This article laments the loss of wealth in the US and wonders aloud “where did it all go”. Everything in the article is accurate but unless you already know the answer you are likely left wondering what you just read because a lot of it stays in the realm of the ethereal.
Here is an example of this from the article:
“the wealth a nation believes itself to possess is based strictly on the citizenry's expectations about the future. It is in good part a figment of the citizens' imagination.”
What is a person to take away from such a statement? That he owns stocks of imaginary companies? The statement is 100% true but it is nearly meaningless to most people unless more context is provided. I’m not sure this is intentional or whether these smart people simply don’t know how to boil down all of the information into hard, actionable facts. I half suspect that they are just cowards who use the techniques of talking around a subject and sophistry in order to avoid sounding like a conspiracy theorist.
The author is describing a credit based Ponzi scheme. Poor people have no idea it is happening. Middle and upper class people participate in it out of greed and they expect that government will be able to maintain it indefinitely. Thus they think they have wealth but the wealth only existed in the form of Wimpy Promises which is all most people are ever going to get from a Ponzi scheme. The elite, “illuminated” people, in other words, the ones that have been let in on the scam, get out early with as much as they can take with them. They know that, in the words of Citi’s Chuck Prince, the music will stop some day. That is why you see the employees of Goldman Sachs gutting the company from within by taking massive bonuses that exceed the operating earnings of the company. They know the scam is collapsing and they want out while there is still something to take with them.
In any Ponzi scheme people imagine they have wealth that never existed. Madoff patsies thought they were rich and getting richer with every lying monthly account statement he would send them. Yes they were Wimpy Promises but Madoff was a big man on campus, a real Wall St veteran and one time chairman of the NASDAQ stock market. He was just too proper and well connected to be a crook. A very large part of the wealth of the US is still held in Wimpy promises that cannot possibly all be kept. Like goldman employees, those who lay hands on their property first will have it and others will just stare in shock and disbelief when they finally realize there is not enough to go around. Every one of us should take some time to consider how we convert paper/ethereal wealth into something tangible that does not count on Wimpy promises from someone else.
