America's 1% Has Taken $50T From the Bottom 90%
time.com
time.com
When you bail out irresponsibly over-leveraged and nearly bankrupted banks and corporations, and pay for those bailouts with tax-payer money, you steal from the poor and give to the rich.
Most importantly, when the Fed decides to print money ad nauseam, they create massive asset inflation, which steals from the poor and gives to the rich. This is because those dollars that are printed go directly into bonds, equities, and assets that only a small amount of the population owns a significant amount of. When money is "printed" the Fed actually injects money into financial markets through buying assets. This asset inflation caused by money printing gives more money to the rich to buy more assets, thus driving up the prices of financial products, real estate, and all other valued assets in society. Thus, cost of living skyrockets, but only the rich are actually increasing their net worth (which is increasing exponentially). All of this happens while minimum wage, and most wages, are stagnant.
Wealth inequality and social unrest in America is DIRECTLY related to corrupt and/or incompetent (you choose) Fed policies. It amazes me why most people do not grasp this. I think it is lack of education.
The question is - how do we apply a mechanism like bankruptcy to government organizations?
Thos. Jefferson's quote continues:
> I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people to whom it properly belongs.”
Remember the purpose of the US Mint was to convert the silver & gold of any citizen into legal tender for a reasonable fee and return it to them as coins. Printing of bank notes was not on the agenda until politicians having a more predatory agenda got their way.
Not sure if this is an answer for every government org, but hundreds of municipalities and possibly even states are going to go bankrupt due to obscene pension liabilities. The very difficult "solution" is to let them to bankrupt, and allow them to re-negotiate liabilities.
Unfortunately many municipalities have promised the world to retirees, often with inflation adjustments and often starting at 20yrs of service (that is, age 41 until death). Add in tricks like matching final year salary (which is often packed with overtime) and you have unbearable pension obligations. It isnt the worker's fault. But the local leaders and pension managers are at fault, and citizens are on the hook. Unfortunately the decisions were made by leaders 10 or 20yrs ago, so it may not even be the current leadership.
If the municipalities are bailed out, then it gives a signal to every other municipality to overpay massively because either the state or uncle sam or PBGC will come in and bail everyone out. It is going to be a mess.
What seems that way to you has turned out to not even be as much prosperity as it should have been for those having the most effective inflation-calibrated plans.
There was no other way to even come close to what employers had intended for their people when they granted these benefits in lieu of full market pay. That's how destructive inflation was.
And of course for the vast majority of retirees it has always fallen far short of what could have been since inflation has been calibrated over the years to continually bring the buying power of gains downward the more that accrue regardless.
We're so deeply entrenched in the "American Dream" (Capitalism & Trickle Down Economics) that we're unable to challenge the current status quo.
Worse yet, this is driving us towards the defunding of public education, and the further worsening of our problems.
Our collective ignorance manifests itself in a number of ways, from wealthy mainstream journalists blaming economic problems on the poor to their audience of middle-class Americans, to mass-delusions regarding conspiracy theories intended to divide people.
I am of the opinion that these habits and the ideology that supports it is the biggest reason people who are in the lower income brackets continually stay there. The best path to wealth is to convert your work into capital. If you spend everything you make and more there is no excess to re-invest.
Yeah, this is a perfect example of "don't attribute to malice what is equally explainable by incompetence."
I'm not talking about the incompetence of teachers. I'm talking about the incompetence of the system, and it's inflexibility towards change. This is not caused by malice. It's caused by is being completely unable to effectively handle the millions of different perspectives of "what education should be."
You talk about indoctrination of a country, but I don't think it's indoctrination at all. It's people clinging to their views and being completely hostile to the idea that they might not understand important parts of the system. It's people turning to ideology instead of engaging with the actual complexity of the world.
As predicted in 1970:
'the accelerated rate of technological and social change leaves people disconnected and suffering from "shattering stress and disorientation"—future shocked.'
Critical Thinking requires some dose of cynicism. Which in itself is against the main stream thought of American Optimism.
> America's education system emphasizes nationalism and obedience. It doesn't encourage critical thinking or alternative worldviews.
They're not complaining that we're not teaching enough, they're complaining that we're teaching the wrong things; that the same resources could be used for better teaching.
I dont think that is the case at all. The concept is simple and easy enough to understand. Most people just dont care and want a single target to blame. And someone decide that target will not be government or Feds.
Edit: And it is now unflagged.
The road to socialism via inflation:
• Print money, crash the reserve currency, destroy savers, and force them into inflated assets.
• Asset inflation leads to inequality. Demonize asset holders and tax the nominal gains, thereby confiscating the real value of the assets.
[1] https://twitter.com/naval/status/1359650086221930496?s=21
Why would the ruling class (which his tweet presupposes is corrupt), who benefit from this status quo, purposefully destroy the systems that make them rich? It just doesn't make sense, the logic implies that a corrupt ruling class would purposefully destroy the systems that allow them to be corrupt in order to achieve "socialism" (which Naval clearly implies is somehow innately corrupt here). Why would they destroy what they benefit from on purpose?
Ruling classes benefit from stability, if people are not starving and live generally decent/free lives they won't search above for answers or be inclined to upheaval.
> destroy savers, and force them into inflated assets.
I don't understand this part, isn't it a broad consensus in the US that savings should not be in cash but instead in a diverse set of assets and bonds? How does inflating assets destroy savers in this case? Every time I hear advice on saving in the US it's basically (take anything above emergency fund savings and invest it in ETFs/index funds/bonds)
We should be careful about wording here. The lack of education is a direct consequence of the top "1%" politics and very well thought decisions. They have everything to gain from us plebeians not thinking about these issues.
> (you choose)
It's much more complex than that, especially in America. If you can choose between A and B but the right answer is C you have everything but a choice. Even worse than that, if the entire culture and education of your country is built on making you think only A and B exists, C being the right answer will never even materialise.
We're past the time of blaming "the people", when the entire system is corrupt to the bone we should stop blaming eachother and look up, when all the parties converge to the same point you know you're being played
The study shows that if wages kept up with productivity (as was the case in the immediate post-WW2 era) the bottom 90% would earn $2.5 trillion per year more.
> We document the cumulative effect of four decades of income growth below the growth of per capita gross national income and estimate that aggregate income for the population below the 90th percentile over this time period would have been $2.5 trillion (67 percent) higher in 2018 had income growth since 1975 remained as equitable as it was in the first two post-War decades. From 1975 to 2018, the difference between the aggregate taxable income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion.
Which rests on the fundamentally incorrect assumption that a dollar a rich person gets means that a poor person is a dollar poorer.
More accurate to calculate how it still regularly costs a million poor people a dollar each to make one person a new millionaire.
But we all know a $Million doesn't buy what it was supposed to any more, so all million-and-one of them are screwed anyway.
And poor people actually used to be able to afford this kind of spending.
TL;DR:
1. The pay line is for the bottom ~80% of workers, while the productivity line is for all workers. If you graph all workers wages vs all workers productivity, then the gap shrinks quite a bit. (Of course, maybe we should redistribute wealth from top workers to all workers, but that's another discussion.)
2. Average hourly wages doesn't take into account workers' increase in benefits.
3. The lines aren't adjusted for inflation in the same way, which makes the gap look worse.
I can't help but feel /r/badecon's rebuttal is dishonest. For many people benefits haven't increased, so the fact that it is excluded is a non-issue. E.g. The growing number of workers who are kept below full time hours to avoid being given fulltime benefits as one of many examples I could list.
Regardless, if it is accurate I'm very curious what the growing employer benefits has been.
There is a pretty good reason for that. Most of the increase in benefits has been in the form of increased healthcare costs, which only somewhat reflect increased value, as much of that value is unrealized due to high deductibles incentivizing people to not use medical services if they can avoid doing so (which preserves an odd form of household rainy day fund dedicated to medical catastrophes).
Meanwhile, the segment of workers that are (precariously, so with litle to no leverage even in aggregate) holding one or more part-time jobs instead of a full time job with benefits has grown as well.
"Growth in productivity and hourly compensation since 1948"
"Real GDP, Real Wages and Trade Policies in the U.S. (1947-2014)"
"Real family income between 1947 and 2016, as a percentage of 1973 level"
As for the remaining graphs, for a number of them;
>The lines aren't adjusted for inflation in the same way, which makes the gap look worse.
In spite of this discrepancy, the outlooks experienced over these decades are still even worse than they look.
Nixon was quite bent on the effort to remove the potential for building middle-class wealth any more for unionized workers. His people didn't like the way it had already occurred to a good extent before he got there. The objective was to not only stop but reverse the trend.
And unionized workers were paid much more than average plus had some excellent benefits which were so essential to an upward class move that non-union companies had to mostly have similar benefits even while lower average wages prevailed.
So it took them and all average-paid-or-lower workers down by removing cash buying power directly from their earned income & savings. Not just a notch like levying income taxes & instituting the Fed to remove gold from circulation as legal tender, then prohibit its possesion, and the subsequent currency devaluations had done much earlier in the century. Instead was the most devastating thing they could come up with at the time since income tax and central bank had already been done, and they had all the gold in the US under their control. Generations after the safety net of silver had been a lost memory after the Founding Fathers' wise reliance on both silver & gold as the standards when designing US currency to begin with had been compromised leaving only gold.
By 1976 average people had lost half their wealth and with hindsight much more than half their wealth potential, just like it seemed was going to happen back in 1971. While the truly wealthy mostly lost half their dollar-denominated wealth too, but they were still rich and their outlook has done nothing but improve in spite of the devaluation of the dollar.
Everyone else was set back decades and here we are.
Never did it seem like there was any objective other than inequality being preferred over prosperity, even for the top Wall Streeters who numerically lost more millions than any working person to the market crash [0], and inflation which had to be accepted as never-ending at the time, from that point forward until a major reckoning.
Still overdue but the wealth removal from the general population needed to continue without more inflation after a certain point or the graphs would have gotten really revealing much too early for those who had yet to cash out.
[0] was watching it live on a Quotron: https://en.wikipedia.org/wiki/Quotron
The price for goods did go down. Everything from food to toys to tools got much cheaper than it was before.
However, the price for cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education, physical security - and the percentage of income and average net worth that these consume went up dramatically.
Furthermore, these things became ever more correlated with each other, meaning that if you have bad access to one, you are likely to have bad access to the others, and if you have great access to one, you likely have great access to the others.
But sure, it's never been cheaper to buy random widget X at a big box store.
First, I wholeheartedly agree that this is the major stakes. I mentioned consumer goods prices because they're immediately tangible. The differences in the others are all too easy to handwave away as improvements.
> Everything from food to toys to tools got much cheaper than it was before
I don't know about toys, and they seem hard to compare. Food has gone up over the past few decades (groceries that used to cost $2 now cost $3, $3->$4, etc). From one of the first hits for historical milk price (https://www.in2013dollars.com/Milk/price-inflation): "Between 1997 and 2020: Milk experienced an average inflation rate of 1.73% per year". Note that I'm talking about sticker prices here, not any "but they actually went down with inflation", as the original argument was referencing stationary wages.
Tools are being made much more flimsy and disposable - eg real high speed steel has been replaced by inferior foreign steel with gimmicky coatings to "prolong" its poor wear characteristics. If you look at good quality tool brands today, the prices are higher than what tools cost several decades ago. This goes for appliances as well - take a look at "commercial" offerings that are built to be maintained.
In the US. But in other societies they have been "governed" such that they are more accessible. The kind of governing makes a big difference.
And there's a lot of pseudo-productivity here that is mostly just rising healthcare spending (without commensurate changes in outcomes) and land value. This sort of makes sense since these sectors have massive capture problems.
Tech itself is the exception that proves the rule. Its progress is so strong that it's becoming less expensive in spite of inflationary policy.
How about 95% of economy: education, houses, food, heating, electricity, fuel? What about industrial goods: Bricks, steel?
But oh, you can now live in poverty unable to afford cancer treatment with a TV.
For $500 + being subjected to ads.
The productivity growth is not a constant number. The productivity of a Machine Learning engineer has increased much more than the productivity of a gas station attendant.
The decoupling of wages from productivity started around 1971-1973, which is suspiciously close to the Nixon Shock and beginning of the 1970s inflation. In periods of inflation, firms with high bargaining power (notably monopolistic corporations, corporate executives, and right now, software engineers & quants) can extract the excess money floating around. Firms in highly competitive industries (notably restaurants, family farms, and ordinary workers) get undercut every time they try to raise prices. Therefore all the gains go to the rich.
the US was the only major world power left standing after world war 2 without colossal damage, and rebuilding (western) europe took the better part of 25 years to fully complete.
The causality for the decline in union membership runs [collapse of Bretton Woods system] -> [U.S. dollar becomes global reserve currency] -> [U.S. manufacturing becomes uncompetitive abroad] -> [American manufacturing firms go bankrupt, allowing them to renegotiate or renege on union contracts] -> [decline in union membership]. Step 3 had a lot of help, between poor corporate governance and quality control at American corporations, the rest of the world rebuilding from the ashes of WW2, the collapse of communist systems in China and the eastern bloc, and globalist policies from Washington. But probably the most significant factor is that the dollar is overvalued, which makes American exports overpriced, which makes all but our highest-productivity industries uncompetitive.
The causality for inflation-lowered wages is [U.S. dollar is global reserve currency] -> [U.S. must "print" an excess amount of dollars to satisfy foreign demand - here really referring to interest rates, since physical currency is a minority of foreign trade] -> [excess dollars flood financial markets, causing asset inflation] -> [ordinary workers lack the bargaining power to divert some of these excess dollars to themselves, falling behind in purchasing power]. Note that when ordinary workers do have this bargaining power - like when they work for Goldman Sachs, or when they're paid in Google/Apple/Facebook stock - they actually have shared in this inflated prosperity.
