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The Real Cause of Income Inequality Will Surprise You

“Inflation is never neutral.” — Ludwig von Mises “Inflation is like trying to catch a tiger by its tail.” — Friedrich Hayek Adam Smith, the…



“Inflation is never neutral.” — Ludwig von Mises

“Inflation is like trying to catch a tiger by its tail.” — Friedrich Hayek

Adam Smith, the founder of free-market economics, always taught that laissez faire capitalism would actually reduce inequality by dramatically improving the lives of the common man.

He promised that his system of natural liberty would lead to “universal opulence which extends itself to the lowest ranks of the people.” (See chapter one, “It All Started with Adam,” in “The Making of Modern Economics,” available at

But over the past 30 years the gap between rich and poor has increased. What gives?

The answer is surprising. The #1 and #2 causes of inequality have to do with two critical events in our history.

The first has to do with a change in the tax law in the early 1990s.

In 1965, CEOs were reasonably paid about 20 times as much as an average worker.

The compensation for company executives gradually rose in the 1970s and 1980s, but there was nothing alarming about the rate of growth. The average income of business leaders, as well as employees, increased with productivity.

But then everything changed in the early 1990s. In the 1992 election, politicians like Bill Clinton complained that top executives were being overpaid. When he beat George H. W. Bush, the Democratic-controlled Congress decided to do something about it.

It enacted section 162(m) of the Internal Revenue Code, which limits what companies could pay their executives. The section caps the corporate deduction for annual compensation to senior managers at $1 million.

The $1 million limit to corporate deductions for executive compensation is still on the books. If a company pays an executive a salary of $3 million, they can only deduct $1 million worth as a legitimate business expense.

The act failed miserably. In fact, it made things worse.

Corporations found a loophole. In the future, CEOs and top executives would be paid $1 million in salary, but then they were given bonuses, especially stock options in their companies, that were not subject to the limitation.

The bull market resumed in 1994, and the Dow and Nasdaq increased dramatically. Now tied to stock prices, CEO compensation soared in the latter half of the 1990s, far more than average wages. In the early 1990s, CEOs were making an average of 60-70 times the average wage-earner. Today, total CEO compensation is 300 times the average pay of a worker.

See the chart below.

You can see how CEO compensation soared around 1994-95, when the stock option loophole began. It’s been out of control ever since.

How the Federal Reserve Exacerbated Inequality of Wealth

The #2 cause of greater inequality can be laid at the feet of the Federal Reserve. It made inequality worse when it began a policy of “quantitative easing,” the controversial buying of assets directly in the financial markets in response to the financial crisis of 2008.

By aggressively buying Treasury bonds and mortgages, interest rates declined. This propped up the value of corporate bonds and equities.

For years, the Fed adopted both QE (quantitative easing) and a ZIRP (Zero Interest Rate Policy). The result was the “mother of all bull markets,” a market we profited from in Forecasts & Strategies. My subscribers made a lot of money from the “lords of easy money.”

And who has been the primary beneficiaries of higher stock and bond prices? Wealthy investors!

As Christopher Leonard writes in his fascinating book, “The Lords of Easy Money”:

“ZIRP caused asset prices to rise. This increased demand drove up the price for corporate bonds, stocks, real estate, and even fine art. The hope was that higher asset prices would create a ‘wealth effect’ that bled out into the broader economy and created new jobs… [But] ZIRP must first and foremost benefit the very richest people in the country.” (p. 119)

And who were the biggest cheerleaders of QE and ZIRP — Ben Bernanke and Janet Yallen!

So, if you want to blame someone for the growing inequality between rich and poor, don’t blame free-market capitalism. Blame the government officials who have been in cahoots with Wall Street bankers — one of which is the current chairman of the Fed, Jay Powell.

Even as the Fed is now grappling with out-of-control inflation, Christopher Leonard ends his book on a sober note:

“When America relied on the Federal Reserve to address its economic problems, it relied on a deeply flawed tool [quantitative easing and interest-rate manipulation]. All the Fed’s money only widened the distance between America’s winners and losers and laid the foundation for more instability. This fragile financial system was wrecked by the pandemic and in response the Fed created yet more new money, amplifying the early distortions.”

In sum, Leonard writes,” The long crash of 2008 has evolved into the long crash of 2020. The bills have yet to be paid.” (p. 305)

The Global Financial Summit at FreedomFest Addresses the Impact of the Fed’s Unstable Policies

We will have several sessions at our Global Financial Summit at FreedomFest next July 13-16 at the Mirage Hotel & Casino to deal directly with the latest boom-bust cycle that the Fed has engineered. Experts include Steve Forbes (who will talk about his new book, “Inflation”), economists Steve Moore and John Fund, money manager David Bahnsen, Jim Woods (co-editor of Fast Money Alert) and legendary investor Jim Rogers.

The full agenda is now online here. Use the code EAGLE to get $50 off the registration fee — it ends on July 1. Now is the time to sign up.

Good investing, AEIOU,

Mark Skousen


You Nailed It!

Check Out The Newest Museum In Washington D.C.

“Communism is the greatest satanical threat to peace, prosperity, and the spread of God’s work among men that exists on the face of the earth.” — David O. McKay

There are dozens of Holocaust museums around the world that retell the atrocities by the Nazis against the Jews. It is estimated that over 6 million Jews were killed during World War II.

But the Communists — led by Stalin, Mao, Pol Pot and Hugo Chavez, among others — have killed an estimated 100 million people, and they still control the lives of over 1.5 billion people in China, Cuba, Venezuela and North Korea.

Hans von Spakovsky states, “The only difference between the Holocaust and the gulag is that the Soviet communists never got around to using gas to kill their prisoners — just old-fashioned bullets, beatings, starvation and literally working them to death.”

The communist and Marxist doctrine continues to expand, as evidenced by recent election victories in Chile and Columbia.

To counter this trend, Lee Edwards (of the Heritage Foundation) and other anti-communists are expanding their influence through education and have established the first Victims of Communism Museum in Washington, D.C.

After 30 years in the making, the museum was dedicated last week and is now open to the public. You can learn more about it here.

The museum includes a large section of the Berlin Wall, which long served as a symbol of oppression.

The museum was funded by private individuals and several Eastern European countries, such as Poland and Hungary. Sadly, the American government donated no funds to this museum.

The Victims of Communism Foundation is also encouraging states to require students to study the evils of communism. The latest such state is Florida. Governor Ron DeSantis signed a law last week requiring students to learn about communism on Nov. 7 of each year as part of the state’s “Victims of Communism Day.”

Going to a victims of communism museum, like a Holocaust museum, can be depressing. But we constantly need to be reminded of the depravity of man, “lest we forget” and history repeats itself.

I’m doing my part to fight Marxist/Communist doctrine through my book, “The Making of Modern Economics.” Chapter seven is entitled, “Marx Madness Plunges Economics into a New Dark Age.”

So, you know where I stand on Karl Marx. That chapter alone has converted many Marxists into free-market champions. To order a copy for only $35, go to

The post The Real Cause of Income Inequality Will Surprise You appeared first on Stock Investor.

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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide…



Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide Black Lives Matter riots in the summer of 2020, some elite colleges and universities shredded testing requirements for admission. Several years later, the test-optional admission has yet to produce the promising results for racial and class-based equity that many woke academic institutions wished.

The failure of test-optional admission policies has forced Dartmouth College to reinstate standardized test scores for admission starting next year. This should never have been eliminated, as merit will always prevail. 

"Nearly four years later, having studied the role of testing in our admissions process as well as its value as a predictor of student success at Dartmouth, we are removing the extended pause and reactivating the standardized testing requirement for undergraduate admission, effective with the Class of 2029," Dartmouth wrote in a press release Monday morning. 

"For Dartmouth, the evidence supporting our reactivation of a required testing policy is clear. Our bottom line is simple: we believe a standardized testing requirement will improve—not detract from—our ability to bring the most promising and diverse students to our campus," the elite college said. 

Who would've thought eliminating standardized tests for admission because a fringe minority said they were instruments of racism and a biased system was ever a good idea? 

Also, it doesn't take a rocket scientist to figure this out. More from Dartmouth, who commissioned the research: 

They also found that test scores represent an especially valuable tool to identify high-achieving applicants from low and middle-income backgrounds; who are first-generation college-bound; as well as students from urban and rural backgrounds.

All the colleges and universities that quickly adopted test-optional admissions in 2020 experienced a surge in applications. Perhaps the push for test-optional was under the guise of woke equality but was nothing more than protecting the bottom line for these institutions. 

A glimpse of sanity returns to woke schools: Admit qualified kids. Next up is corporate America and all tiers of the US government. 

Tyler Durden Mon, 02/05/2024 - 17:20

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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…



To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….



Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 


About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. 

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