The Coming Great Wealth Transfer

Key Concepts Public Key Concepts
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In Part 1 of this article, author Chris Martenson explains the Great Wealth Transfer, the mechanisms driving it and its inevitable outcome. In Part 2: Winning The Great Wealth Transfer (premium content), he shares insights on how to ensure you're on the winning side of the Great Wealth Transfer.
In the past, I've warned about the coming Great Wealth Transfer. But now we need to talk about it in the present tense, because it’s here.

And it will only accelerate from here on out. The Rich will get richer at the expense of everybody else.

This isn’t personal. It’s simply a feature of what happens near the end of a debt-based monetary system run by corruptible humans.

Of course, those in charge don’t think of themselves as corrupted or villainous. I’m sure that Federal Reserve Chairs Greenspan, Bernanke and Yellen all think of themselves as good and decent people doing “God’s work”. But the truth is they’ve irrevocably harmed millions – if not billions – of innocent people.

They and other central bankers have become the standard bearers of a system that can best be described as a reverse Robin Hood scheme, one that takes from the poor and gives to the rich. It’s just that in this tale, the ‘poor’ means everybody not in the top 1%.

So you need to understand this wealth transfer process – how it works, who’s perpetrating it, and what dangers to watch for. If not, you’ll be a victim of it. And you’ll probably live in confusion and shock by how hard just ‘getting by’ becomes going forward.

Realizing that you’re being specifically targeted by a system determined to separate you from your wealth is the essential first step towards figuring out how to evade the predators and protect yourself.

The Great Wealth Transfer, Act 1: Financial Repression

What do we mean by a Wealth Transfer?

It isn’t just some academic concept. It’s a playbook that’s been used many times in the past by governments to forcibly extract wealth from the public and use it for the benefit of those in power.

The first part of this Wealth Transfer process is called Financial Repression. It’s an extremely effective – and nefarious – financial engineering scheme, which we’ve discussed here at PeakProsperity.com many times over the years – notably here, here, here and here.

Financial Repression is enacted when governments take on too much debt (which they often do!) and find themselves with few politically acceptable ways of escaping that situation. So, in ways both overt and covert, they conspire to use the public’s savings to dig the government out of its debt hole.

The formula for Financial Repression

  • Step 1: A government (or an entire nation) gets into trouble by borrowing too much.
  • Step 2: Rather than pay this debt down honestly via cutting spending (unpopular) or by defaulting (even more unpopular), the government conspires with the central bank to slowly liquidate its stack of obligations by forcing negative real interest rates on everyone -- that's when you get paid less in interest than the current rate of inflation. So if you're getting 0% on your savings, but annual price inflation for the things you need to live is more like 5% (sound familiar?), you lose.
  • Step 3: But there’s a problem. Negative interest rates don’t work if people can dodge the Financial Repression by parking their money safely elsewhere. So a ring fence has to be built -- using capital controls and explicit interest rate caps on and across the whole spectrum of interest-bearing securities. Nobody can be allowed access to investments offering positive interest rates. And to prevent people from simply hiding their wealth under their mattresses, cash can be outlawed. (This is what the "war on cash" and the talk of moving to a "cashless society" is really about)
  • Step 4: Sit back and watch with glee as everyone with savings silently and steadily has their purchasing power transferred to the debtors, be those public or private entities. You see, lower real interest rates not only reduce the government's costs of servicing its debts, but they erode the real value the debts themselves. The government is deliberately killing the value of the money we've worked hard to earn and save, for the sole purpose of avoiding the consequences of its reckless borrowing. They get a hall pass; we get screwed.
This is theft, plain and simple -- engineered theft of the highest order. It takes from the many, without their consent. It's not openly debated, put up to a vote, or even openly admitted to. It's deliberately done behind the public's back.

This is what Janet Yellen and her merry band of thieves at the FOMC are carefully administering. Seniors who can’t afford to live on their savings? Young adults who can’t afford to buy a home? The central bankers ignore them, as well as the social pain and economic misery their policies are inflicting on hundreds of millions of people.

But make no mistake, the loss of income that the Financial Repression inflicted by these sociopaths has harmed the elderly, pensioners, savers, and the young. Plus inflated the biggest asset bubble in history, which will make 2008 look like a picnic when it bursts. All to prolong the government’s out-of-control spending addiction a little bit longer, and to put even dollars into the pockets of the banks and the wealthy Elite.

