Income inequality is a topic usually employed by the left to pass further entitlements - often times just to secure more votes. But there is a real bubble about to burst that will have the rich getting richer and soak the average investor in the stock market.
Monday on The Glenn Beck Program, Glenn took to the chalkboard to break down how the system has historically worked compared to how it's running now - and the results aren't pretty.
"In the old way, let's take Ford. Ford started a company with Henry Ford. And let's -- I'm making this number up -- let's say he started with a million dollars of his own money, and he invested in that company. And he started with a million dollars that he didn't want to lose. And he started making cars," Glenn said.
"But he could only make a limited number of cars because he only had his million dollars. But he was making the cars that he wanted. So he thought, 'Okay, we can make a lot more money and a lot more cars if I get some investors.' The way you get investors is, you go to the stock market."
Enjoy this complimentary clip from The Glenn Beck Program:
The market would value your stock based on its EBIDTA --- earnings before interest, depreciation, taxes and amortization. As that number went up, the value of your stock went up and the more you could invest into your company to expand facilities and production.
The historical model could, theoretically, sustain itself --- and it has. But the new model might as well have been designed by Bernie Madoff.
"Let me show you how dangerous this bubble is and the entire world will now start to make sense to you," Glenn said. "Here's the new way. Here's the evil corporation, and it's run by the CEOs and the boards. And the CEOs and the boards -- unlike Henry Ford -- they don't have any money in this. They're hired guns. They have nothing in this company."
These hired guns are paid in cash and stocks, with their only intention being to raise the price of the stock by any means necessary.
Here's where things get hairy.
"Now, they already have stocks. They already have investors --- you. They're already traded. And let's say they make tablets. And it's good tablets. And everything is great. But their EBIDTA, their earnings before interest, taxes, depreciation and amortization is going down. What does it do to their stock price?" Glenn said.
"It drives it down. Who cares? You and the board and CEOs, right? CEOs really care because they've got a lot in stocks. So things are falling apart because the economy is bad, maybe jobs are being driven overseas, they can't make things as cheaply . . . whatever the reason is . . . mainly the economy is bad. Their earnings are going down."
When this happens, the stock price should be going down, but the hired guns are taking advantage of cheap loans from the federal reserve to buy up stock. This artificially inflates stock prices allowing these guys to sell off their own stock and cash in before the collapse comes, before the bubble bursts.
"You want to know how the rich get richer? Unlike you, these guys are watching the global economy. What's happening? Our economy is not doing well. Who are the people that are watching that economy and know before you do?" Glenn said.
"The corporations. Because it's their job to know. When the corporations understand, 'Holy crap, this thing is -- this bubble is about to burst, this thing is -- the wheels are coming off of the economy, the global economy,' what is the first thing these guys are going to do with their stocks? They're going to sell it. They'll walk away with money."
So if they are the ones walking away with all the money, what happens to the average investor?
"Everyone else who is in mutual bonds or stocks or anything else, you'll be wiped out. But these guys will be very, very wealthy. And that is exactly what's happening. That is what's happening," Glenn said.
This is one place where Donald Trump is dead wrong. He's used to the old system and believes we can just print more money to dig ourselves out of the hole without defaulting.
"And this is the system that Donald Trump is used to. You game the system," Glenn said. "He always says, 'I came out great.' That's what's happening. The upper level is going to come out fantastic. The rich will get richer. And you will be left with nothing."
It wouldn't be a proper chalkboard lesson without a little parting wisdom from classic literature.
"To quote Rudyard Kipling, 'We had plenty of money, but nothing our money could buy.' Why? Because in the end, the federal government doesn't go broke. It doesn't go bankrupt. It prints money."
If this all plays out the way it's headed, Bernie Sanders' pipe dream of a $15 an hour minimum wage will be less than peanuts in the new economy. Do you "feel the Bern" now?
Listen to this segment from The Glenn Beck Program:
