Chris’ note: Daily Cut regulars know there’s no shortage of opinions in our mailbags about what’s better for America – capitalism or socialism. (Catch up on the latest back and forth here.)

But in his Diary e-letter on Friday, Legacy Research cofounder Bill Bonner exposed a side of the debate few people are talking about. As you’ll see, it isn’t socialism or capitalism that’s running America… and what’s really running the country affects your pocketbook no matter where you stand…

Last week at the Diary [catch up here and here], we saw that socialism – in all its forms – doesn’t work very well.

You soon run out of other people’s money. And people don’t always want to give up their money readily. Or let you boss them around.

Inevitably, the more ambitious your plans, the more people you need to kill.

Reform Capitalism

But today, we turn our attention to those who say we need to “reform” capitalism to save it.

In this category, we lump all those who claim to support free markets – such as most of today’s Republicans and Democrats – but still think they can make them work better, with trade barriers, phony tax cuts, fake money, fake interest rates, regulations, controls, etc., etc.

Journalist Edward Luce, for example, writing in the Financial Times, explained that we need to “save American capitalism from itself.”

Whenever you read somebody in a newspaper suggest that “we need to,” you can be almost sure that the next words are nonsense. This is no exception.

“The question America’s financial and tech elites must ask,” Luce continues, “is ‘what price social peace?’”

Circuses are not enough; the mob wants more bread. And after having cheated them out of trillions, Luce thinks we should at least toss them a few crumbs.

Winners and Losers

The first thing we notice is that anyone who says he wants to “reform” or “improve” capitalism must not know what it is.

Capitalism doesn’t allow you to pick winners and losers. There is no way to improve it. And it doesn’t care whether there is “social peace” or not.

It is a free spirit… wandering around, with no knowable destination… going where it wilst, at its own speed, in its own way.

Where it will end up, no one knows; but wherever it is… it is where it should be. And it must be left alone, unmolested and undisturbed… or it will end up somewhere else!

Which is precisely what so aggravates the world improvers.

Rising Democratic Socialist star Alexandria Ocasio-Cortez (AOC) and Bernie Sanders whoop for socialism because they think capitalism has failed.

The reformers – Luce and billionaire investor Ray Dalio – think it has succeeded too well; leaving the masses hopelessly behind.

But the lynch mob – socialists and capitalist apologists alike – has grabbed the wrong man.

America’s economy is not really capitalist. It is a form of late, degenerate state-controlled, crony-manipulated, empire-addled, pseudo-capitalist claptrap. And you can quote us on that!

A quarter of the economy is directly run by the feds. Another quarter – including medical care and education – is guided and approved by them. And the remainder is chock-a-block with rules and regulations… All of them intended to upgrade, or at least to genetically modify, the fruits of naked capitalism.

We don’t know what America would look like if capitalism were permitted. But it would certainly be a whole lot richer. Especially the working stiffs.

Socialism is always a drag on an economy. And the more the feds decide who wins and who loses, the more they tilt the playing field to favor their friends, cronies, and the Deep State elite.

We’ve seen studies suggesting that if economic freedom had been allowed in the USA, average incomes would be more than twice what they are today.

JPMorgan Chase’s CEO, Jamie Dimon, says the U.S. economy should have added $4 trillion more to GDP in the last decade alone; it should have grown by 40%, not 20%, he says.

“Why have productivity and economic growth been so anemic,” he asks? Good question. And here’s the companion question that Edward Luce should have asked: “How come the rich got so rich while everyone else was losing ground?”

Here’s why…

Giveaways and Throwaways

Every year, trillions of dollars of output are wasted. Silly wars, goofball programs, giveaways, and throwaways – at least half the federal budget is tossed down the drain.

As Bonner-Denning Letter coauthor Dan Denning showed recently, the government’s entire monthly budget was sunk on just three federal spending items: Social Security, Medicare, and interest on the national debt.

Then, too, all the paperwork, delays, malinvestments, tax filings, labor-law mandates, make-work, and standing in line demanded by the feds must easily cost the nation another few trillion.

And we haven’t even gotten to the big losses, caused by the feds’ fake money system. There, of course, is where we find the real source of the “inequality” that so worries Obama, Dalio, AOC, and so many others.

It was not capitalism that boosted stock prices close to 150% of GDP while wages flattened. Normally, the stock market is worth about 80% of GDP. That would mean about $16 trillion worth of stocks today. But at 150%, investors – the rich and the elite – got some $14 trillion more.

Where did that money come from? Why were America’s corporations suddenly worth so much more?

Looking at pre-tax earnings, we see that corporate America hardly made a penny more in 2018 than it had in 2012. In an honest, capitalist system there was no reason for stocks to go up. But the fix was in.

The feds were lending fake money at fake rates, so the corporations could earn fake profits and buy back their own shares with free money.

The result? A huge shift of wealth from the middle classes of Main Street to the upper classes of Wall Street, Washington, and cronies everywhere.

Did these pseudo-capitalists say “Thank You”? You bet they did!

They slipped the feds campaign contributions; they offered jobs in their think tanks and lobbying firms; they gave them lavish “speaking fees” for blah-blah about nothing to people who weren’t even listening.

And now, having banged, bent, and bamboozled capitalism for their own ends…

…and feeling perhaps a little guilty… and worrying that the masses might be getting restless… they propose to take a sledgehammer to what’s left of it.



Bill Bonner
Cofounder, Legacy Research


Chris here – Last Thursday, we shared Bill’s take on the capitalism vs. socialism debate. As Bill put it…

The capitalism versus socialism debate is a red herring. There are only two ways to get what you want – win-win deals or win-lose deals. There is no other way. You either cooperate or you defect. You either give to get… or try to get without giving anything in return. It’s either reciprocal or it’s not. It’s either voluntary or it’s forced.

And it’s got your fellow readers thinking…

I agree with Bill’s view of win-win vs. win-lose. However, these are only symptoms, albeit important ones. After escaping from the German Democratic Republic under dramatic circumstances, I have firsthand experiences with both [socialist and capitalist] systems.

Uncontrolled capitalism is not the ideal choice as we can see today in the power of the elite, as well as in history. The best system as experienced by me was in West Germany, after my escape. It had the ideal combination of value-producing capitalism and a caring social attitude throughout, with the support of education.

This is a typical example of how to combine capitalist behavior looking for return on investment with social attitude, to help qualified but poor youngsters build on their qualities to advance in life, instead of depending on handouts. This produced a working win-win atmosphere and attitude.

As soon as any one group claims more power or privileges above the rest, it distorts the natural balance and harmony – whether you call it capitalism or socialism. Both in isolation are bad for the well-being of the people.

– Gerhard G.

When I was growing up, during the Cold War era, part of our high school curriculum was a mandatory class: Americanism vs. Communism. There was a starker, more obvious difference than the debate today between capitalism and socialism.

Socialism is portrayed as attractive. However, it is simply a group of politicians that wants to be in charge and promise all kinds of “free” things. The only way of paying for the “free things” is to continue to raise taxes and devalue the currency, making all of these “free things” more and more of a burden on the people who are “benefitting” from them… and even the people who are productive and are not interested in receiving the “free things.”

– Peter M.

Is a combination of socialism and capitalism the best solution, as Gerhard G. believes? Or should socialism have no place in the Land of the Free, as Peter M. says? Write us at [email protected].



Chris Lowe
April 22, 2019
Dublin, Ireland

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