No Fear at the Top Over the Next Recession

 

Recessions are simply a short intake-of-breath for the rich
and there’s a reason why.
They invented a heads-I-win,
tails-you-lose
economic environment when we weren’t looking. It’s the
nearest we ever came to alchemy—the turning of base metals into gold.
Let me explain.

In a recession—or even a major
crash—two things happen.
1.  Things
lose their value. Stuff like houses and cars and shoes for your kids are
cheaper.
2.  Money
doesn’t do that. Money increases in value. The cash you stashed under
the bed, because you didn’t trust the banks, will buy more after a
recession.
But you and I, along with other
ordinary folk aren’t able to buy more, because our beds have feathers
inside, so it doesn’t help us. We’re having trouble enough paying the mortgage
and keeping our kids in school.
But the rich, the wealthy, whatever you choose to call those
dudes at the top, have lots of money—or access to it, which is pretty
much the same thing.
Those in this favored class always
buy heavily when a market bottoms out and if you own real-estate or heavy
machinery, there’s no better time to buy more. Recessions bring enormous
amounts of goods at auction and lots of good stuff is on the block, from
private jets to underwear.
Here’s another interesting thing.
Warren Buffet’s been recently criticized for hanging on to $122 billion in cash
at Berkshire Hathaway rather than investing it. My take on it is he sees a
serious recession coming on and, unsure of its timing, is holding on to the
dough. If things are worth less and money is worth more, he’s
simply patiently waiting, like a frog on a lily-pond that knows a big bug will
soon come along.
So the Dow Jones keeps going up and the banks announce
record earnings, because it’s not their money they’re playing with.
After all, what happened the last time? Those on the bottom lost their homes and
jobs, while those on top played various versions of “Happy Days are Here
Again
.”
No hedge-fund manager or bank CEO is going to lose his
multi-million dollar a year job, so you’re not likely to find much panic in
that rarified atmosphere.
Too big to fail finally has a corollary…
…it’s called too rich to fail.

 

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