Preface to all 21 parts: This is a special holiday weekend, because not only does it contain Good Friday and Easter, but it also begins the Slope of Hope's 20th year in continuous operation! Through the weekend, I will be sharing some of my favorite posts from the past, plucked from among the literally 30,000 posts I've created over the years. Here is one of them:
A bicycle ride gave me some clarity, and I wanted to share those thoughts with you now. And the clarity wasn’t a total accident. I was going to run an errand on my bike, and I told myself as I got on, “I’m going to think about asset inflation on this ride.” In this absurdly controlled market, one has to strive to create decent content, so I decided to put my mind to work.
So I took off. I love my neighborhood. I took a few moments of video on my bike to show how pleasant it is. Just block after block of this:
Beautiful homes. Neatly-kept lawns. For a suburban mutt like me, it’s heaven.
As I made my way through Crescent Park, I considered what’s going on in all these $8 million houses I was passing. The people who lived there had, on the whole, become richer in 2020, in spite of the awfulness of the year. They were all financially secure. Indeed, they were more secure than ever. What’s all this bitching about 2020? It was great!
Then I got to the Newell Street bridge. This is an old, narrow, tiny bridge that connects Palo Alto (where the Whites and Asians live) to East Palo Alto (which, no matter what progressive Bay Area resident will try to explain away, is where the Blacks and Hispanics go). With just a few rotations of the bike pedals, I’ve gone from the land of the rich (literally having just biked by Zuck’s house) to the land of shit.
Run-down cars. Derelict apartments. The working poor. All of them easily able to see the gorgeous homes through the eucalyptus trees on the other side of San Francisquito Creek
The people who live here had a shitty year. Sure, they had a bit of a bonanza for a few months, collecting unemployment that was actually a big “raise” from their normal income. But that’s gone now. It’s back to the grind.
But it’s worse than that. There’s a subtle rot going on that can be explained in part by a simple thought experiment: let’s say for some reason a fellow was strolling around University Avenue, handing out $100 bills to strangers. He doesn’t shout about it. He just wanders from person to person, gently and quietly handing them a bill, and then moving on.
What if he hands it to me? Well, that’s nice. I’m $100 richer. I’ll tuck it away. I don’t need it. I’m not going to spend it. It’s just a little extra savings.
How about the homeless guy – – the same one I’ve seen downtown literally since I moved here in the 1980s – – how does he react? Well, the $100 made his day. It’s probably never happened to him before. And, believe me, that money is going to get consumed in the next 24 hours. Hell, it’ll be consumed in the next 24 minutes. Maybe food. Maybe booze. But he’s about to have a $100 party.
And that’s the key difference. I came up with a term during my ride that I think sums it up nicely – – “Progressive Inflation“. What I mean is:
- The Fed is printing up trillions;
- Those trillions have gone to everyone, in some form or anything, although the vast majority to those who need it the least;
- For those at the bottom who got it……………it’s gone. Spent. Consumed. Never to be seen or enjoyed again.
- For those at the top, it’s all just added to the pile. The $50 million fortune is now $100 million. The deci-billionaire is now a centi-billionaire.
- There’s no inflation at the base level. The $2 bottle of Listerine is still $2. It isn’t going to be $50 just because Bezos is ungodly rich.
- The inflation exists above. The higher you go, the more there is. A good friend of mine (and a Sloper) who is a commercial jet pilot tells me that private jets are 40% more expensive than they were two years ago. I daresay that the ultra-high-end art auctions are seeing massive amounts of inflation. Why? Because there’s a shitload of free money from Jerome Powell that has landed into the laps of the ultra-rich, and they’ve got to do SOMETHING with it, right?
- Thus, there’s hardly any inflation at the food ‘n’ gas level, and Weimar-level inflation in the rarified air of the mega-wealthy.
In a sense, it’s as if the upper 1% has a whole new class of currency, separate and apart from what their underlings are spending, and this silo of mega-wealth is largely housed in equities. Does it matter that a guy with $200 million in paper wealth now has $400 million? No, not really. He’s not taking the food out of any baby’s mouth, now, is he?
So long as this reservoir of riches is safely behind the dam separating the “haves” from the “have-nots”, it’s as if they are in two separate worlds (and, as my little journey across the Newell Street bridge showed, they are). But that dam, as with all things, is impermanent. And what will erode that dam is resentment.
Because after a while the guy working the shitty job for the shitty paycheck paying the next installment on his shitty car in his shitty apartment is going to get fed up with reading how Jeff Fucking Bezos and Elon Fucking Musk each got another $20 billion in wealth today. Get enough millions of angry people involved, and maybe you’ve finally got something going.
As I was winding up my journey, about to exit the dismal East Palo Alto for my beloved actual Palo Alto, I came upon a scene which captured the entire situation beautifully. I give you this:
![ferrari](https://slopeofhope.com/wp-content/uploads/2020/12/ferrari-640x480.jpg)
It’s a Ferrari. I don’t know what it costs, but obviously hundreds of thousands of dollars. Those markings you see aren’t mine; they are from a body shop. Evidently there’s a little looseness here, and a tiny scratch over there. Minor imperfections. And here it is, literally next to a decrepit mobile home park, awaiting work at the body shop. Tremendous wealth surrounded by a shitstorm of poverty.
This is an awesome time to be rich. You get free money, you don’t have to pay taxes, and you don’t have to deal with the little people, except when you need your Ferrari tidied up. There’s going to come a day when the shit truly hits the fan due to all this. It’s probably years off. But, honestly, sooner or later, the hundreds of millions of people propping up the thousands of zillionaires are going to get sick of it. And that’s when things are going to get really politically dangerous. History has shown it, again and again.