We had no proof. Just an observation. But it looks to us as though government always begins and ends as a tool for those who control it.

It is not the product of a “social contract.” It is not an expression of the “general will.” It is not the “price we pay for civilization.” It is not “captured by wealthy special interests.”

On the contrary, it is as blunt and stupid as a crowbar. It is used by the elite to pry wealth, status and power away from everyone else.

Few victims of the public school system believed us, but now cometh a study from Princeton and Northwestern universities proving we were right. From a report by United Press International:

Oligarchy is a form of government in which power is vested in a dominant class and a small group exercises control over the general population. 

 

A new study from Princeton and Northwestern Universities concluded that the US government represents not the interests of the majority of citizens but those of the rich and powerful.

 

“Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens” analyzed extensive data, comparing nearly 1,800 US policies enacted between 1981 and 2002 with the expressed preferences of average and affluent Americans as well as special interest groups.

 

The resulting data empirically verifies that US policies are determined by the economic elite.

 

The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence,” says the peer-reviewed study.

Win… Win… Win…

Yes, dear reader, the elite run things.

That’s why we have QE (quantitative easing), for example. The banking cartel is perhaps the most powerful group in America. Its oligarchs want to make a profit. How better to do so than to lend themselves money for practically zero interest… then use that money to lend to Washington at a higher rate?

Everybody wins, right?

Washington gets the cheap funding it needs to continue handing out billion-dollar contracts for things we don’t need… and banks earn a fat margin on the newly created money. Hey, and maybe the “wealth effect” will drip a few shekels onto the poor schmucks who still think their votes decide things.

Win…win…win…

One of the most special of special interests in America is what President Eisenhower (previously a five-star general in the US Army) called the military-industrial complex.

When the feds ran low on money they decided to cut the Pentagon back a bit. (Why not? We have no enemies worth mentioning… at least none that we didn’t create ourselves). That was the famous “sequester” worked out by the bunch of hacks and slacks who call themselves Congress. Rather than agree to cut spending, Congress decided to let the budget cut itself – automatically – in future.

The Old DC Trick

Well, the future is here. And here comes Representative Paul Ryan with a budget designed to put the military-industrial industry back in high cotton. Ron Paul describes it:

The Republicans are using the old DC trick of spending less than originally planned and calling that reduced spending increase a $5.1 trillion cut in spending. Only in DC could a budget that increases spending by 3.5% per year instead of by 5.2% per year be attacked as a “slash-and-burn” plan. 

 

Last week’s budget debate showed how little difference there lies between the parties when it comes to preserving the warfare-welfare state. One side may prefer more warfare while the other prefers more welfare, but neither side actually wants to significantly reduce the size and scope of government.

Adds Jon Utley of the American Conservative magazine:

The former chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, said “the greatest threat to our national security is our debt.” In the final analysis Ryan is not a leader, he’s just another puppet of the military-industrial complex. If he really cared about American defense he would take up some of the many ways to stop wasting money and make America truly stronger and more competent.

Now we know: There is nothing “wrong” in Washington. There is nothing we can fix. No one is making a mistake. This is just the way government operates: It rewards the people who control it… and punishes everyone else.

Regards,

Bill

Editor’s Note: There are elites in the investing world, too. Bill’s son Will recently “infiltrated” a group of very wealthy investors in London. What he discovered turns most of what you think about investing on its head. If you ever wondered how the rich really got rich… and how you can use their secrets to build wealth for yourself… read Will’s report.

Market Insight:

Why Are Small Caps Breaking Down?
From the desk of Chris Hunter, Editor-in-Chief, Bonner & Partners

US stock market investors are shrugging off Wednesday’s weak Q1 GDP report, which came in at 0.1% versus the consensus forecast of 1.2%.

The Dow Industrials closed at a new all-time nominal high mid week. And the S&P 500 is 1% below its all-time high.

This shouldn’t come as too much of a surprise…

There have been six quarters over the past 15 years where GDP has come in one percentage point or more lower than expected. According to data from Bespoke Investment Group, in the month following these disappointing releases the S&P 500 was down only once… with an average gain of 1.4% for the following month. (GDP reports are, after all, backward looking. And stock market investors are concerned about the future.)

The weak link in the US stock market is the more growth-focused indexes that led the way up in this rally: the tech-heavy Nasdaq and the small-cap Russell 2000.

The Nasdaq is down more than 5% from its March peak. And the Russell 2000, pictured below, is down more than 6% from its all-time high in March.

Old-timers have a saying: “The stocks that lead the way up lead the way down.”

If you want to know what’s in store for the US stock markets… keep a sharp eye on the Nasdaq and the Russell 2000. If these indexes break down further, it will be bad news for the big blue-chip indexes too.