The causality for growth of the financial industry is [U.S. dollar is global reserve currency] -> [a significant number of foreign transactions require trade in dollar-denominated assets] -> [more jobs are needed to manage these money flows] + [manufacturing careers in the U.S. suck, per second paragraph] -> [smart, ambitious people go into finance because it's where the money is, literally].
It was plain to see Nixon's purpose was to destroy unions at the time.
And it had to be an overwhelming salvo, or there could be no guarantee it would outlast his crooked regime.
Turns out it has lasted longer than anyone would have wanted, so you get nothing but finger-pointing after a few decades, mainly by people who were not even there or into financial math at the time.
Your comment would also imply that before there was such a thing as a Federal Reserve, income and wealth inequality didn't exist. This is false.
https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
They also implicitly affect asset prices which is probably one of the primary causes of wealth inequality.
> Who owns the Federal Reserve?
> The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.
(emphasis added)
Ironically Greenspan also spoke about irrational enthusiasm. Words are cheap.
And "The bigger spender wins congressional races 91 percent of the time" [2].
Talking about policies without even mentioning who makes them, kind of misses the point. Big money controls everything. It's no wonder that people come out to defend them, when they control much of mass media and shape the narratives to such an extent.
[1] - https://www.washingtonpost.com/news/monkey-cage/wp/2014/04/0...
[2] - https://www.vox.com/2014/10/27/7077647/midterms-spending-mon...
That's one of the reasons why the Great Depression was so bad: the US was on the gold standard at the beginning. The US can't create gold out of thin air, so the USD started deflating, people stopped spending, and capital stopped flowing. Companies went bankrupt, people lost jobs — all because much needed dollars were stuffed in people's mattresses instead of being spent.
The Fed is increasing the money supply by purchasing bonds because corporations need cheaper capital to pay their workers and their bills. When the pandemic is over, it will sell back these bonds the banks it bought them from. Without the Fed's intervention, this recession and pandemic would have been far, far worse.
Of course, helping corporations also helps the people who own the corporations: the rich. That's a distributional issue, and the main solution is tax policy. We need to raise income and estate taxes on the rich, increase the tax on capital gains, and institute a wealth tax.
The Fed is like an engine. But engines are a tool. Tools can cause good things and bad things. Right now, the Fed is causing good things by providing liquidity, which has the side effect of causing bad things because it lets the rich accumulate wealth.
If the Fed is like an engine, then it serves to move a train — the economy. If the train is runaway — if the economy benefits the rich far more than normal people — that doesn't mean engines are bad. It means we need to stop the train, fix it, and start the engine again.
If we restructure our economy, the Fed will still continue to do good things, with fewer negative side effects. That would be, on net, good. So the problem isn't with the Fed, it's with the economy. And claiming that the Fed is the root of all our problems misses the bigger picture.
This remains to be seen, the market had an absolute fit when they said QE was tapering in 2013, and also had an absolute fit when Powell was raising rates in 2018, particularly in December.
The Fed may have painted themselves into a corner here, nothing is certain with regards to unwinding QE or raising rates.
To me (and this is a minority viewpoint - my finance industry friends disagreed), the way this plays out is both obvious and terrible. The Fed knows that if they raise interest rates, very large American institutions are going to go bankrupt and millions of Americans will be thrown out of work. The Fed's primary mandate is full employment (adjusted last year from a dual mandate of "full employment and low inflation"). Therefore, the Fed is not going to raise interest rates. We'll see this first as a massive asset bubble during the early 2020s, and then as rising inflation in the later 2020s, and then finally as hyperinflation. When it gets to the hyperinflation stage the Fed will take notice and raise rates, but it's too late by then. Hyperinflation is characterized as a sharp increase in the velocity of money, which makes traditional monetary policy tools ineffective for curbing it. You have to ditch the currency and start over with a new one.
Trying to figure out how you unwind it slowly when apparently "slowing raising rates" still destroys many businesses with a lot of debt...
On the other hand how can the fed buy bonds from the "good" companies worth saving, and not from the "bad" companies that can freeride until "eventual" profitability?
I suppose you let the market decide - let the bonds float, and anything worth saving should be bought back up by the people enriched by the buybacks, right? Isn't that what efficient markets and capitalism are all about?
Dumb idea: maybe if you had a published interest rate schedule that planned out 10 years, 15 years, whatever. So everyone knew what the bond/loan base interest rates would look like for the next 15 years.
years 0 - 7: base interest rate ramps up from 3% now to 10%
years 8 - 15: base interest rate ramps down from 10% to 3%
years 16-21: repeat
years 22-28: repeat
Downside I'm sure is that people who come of age during high-interest-rate periods can't get car loans or education loans that don't eat them alive...
There is risk here though - bottom up stimulus comes with it's own moral hazard issues, but then again I don't know what the net drag / benefit is compared to zombie companies getting infinite credit moral hazard we have now. I suspect UBI for individuals leads to fewer systemic risk sorts of issues, but I really don't know, it's very hard to envision what actually ends up happening due to lack of having ever experienced anything like that in my lifetime.
It would be nice if we could try it out - but there's probably a momentum term hidden in there somewhere - give an inch take a mile sort of thinking. Is UBI like corporate debt backstopping? Once you get a taste you can never go back?
I really don't see any good answers here other than "try to be on the top half of the K, and also try not to get eaten".
The big problem with bottom up is that you need a lot of it to continue the money supply expansion, and money created that is given to spenders as opposed to savers triggers inflation at drastically higher rates.
What are other alternatives? More of the same and hope technological multipliers for productivity continue to outpace CPI inflation so that there aren't bread lines? Charity? I suppose you can keep doing monetary stimulus without fiscal, and then increase taxes, and spend it on infrastructure that improves everyones lives?
1. Negative rates. All pretext is lost.
2. Repeat of Japan. Government ends up owning half of the stock market.
3. Mild to extreme bottom-up during a planned crash of assets. In this path you will see the stock market crash at the same time inflation soars.
Number three is the hardest but also the one that will end up with the best productivity. When you see stories like Bill Gates being the largest private farmowner[0], you might see it as an ominous warning that the rich are hedging this possibility and are making sure they end up okay.
[0] https://www.businessinsider.com/bill-gates-land-portfolio-bi...
I've built up an intuition that the money supply should match changes in productivity, and that if it doesn't it will eventually lead to problems. But it's also notable that the trend is extremely important. If you do match, everything should be fine and this can last forever. If the money supply rises faster than productivity, you see what we've seen these past 50 years since we've been off the gold standard, a huge surge in asset prices. And if productivity rises faster than the money supply, people flee assets and into money. This is called a Deflationary Spiral. But the opposite state is basically an Inflationary Spiral, with people unwilling to spend their assets.
Dalio in his "Explaining the Economic Machine" video talks about a "Beautiful Deleveraging". My thought currently is that such a thing isn't possible. If you wait for the debt to get so bad that you have to do something, you can't match productivity anymore. Therefore the only thing you are left to do is grow the money supply less than productivity. And that changes everything. Suddenly the trend is to money. And once the money managers work that out, they all rush out of assets and into cash. This triggers a crash. So it's the trend that dominates, and there is no way to balance the deleveraging.
The root cause of this is that our economy has become hyper-optimized around monetary policy that's unsustainable. With markets trending toward efficiency, all major companies that exist today build in the assumption of 0% interest rates into the cost & capital structures of the business. Many activities they engage in would probably become unprofitable at higher interest rates, which means mass layoffs, restructurings, different business processes, possibly adoption of different technologies, products & services going away, etc. Change the monetary environment and you get different companies, different technologies, different supply chains. But the current monetary environment means that whenever there's a demand shock, the Fed has nowhere to drop rates, and whenever there's a supply shock, there's a potential inflationary price spiral.
The Fed, to their credit, recognizes this predicament. That's why they're targeting > 2% inflation, so there's room to raise rates. They've also said that any increase in rates will be well-telegraphed, to give companies time to adjust.
But I have doubts that this'll work. Simply because this isn't a tweak now, this is an existential change to how companies structure their operations. And any company that prepares for it before the Fed actually raises rates will be outcompeted by companies that do nothing, so no company is going to take the mere warning seriously.
It occurs to me that post-Volcker monetary & government policy has basically served to weld the economy & government together so that it's impossible for one part to fail without it all failing. We used to have recessions every 5-10 years; these would clear away uncompetitive businesses so the capital could be recycled into new ones. In trying to "smooth over" these recessions, and then outright bailing them out in 2009, and then failing to raise rates in 2013/2015/2018, we've coupled the whole economy's fortunes together, and then coupled it to the government. As a result, we can't sweep away companies that are doing the wrong thing without widespread civil unrest.
How about proportionally? Stock trading apps now make it easy enough for Joe 6 pack to invest in the market at any income level. I could see a x% higher tax if you're buying 10,000 shares of Amazon, but it seems to me like putting < $1,000 in the market a month should be somewhat painless.
curious, what if the people driving that engine opted for wealth tax instead? Wouldn't that be a win-win and your phrase could have been instead:
> by providing liquidity, with no side effect such as causing bad things because it lets the rich accumulate wealth.
¯\_(ツ)_/¯
I’ll be happy to get my (Of course discredited) books out and recite the counter case about the Great Depression if anybody really wants me to later. Basically the fed and various policies caused what should have been a short sharp correction/stock-crash (at the end of a runaway fed built stock market streak) to extend into a long drawn out mess. Forgetting innumerable details I am sure. But yeah, I know you don’t agree. I do not find your case compelling.
While I have a chance, here is a good book on the Austrian case against the status quo narrative on the great depression:
https://cdn.mises.org/Americas%20Great%20Depression_3.pdf
This is, in the main, what I allude to on that one point (caveat, I am not a gold bug and of course Rothbard is. I think focusing on specific instances of "the way to implement an idea" allows people to laugh at the specific to forget/discredit the greater idea itself. Similar issues arise with Austrian rejection of stats and involved mathematical analysis.). I do not subscribe to those ideas, but find the bulk of the economic analysis itself compelling.
I've read many of the books you're talking about, and there's a reason they are "unpopular" and “discredited".
Who cares about gold? Who cares about avoiding math? Not me. I guess I am no Austrian for those reasons. I do care, however, about restraining the inflationary tendencies of governments because I believe they are an engine of wealth redistribution from the poor to the rich and powerful. And sure, I suppose I do care about avoiding mathematical naval gazing, or statistical hackery. But those are side-issues.
Where are the Austrian models that describe and predict accurately?
I can make a regression say anything, but I predict the fed continues to operate, and the status quo of wealth flow from poor to rich continues. Now it can be modified by laws, and certainly will change with time, but the dynamics are there. You can superimpose other things on top and the results will vary. You can then make a model that focuses on one thing or another, and evaluate it statistically, and again, results will vary. This is some of how we ended up with a pluralist economics today.
I wrote up some other stuff about my anecdotal experience with modeling and searching for "good governance" in grad school, and how I disagreed with methodology of the papers I was reading, before abandoning the enterprise for a return to physical engineering, but I guess this is my chief point. Methodology designs in what you want to see. Economics is not a controlled science (I mean mostly the studies can have no actual control group), and therein festers a great rub. Good fun learning the statistical analysis methods though.
The people who wrote those books that you said would support your argument certainly do.
>I’ll be happy to get my (Of course discredited) books out and recite the counter case about the Great Depression if anybody really wants me to later
>I do care, however, about restraining the inflationary tendencies of governments because I believe they are an engine of wealth redistribution from the poor to the rich and powerful.
Are you basing this belief on anything other than gut feelings and the work of Austrian economists who's books you've read? von Mises is an absolute crackpot, but he does a very good job of making you "feel" that his arguments are valid.
>And sure, I suppose I do care about avoiding mathematical naval gazing, or statistical hackery.
That's different than the Austrian position that mathematical analysis is impossible and harmful. Without accepting the basic premise of Austrian economics that "no measurement is possible" and everything can be derived from the first principle of "humans acting with purpose", the rest of their "proofs" are worthless. You can't just accept (and cite) their arguments while also acknowledging the fundamental flaws with the axioms they use to reach their conclusions.
The Austrian School on the other hand, is centred on Mises, whose magnum opus insisted that all his conclusions were logically deduced from the premise "humans act with purpose" and therefore unfalsifiable, stated that "no measurement is possible" in the field of economic activity (!) and who later described econometrics as "childish play with figures". That's a very different position from the many other mainstream and non-mainstream economists who simply think other economists' models are insufficiently connected to reality .
Mainstream economics says that monetary intervention is necessary to "stabilize" the economy, as measured by metric X Y or Z. Who benefits from that stability? I would say mostly the upper echelon status quo. And what is the social cost of the stability? Mainstream economics also measures the widening wealth gap but it's incredibly infuriating that they can't fucking put two and two together and understand that the gap is the social cost of their stability measures. Especially so since there is a clear straight line mechanism for that to be the case.
The people who lose absolutely everything they've ever worked for in the event of a sustained recession. They tend not to be rich, nor comfortable with the rival Austrian solution of waiting it out because if wages drop low enough the rich might eventually deign to act by unburying their gold and investing in capital formation and job creation again.
> it's incredibly infuriating that they can't fucking put two and two together and understand that the gap is the social cost of their stability measures
It's incredibly frustrating when the school of economics most founded by a man who stormed out of a meeting of the right wing Mont Pelerin society screaming "you're all a bunch of socialists" for discussing possible solutions to income equality masquerades as egalitarian. Other economists can and do discuss causes of and solutions to inequality, including establishing the fact "the rich get richer" was a truism when gold standards were everywhere. Austrian economics doesn't even acknowledge the possibility of "social cost", rejects the possibility of making meaningful claims about some people needing a dollar more than others and wants to set a floor on how much of the future economy the 1% control by ensuring their 'sound money' is still good for that share of future economic growth even if they impede that growth by withdrawing it from circulation.
