Real Wealth to Phantom Wealth

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From Real Wealth to Phantom Wealth

Real wealth has intrinsic value. Examples include healthful food, fertile land, pure water, clean air, caring relationships and loving parents, quality education, affordable health care, fulfilling opportunities for service, and time for meditation and spiritual reflection. The most important forms of real wealth are beyond price and unavailable for market purchase. These include healthy children, loving families, caring communities, and a beautiful natural environment.

Phantom wealth is money or a financial asset that is unrelated to the creation of anything of real value. It can appear or disappear as if by magic, as in the case of the inflation and ultimate collapse of the tech-stock and housing bubbles.

Phantom wealth also includes financial assets created by debt pyramids, in which financial institutions engage in complex trading and lending schemes based on fictitious or overvalued assets in order to appear to generate profits and justify outsized management fees. Debt pyramids may be used as a device to feed financial bubbles.

The United States carried out two major experiments in money system design during the 20th century, one favoring the creation of real wealth for all, the other favoring the creation of phantom wealth to increase the claims of the few over the real wealth of the many -- a form of theft. The first, a response to the Great Depression, introduced financial reforms that limited financial speculation and supported the creation of a well-regulated and accountable system of local banks, savings and loans, and credit unions that functioned as public utilities responsive to community needs. This system helped to build the U.S. middle class and make the United States the most prosperous of nations, but left in place the basic structure of a system of concentrated financial power referred to as Wall Street.

Under the banner of the "Reagan Revolution," Wall Street interests mobilized their political power to role back the reforms of the Roosevelt administration through deregulation, privatization, and tax breaks for the very rich. As Wall Street institutions reasserted their control over the economy, they in effect organized themselves into a powerful syndicate engaged in legal and illegal criminal activities, including counterfeiting, usury, accounting fraud, loan sharking, corporate asset stripping, insurance scams, bogus securities ratings, and extortion. The production of useful goods and services became purely an incidental byproduct of Wall Street's core purpose of enriching its own most powerful players.

The result is a growing class divide and a weakening of the U.S. economic position in the world under a financial regime that consolidates the power to create and allocate money in the hands of a ruling financial elite for its exclusive private gain beyond the reach of public accountability. This is an inevitable result of deregulation and a particular set of money system design choices.