Delaying The Inevitable (A Slow But Steady Decline)

So Financial Repression is Act I of the Great Wealth Transfer. It’s happening now, and it will likely persist for a lot longer. Sadly, it will continue for as long as the banks, the Fed, and the politicians can get away with it -- until the economy collapses under all the debt and/or the impoverished public breaks out the torches and pitchforks.

The middle class will experience this as a steady erosion of their financially security. It’s a drip, drip, drip style of torture. Every year, your income and savings will buy less. The value of your money will be in terminal decline.

Those who don’t understand Financial Repression are probably still confused by Trump’s victory. But if you realize that the vast majority of the people of the United States (and Europe and Japan) have been tossed under an economic bus to help serve the narrow interests of a tiny financial elite, and are barely hanging on to a middle class lifestyle as a result, electing an anti-establishment firebrand candidate suddenly makes a lot more sense. It explains the similar rejection of incumbents we’re now seeing across Europe.

Virtually everybody in the bottom 95% is being economically and financially sacrificed to bail out the prior bad decision of the central banks and their associated governments. And as that’s deeply unfair, it breeds resentment. Psychology tells us that resentment breeds contempt. And once there, relationships are doomed to fail. Our leaders have broken their covenant with the governed, and the governed are increasingly pissed. Expect that simmering anger to boil over at some point.

But, as mentioned, Financial Repression is just Act I. Act II is a lot more ugly.

Financial Repression is a way to delay the day of reckoning. That day will still arrive, and be all the more destructive for the pent-up forces that have built up during the delay.

How The Death of Paper Currency Will Redefine Wealth

At the heart of the matter here is that too many debts, too many claims, have been created. There's a finite amount of "real stuff" in the world (productive companies, farmland, mineral ores, timberland, buildings, railways, waterways, etc). But with each new issue of debt, the claims on that real stuff multiply.

So what’s at risk here is an inflection point where the world realizes it’s holding a lot of paper, but little of substance. At that moment, the value of nearly every financial asset – stocks, bonds, mortgages, derivatives – even and especially our own currency – will be sharply, painfully reduced.

In Part 2: Winning The Great Wealth Transfer, we detail what that re-adjustment process will look like and where the carnage will be most extreme. More importantly, we explain that even though the paper losses will be staggering, the number of “real things” – those factories, acres and commodities – won’t have changed at all. Merely their ownership will have changed. And that will make all the difference in determining winners and losers.

Click here to read the report (free executive summary, enrollment required for full access)

This is a companion discussion topic for the original entry at https://peakprosperity.com/the-coming-great-wealth-transfer/

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I absolutely agree with the Peak Prosperity message however I have come to realize that the timescale for decline is measured in decades. There are phases of decline and even after monetary or political collapse many institutions limp on for decades eventually giving way or being absorbed into new governments and constitutions; hopefully better than the last maybe worse for another decade or three.
Prior to collapse truly wealthy will literally bury their wealth in the form of gold, jewels, infrastructure, paintings and real estate. All of which will lose buying power but who cares when half of a billion or even a quarter is still significant riches. Enough to guarantee membership in the next new establishment.
Those with a cool million may have their homes or land and be positioned to take advantage of opportunity but they will be scrabbling for them with all the other 8 billion desperate souls hungry for their next meal.
The upshot is that derivatives of the establishment remain to restart the same political processes around the same institutions The difference is that they will have learned something so that the same mistakes can be avoided for a few generations. Meanwhile the less fortunate will struggle on to take advantage of the opportunities left in the wake of carnage and loss. None of this leads to utopia. It is merely the resurfacing of opportunity that comes from destruction and rebuilding.
This is what history teaches us. The only difference with the current collapse is the size of the “state” (effectively three quarters of the world) ,the size of the population and its dependence on energy that suggests civilization must shed a lot of lives and suffer enormous pain to return opportunity as society slowly rolls over into something new
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A question I would like to get members views on is:
Will there be another episode of price deflation in nominal the prices of assets - stocks, real estate, farms, etc and without the system/currency collapsing?
Mean reversion is inevitable, but whether it happens in nominal terms is a key question imo. If one is on the sidelines with cash, say wanting to buy specific shares or an income/livelihood producing farm, waiting for a fall in asset prices in nominal terms makes sense - assuming it will actually come. My concern is that indeed “cash” won’t be allowed to appreciate (at least domestically) - that is, the plan of holding cash and buying things on the cheap will never pay off b/c the central banks will never allow nominal prices to fall very far (they will print money to buy and sustain prices as needed).
Alternatively, understanding the various way asset deflation will occur in real terms while maintaining elevated nominal prices could be helpful in positioning assets and deploying capital.
So, what does one do with excess “cash” - buy overpriced assets or wait for nominal decline in asset prices or …? Paying for an overpriced asset may be preferable to being the victim of a “bail-in”.?

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I think you have asked the crucible question, gkcjrrt. Will being in cash now be rewarded later? I don’t know the answer but I personally don’t feel comfortable investing in any assets at these elevated prices at the moment. However I share your concern that the central banks might be able to keep asset prices high and real interest rates negative for longer than I can stay solvent.
My calculation is that the next black swan event could occur at any time. The nature of black swan events is that central banks don’t see them coming. Say you have cash on the sidelines and the real negative interest rate on it is 5% per year. The purchasing power of that cash halves in 14 years (70/5 = 14). If a black swan event occurs within 14 years that halves all asset prices then being in cash is a winning strategy.

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Aloha! Kind of odd that given the current anti-wealth climate fostered by 2/3 of the global elite politics class that any form of portable wealth would be allowed to survive. I can smell the scent of the monied looking for ways out now. Besides since when has wealth ever been safe?
If you do not have immediate and unlimited access to food, water and shelter now then why is anyone thinking cash is their savior? I just read the latest data from US Farm Bureau that states now only 2% of US families have a farm or ranch and the costs to keep it are increasing faster than the production of farm related revenues. Also there seems to be a glut of those over 55 who do own a farm or ranch who have no way to pass the family farm onto their offspring. It seems agriculture has become a loathsome lifestyle for the younger generations. In other words there is no real money in it and there is nothing sexy about farm life as attested by the latest political references to the “fly over” states, which are mostly ag based. With that cycle in mind it seems we are way overdue for a food crisis. In my wanderings from Louisiana to Hawaii via California there is no … absolutely no … concern for farmers or food, as if the entire world has taken food for granted and shoved the family farm down the drainpipe of forgotten dreams. Farming is about as dead as dead can be in this World of politics and celebrity and for me that is a huge loud and bright red flag in the offing. Next time you have a crap load of cash sitting around and need to put it somewhere think about what it feels like to have no food, even if you own a billion in gold and a billion USD! No food … no water … no life! Not sure, but didn’t we all learn that in ninth grade biology?

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Agricultural land prices, here in the UK, is at all time highs. It has experienced double digit increases in price per year for the last 10 years or so. Hence it is another asset class I would be nervous in investing in at the moment.

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Average commodity production/acreX7 is a good measure for land cost. If you move much from that it is either a good deal, a lie, or speculation for use other than commodity production.

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yes, acting is more lucrative than farming. but can you live on a soap opera? Taoist philosophy states that the 3 necessities to continue life are AIR, WATER and FOOD. that would be a realistic viewpoint, therefore it would be a promary objective of a living organism to seek and protect these basics. unfortunately for the human being we have imagination, which has led us to believe in imagined priorities. we have changed necessity for desire and satisfaction for pleasure. I feel that our greatest challenge is to control the imagination and use feason to guide it for life promoting projects, not pleasure enhancing ¨ things ¨ Farming, or food production is a prime example. of course maintaining clean air is also of prime importance for our health and the health of all living organisms which form the ¨ WHOLE ¨ Imagination is an incredible tool, but when misused it has terrible consequences, take nuclear energy for example. or the internal combustion engine. they produce pleasure in the short term, but have dire consequences in the long term. cheers GO

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“Spoiler Alert” is a really bad pun on “The coming wealth transfer–it’s here.”
Just sayin’…

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Michael_Rudmin wrote:
"Adam, please try not to be so offensive in your headlines
Chris, no?
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I wrote the “spoiler alert” part.
Just not understanding what’s offensive about it…

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Here Mike:

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climber99 wrote:
Agricultural land prices, here in the UK, is at all time highs. It has experienced double digit increases in price per year for the last 10 years or so. Hence it is another asset class I would be nervous in investing in at the moment.
Climber, I'm not so sure that UK agricultural land is a poor investment. Long term anyway. The UK's Office For National Statistics [ONS] projects a 15% population increase between 2014 and 2039. The increase to 2027 - just 10 years away - is 8.4%. Intuitively we might surmise that more people = more hungry mouths = more demand for land [maybe even agricultural land] = higher prices. In my 15 years in the UK I heard a lot of gnashing of teeth by UK farmers, complaining that European farmers were significantly assisted with cheap production [or in some cases no production] because of the generous European subsidy system, while UK farmers earned a pitiful crust by comparison. That might change in future. If one buys into the theory that financial problems generally start at the periphery and work their way inwards then could that hold true for migration and land demand as well? Maybe. I'd say that the UK is definitely not on the periphery, and could hold its own - financially speaking - for a lot longer than other countries. Certainly the great migration currently occurring across Europe could end with vastly more UK numbers than previously thought. [In fact the ONS predicts that 51% of the UK's population growth in the next quarter century will be courtesy of net immigration.]