But yes, it's very good at scapegoating the Fed as the root of all evil as its oil baron funded adherents join often successful lobbying efforts against every single policy that might make working class people's lives less uncomfortable.
Not being an Austrian helps you conclude that their arguments that economics isn't quantitative, positivism isn't useful and reducing income inequality is actually a goal a government might wish to consider wrong though. :)
So like chicago, keynes, socialism, mmt (which admittedly is niche)
Better?
Because it's not. It's the cost of fiscal policy decisions made overtly to aid “job creators” in the supposed hope that the wealth they drink in will trickle down as a golden shower for the rest of society.
"Even in the long run, it's really really hard to cut nominal wages..."
Don't get it wrong. Inflation is a tool to cut wages. It is fundamentally anti-labor.
It is difficult to paint the alternative of artificially restricting the money supply to a level where the private sector [as a whole] must reduce some employees' nominal wages or fire them every time it offers pay rises to its most in-demand staff as more pro-labour. It doesn't sound any more pro-labour when people preferring that arrangement argue that recessions are a more appropriate mechanism to hold down wages, and acknowledge the purpose of zero inflation [and acceptance of economic downturns] is to allow wealth to be preserved for years or even generations without the need for it to be used in job creation.
But it's a blunt instrument. Providing tools to aid those workers adversely affected by those market shifts, whether by declining real wages or lost jobs, is the role of fiscal, not monetary policy.
I think an MMO designer would suggest two options:
A. Nerf the Fed, which would have the problems you note.
B. A balancing mechanic -- Some more universally-accessable way to inject income at the base of the economy.
Something like, for example, giving $1000 to every adult?
The value of currency and debt has diverged too far from quality of life concerns -- days off seem a direct way to inject quality of life capital into the system and, I think, could prove an investment able to unearth very new and effective social transformation capabilities ... as well as a new shared basis from which to renegotiate and rebalance our social contracts.
No, that's not the problem.
The problem is Congress [0] has been asleep at the switch on fiscal policy since the administration of George W. Bush.
[0] in the sense of “the body that legislates, including the effect of the President acting in his legislative role”.
The pandemic is a case of exactly when the gov. should step in. Unfortunately the gov. is slow and takes so much time to do anything.
> That's a distributional issue, and the main solution is tax policy.
Exactly. I think a better argument could have been made by looking at the tax cuts a couple of years ago. Companies didn't go on hiring sprees or even keep any money in the bank. They did stock buy backs, paid bonuses, etc...so that when the pandemic did hit they had nothing to fall back on (see the airlines).
If airlines didn't spend money on buying back stock, they could have:
1. Invested it in growth. But if they had invested it in all the normal things an airline might invest in, they would still suffering because of the pandemic.
2. Saved it for a rainy day.
You're arguing (2) should have happened. But an important thing to remember is that companies' savings are not like your savings — companies have far more reliable future cash flow, which means that they can borrow at much lower rates than you can through the equity markets.
If airlines had saved their earnings, maybe they would have grown at bond rates (investing the company's savings in the stock market is too risky and unorthodox for corporate finance officers). That's not good for investors who are looking for 1) return on capital and 2) higher exposure to travel. By returning the capital to investors, airlines increased their exposure to airline-adjacent things and their return on capital. That's a good thing for investors because it gives them more choice! If an investor wants a safer investment, they can create their own basket of bonds and airline stonks.
Similarly, now that the coronavirus has hit, investors know that airlines' fundamentals haven't changed — they're just hitting temporary turbulence. So, to raise capital, airlines can issue stocks and bonds to temporarily get them through 12-24 months. And that's exactly what they did last May: https://www.wsj.com/articles/aviation-industry-races-for-cas...
Basically: corporate finance is not like personal finance, and it's a mistake to think that companies need "rainy day funds." They don't: that's what the equity markets are for.
As for "rainy day" uses, giving the company pension fund a windfall would probably qualify.
Increasing the company pension would not have saved them from their current woes: they would still need to issue debt or equity.
It’s not common, though (and for the purposes of the comment you responded to, the distinction isn’t relevant). If management are saying “we can’t think of anything to do with this money”, most investors won’t disagree with them.
The only thing that needed to happen to keep the economy afloat was the Congress passing their bills.
But these do affect consumption.
1) Stonks going up means that companies have more capital (through stock issuances and equity raises). Companies use this capital to buy things and pay workers, so the dollars end up recirculating through the economy just like if a regular person spent it.
2) Buying houses is consumption. And increases in housing prices causes more building of houses. Which leads to people getting paid for building houses and creating materials which leads to money circulating.
Wealth inequality is bad, and Congress should have done more to help the American people. But the populist "rich people hoard money in stonks and houses so it doesn't recirculate" is also a complete misunderstanding.
2. Buying houses is an investment and is specifically carved out in the CPI. Consumption is Owner's Equivalent Rent, buying is not.
https://www.ft.com/content/a59c2a9d-5e0b-4cbc-b69e-a138de76a...
https://www.bloomberg.com/news/articles/2020-12-21/u-s-stock...
Stock and bond issuances are at all time highs.
Housing is an investment in the CPI because most people don’t buy houses as consumption. The CPI aims to create a basket of consumption for normal people. Rich people do consume houses, and their consumption leads to money circulating.
Should rich people be rich enough to buy houses willy-nilly? That’s a different question. Maybe they shouldn’t, to the current degree.
Kinda problematic when one large company doing buybacks dominates over thousands doing issuing reversing your entire narrative. Taking out bonds to give to shareholders is not something that helps main street.
[0]:https://www.barrons.com/articles/debt-fueled-stock-buybacks-...
Within ten years a film will come out about the next economic disaster and everyone will be saying "how could we be so stupid to allow firms to buy their own stock with debt?" much like the housing crisis.
why not? What's wrong with altering a company's capital structure to be more efficient?
Stocks have a cost (aka, cost of equity), just like debt. Sometimes, cost of equity is higher than cost of debt (aka, the interest rate). Sometimes, the cost of debt is higher than cost of equity. This is determined by the general market conditions and economic environment.
A company may find itself in a situation where the cost of equity is very high, and cost of debt is very low. In this case, it makes a lot of sense for the company to borrow to reduce the amount of outstanding equity on the market. There is an equalizing point, where the total cost of capital is lowest, and that is where the company's money source is most efficient.
There is absolutely nothing wrong with company buying back stocks, if this is the case. The only problem, really, is that buybacks gives capital gains for stockholders, and this is taxed lower than normal income. This is a question of taxation policy, not stock buybacks. Is it fair that capital gains are taxed less than earned income?
This, no shareholder controlled board would ever authorize taking out debt to pay dividends, unless there's some special circumstances for which this makes sense (i can't think of any atm).
The difference with buybacks using debt is that buybacks changes the capital structure. I suppose if the debt is artificially cheap (say, the gov't is forcing interest rates down to lower than what the market rate _would_ be), then it makes sense from a financial perspective, to borrow money, and pay (to the shareholders) the difference between the "real" market rate and the artificial rate. But this predicates that the real rate is much higher (transactional costs, and other overheads might easily dwarf this difference in rate).
Energy (oil & gas) companies certainly did last year. Those stocks are a little different than the broader market, in that investors in them generally aren't looking for appreciation in share price, they want consistently high dividends. Exxon is a good example of this.
Sorry, but this is nonsense. Increasing debt and giving the proceeds away to shareholders definitely alters the debt ratio of a company ... basic financial accounting concept.
you can try to convince people that buybacks are evil, and if enough concensus is reached, it will be outlawed.
The problem is that there's no good evidence that it's evil in the general case, and it's hard to convince large portions of shareholders that it is.
The pandemic has not hit Apple as hard as other industries, and they're taking advantage of low interest rates by issuing debt.
And there's nothing wrong with buying back stock. It's bad when managers use it to boost their personal compensation. That's not happening in Apple's case; they are just returning capital to investors because Apple is doing well and is sitting on a huge balance sheet.
Why not just show me the increased consumption? Show me these increased workers. Show me the raises.
CPI is up 1.5%, due directly to Congress, not the Fed. Unemployment is at 10%. The money supply is up 25%. The velocity of the M2 is down 21%. Straight into assets.
There's nothing wrong with using debt to buyback stock because the environment is corrupted. That's the problem. Fix the environment.
Stock prices only directly impact companies when they actually sell stock. So, propping up the market has zero long term impact as the value of future cash flows is unchanged. It’s simple a handoff of money from the government to people selling stocks over a short period.
It’s popular because it keeps highly leveraged investments viable.
In terms of stock issuances that’s surprisingly nuanced. Delta Airlines for example has 2.7% fewer outstanding shares in Dec 31 2020 vs Dec 31 2019.
AMC is the most public example, where they dumped their at the market offering into retail investors. But there's hundreds of other examples.
Big caps: CCL, TSLA both with multi billion at the markets with little dilution thanks to stock price being propped.
Small caps: Literally hundreds of names, check DilutionTracker on Twitter.
The parent post is correct in that an increase in the stock price in the secondary market has a material impact on the prospects of the company, especially if it's struggling. Raising money isn't the only mechanism, employee retention is another. In this sense, Soros' positive reflexivity has some merit.
The Fed benefits banks and the wealthy. Inflation and increasing money supply makes labor cheaper for businesses and hurts those on fixed salary or wage by decreasing the real value of wages over time.
First off, there is no general consensus about the exact cause of the Great Depression and the cause of the recovery. If you're going to make an attempt at a history lesson, at least get it right. We know that the stock market crash and banking panics played a large role in the contraction of economic activity, but there is absolutely no general consensus for the exact causes. Your theory, that was portrayed as a fact, is solely an opinion that is disputed by many economists and historians. Academics are split as to the exact cause of the great depression and stopping deflation made possible by the gold standard is not an accepted fact in any economics or history debate. [1]
Secondly, the Fed providing liquidity is not "stabilizing the price of the USD", as you say. Printing money out of thin air at extreme rates (22% of all dollars were printed in 2020) is massively devaluing the USD and is borrowing against the future of the country, thus ultimately destabilizing the USD. Just like how many things that feel good in the short term are unhealthy for us, providing artificial short term liquidity that ends up destabilizing society long-term is not healthy or intelligent. As we add trillions of dollars of debt to the US balance sheet, we will soon get to a point where the vast majority of federal expenditure will be on interest payments (it is currently less than 10% but increasing exponentially). At that point, the US will either be forced to hike taxes to ridiculous levels to pay down the debt, or will essentially be bankrupted, and the country's assets will be taken over and dissolved to pay back its lenders by some supranational organization.
The only thing you said with a hint of truth was that the Fed is like an engine that serves to move a train. However, the train is off the tracks, not moving the economy forward. The fed is actively destroying the economy by devaluing the USD and destroying the future of this country. Look around you - companies have already started hedging against the dollar and moving into anything that won't surely be devalued at dangerous levels like the USD in the next decade (i.e. Bitcoin). The Fed is being disrupted, similarly to how Amazon disrupted Barnes and Noble, Netflix disrupted BlockBuster, Uber disrupted Taxis, AirBnB disrupted hotels, and so on. The Fed is NOT a not a net positive on society and people are waking up to it. Hence crypto (deflationary in nature) being the highest returning asset in the last decade, appreciating at 200% each year against the dollar, which people are flocking to. The economy will surely be destructured, but it will be away from centralization and the Fed, because it only serves to enrich the monied interests, while putting on a facade that it exists to 'lower unemployment' and 'stabilize the USD'.
[1] https://www.britannica.com/story/causes-of-the-great-depress...
The point is, without control of the money supply, a government cannot prevent deflationary spirals. Since Fed can print money temporarily, that makes recessions much milder.
You're right, in a sense, that money printing is inflationary. But when money printing happens, it's to avoid a far greater evil: severe deflation.
https://www.history.com/news/how-did-the-gold-standard-contr...
Yeah, in such a complicated system there are so many parties involved that trying to break down one cause seems like an impossibility. All one can do is look at effects and try to speculate backwards from there to see whose incentives may have aligned and who might benefit from the outcomes we got. Maybe nobody, since accidents happen, but in the case of the Great Depression I think it's very interesting to learn how the 1929 stock market crash stemmed the tide of people leaving the south for better-paying industrial jobs in the northeast cities: https://en.wikipedia.org/wiki/Great_Migration_(African_Ameri...
"Between 1910 and 1930, the African-American population increased by about forty percent in Northern states as a result of the migration, mostly in the major cities. The cities of Philadelphia, Detroit, Chicago, Cleveland, Baltimore, and New York City had some of the biggest increases in the early part of the twentieth century. Tens of thousands of blacks were recruited for industrial jobs, such as positions related to the expansion of the Pennsylvania Railroad."
There IS a consensus understanding to what caused the Great Depression, they only folks who disagree tend to be charlatans pushing Gold or other deflationary bubbles such as Bitcoin.
The world is not going to adopt deflationary currency away from central banks - that would be suicidal.
Perhaps the causes of the Great Depression are unknown, but there is consencus that had the Fed stepped in to prevent monetary deflation, the Depression would have been much less severe and ended much earlier.[1]
As for your second point, I would like to point out two things: first, it is indeed possible for the Fed to greatly increase the money supply without causing inflation if the velocity of money decreases, as tends to happen during a pandemic when people cannot go out and buy things in person. Secondly, the US dollar exchange rates have not deviated in a radical manner compared to other currencies, which would imply that things are relatively stable. (besides bitcoin, which I will get to later)
As for the US debt, there is no arguing that it is not a problem, however should the Fed not have acted, it is likely that a Depression would have happened, and the resulting doom loop would have made it impossible to ever pay our current debts, since without stimulus you would never leave the recession.
Now comes the elephant in the room: bitcoin. The only non hedge fund company I know of that actually bought bitcoin is Tesla, which is certainly not a figurehead for other corporations considering how its valuation is larger than the largest carmakers in the world put together despite having a small percent in the market.
Now Im going to be a bit more speculative from here on but I think its an important point.
Bitcoin only proves the supremacy of the dollar, since all people care about is how many dollars they can get from their bitcoin. And indeed, there are no signs bitcoin will actually be used for anything other than speculation, especially since I doubt anyone can tell me how much bitcoin my sandwich would cost.
You're right though about bitcoin being deflationary in nature. Imagine if everyone finally bought into bitcoins incredible returns, and billions of people put their savings into the coin, watching as their wealth grew and grew... except wait a moment, what's this the financial system is hollowed out! Theres no money to make loans with, no money to invest with, not even the most profitable of opportunities? Perhaps people should be lending out bitcoin? But wait we can make more money just sitting on it cant we? After all the less we spend the more money we have?
[1]http://www.employees.csbsju.edu/jolson/ECON315/Whaples212377...
-see the page marked 143
And by doing that, we have the Cantillon Effect [0].
> The Cantillon Effect refers to the change in relative prices resulting from a change in money supply. The change in relative prices occurs because the change in money supply has a specific injection point and therefore a specific flow path through the economy. *The first recipient of the new supply of money is in the convenient position of being able to spend extra dollars before prices have increased. But whoever is last in line receives his share of new dollars after prices have increased*. This is why when the Treasury’s deficit is monetized, inflation is referred to as a non-legislated tax. In these cases, the government has seized purchasing power (rather than physical bills) from its citizens without congressional approval.
[0] https://www.aier.org/article/cantillon-effects-and-money-neu...
Increasing minimum wage would definitely increase money spent throughout the economy, but I think business owners would offset that cost by creatively reducing/stagnating pay and benefits for middle-class type roles. And the resulting extra demand (without extra supply) would prob lead to higher prices for common goods/services (even more inflation), therefore compounding the issue we are discussing now. On top of that, a big chunk of the extra minimum-wage money spent (by the employees) will end up in the pockets of the richest as they "reinvest profits back into the business". IMO this is essentially transferring wealth from the middle-class to the upper-class via extra money paid to the lower-class.
[0] https://soundcloud.com/rhodescenter/is-now-the-time-for-a-fe...
I think you are missing the bigger picture here, When Fed steps in to bail out failed companies, it increases the moral hazard, there is no reason to be responsible when you know the Fed will bail you out.
I hope we don't exhaust ourselves to keep up.
I’d argue that recent fed actions are the reason supermarket shelves aren’t barren which is in the interest of all Americans.
King makes money -> gives it to the army -> collects money as a tax from all citizens.
It creates a system where all the people in the kingdom have to contribute to the army in some way.
Now The Fed creates money -> gives it to bankers -> gov't collects taxes in that coin.
So we've created a system where your ability to buy things is a derivative of how much you support banking. It's no wonder why everyone is overleveraged and fragile and needs bailouts all the time.
We should absolutely help those most impacted by the pandemic, but the amount of money being injected amounts to gross negligence.
Why were people who made 6 figures and still employed being given checks, for example? The stock market is on fire, and many businesses are smashing earnings expectations, yet we inject another $2 trillion?
I've got a sizable portfolio, but the government response frankly saddens me. The green we see every day just represents inflation (of assets). Big gains in stonks, but now we have to pay 2 million dollars for a house in a nice part of town.
Really unfortunate for those without significant assets that ever hoped to own a home.
Because it's easier to do this than to gauge need, and with the paltry amounts handed out it doesn't add up to much compared to the big picture. The real question is why this has become a political talking point, and the answer is to distract from that much larger rapidly-implemented scam of bailing out the bond market that you rightly point out is "Really unfortunate for those without significant assets that ever hoped to own a home". Hiding the large scale theft is much easier when you can distract people into bickering about their financial neighbors.
100% agreed that fed action via bond buying has been excessive as well. In a healthy economic system, there need to be "down" cycles where overleveraged or poorly run businesses fail.
If the government will backstop all investments, then why not leverage up as much as possible and take on excessive risk? Those that have been financially prudent have been punished consistently. I wonder how much of the fiscal/monetary response is really driven by personal bias towards protecting their own portfolios.
Helicopter money is certainly good optics in the short-term, but terrible governance on a longer timescale.
edit: the stock market is on fire while small businesses collapse. The market isn’t attached to reality.
Small businesses collapse, but government efforts haven't been towards helping them, largely more towards sending out helicopter money to the people.
Handing money to people will help all businesses of course, but I'd venture to guess it helped large corporations and brokerages the most.
The loan forgiveness program for small businesses was a good step, but it seemed that a lot of smaller businesses chose not to make use of it.
I'd guess that in the long run, the traditional small business (retail) will become non-viable anyway though. There are too many economies of scale to be gained by operating under the umbrella of a larger corporation. e.g. Amazon can only justify its massive distribution network and same day delivery due to its size.
https://twitter.com/matthewstoller/status/899305677457416193
Or, you know, the Fed is not authorized to deal directly with individuals via the Federal Reserve Act. The Fed's job is monetary and financial stability through credit markets. That's the tools that it has, and it uses them when needed.
If you want to help individuals through taxes/redistribution, social programs, etc, then that's government spending which is controlled by Congress.
It's not the Fed's fault that politicians in the House of Representatives and/or Senate do not wish to pass legislation that authorizes these types of things.
Is this really true anymore? At least the past year, the Fed has taken an unprecedented powers to counter the effects of the pandemic. We've all heard of quantitative easing but there's a handful of programs such as SMCCF that allows the Fed to buy debt directly from large corporations.
Corporations aren't people but they're owned by shareholders and controlled largely by the 1%. The amount of money the Fed has directly or indirectly injected into global economy is absurd and surely, if there's a reckoning, the blunt will be taken on by the bottom 90%.
I thought this was a good overview of all the Fed's programs and initiatives since last year. https://www.americanactionforum.org/insight/timeline-the-fed...
I agree that this was questionable. The problem is that elected politicians are becoming increasingly dependent on the Fed to solve mistakes that they caused themselves. It's like a morbidly obese patient giving a surgeon to permission to do more and more invasive surgery. The surgery itself will only ensure that their body will stabilize, but it's up to the patient to actually get healthier.
The Fed does not have the infrastructure or authority to help the Little Guy/Gal.
You may wish to examine some of the biases that the American Action Forum has:
* https://en.wikipedia.org/wiki/American_Action_Network
Again: if you want the Joe/Jane Doe helped, that's Congress. The Fed is about Wall Street and not about Main Street, and that's by design.
Also not to mention this new trend where younger generations prefer to spend their paychecks on vacations, smartphones, fashion as opposed to long-terms investments like a home.
Buy a home to live in it, but don’t expect that you’ll make money from it.
If you're looking to cast blame on bad policies, then blame those ultimately responsible: the politicians and the voters who put them there.
Ideally, the United States would have a mechanism that would allow voters to choose politicians with the best policies. What we have instead is a system where voters have to chose between the least worst of two possible options. Both parties are beholden to the top 1%, but the are not equally so.
What I find amazing is the lengths people will go to to blame government bureaucrats while reelecting the people who appointed them in the first place.
Everyone loves their Congresspeople. It's the other 433 who are screwing everything up.
Its worse than that. We have a system where people vote for their team color regardless of changes to the team's positions.
2020 seemed to be a year that more people realized that the party they had been faithful to no longer represented them. The number of "why I'm leaving (republican|democrat) party" posts and videos last year was something I had never seen before. I'm hoping this is a trend that continues. Red or Blue, they don't work for you.
Bitcoin is explicitly deflationary by design, which is different than 0% inflation. If you have the same fixed supply and an ever-increasing demand (new population, new Bitcoin owners) then the currency is deflationary. If your economy is deflationary, you will enter a deflationary spiral which discourages anyone from doing anything other than hoarding the currency. It's no coincidence that HODL is the unofficial motto of Bitcoin proponents.
This creates a different set of problems. If you thought wealth inequality is bad now, just imagine how bad wealth inequality would be if everyone had to buy into Bitcoin, making early adopters orders of magnitude richer. The inequality between early and late adopters would be insane. Early adopters love this idea, of course, because they're at the top of the pyramid. Doesn't work out so well for the late arrivals, though.
If you only spend when it's absolutely necessary because you want to keep as much currency as possible, that's the definition of hoarding.
What would you define as hoarding? Spending so little that you starve to death?
Keep in mind that spending includes things like investing in businesses. If currency itself provides the highest return because it's a race to hoard more than anyone else, investing in businesses becomes less attractive.
Currency should facilitate the economy, not be the economy.
People don't hoard stocks, index funds or gold. They spend the profits when they want something for themselves. Why not have money that works like that.
Inflation reduces debt and wealth at the same time. Wages at the low end rise with the cost of living. Debt and wealth are denominated nominally. The cost of a new car may go up, but the cost of the car you're currently driving (and haven't paid off) is going down.
Printing money doesn't steal from the poor. Printing money and giving it to the rich steals from the poor. Speculation on assets comes with low inflation, not high inflation, because with low inflation comes low interest rates. The only reason this is bad is because when this speculation crashes the economy, the rich will be saved by direct payments from the government.
Nominal asset appreciation due to a rise in the money supply isn't a rise in value, and the poor aren't competing with the rich for assets. It seems like that in housing because it is an extraordinarily safe asset to drive up in value (when interest rates are low) based of the history of the US government bailing out losses in real estate.
Wealth inequality in America is due to direct payments to the wealthy, and the government consistently stepping in as the silent guarantor of last resort behind every asset bubble. If the government were instead the asset buyer of last resort (not at par like after the mortgage crisis, but at market value), crashes of asset bubbles would be a boon for the public, not a boon for the people who participated most in the bubble.
edit: The problem with the Fed is that it focuses on a goal of holding down inflation while not considering employment in enough detail. The quality of jobs, whether jobs are in bubble (or fragile) industries, rate of rise in wages, and the quit rate are ignored in favor of a simple percentage of unemployed, and administrations even narrow that down to the proportion of people currently collecting unemployment instead of the prime-age (25-54) employment rate as would make sense.
Also wages have not been rising enough to counter trends.
I think this is really an elasticity issue and that we have far too much low skill labor available in the USA (in part because we can import it easily). This means that low end wages have no reason to rise.
So whatever the causes of the (I certainly agree) massive transfer of relative wealth to the 1%, I don't see much evidence that it's US government financial institutions that are to blame. As for fixing the problem, in the simplest, most effective way: highly progressive real income and wealth taxation and whatever Picketty thinks the fraction the inheritance tax should be.
So, all governments are doing the same wealth transfer because they are run by humans with similar incentives and the US Government destroyed the leash.
The fix isn't to add more bandages over the wound. It is to repair the wound by putting government spending back on a leash.
Exactly. The participants in our tumor-like financial sector collect a risk premium, without actual risk. They have responded accordingly. It's Moral Hazard 101.
> consistently stepping in as the silent guarantor of last resort
Right again. GP's claims about buying are nonsense, and they're clearly projecting about lack of education. Not counting the exceptional last year, the big issue has not been buying but paying off loans (either their own or bailout beneficiaries') with made-up money. Giving made-up money to regular people is comparatively a lot better, either in itself or as a way to avoid worse kinds of collapses, but still not something to make a habit of.
It takes $500 to build a well-diversified portfolio with a roboadvisor, and that portfolio will behave comparably to a larger one (it'll be a bit worse, but also taxed at a lower rate). So, if everyone invested their savings rationally, then when the Fed propped up stock prices, it wouldn't change the distribution of savings across the population.
The real issue is that a larger percentage of the poor's assets are in items that depreciate.
In the '08 crash, a the percentage of people in the US that owned a home dropped from 69% to 63.5%, and is only starting to recover:
https://www.statista.com/statistics/184902/homeownership-rat...
The Fed has been keeping mortgage rates low, and that has certainly helped home ownership rebound. So, it's more nuanced than "the fed steals poor people's money".
(Don't get me wrong; the system is rigged to transfer wealth to the rich. I'm just saying there is more than one mechanism at play.)
I can invest 80% or more of my take home pay if I choose to live frugally. Somebody close to minimum wage can probably get somewhere closer to 10%, which would come at greater personal sacrifice.
Agreed that more people should participate in investing and there's an educational/behavioral component, but recent government interventions have been excessive and basically amount to inflation of asset prices.
Dropping interest rates helps people purchase a home "today", but home prices quickly appreciate such that the carrying cost of the home is exactly the same as before, just priced higher and weighted more towards principal payments.
Americans are notoriously poor at actually saving or investing that money compared to their counterparts in other developed countries, but $12,000/year is quite a lot to invest in the stock market. If you saved even half of that you'd have a comfortable retirement.
12,000 a year is a lot less per year if you are saving for your child's college education.
There are people living in London that have been paying rent on the dot for 20 years and still can't get a mortgage because they are not deemed credit worthy. Each month they pay £1,500, they landlord pockets £200 and uses the rest to pay the bank. 30 years later, landlords owns a home worth £300,000 + £72,000 of recurring income, and the family owns nothing. Being self employed or on zero hour contract can do that to you.
But even if you are an upper-middle class homeowner, you still loose against someone who own real assets. They can borrow ridiculous sums against existing assets at near-zero interest rates and invest with leverage, making millions of capital gains while you squirrel away whatever pennies you can spare into your pension and mortgage.
[0] https://www.nytimes.com/interactive/2020/07/03/us/george-flo...
[1] https://www.axios.com/hillary-clinton-2016-election-votes-su...
Once they do that, inflation numbers will read much higher. By some accounts, home prices have increased by over 10% since this time last year.
A healthy society needs room for social/fiscal mobility, which becomes increasingly difficult when asset prices are inflated relative to median income.
Housing prices, college tuition, and medical care dominate inflation measures. All three of those categories have significant government influence well beyond the fed. If we stopped using federal funds to subsidize college and home loans, tuition prices and housing costs would magically stabilize in no time.
Trying to tame tuition or housing inflation from the fed won't work if the other parts of the government are going to great lengths to subsidize those areas.
It's a way of averting ye eyes from the real problems with the negative externalities and market failures, and the hard work to come up with policy solutions that patch the holes in capitalism.
The analysis of the OP also ignores the decreasing returns to labor investment and increasing returns to capex because of automation which almost guarantee that the bulk of ROI will accrue to capitalists in the future.
Hire some (temporary) middle class workers to build your robot factory or automated logistics warehouse, fire most of the workers in your old factories/warehouses, and watch as more net income is transferred.
I will take the capitalist over these government clowns any day of the week.
Moderna created a vaccine in less than a day. Even with a year to think about it, my state and county still can't decide where the mass vaccination site should be located.
Our government has coasted for too long and is incompetent. When the world decides to quit paying the dollar tax imposed via Fed printing, it will be a rude awaking for all Americans.
Moderna benefited immensely from decades of publicly funded research as does most of Pharma, as well as direct aid from Emory University, NIAID, etc
Look, if you believe the market works as the best mechanism for allocating goods and services, then you've also got to believe it won't work properly if prices are distorted, otherwise Garbage In, Garbage Out.
If a firm is able to pass off costs onto others, it is a hidden subsidy, a form of market distortion. For example, if I just throw all of my trash and waste into the local lake and hope no one notices, I don't pay the costs for my waste, ergo, my prices and my profits do not reflect the true marginal cost.
"But but but...tort! You can sue if injured by dumping!" Get real, this is a libertarian fantasy and not at all how diffuse stochastic waste works. The same people who tell me that what makes a poison, poison, is the dosage, not the molecule. Well, if you dump an insignificant fraction of pollutant, by itself, it is not harmful, but if 1000 firms dump the same amount, then it can be harmful. Who do you sue?
Property rights only work if you can draw a border around something. There are no property rights to the atmosphere or oceans and hence civil lawsuits can't really be a solution to tracking down and punishing individual violators after they've done the damage, the government must force firms to PRICE IN the costs of pollution, either via an upfront regulation, or an upfront tax.
The same is true for negative social externalities. If a firm, or a new technology, is having a large scale negative effect on society, making people less unhappy, more depressed, more prone to crime or violence, more impoverished, it becomes a cost that is passed off on everyone else.
Who pays the costs? We all do. We pay it at the hospital. We pay for it to the tune of $44,000/yr to house prison inmates. We pay for it in more police and criminal justice, more fear, more suicides.
If your company movies into a small town, puts all of the local shops out of business, and then refuses to raise wages or benefits, what ends up happening is, the other citizens end up paying for the healthcare, retirement, or other benefits that the Walmart, et al, aren't paying.
Acting like we don't live in an interconnected system where negative costs get transferred, or that every deal is win-win-win, is a fantasy. If you don't pay for your neighbor's kids nutrition, early education, or healthcare, you'll pay for police to lock up their kids when they try to rob you.
I'd much rather live in a society where I am "forced" to pay for educated, civilized, happy people to be around, then to live inside of a Fortress, "forced" paying for a bunch of private prisons in a police state, just so I can view the misery of the world from my tower windows.
So if you really believe capitalism is the best system for allocating resources, you should be in favor of correcting market distortions where firms can cost-shift their damages onto others, especially when it comes to diffuse-in-time-and-space mechanisms where there is no easily visible negative feedback mechanism to correct the firm's behavior.
Add to my list above supplying safe drinking water and having an effective hurricane evacuation plan (I am looking at you New Orleans).
I do believe in capitalism, and I _am_ in favor of strongly policing the system so that it's fair for everybody. Some call it "big government"
a bit off topic, but it really bugs me when people talk about government like its some big external hostile force. It's our collective power, we should take ownership of it. If its not working that's our problem.
In this way I am for socialized health care, significantly stricter regulations or punitive measures regarding the environment. However for most other issues I would rather have a competitive market.
In the end I think some form of UBI may help us get there most efficiently. Ensure the environmental and health sustainability and give people a minimum amount of money to ensure they can reasonably sustain themselves, then let the market consider the rest.
At this point it's really future generations who are being stolen from.
I'm older, own a house, and paid for multiple degrees years ago. Inflation is good for me personally, but destroys young people. Salaries just can't keep up with how fast housing and education (and healthcare) costs have risen.
I do not think the fed is solely to blame though.
This doesn't get repeated often enough.
People like to blame the fed for everything, but much of the inflation in categories like tuition has been driven by misguided efforts to increase college loans to young people and encourage everyone to attend the most prestigious college they can get into. Colleges have been more than happy to soak up the increased demand with ever-rising tuition costs.
The fastest way to reduce college tuition would be to put an upper limit on federal subsidies and bankruptcy protection for college loans. College tuition would magically drop to match that amount, almost overnight.
Likewise, we need to stop going to such lengths to incentivize everyone to own a home. It started with good intentions, but it turned into an unsustainable arms race. Slow down the federal backing of home loans and let the market sort it out. Renting isn't nearly as bad of a financial choice as many young people think.
Because the people who figured that out also figured out the divide-and-conquer strategy. So first you quietly take X% out of everyone's pocket, and then you do massive PR campaign splitting them into identity groups and forcing them to fight over who should be more entitled to a 0.1X% bonus in the name of equity and justice. And you turn a blind eye, and even somewhat encourage people burning each other's businesses and getting each other fired over made-up differences.
And it works, it just works. All the recent equity activism is about raiding the upper middle class and giving to those who openly oppose economic independence and self-reliance. Completely ignoring the fact that it's the corporations and the people controlling them, who are actually behind the economic degradation of the rank-and-file stratum. And calling it out publicly can now cost you your job [0].
So, endless equity fights for the bottom 99% and an unprecedented increase of power for the top 1%. Congratulations, people.
[0] https://www.dailymail.co.uk/news/article-9248331/amp/Mandalo...
If the Federal Government isn't putting out massive amounts of debt (like it is now) then The Federal Reserve buys bonds from banks & pension funds to lower yields.
This is what happened in QE2 & 3 and why we didn't see inflation then (as measured by CPI).
This time, though, the Federal Reserve is almost literally printing money. The Federal Government's massive debt is mostly because it's giving helicopter money to the bottom 50%. This is only possible because the Federal Reserve is "buying" that debt from the Federal Government. The money is coming from nowhere and being handed directly to people. This IS printing money. But it wasn't the case in the past.
That being said - it's hard to argue this is a massive handout for the .1% at the expense or the bottom 90%. The bottom 50% are getting free money! In percentage terms - they're doing the best.
If we must treat this as a zero sum game and go with the pie analogy - then the people with incomes too high to get free money and no assets to get inflated are the ones who got less pie.
It's not a zero sum game, though! We all MASSIVELY benefited by not going through a 2nd great depression.
It's interesting to me, though, that the vast majority of Americans think the way it's working out is fair - that people with high incomes who could keep their jobs should be the ones footing the bill - not people with massive amounts of wealth (especially massive since it was pumped up by The Federal Reserve).
I am Canadian with a strong exposure to the US market and all these injection of moneys to keep the market high made for nice returns in 2020.
Presumably debtors benefit from inflation since they can pay off their debts with inflated dollars.
Presumably people with cash savings are harmed by inflation since cash loses value.
Weren't these repaid (with interest, I heard)? Or are you referring to some that weren't?
It is a popular Internet narrative, but it is also completely false. The Fed’s policies have directly helped the US at being one of the least impacted countries from the Great Recession.
Also, asset inflation isn’t actually a thing.
This lack of regulation is part of the inequality issue. Other factors include a potentially flooded labor market driving down wages, allowing people in control of economic resources to reap more work for the same price. However, some skilled people in labor also use this as an opportunity to move up the ladder. It's complex, ever-changing system with multiple variables and outputs. Read more here:
https://aeon.co/essays/history-tells-us-where-the-wealth-gap...
What do you think the Fed is? The Fed is made up of the top banks, which means it's controlled by... the 1%.
EDIT for the downvoters:
> The Federal Reserve is "Controlled by member private banks"
You are violently agreeing with the article with the pretence of disagreement
I do not think you mean education as in formal education but rather people have not systematically thought about these things. And, I think people will never be educated enough on this topic. Inflation and Climate change in some sense are pretty much alike. Both are some serious market externalities as a consequence of which they do not benefit from market signals (the biggest teacher of them all).
For issues like this the biggest teacher is the market and not books. A lot of climate change deniers have invested in Tesla and Solar companies and a lot of climate change maniacs have purchased Bitcoins and oil stocks. Some of the biggest proponents of climate change hysteria own private jets and ocean front properties. A lot of people call this hypocrisy and assign motives of fraud to these people but I do not think so. When it comes to climate change the market signals are clear that we need to look for an alternatives to our current energy sources and these sources will be more popular while completely rejecting alarmist claims. One might argue that market signals are not correct. But that is irrelevant. The point is people react to market signals FAR FAR better than anything that gets pushed by intellectuals, even those intellectuals who share their own political biases.
Markets signals around bailouts or inflation are missing. As someone like Milton Friedman pointed out, there is simply nothing that an average American can do to prevent government from printing money. If nothing you do will have an impact people wont do anything. The market signals are missing because there is no competition where you can see what works and what does not.
Instead of taking strong ideological positions I think we should work on making market forces operate more freely in this space. Bitcoin is already challenging the dollar in this space. It is a David (USD) vs Goliath right now but at some point people will figure out that a constant inflation for USD would mean higher price for Bitcoin over time.
For bailouts I think we need ot come up with solution that is more market like. Perhaps increase of creating ad-hoc bailouts for large corporations, pass a clear law that describes the terms of bailout well in advance and provide different options to chose from for the corporations and then stick to it.
You will be surprised how quickly people will vote in favor of better bailout policies.
Who do you think is behind this. Jerome ain't going to lunch with you or me.
Why the perpetrators are not in jail is what on my opinion is the true betrayal of the common person.
I strongly believe the rise of the alt/far right is a direct byproduct of the complete disintegration of trust in the established political class.
All over the world atypical politicians rose in popularity, even when they weren’t populist right wingers.
I would say it's every interest who benefits from mass acceptance of completely stupid & misguided narratives from almost all Democrats & Republicans.
Libertarians, especially non-Party members, are the least of my worries.
Besides the fact that what now passes for leadership ability can not even rise high enough to polish the shoes of Dwight Eisenhower or JFK and they weren't good enough either compared to the Founding Fathers.
Corporations worldwide have modeled themselves on this American trend of precipitiously declining competence at or near the top, plenty of money can always be made by Bozos after true leaders have built the money-making machines.
By the time Reagan & Clinton came along it was far too late.
Clinton knew it so well that's why one of his earliest (naturally unfulfilled) campaign promises in 1991 was to give every citizen $5000 if they wanted to start their own business. At the time nothing else could be seen that would allow wage-earners to escape to the prosperity their forefathers had worked for and truly earned up to that point in the 20th century.
I'd say it is the intended result of education. Why would you expect a school named after a billionaire to teach you how she is stealing from you any more than a school named after Karl Marx to talk about the problems of socialism.
But...the Fed doesn't do that.
Taxpayer funded [0] bailouts come from Congress’ executed by the Treasury, not the Fed.
Fed operations don't come out of tax funds except in the sense that anyone holding government securities is spending taxpayer money when they spend the proceeds.
[0] to the extent fiscal spending is accurately describes that way, which is less than one might think.
"Irresponsibly over-leveraged and nearly bankrupted banks and corporations", allowed to crash and burn.
If this happens, everybody will be worse off - rich & poor alike, but the poor will pay the brunt of the cost. Except this time it won't be just "taxpayer money" that is on the line.
Consider it is possible for the fed's policy to be unfair AND the right thing to do at the same time.
There is no doubt that financial collapse leads to economic collapse. I find it difficult to claim both to be in favour of the common people, and to argue for a course of action that would set the whole world aflame.
That's QAnon level stuff.
Which is why we shouldn’t give stimulus bailout and let businesses run.
-Increasing the taxes, only gives money to the government and my impression is they are not efficient in using money so overall the wealth of the society doesn't increase.
If we limit how much a rich person can hold in large companies as stock, will it force the rich people to invest in small companies? Now we will have a mechanism of spreading the wealth by the rich person who knows how to use money efficiently. However the rich person will still become richer, not sure yet how to solve it completely. Maybe inheritance law should be changed so that once the person dies all his wealth goes to the employees in some fashion.
The balance of wealth is insulting when we have so many basic needs not being met for those at the bottom
"Stealing" is a word that gets knee jerk reactions. But the more polite way to phrase it is that the rich benefit from societal structure 1000x more than the poor and are able to acquire wealth at an accelerated pace because of these structures. Asking the wealthy to pay a greater share to improve society is perfectly reasonable. The fallacy in complaining against taxes for the rich that are already higher than their proportional of wealth is ignoring the fact that so much of taxes goes towards systems that just increase the rate of wealth accumulation. The wealthy reap the benefits of power in compounding ways.
What makes that especially awesome is that Apple and the telecoms have gotten into the business of supplying credit to consumers who would otherwise have no business (literally and figuratively) owning a $1,500 phone when a $250 phone would do.
I would argue that yes, in the first world a smartphone is almost required, but there are plenty of great <$200 Android phones that do everything one would deem essential. $1500 smartphones are now simply a status symbol alongside Nike's and Rolex's, and have been for some time.
Sure - but what should the wealth ratio between the top 1% and everyone else be? Perhaps if the ratio were lower, everyone would be able to afford great phones.
Also, who ‘deems’ what is essential?
Some things have functional advantages even if they also signal status. The working class has at least as much need for functionality as anyone else. A $400 phone vs a $200 one could easily be more useful to a poorer person than a richer one. Same with $100 vs $25 shoes.
My Seiko tells time as well as a Rolex (though not as well as an even cheaper quartz watch would). But even here, where status is definitely a factor, it’s not like the Rolex has no additional value: it has resale value, and aesthetic value.
It's not just iPhones. Even access to food is dramatically better thanks to technology. We no longer have wide-scale famines that we used to have in the past that would kill thousands. Even in the US, to my knowledge, food insecurity is much less of a problem today than it was in 1960.
So I don't see the point in implying that technological progress is worthless.
I do think it's correct that the rich benefit from societal structures more, but I'd rephrase: the rich are more capable of leveraging societal structures. Which in and of itself isn't a bad thing, so long as others are allowed a shot at utilizing those structures, too.
In other words, the fact that more money gives you more benefits isn't something to be sneered at. It's kind of the whole point of money. It should make your life better. Otherwise it fails as an incentive. What shouldn't be the case, however, is that people are unfairly barred from being able to make more money in the first place.
I think we focus too much on equality of outcomes, and not enough on the three important questions:
- It doesn't matter who can leverage societal structures the most. Kudos to the people who can. What matters tax-wise is, who is stressing societal structures the most? An example for illustration's sake: if Amazon is placing an insane burden on the road system and causing more maintenance work, theoretically they should pay more for that than the rest of society does.
- Why don't people have more opportunity to make money? Is our educational system failing them? Are there laws and regulations that are keeping people down? Is rent-seeking behavior edging people out? Etc. This idea that people can't make money because rich people are "taking it all" is silly and not the real problem.
- How can we raise the floor? How do we make it so being poor in America isn't so terrible, and ideally, is okay? We have so many problems with rising healthcare and educational and housing costs, segregation, crime, etc. Collecting more taxes doesn't seem to solve this. Look at SF. One of the most tax-rich cities in America. But do we even know how to deploy that budget effectively to curb homelessness? It doesn't seem so.
Instead they say that because things are better now, then you cannot complain.
Their TV is bigger, but they're also much more stressed about their security...
Is the market actually shrinking or just shifting?
The best way to demonstrate inflation is to index historical prices to another asset like gold.
Sheesh, I know what you mean.
It was such a drag in the 1960's having to save every penny you could working minimum wage, and it still took a year or two before you could afford to pay cash for a new Ford Mustang or F-150.
By the 70's gasoline had skyrocketed to 50c per gallon too, so then you could only afford to drive across the country once or twice a year.
Motel 6's had already gone up to $8, that's just how bleak it was.
While those with trust funds never had to worry about these types of limitations.
The iPhone is a luxury product within a category of luxury products. No one needs a smart phone to be successful in life - you don't need it to educate yourself, to find jobs, to do work, to entertained, etc. It could be used for all those things, but it isn't a prerequisite or the only way. But the fact that the vast majority of adults in the US can afford the disposable income to acquire such a luxury, a device that we could scarcely envision 15 years ago, is a sign of how healthy capitalism is. But leaving America aside - consider as well that globally, extreme poverty has plummeted under capitalism (https://fee.org/articles/extreme-poverty-rates-plummet-under...).
People today have greater purchasing power, standards of living, and life expectancy than ever before, at every income level. To claim that people somehow cannot afford the basics in a country where immigrants regularly show up, live frugally, grind, save, and find a way to thrive, seems disconnected from reality. Instead of blaming the system fully, some blame must also be apportioned for those who don't show the personal responsibility required to manage their life well. That's not insulting, it's just common sense in my opinion.
> Asking the wealthy to pay a greater share to improve society is perfectly reasonable.
How is this not explicitly unfair and discriminatory?
I take it as a sign of the deflationary nature of technology and economies of scale.
Capitalism is a very fuzzy word. I'd say markets and the price mechanism clearly work better than barter. Poorly regulated capitalism is unhealthy.
It's the same way you don't need a car either, but you're going to struggle.
In particular, people don’t actually care about absolute inequality. They care about progress and opportunity. As you stated, the inability to provide for basic needs trumps the fact that you have an iPhone.
But the inability to provide for basic needs is not necessarily caused by wealth divergence. Medical care costs today have little to do with wealth, and more to do with the cost disease, regulatory morass/capture and transferring costs from the young to old.
Housing costs, another huge personal expenditure, are driven by local NIMBY restrictions and city zoning planners.
Education costs are clearly not driven by the wealthy, unless you believe Bryan Caplan’s signaling theory (which I personally do). But in that case, tax transfers don’t help either.
And so here is part of the nuance. Some of the wealthy are ‘stealing’ the money via power/regulatory capture etc. Others are not, they are growing real wealth. Yet others are destroying jobs via automation whole making products cheaper.
I’m personally less well off because my Dr. can charge 3x his value and my local city vigorously defends single family zoning at the expense of non property owners. But I’m not really worse off that Elon Musk is selling cars at a competitive price or Tim Cook is selling headphones at 550 a pop.
And that nuance is important. Equally punishing the growth with ‘theft’ hurts the economy and doesn’t fix any of the underlying problems.
All of these excess costs, make it very hard for people to stay afloat let alone build capital/wealth.
And those problems persist regardless if we transfer via taxes; housing markets are artificially constrained and tax transfers will just get sucked up to bid the price up. The medical system will find ways to suck up as much money as it possibly can. Giving people more money just to have it siphoned off isn’t a great fix.
So I, as a 1%er wouldn’t mind higher taxes. But we have to fix the underlying problems first. Otherwise your just taking my money to hand off to my Dr’s Porsche fund while the less well off get nothing in return.
People care about fairness. Hell, even monkeys care about fairness: https://www.youtube.com/watch?v=meiU6TxysCg
Extreme income inequality is unfair. Jeff Bezos is not 1,000,000,000% "more worthy" of wealth than Richard Feynman—and everyone knows it. Very little about financial capitalism is fair.
John Q. public could care less about Jeff Bezos unless they feel he is part of the 'theft' group listed in my original comment. People like winners that win fairly.
I doubt Feynman would have cared either. He was playing a different game.
https://fee.org/media/17509/prices2-1.png?width=645&height=6...
I don't agree with the argument FEE is trying to make: "Consider each product or service shown. College is heavily subsidized, regulated, and exclusionary, and the costs are soaring. The textbook industry is hobbled by extreme copyright regulation, and can depend on captive buyers. Childcare is one of the most regulated industries in the country. Not just anyone can enter. Every aspect of childcare provision is controlled by the state."
To me, the point is the things that people truly need have risen steeply whilst things that are luxuries have decreased greatly in cost and I believe that's a failing of government to not correct where the market would not. If you're surprised that things like healthcare and childcare are regulated, you've likely never been anywhere they were not, but that doesn't mean the costs to end users have to be so exponentially exorbitant as time marches on.
This strikes me as a problem that escapes simple scapegoats.
Childcare is constrained by the fact that each childcare worker by law (for better or worse) can only look after so many children at once. This ratio varies by state but it's usually around 4 children per childcare worker. The result is that it has to be expensive because (short of having robot caretakers) it always takes 1/4 of a person's labor.
Education is similar, but has gotten worse in the past few decades w.r.t. labor requirements. While class sizes have remained relatively constant, there are more administrators, special needs educators, counselors, etc. servicing the same group of students.
This isn't to say they shouldn't be regulated, or that there isn't room for improvement. College tuition and textbooks could certainly use some downward pressure.
Textbooks are now distributable by e-books, easily scalable. Yet somehow capitalism has utterly failed to deliver it's supposed benefits.
College tuition is now distributable by remote learning, theoretically massively reducing costs. Again, capitalism has utterly failed to deliver it's supposed benefits.
Housing has massively advanced, with cheaper construction, high rises, etc. but laws have been crafted to ensure that doesn't happen to protect rentiers. No taxes on unoccupied land, restrictions on where you can build, massive consolidation of available land without any desire to actually build anything but expensive condos. Again, capitalism has utterly failed to deliver it's supposed benefits.
The cost of tuition is not primarily in where or how people attend classes, it's the labor of developing curriculum, mentorship, and research.
The cost of housing is not primarily in construction, it's the scarcity of land. High density construction does address this, but you even mention that laws are obstructing this. How is this capitalism's fault when democratic governments enact laws that are literally stopping it from functioning freely?
I put the quotes there because (arguably obviously) it's also thanks to capitalism that intellectual property is extended so obscenely.
Anyway, no university (or higher-ed institution) is forced to use textbooks. They do it because they can. Because there's no market force pushing prices down, because captive audience, because the signaling value of degrees is still high (because nobody got fired for hiring the candidate with more degrees - that also happens to have a wealthier background, and maybe even also happens to be white). But it's changing (due to market forces).
Similarly, housing is not a market problem. It's about "preserving the character of the neighborhood", and most neighborhoods happen to be favoring those who happen to be wealthy and against building.
see: https://www.forbes.com/sites/carolinesimon/2017/09/05/bureau...
"Education and healthcare are notable examples of sectors seemingly stricken by constantly rising prices ... At the same time, home appliances and telecommunications have become much cheaper. Why?"
[1] https://www.mercatus.org/publications/healthcare/why-are-pri...
That's because we govern as if public luxury is the supreme law. Luxus populi suprema lex.
Curtis Yarvin talks about it here: https://graymirror.substack.com/p/4-principles-of-any-next-r...
https://www.taxpolicycenter.org/statistics/historical-highes...
A second hand or refurbished iPhone SE is probably the best deal out there. It replaces a land line, especially for lower income folks who move a little more, has built-in internet access (a gateway to accessing government services, jobs, healthcare and knowledge) and built-in navigation, making navigating confusing public transit easier. And Apple supporting hardware forever means that it won't be left out without updates after two years like most lower-priced handsets.
I have the new SE and knowing that it will likely be supported (and repairs, if needed, are accessible) I until the next SE comes out. I’m very excited the next SE will probably be the form factor of the 12 mini or very close to that.
"The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal loaves of bread."
There are some contributing factors to the shift in inequality, a major one being that labor is now oversupplied compared to the post-war period, and the competition is driving wages lower. The U.S. has much higher immigration rates now, which contributes to the oversupply of labor. The late 1800s and early 1900s had similarly high immigration and high inequality. [1]
Whether the historical baseline for inequality is the best amount of inequality is a different question though. It's clear that as redistribution flattens the income curve there is dead-weight loss as highly productive people stop wasting their time doing taxable work. It's also clear that investing in children who would otherwise be malnourished or lack education or healthcare is a net positive for society. It's not clear to me that the current level of inequality is the wrong one - we're admitting a lot of immigrants who are vastly improving their life prospects as a result, the economy is growing, and technology is amazing. Spending more money on health care would have limited benefits [2]. I don't really have a strong opinion on whether inequality should be higher or lower (it's hard to find a good-faith analysis in these terms), but the Time article uses an arbitrary timeframe and doesn't shed any light on the question.
[1] See Ages of Discord for a much more detailed dive into this. http://peterturchin.com/ages-of-discord/
[2] Robin Hanson gives an argument with lots of evidence here: https://www.cato-unbound.org/2007/09/10/robin-hanson/cut-med...
If you’re legally someone else’s property, isn’t your economic inequality to that person immeasurably high? Not a number?
If you insist on a specific citation, check out Ten Thousand Years of Inequality. The editors (whose detailed reasoning I ultimately disagree with) have spent years doing papers on this subject.
1: https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...
As that's not "exceptional", that's justice.
https://www.cato.org/blog/middle-class-shrinking-households-...
https://www.sciencedirect.com/science/article/pii/S002210311...
I'm not sure what you mean that "the framing in the article is ahistorical". Such framings were common throughout history.
Why? Is there any reason for this assertion? Or is it just that you feel this way?
More importantly - the _low_ inequality was really only in the US. Ever since the beginning of agriculture, the world has grown steadily more unequal. It peaked in the Belle Epoch in France (leading up to WW1), and we've recently sky-rocketed past that level.
> Other nations are suffering less from COVID-19 because they made better choices
Which other nations? As someone who regularly reads francophone european news, I can assure you it isn't any nation in Europe. OP goes on to cite minimum wage, overtime pay, state-funded healthcare/childcare/education, and more powerful unions as choices Americans could make to improve their economic standing.
But broader economic outcomes such as wealth inequality in Europe has followed a similar trajectory to that of the US over the past 40 years, and since the start of the COVID crisis, civil liberties have been decimated by the technocracy's crisis response, medical outcomes even with their much-vaunted state healthcare systems are not significantly better than in the US, and small businesses are failing and people are falling into poverty at astounding rates. The ECB prints euros in lock-step with the Fed's dollars.
My intent isn't to make an argument for or against Euro-style social security features, but merely to remind that even with those features, Europe is not presently faring better than the US. Arguably coronavirus-related economic and social outcomes (medical outcomes notwithstanding, depending on the nation/state) in Europe are even more onerous than in the US at present.
Furthermore, this whole episode could sweep far-right parties into power in Europe. It's essentially a given, for example, that Marine Le Pen will run against Macron again in 2022, and not at all certain that she will lose…
An extremely unfair comparison, in my opinion, considering the population difference, physical location, and trade obligations of the US and other countries in the EU.
https://www.newsroom.co.nz/ideasroom/vietnams-showcase-covid...
IMO, a lot of this had to do with the federal response and cohesive messaging they provided. It wasn't perfect, but they at least took action with things like CERB payments, enforced travel quarantines, etc.
On the other hand, the US is way ahead on vaccinations (due to, I would guess, them being developed in country). It does seem like a very US outcome to solve problems with technology and private enterprise in the face of government ineptitude.
