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The Reason the Rich are Getting Richer is Because Inflation Pushes Money Up and Inflation is Accelerating

By: Steve Johnson

9/18/2009 - 56 Comments

Michael Moore has produced a new movie titled, “Capitalism, A Love Story” in which he suggests that Capitalism has caused 1% of the population to gain 90% of the wealth, while the middle class has been pushed into poverty.

I must admit I have not seen the movie, only read the reviews.  From my understanding, Michael believes that capitalism is the cause for global poverty and therefore all nations should turn to socialism.  Nothing could be further from the truth.

Michael believes that capitalism is the reason that the rich are getting richer and the poor continue to get poorer.

The rich are getting richer; there is no question about that. The question is why are the poor getting poorer?  Michael lays his case against capitalism based on the decrease in labor wages and the increase in CEO incomes.

The Real Problem

The real problem that causes the poor to remain poor is not capitalism, but government central planning that does not allow capitalism to function and instead plays an active role in trying to force the market to distribute money in ways that it would not normally do. 

The real problem is the current economic system, which Michael believes is capitalism – when in reality it is only partially capitalism and partially government central planning. 

The redistributions of money from government central planning causes the market to react in such a way that it results in very bad investments (like in companies that build more cars and houses then the market can purchase) and a much larger amount of leverage available to the rich. 

In which, capitalism can appear to be the culprit while the real problem is the wrench in the system - otherwise known as government central planning.

Inflation is the wrench in the system that causes the poor to get poorer, yet the government continues to accelerated inflation because they benefit from inflation in so many ways

This is the primary theme of Senator Ron Paul's new book, "End The Fed". 

Central Planning Distorts the Market

When the government takes money away from working taxpayers and gives it to the poor, through a humanitarian policy like the sub-prime mortgage policy that the Democrats created with Freddie Mac and Fannie Mae, the poor end up bankrupt.

In this case, people that couldn’t afford homes were encouraged to purchase homes with zero money down and ultra low interest rates.  The result pushed up homes prices across the nation, causing a bubble in home prices that began to deflate in late 2006. 

Freddie and Fannie went bankrupt and the government was forced to bail them out and add the losses to the national debt for the next generation of middle class taxpayers to pay for.  This example shows how these policies distort the market and eventually result in everyone getting poorer.

Bad Policy Makers

The people that couldn’t afford homes are now bankrupt and the middle class taxpayers are stuck with the bill.  We need to understand that policies like these that are proposed by politicians who claim to be helping the poor under the disguise of a humanitarian need don’t actually help the poor.  They actually result is hurting the poor.

It is more humanitarian to vote against these policies then for them, but that takes an understanding of how these policies distort the market and an unselfish look at what is best for the national economy long-term.

Many politicians are willing to ignore the long-term damage in exchange for short-term prosperity and getting reelected.  They take advantage of the poor financial education of the public to buy votes with their policies that appear to be in good nature.

Non-profit groups like ACORN that support these far left-policies believe they are helping, when they are actually hurting the very people they are trying to support.  ACORN played a major role in getting Obama elected, by convincing many of the poorly educated to support Obama’s far-left agenda, without realizing that the long-term effects of the far left-policies are the source of the economic crisis.

Politicians like to hand out money because anyone who argues against them looks like they are not willing to help the poor, which results in a sure way to secure votes and build a political career.  

The late Senator Kennedy is another example. A lot of people are convinced that Senator Kennedy helped the poor with many of his policies to increase welfare and provide low income housing.  People who oppose his policies realize that he only made the poor poorer.  The uneducated poor don’t understand how the economics plays out and therefore they vote for the wrong guy that impoverishes them even more.

Every policy that hands money to the poor ends up costing the poor more money than they had in the first place.   The result is that giving money to the poor without increasing their financial education or creating inflation in the process only makes them poorer.

The only way to help the poor is by increasing their education or by giving them money from your savings (not by printing or borrowing money) and showing them how to invest it wisely to get out of poverty.

The current government polices don't do this and therefore they are the cause of poverty in America - not capitalism.  If Capitalism was allowed to function, our nation would be increasing wealth and everyone would benefit from it - mostly the middle class and poor. 

Michael Moore doesn't realize that the current social policies of redistribution and inflation are the cause for the distortion in the market and are the source of our troubles. Socialism is always destined to fail.

This discussion has gotten longer then I originally intended and therefore I’m going to continue another day with part 2.  Here is part 2.

Also, here is another article about inflation. What is the Likelihood of Hyperinflation in 2010, 2011 or 2012? Part 1: Why is Inflation So Hard to Stop and So Easy to Start?

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