What I’m wondering is: what happens when the SHTF, incomes are low, jobs are scarce, and countries impose stricter nationalist/protectionist policies? [See Trump, Le Pen, Wilders.] Will that include food supply as well? What about access to land and the means of production? Food supply can definitely be used as a weapon [for instance, keep an eye out for it in the leadup to next year’s Zimbabwean presidential election… hunger comes around every 5 years, regular as clockwork - in fact my own family there will be in the crosshairs].
In Australia the value of our agricultural land over the past 3 years has soared, driven in huge part by the voracious protein demand by the the growing Asian middle class. I worked for Australia’s largest premium beef producer for 4 years - we were constantly fighting off blank Chinese cheque books for access to good agricultural land.
So, will future land prices be subject to “commoditisation” in the same way as other goods? Perhaps. If countries close ranks and borders then how will they sustain themselves if food imports dry up? The UK will have a hard time feeding its 74m people on relatively limited strips of land. What value will land have then? [And yes, legislated expropriation may well rear its head.]
Like all of us I’m extremely wary of bubbles. However, some present fewer risks than others. Despite double-digit UK price growth I’d be reasonably optimistic about its long term value, unless there’s a calamitous population event. However, if you’re only in it for the short term then you pays your money and you takes your chances.

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" It seems agriculture has become a loathsome lifestyle for the younger generations. In other words there is no real money in it and there is nothing sexy about farm life as attested by the latest political references to the “fly over” states, which are mostly ag based. With that cycle in mind it seems we are way overdue for a food crisis. "
It should be interesting on the future directions of farms go. In the US, the average farmer is about 60 years old and the age continues to increase. I think the US will probably end up importing foriegners to run farms. Afterall they did H1B Visa for IT workers, I am sure they will do something the same for farmers too. I suspect that big Agra will be given large gov’t grants to buy up unused farm land and them use tenate farmers imported from third world nations.
One issue is that food is key to keeping inflation under-control. If there is a food shortage it will drive inflation. Consider that the West cannot afford inflation because it so deeply buried in debt. They can’t simply put a Paul Volker in at the Fed that will drive up inflation rates to crush inflation. The Gov’ts and corporations cant’ even survive normalized rates of about 5% before going bust.
FWIW: I purchased a farm last year.I fear that at some point there will be a crisis that results in supply shortages. It might be triggered by another financial crisis, energy, geopolitical, or enviromential. I just don’t want to be 100% reliant on the current system whcih could begin to come apart at any time. While I don’t think a crisis will begin tomorrow, the risks continue every year. To be honest I do worry that I am behind the curve. its going to take me several years to get my farm operational and for me to learn what I need to know. I just hope that the current system, held up with duct tape and bubblegum doesn’t burst before I am prepared.

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Based in the above I feel there is a huge misunderstanding about modern agriculture. It is true the only 2% of the us pop now lives and works on an operating farm.
Ill throw a crazy theory out there, one that I am continuing to work on with facts. The average us farmer receives more benefits than any other working class (occupation) in the US. All major crops are subsidized in some fashion.
Also get this, demand for about 1/2 the corn crop is mandated via the RFS and ethanol. Take that demand away and we would be looking at sub $2.00 corn. Every person that fills their car with gasoline mixed with ethanol is in essence helping the farmer out, or having their wealth transferred, take your pick. The way modern farming exists, couldn’t exist without MASSIVE help from our fed and state governments.
Like is said it’s a working theory… But don’t believe for a second there isn’t enough ground to feed the world. A simple change in farming practices is all it would take.
For what it’s worth, I too believe ag land is overvalued. In the Midwest US at least.

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Puns are supposed to be painful and offensive, enough to make a person groan.
Kindof like the title of a book my son checked out from the library: “sign language for dummies”.
You should be saying "no. No. NO. Even as you approach the punch line.