Oh come on... Canada is less populated than California with 25x more land...
https://en.wikipedia.org/wiki/List_of_United_States_cities_b...
vs.
https://www12.statcan.gc.ca/census-recensement/2011/dp-pd/hl...
This would leave Toronto at #4 in your Wikipedia list if we only count the bold cities (non-bold cities are those that are part of the metropolitan area of another city). If we count by Metropolitan Area, it would be around #11 by my quick count. Otherwise it would be #74, but for comparison Boston is #51 and Chicago is #75, so I'd say it definitely registers.
[0] https://en.wikipedia.org/wiki/Toronto#cite_ref-13
[1] https://www12.statcan.gc.ca/census-recensement/2016/dp-pd/pr...
Wikipedia contradicts itself, as it puts Toronto as having 2,731,571 inhabitants, which would put it as second most populated city, right beside New York, cf. https://en.wikipedia.org/wiki/List_of_United_States_cities_b... for US numbers.
The ones doing really well are: China, Vietnam, Taiwan, New Zealand, Australia, South Korea, Singapore, Iceland, Ireland, Thailand.
For some pure numbers comparison: https://www.worldometers.info/coronavirus/
Sort by "Total Cases/1M Pop, ascending". USA is 215 out of 221.
Sort by "Total Deaths/1M Pop, ascending". USA is 213 out of 221.
Sort by "Active Cases, ascending". USA is 221 out of 221.
Sort by "Total Deaths, ascending". USA is 221 out of 221.
So, uhm, most other nations? Every time this gets discussed we hear how the USA couldn't do what other countries did because the USA is: Bigger/Smaller/Not an island/Testing too much/Not testing enough, etc etc.
Wealth is not a zero-sum game. If I take two lines of code and put them together, I've created something of value that I might be able to sell.
Wealth is created all the time out of thin air. It might take the form of an innovative new technology, open source code, or even art. It might be because you bought raw materials and built a house, and the subsequent value of the house is greater than the costs that went into it.
Scale that up, and you can create vast amounts of wealth without ever taking it from anyone else. The local coffee shop didn't steal $5 (well, $10, but who's counting) from my wallet; I pay it willingly.
This very common idea that if one person has wealth then they must have taken it from someone else is simply not true.
There are just as many fair and honorable ways (perhaps more) to make wealth as there are the opposite.
Except that is one of the root causes for wealth/income disparity. A few thousand software developers can and did obviate maybe million+ secretaries, travel agents, book sellers, retail middlemen, map makers, camera manufacturers, advertisers etc.
The reason tech companies have such high profits per employee is because they deliver even more value per employee, far more than previous companies have ever delivered on a per employee measure at their scale. That’s the power of the infinitely scalable solutions and near zero marginal costs of software.
Your point isn't necessarily wrong, but it's worth pointing out how that came to be. Said software developers did not appear out of thin air, they were raised and educated by society and have inherited technology unprecedented in scale and influence. And this is only a development of the last 80 years or so. This probably calls for a reframing of how we think about individual economic value, at least in a distributive sense.
I’m not really sure how this fits with the discussion. Literally everything builds on something that came before, software isn’t particularly unique that regard. This also doesn’t change the fact that one person can provide far more value than another.
any this opportunity was available to "everyone" in society. its just that only some chose to take it early on, and reaped the proportionate reward to having taken it on early (not knowing that it would lead to this end result). Now that it is known that tech is high pay, people now naively claim that it's unfair, and that the tech jobs should "pay" for this inequality of outcome.
What does "everyone" mean?
Imagine what it would have been like if the million+ were uplifted instead by the same amount of developer effort.
Now I expect most tech creatives will never know how much more you can get done when you have an above-average secretary compared to just another average engineer.
Apple and their kind have such high profits per employee because all the outsourced workers don't count as Apple employees.
How this privileged viewpoint came to prevail is most likely from decades of brainwash. Wealth has power to keep that message strong and alive.
This keeps coming up in almost every thread because of so many blinded by acquiring capital. The Myth of the Temporarily Embarassed Millionaire. Shine on
If one assumes that the wealthy are using their money to buy commodities and selling those commodities with the expectation of getting their initial money back plus some delta, then it becomes fairly trivial to demonstrate that the more money you start with the more money gets concentrated around you.
For example, I could leverage my current house to purchase a rental property in my city and rent it at a profit. Over time I'd pay down my loans and the value of my two homes would increase. I could then leverage two properties to purchase more or larger rental properties. My wealth would increase because I had sufficient wealth to begin with.
The article is about how the post-1975 period differs from the pre-1975 period. So it's demonstrably not a natural law. Natural laws don't change over time.
Arguably, it was always a natural law, but the 1970s were an inflection point after which capital was allowed to accrue advantages at a much faster rate.
Nobody paid 90%. The tax rate reduction was countered with the closing of loopholes. (There are still a lot.)
Evidence for this is the nearly constant fraction of GDP collected in taxes. The other points are correct. Also, real incomes have both increased at the top end and shifted up for the population.
[1] https://www.cbo.gov/sites/default/files/110th-congress-2007-...
Meanwhile, the proportion of taxes paid by the top quintile earners has increased from 55% in 1980 to 70% by 2013.
In 2017 the top 1% of income earners paid 38.5% of all taxes, vs the bottom 90% who paid 29.9% of all taxes. The top 50% of taxpayers paid 97% of all taxes in 2017.
But all this ignores the main fact, which is that actual rich people make most of their money not as income, but as unrealized capital gains. High marginal rates on income taxes affects high-earning professionals. Not the private jet crowd.
Technically, they make most of their wealth as as unrealized capital gains. It doesn't become money until they realize the gains, at which point it is taxable income.
It's not a good idea for tax minimization to be the main goal of your investment strategy, but it seems like people can get access to a large portion of their investments without actually realizing capital gains.
That's a completely pointless question. If I own 50% of GameStop, my net worth will have gone from $650 million to $12.2 billion to $1.8 billion in like 45 days. Sure, this is an extreme example, but it happens over longer stretches of time to a ton of the richest people.
How exactly do you expect to tax that movement of those unrealized gains?
> You can get variable and fixed rate loans against your investment accounts.
That you eventually have to pay off. The money you pay it off with will be taxed.
In 2019 it was 52% of the income.
> Meanwhile, the proportion of taxes paid by the top quintile earners has increased from 55% in 1980 to 70% by 2013.
Isn't this exactly what you would expect with growing income & wealth inequality, so long as your tax system maintains some aspect of progressive taxation.
I'm not claiming I know what is actually happening in the US, it's complicated and I haven't spent enough time looking at it to be confident.
However, it's true that if there is a) an increase in total income that b) is entirely captured by a small percentage of people, then naturally their share of the total income tax paid will increase and everyone else's will decrease as a fraction unless the system is regressive in some way.
"Progressive" here doesn't mean higher earners pay more in aggregate, it means (by definition) that their marginal rates are higher that people with lower income.
So even if they weren’t earning more, they be paying more taxes.
Citing the amount collected from the top quintile is moving the goalposts a bit. A typical 20%er is someone like a successful dentist. Sure, they probably have a stock portfolio, but that's for funding their retirement.
It doesn't help that the statistics are always presented in misleading ways. We really need the stats to be stated in terms of tranches that exclude the higher ones (eg. top 0.01%, 0.01-0.1%, 0.1-0.5%, 0.5-1%, 1-5%, 5-10%, 10-20%, 20-40%, 40-60%, etc.). Instead, lumping the 1% in with the 1-20% just co-opts the upper-middle class into defending the interests of the 1% and above.
> But all this ignores the main fact, which is that actual rich people make most of their money not as income, but as unrealized capital gains. High marginal rates on income taxes affects high-earning professionals. Not the private jet crowd.
Of course. That's where discussion of wealth inequality (and the estate tax) takes over from income inequality.
Neither will income or property taxes.
Successful dentists are not much different than fast-food workers compared to multi-billionaires already.
Only taxing commerce can be sustained over the long term, and there need to be tariffs calibrated to insure any currency leaving the land of its fully-backed legal tender is replaced with incoming amounts of the same in a timely way.
Of course nationals need to be taking fair profits in both directions, and everything will eventually work out just fine.
Wealth can continue to generate wealth, which we can then tax and redistribute. The natural law hasn't changed, but how we work around it has.
You wouldn't say that gravity doesn't exist because someone is holding up a ball and that it suddenly appears when the person lets go of the ball. This is what happened to monetary policy in the 20th century. The government abdicated its role in the name of unfettered corporate growth and now we have billionaires.
Capital adds value to the economy too, thats why people will pay to rent it.
> I've never understood why the capital gains tax is lower than the labor tax.
One good reason is that if the capital gains tax is higher than the marginal profit, then that business doesn’t exist. If we taxed capital at the rate that we tax labor, there would be one or two ultra-hyper-wealthy people who employed everyone, and the rest of us would be serfs working for bezos or the government, or on public assistance.
> It seems to me it should be the opposite if you want a productive economy, encourage more people to put their money to work instead of playing games in the market.
Investing your money is putting it to work, that is precisely why it earns a return.
What's interesting is that while intuitively this makes sense (for the reasons you gave), the implication (that the rich get richer and inequality grows) is the opposite of what was hypothized by Kuznets (https://en.wikipedia.org/wiki/Kuznets_curve); the latter hypothesis, to my limited understanding (as a non-economist), is fairly mainstream, and has influenced plenty of politics and public policy.
> Otherwise you end up parroting talking points without actually having thought about it.
That is quite a leap and a lot of assumptions baked in.
https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
In Marx's text, he discusses the history of commodity exchange, how people usually exchanged Commodities for Money which they exchanged back into other Commodities they needed. (E.g. I'll sell you my wool for coin, which I can use to buy food.) He called this CMC exchange. (Commodity-Money-Commodity).
This gave rise to people who had hoards of money, and could invert the exchange -- Money into Commodities into Money + delta Money. He called this MCM exchange (Money-Commodity-Money), and posited that it could only exist if the second M was larger than the first -- why turn your money into commodities and back into money if you weren't going to get more money as a result? So it must be that if MCM exchange exists, then it must be MC(M+∆M). Once sufficient hoards are accumulated, they will continue to accumulate.
Marx, of course, carries on with his own opinions about what to do with this and how society should be structured. He also bases his ideas not on data like Piketty, but on building up a model of a Capitalist economy from principles.
I think it's interesting to see this line of argument presented historically and compare/contrast that with the more data driven analysis we see in Piketty. (No matter how you feel about the rest of Marx's work.)
Edit: Downvotes? I feel like I'm presenting a factual response to the parent poster. I know it contains the word 'Marx', but I'm not diving into socialism/communism elements of his work, but rather the analytical dialectic of his critique of capitalism as a system.
Did Marx address the notion that collection of rents on capital create an incentive for the creation of more capital?
How did Marx address the case of MCM transactions where the capitalist has erred and lost money?
The reason I mention that is because his thesis was that, in aggregate, the role of capitalist must expect a positive return on MCM transactions, or they wouldn't occur. Individuals may suffer losses, but as a role it just be positive.
He's less data driven than Piketty, and he builds this notion on top of the idea that there is a desire to hold wealth. Or, put another way, it is natural in an economy of commodities and money to prefer holding money over any given commodity. Eg, having a hoard of money is more useful than having a hoard of wool, as it is generally easier to convert money into a commodity you need than to convert between two commodities.
So the natural inclination is to try and increase wealth, and MCM exists commonly, so therefore MCM must be a net engine for increasing wealth. (Even if individual cases are losses.)
I'm less confident in answering your first question. It hasn't come up in my reading, but I'm not a scholar. It could be in there. (One of the things Marx often does is open windows to look at something and then move on without diving deep on them. For instance he acknowledges inflation, and moves on rather quickly.)
I'm guessing this is oversimplified, but I haven't read the book. Otherwise, the simple fact is no trade in business is guaranteed, there will be plenty of such exchanges that lose money due to speculation. At the very least your buyer could pull out or go bankrupt before finalising the sale resulting in a fire sale and a loss.
Of course, by sheer probability if not talent, some people will win more than they lose and get ahead. The real danger is the plays that an excessive force of money can enable, like predatory and monopolistic practices in buying up a market (or legislators), or driving a competitor out of business. That's where money really makes money.
You are making the inverse mistake of someone who looks at a large jackpot win in Vegas and thinks it's a good investment, when in reality the expected value of a bet is negative.
The rate of return on capital has held relatively steady at ~4% for hundreds of years. Stop thinking about individual winners and losers, and look at the broader picture. If you have sufficient capital, you can expect to return capital + n% over time, where n is approximately 4%.
I'm also not sure what you mean by "sufficient capital". You can by shares one at a time. You don't have to be wealthy to have access to growth in assets.
You have to be wealthy to see an appreciable growth in assets. Both the absolute and percentage amounts matter. Yes, anyone can get a 3% return on their investments over time, but that doesn't really matter when you can only invest $1.
Living has a certain minimum set of fixed costs, those with sufficient capital can pay for those fixed costs through the growth of their capital and still see a net increase in wealth . Someone making $30k a year in wages will never achieve that, even if they see some growth in assets.
> You're quoting an average and claiming it is steady but there are periods where your savings would have not seen that growth and even seen negative return.
You are making a pedantic semantic argument. I acknowledged the presence of dips and bubbles. But on "average" you will see a return on capital, especially a diversified market.
That analysis only looked at the S&P 500, which is a tiny share of the economy and not at all representative of the growth of capital over time. What about housing, bonds, precious metals, commodities, short positions, international funds, etc.
Move up one level of abstraction and look at the forest, not the trees.
This is an excellent example of how low interest rates prevent anyone but the wealthy from making money on investments.
> "These decisions involve risk"
The Federal Reserve increased its balance sheet by about 6 trillion USD since March 2020.
There is no risk when you have the US Gov't backing you!
Edit: https://www.cnbc.com/2020/06/15/the-fed-says-it-is-going-to-...
