Robbing the Cradle: Feeding the Rich, Starving the Poor

Robbing the Cradle: Feeding the Rich, Starving the Poor

“People who treat other people as less than human must not be surprised when the bread they have cast on the waters comes floating back to them, poisoned.” ~ James Baldwin, 1924-1987, American Author

 Robbing the Cradle: Feeding the Rich, Starving the Poor

May 18, 2024

In today’s bustling metropolitan centres, a modern tragedy unfolds. The glittering skyscrapers and vibrant urban landscapes mask a silent yet insidious crime: the systematic impoverishment of the poor and elderly to enrich the already wealthy. This narrative delves into how the vulnerable are exploited today. It exposes the mechanisms by which the hardworking and the meek are left behind, their savings eroded by inflation and their livelihoods undermined by policies favouring the rich.

Plato once said, “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” This wisdom rings true today as economic disparities widen and the wealth gap becomes a chasm. Niccolò Machiavelli observed, “The ends justify the means,” a principle seemingly adopted by policymakers whose actions benefit the elite at the expense of the many. As we examine the plight of those struggling to make ends meet, it becomes clear that the current system is rigged to favour the affluent, perpetuating a cycle of poverty and inequality that undermines the very fabric of society.

 

 The Silent Killer: Inflation

Inflation, often called the silent killer, is a tax that erodes the purchasing power of money. For the poor and elderly, who rely on fixed incomes and savings, this is a double-edged sword. They work hard, but their earnings and savings are continually devalued by the government’s relentless creation of money out of thin air. This process, known as quantitative easing, is intended to stimulate the economy but often results in higher prices for basic goods and services.

Consider the case of Social Security payments in the United States. In 2022, the Senate rejected a measure to give 57 million elderly individuals, veterans, and persons with disabilities a $250 check. This decision came despite the fact that Social Security payments remained flat for the first time since 1975 due to a decrease in consumer prices during the worst economic recession in 70 years. Independent Senator Bernie Sanders, who sponsored the amendment, argued that it was wrong to turn our backs on seniors in this moment of economic difficulty. However, the proposal was defeated by a coalition of Republicans and some Democrats who argued that the law should not be changed.

The Real Definition of Inflation

The true definition of inflation is an increase in money supply, not just an increase in prices. Over the past decade, the money supply has surged, and the national debt has doubled. Despite this, the effects of inflation are not always immediately visible. Prices for essentials like gas, heating, and rent have steadily increased, while wages have not kept pace. This disparity means that the poor and elderly are effectively being robbed of their purchasing power.

The Impact on Savings

For those on fixed incomes, the erosion of savings due to inflation is particularly devastating. In the 1950s, a person who saved diligently could afford to buy a decent home. Today, even after significant market corrections, the average person struggles to afford a home on their salary. This is a stark illustration of how inflation disproportionately affects those who are least able to protect themselves.

 Government Priorities

Adding insult to injury, the government often prioritizes bailing out large financial institutions over helping those in need. During the financial crisis, billions of dollars were lent to banks that played a significant role in creating the economic turmoil. Meanwhile, individuals who needed assistance struggled to receive even a modest $250 check. This disparity highlights a systemic issue where the rich are protected, and the poor are left to fend for themselves.

Precious Metals as a Hedge

One of the best hedges against inflation is investing in hard assets like gold and silver. Over the past two decades, the price of gold has increased by approximately 400%, while oil has seen an even more dramatic rise. These commodities retain their value over time, unlike fiat currency, which can be devalued by inflation. For those who had the foresight to invest in precious metals, the impact of inflation has been mitigated.

Real examples

The refusal to increase Social Security payments is just one example of how the system fails the vulnerable. Another example is the rising cost of healthcare, which disproportionately affects the elderly. As medical expenses increase, those on fixed incomes find it increasingly difficult to afford necessary care. This is compounded by the fact that many elderly individuals rely on Social Security as their primary source of income.

The refusal of the Senate to provide a $250 check to 57 million elderly individuals, veterans, and persons with disabilities in 2022 is a stark example of how the system often fails the most vulnerable. Despite the rising cost of living, these individuals were denied a modest increase in their income, highlighting the need for personal financial strategies that can mitigate such systemic shortcomings.

Moreover, the rising cost of healthcare and housing further exacerbates the financial strain on the poor and elderly. As medical expenses and rents increase, those on fixed incomes find it increasingly difficult to make ends meet. This is where the strategy of living below your means and investing the savings becomes crucial.

Living Below Your Means: A Path to Financial Security

In a world where consumerism is rampant, and the pressure to keep up with societal standards is immense, living below your means can seem like a radical concept. However, this strategy is not only practical but also essential for building long-term financial security. By living 1-2 standards below your means and deploying the saved money into the markets, individuals can protect themselves against the silent killer known as inflation and ensure a more stable financial future.

Warren Buffett and Charlie Munger, two of the most successful investors of all time, have long advocated for the importance of living below one’s means. Both have famously lived in the same modest homes for decades, despite their immense wealth. This lifestyle choice has allowed them to save and invest a significant portion of their income, leading to the compounding of their wealth over time.

Buffett once said, “It’s pretty easy to get well-to-do slowly.” This statement underscores the importance of patience and consistency in building wealth. By saving a portion of your income and investing it wisely, you can take advantage of the power of compounding. Munger echoed this sentiment, emphasizing that “the big money is not in the buying and the selling, but in the waiting.” This long-term perspective is crucial for achieving financial success.

Inflation erodes the purchasing power of money, making it essential to invest in assets that can outpace inflation. For those living on fixed incomes, such as the elderly, inflation can be particularly devastating. Their savings lose value over time, and their ability to afford necessities diminishes. This is why investing in assets that can provide a hedge against inflation is crucial.

Buffett and Munger have consistently highlighted the importance of investing in quality assets that can withstand economic fluctuations. For example, gold and other precious metals have historically been effective hedges against inflation. Over the past two decades, the price of gold has increased by approximately 400%, providing a buffer against the eroding effects of inflation.

 

 Practical Steps

1. Budgeting: Create a budget that allows you to live 1-2 standards below your means. This might involve cutting back on non-essential expenses and finding more affordable alternatives for necessary ones.
2. Saving: Allocate a portion of your income to savings each month. The power of compounding can grow even a modest surplus significantly over time.
3. Investing: Deploy your savings into the markets. Buffett has consistently praised index funds as a reliable way for most investors to gain exposure to the market. These funds offer diversification and have historically provided solid returns over the long term.
4. Education: Continuously educate yourself about investing. Both Buffett and Munger are avid readers and lifelong learners. Understanding market dynamics and investment principles can help you make informed decisions.

Conclusion: Robbing the Cradle

“Robbing the Cradle: Feeding the Rich, Starving the Poor” is not just a narrative but a call to action. The current economic system benefits the wealthy at the expense of the poor and elderly. Inflation, the silent killer, erodes the savings and purchasing power of those who can least afford it. Government policies often exacerbate this issue by prioritizing the needs of large financial institutions over individuals.

To protect against the evils of inflation, individuals must consider investing in hard assets and living below their means. However, systemic change is also necessary. Policymakers must recognize the impact of inflation on the most vulnerable and take steps to ensure that economic growth benefits everyone, not just the wealthy few.

Baron Wessenberg once said, “Nothing in the world is more haughty than a man of moderate capacity when once raised to power.” It is time for those in power to remember their duty to all citizens, not just the privileged elite. Only then can we hope to create a fair and just economic system that truly serves the needs of all?

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