thumb, economists often cite labor’s share of income to be about two-thirds of national income—although the exact figure is sensitive to the specific data used to calculate the ratio. Over time, this ratio has shown no clear tendency to rise or fall.” Yet like pretty much every other relationship in the new normal, this rule of thumb got yanked out of the socket, and the 66% rapidly became 58%. This troubling shift away from the mean prompted David Rosenberg to say that “extremes like this, unfortunately, never seem to lead us to a very stable place.”

An accurate reading of the above reveals the working classes are being sacrificed in order to maintain the elite power structure, the one that supports (with “campaign contributions”) the political system.  The rich are being actively and deliberately kept so, at the expense of the working classes.  This is a direct result of the Federal Reserve’s money-printing policies.  The more actively the economy is “managed,” the more distorted it becomes.  1+1=2.  What do we have to do to get our free markets back?  Vote for Romney?  Riiiiiiiight.

Some years ago on these very pages, I predicted a slow death for the middle classes along with endless, guaranteed profitability for the banks.  Welcome to the new normal, citizen.

Rather than hating each other and trying to ignite class warfare, here’s what we need to do:

  1. Flatten the tax structure
  2. End deficit spending: now, today
  3. Close the Federal Reserve and declare the sites to be monuments to the greed, stupidity, and venality of humans, which is exactly what they are
  4. End all market manipulations, tax code favoritism, social engineering, and business-destroying regulations
  5. Stop paying people to not work
  6. Occasionally pause from your labor to appreciate the wonder that America will become again