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I can’t help but feel frustrated at the discussion on agriculture and its viability. Until you take the fossil fuel subsidy out of the question, there is no way to reconcile our current modern dependence on them to allow for 2% of the population to feed the other 98%. Charlie Hall has expounded on this subject, at length, and is now fly fishing out west enjoying his remaining days of the energy glut we are experiencing. His oft cited ERoEI ratio of 3:1 for basic subsistence, is, IMHO, still valid no matter how you wish to spin it. As long as you continue to have birth rates at the 4-5 children per family, you will continue to see the hill sides of equatorial Africa being impoverished and soil fertility declining. Our developed world hubris, on this subject, is only confirmed when we view our current societal and agricultural practices of taking productive land out of production through urban sprawl, over grazing, forest clearance and erosion.
When will we get it through our head that humans are a scourge on this planet at our current numbers and the planet’s ability to heal itself will come at a huge cost to us and the other species we share it with. Any scientific fix will only be short term triage of this condition. I referenced Jevon’s paradox in one of my earlier posts and will repost the “dumb-ed down” version for those inclined to understand the concept. Humans are the prime example of this inevitability.
https://www.youtube.com/watch?v=2S1mPOWRsSc

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PGP wrote
‘The upshot is that derivatives of the establishment remain to restart the same political processes around the same institutions The difference is that they will have learned something so that the same mistakes can be avoided for a few generations’
I agree with much of your post but not this. We’ve all seen video of bare foot water skiers zooming along behind a boat and seeming to defy all common sense by walking on water. It reminds me of our modern information-age civilization racing gloriously into the future.
Like the waterskier our society has used ‘props’ to advance to its current level of sophistication. The skier starts on waterskis and discards them when enough speed has been attained. Similarly our complex technological society has evolved step by step. As the next level is reached redundant systems (the waterskis) are abandoned. In telecommunications for example analogue systems have decayed after being replaced by a digital platform. ( More broadly many of the skills that underpin a less technological society have been lost - blacksmithing, leatherworking, seed saving, weaving, sewing clothes, growing and storing food…)
So what happens when a financial collapse dominoes into a commercial infrastructural collapse and takes out some critical links in the chain? We can’t just step down to the previous level. We’re like the bare foot water skier who finds himself going too slowly and is suddenly underwater!

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I can't help but feel frustrated at the discussion on agriculture and its viability. Until you take the fossil fuel subsidy out of the question, there is no way to reconcile our current modern dependence on them to allow for 2% of the population to feed the other 98%.
Unless all you eat is corn syrup, tortilla chips and vegetable oil the 2% of people that farm don't feed you. It's a fraction of that. Row crop, monoculture farmers don't feed the world. How crazy is this.. a modern row crop farmer fills his tractor with gas containing ethanol, he uses that tractor to plant corn, corn grows and the farmer puts fuel in his combine. The farmer then uses the combine to harvest the corn. The corn goes from a combine onto a semi-truck that runs on ethanol based fuel. The farmer then drives to the ethanol plant to sell his corn to be converted into ethanol. IF not for govt regs and subsidies (which the ethanol plants receive many along with local and state tax credits) this idiotic cycle would cease to exist. I'll debate the before mentioned about 2% feeding the world. If the majority of your diet comes from modern row crop farmers you better have good health insurance.
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MJB,
Your larger argument is basically correct, agriculture is really screwed up. However, no modern farmer has a gas powered tractor, combine, or delivery truck involved in growing of his corn or soybean crop. All modern operations use diesel engines for the overwhelming majority of farm tasks. Only a few of us old time and small time farmers still have gas engine powered machines and we try to avoid ethanol laced gas if possible.
As to the larger picture, as with many other memes, farmers needing to feed the world is a load of crap continually pushed by agribusiness interests in order to continue their profitability at any cost to the farmer, consumer, and environment. An example would be the feeding of antibiotics to beef cattle, hogs, and chickens. This need arises out of the close confinement of large numbers of animals that leads to stress and disease. This practice is done solely to allow industrialization of meat production without regard to antibiotic resistance among the human population. It should have been discontinued decades ago.
In my opinion, agriculture policy is determined with one thought in mind: How are the shelves always kept full to overflowing with a surplus of commodities to keep the price steady and the people generally satisfied. It doesn’t matter if the food is high quality or healthy, just so there is an abundance of it, and it is somewhat affordable.
Don’t get me started on Monsanto.