Federal Reserve literally backing individual corporations at this point. Where's the risk?
It is a natural law of usury, which is what you describe. This is why we used to ban usury as unjust.
Would you want a democratically elected airplane pilot with no training?
[1] https://www.ksby.com/news/national/new-law-looks-to-attract-...
The kind of sentiment you are expressing is directly antithetical to having any kind of real democracy.
If you've ever met the people in power, many of them are quite dumb. It's easy to listen to experts (or not) and give commands. How often do you hear that executives don't know what's happening in their companies but the people on the line know exactly what to do but were not consulted seriously?
To answer your question about airline pilots, I would probably accept (and in fact do, the FAA) a system designed by what is allegedly a democracy. Usually people don't have direct popular elections for technical positions, but design rules in consultation with people familiar with the field. If the voters were in fact other airline personnel, a direct election could be viable though I would require some qualifying criteria (e.g. people with XXXX hours of flight time).
Get your name on some newfangled venture and keep Uncle Sam's hands out of your pocket, but you don't get to rent your money.
but the fed and treasury wont allow that to happen i guess because they prefer inequality as long as it produces a wealth effect
The reality is much more boring. Thanks to "math," they've determined that if the ratio of incomes from 1945-1974 held steady, the bottom 90% would have "more" than they do now. Of course the bottom 90% itself is a fantasy and you can find yourself in or out of it many times in the course of a career.
But is it possible that maybe, just maybe, wealth distribution isn't a 0 sum game? And maybe being in the bottom 90% is better now than it was 40 years ago, because of, I don't know, iPhones, next-day delivery for anything you want, telehealth, instant access to the world's information, electric cars, and many other things that 1 percenters have made for us?
Even if that were not the case, it's abundantly clear that geometrically increasing consolidated economic power is being translated into consolidated raw political power (which is zero sum). The events of the last few months and history in general have proved that this is very, very dangerous.
We couldn't play flappy birds on a mini computer in our pockets in 1970, though, so I guess that makes all that r>g and compound interest accumulating in 0.1% pockets worthwhile.
Looking at the value of my family's house, it's increased almost 40% in three years which seems like it's an insane amount of growth for any asset. Education and houses just seem like they're unreasonably expensive at this point and I honestly don't know how you're expected to break into this market without already owning a house or something along those lines.
Yes, housing would be cheaper if 40% of the population were living on the street because they couldn't afford a mortgage. Lots more supply to go around.
Blaming the AMA for healthcare costs is a unique take. While I can't say they are completely innocent, they are absolutely not a major factor in your insurance quote.
When the government created undischargeable-in-bankruptcy loans for 17 year olds to get them into debt for life so they would need to be pliant, obedient workers for businesses owned by the 1%, on whose behalf did you think they were doing it?
The students'?
But don't discount out of hand the concern that the relative distribution is a problem. Money, and especially money that is capital, almost algorithmically and naturally captures more money.
The trend line then becomes one where more and more wealth is concentrated at the top, even if the total amount of wealth increases.
Wealth, at some level, is the ability to direct labor. As wealth becomes more concentrated, you have fewer people organizing the world's labor power. It becomes harder for the poorest to engage in self determination.
Jesus christ, this has to be satire. The people "making" these things are not in the 1 percent. We don't have to look up to the elites in gratitude because they deigned to give us their magical gifts.
They go on to develop revolutionary technology. The owner class claims the IP, massively profits, and maybe gives the professional a bonus if they're lucky before being told to get back to work
The rest of us are told to be thankful for the gracious gifts of the owner class, which we buy with undervalued labor we sold to them in the first place
How marvelous
It's better than a chinchilla farm.
Telling homeless people that they are better off than the middle-class 40 years ago because they have a smartphone is basically the 21st century equivalent of "Let them eat cake".
Why is it that nearly every company that puts first the shareholders ends up pooping the bed? Because the shareholders don't know jack except what the other people in the 1% want.
I think it's more likely because shareholders typically don't care much for the long term.
I'm not sure this is possible without breaking the entire concept of money. So long as money is a thing humans trade their time for to pay for living expenses and beyond, it can be used to bribe, coerce, etc.
you could achieve this by: giving everyone a basic amount of money, so they are on a more equal footing to benefit from opportunities.
Reducing the powers of money is tough (and kind of a game of whack a mole) but that doesn't mean we shouldn't try.
As it turns out it's the Decentralized that's the important part. You need many people making decisions for productivity to flourish. Rich and powerful making few large decisions simply loses every time.
Nordic countries? Canada/UK? Though they are socialist, not communist.
There's not much to point to other than short lived revolutions and communes, or ongoing struggles, such as:
* Aaragon/Catalonia in the Spanish Civil War
* Ukrainian Free Territories in the Russian Civil War
* The ongoing rebellion in the Chiapas, Mexico
* Rojava
* Paris Commune
* Shinmin Prefecture in Korea
And likely some others I am struggling to remember. All of these communities were/are attacked by competing states with enough force that it's hard to get a sense of what decentralized communism would look like outside of an active conflict scenario.
EDIT: the_gastropod's comment also under this parent is a great short summary of this issue. I second their recommendation of "Capital in the 21st Century"
That's about 1.1% of the net worth of Jeff Bezos.
I indicate this not to imply that Jeff Bezos should be solely responsible for fixing the Flint water supply, but rather to indicate that the resources are there, the problems are there, and what we lack is the will to move resources to fix public problems (be that via taxation or charity). Even problems we know will carry a larger cost moving forward... Flint is a town with a population of nearly 100,000, and a high-lead environment can basically guarantee higher costs in education, health problem remediation, and possibly crime.
- Historically, capital grows faster than the economy at large (generally around 5% annually)
- Steep marginal tax rates help disincentivize high pay (e.g., if the top marginal rate was 90% like it was during the Eisenhower administration, a corporation would see much more of its money go to employees if it gave its lower income workers raises vs giving its exec team bonuses. The purpose of raising taxes on the über-rich isn't necessarily to generate revenue, it's to set up incentives to narrow income disparity, by forcing corporations to distribute money efficiently.
- High top marginal income taxes coupled with a steeply progressive wealth tax would also disincentivize hoarding of capital, and would further "squeeze" the wealth distribution to less problematic levels.
Don’t confuse how politicians sell something with the mechanism. The rhetoric changed with the rise of celebrity through wealth. ‘Soak the rich’ is a sales slogan since it’s easy to punch up, and no one has any sympathy for a guy like Bezos. The same sort of rhetoric is going on right now with lines like ‘billionaires made $2t during the pandemic’, or the headline for this article. the implication is that they actively made moves that increased the amount of dollars in their bank account by literally taking money from the poor. The reality is that they continued running their businesses according to the rules of the game and the value of their business holdings is up.
In that context ‘soak the rich’ should really just be seen as a proposed rule change to the game.
You should perhaps listen more closely. There are a wide array of programs proposed by people who are advocating for greater taxes on the wealthy. Universal healthcare, free education, a larger social safety net and investments in green energy are a few of the big line items being constantly and loudly discussed. Those programs are intended to improve the majority of people's lives. You can interpret that as "more equal" if you want.
That we hear "tax the rich" in isolation these days speaks more to the lack of the prompting question than progressives' dedication to the response.
If tomorrow everyone was given all of those programs, but the income distribution stayed the same as it were today, would everyone go home satisfied or would they discover new things that needed providing?
After everyone has healthcare, will there be people who desire a more-flattened society? Possibly. There are a lot of different people in the world with a lot of different ideas. But that's a separate conversation.
...of course? These programs would (imo) make a better world, but not a perfect one.
Just because you accomplish Goal #1 doesn't mean that you can't continue on to strive for Goal #2.
My point is that while we frequently use the 1% as a reference for discussions on inequality, the driving force of wealth accumulation isn't that some people make 350k+, and people understandably get caught up in those semantics.
There are plenty of Silicon Valley low level engineers who are in the top 1%. Doctors and top lawyers are in the top 1%.
I would fathom most in the top 1% are wage earners and not owning so much capital they can live off of it.
According to BLS, median physician salary doesn't quite make your list, at 208k. Median lawyer is more like 120k. And you are assuming there are two such wage earners per family here, which is probably the minority case. I know a few two doctor couples, by I know far more where the other career either doesn't exist or is much less lucrative.
Any way you cut it, top 1% of income, let alone wealth, doesn't look anything like a typical job and it doesn't do anyone (other than the very wealthy) favors to pretend otherwise.
To say that all top 1% are "capital owners who don't need to work" isn't accurate. There are plenty of wage earners in the top 1%.
I’m certainly not arguing that all of the 1% are living off capital only, but it’s worth noting that the people in there that primarily do it off a wage are unusual even amongst high wage earners.
Absolutely the top 0.01% is different than the top 1%. But that doesn’t make the top 1% just folks.
” This fraction declines and for the top 1 percent (those making $783,000 or more), their income is about equally split between capital and labor income.”
I’d bet if you looked at those in the top 1% but under $1M range the vast majority of income is salary.
https://www.taxpolicycenter.org/taxvox/let-me-tell-you-about...
Most people are unlikely to reach top 1% for income in any one year of their lifetime.
The top 1% for wealth is even a much higher bar to reach: you need to hold over $10 million. People ain't moving in and out of that bracket very often.
As a Sheikh once said 'My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Lamborghini, his son will drive a Lamborghini, but his son will ride a camel'.
This premise has been the basis for many political uprisings (e.g. Venezuela) where wealth has been destroyed instead of created.
By growing the size of the pie you grow the economy, but then the task becomes dividing the pie reasonably to ensure stability and reduce societal problems. In Venezuela, the economy is shafted for numerous reasons - huge concentration of the whole pie into a small elite does no good for the rest of the country, and was worsened by sanctions punishing these actions.
> whatever they allocated it to did.
Machines are inanimate.
The actual value generation occurred there. Not at the capital allocation point.
Church of capitalism might have convinced to otherwise. But if I pay you to carry 10kgs up a mountain I can’t then say: “I carried 10kg up a mountain” ...
There are workers who operate the machines and there are workers who makes sure the factory exists for other people to work at.
> The actual value generation occurred there. Not at the capital allocation point.
Value is generated when a capitalist arranges capital so that he can hire people.
> But if I pay you to carry 10kgs up a mountain I can’t then say: “I carried 10kg up a mountain” ...
If you pay me and my worker’s comp insurance then you can say “we carried 10kg up the mountain” because I wouldn’t have done it for free or without insurance.
A simple measure: if you remove all the capital value CAN still be generated. If you remove all the workers value CANNOT be generated any longer. (Regardless of incentive schemes)
I’m aware that if you remove all the workers, value cannot be generated anymore. This includes the worker whose work is allocating capital. Hence all workers are entitled to the pay that they can negotiate with other market participants, including the capitalist who negotiates a rent (or other arrangement) for his capital.
However the level of productivity of workers without any sort of tools is very likely to be below survival.
Are you holding the view that productive society can’t exist without allocation of capital? Cause the 1000s of years of evidence to the contrary disagrees with you.
Value generation doesn’t require capital, or capitalist. Someone doesn’t need to OWN the results of other people’s work. Crazy I know.
Why do you believe that capital was not allocated for 1000s of years? This seems absurd, and I’m not sure how to charitably interpret this. Do you think that humans were unthinking automatons until recently? When the Egyptians built the pyramids, that was capital allocation.
> Value generation doesn’t require capital, or capitalist.
This is generally speaking, false. Value generation does indeed require capital allocation. Otherwise there would be no tools or raw materials with which to generate value.
> Someone doesn’t need to OWN the results of other people’s work.
Ownership is a social construct that determines who is entitled to use of a thing. Without that social arrangement, then people will just fight over stuff. This is why animals evolved territoriality.
> Crazy I know.
Then join us over here on the side of sanity where we do understand how ownership works.
Plenty of tools and productive work.
> No capital, no ownership (no words to even express the concept).
My understanding is that the Australian government is continuing to expropriate their land (capital). So it seems to be a basic fact that they did own it before, and that is no longer the case.
You understand that tools are capital, right?
Like I said, your position ignores a lot of history. Tools are not capital, as they pre-existed the concept of capital/ownership.
This isn’t like a scientific concept that was discovered. This is a human made dichotomy, there are a myriad of other ways to view the resources and how we consume/share/allocate things.
Yes you can put everything in terms of capital (which is what you’re attempting) but there is nothing “more valid” about your concept than any other competing concept. These aren’t laws of physics.
Thats a distinction without a difference. If you say it was wrong for the settlers to take the land, I ask you why? Either the Aborigines had the right to determine its disposition, or they did not. The right to determine its disposition is ownership rights. Therefore you’re not able to criticize the expropriation of the Aborigines without acknowledging that they held property rights in the land.
> Ownership was a concept introduced in the 1700s.
This is not true, Aborigines have (and had) ownership. When the Europeans got here, the Aborigines had things they owned and territories they excluded other Aborigines from.
> Tools are not capital, as they pre-existed the concept of capital/ownership.
This is nonsense, the concept of capital is the same as the concept of a tool. Means of production.
> This isn’t like a scientific concept that was discovered. This is a human made dichotomy,
Thats correct, ownership is a social construct. Its a social construct that has existed for thousands of years [0] and is not something that you can change unilaterally on the basis of some dogma you prefer.
> there are a myriad of other ways to view the resources and how we consume/share/allocate things.
Yes and you are well within your rights to propose any of those ways, and then other people can choose whether to adopt those ways or not. However taking a different way and forcing it on people is not the way to go, as it amounts to you claiming the right to dispose of other people’s property. Furthermore just because you can posit a concept does not make that concept logical, sensical, or coherent; and you should be prepared to justify your proposition.
> Yes you can put everything in terms of capital (which is what you’re attempting) but there is nothing “more valid” about your concept than any other competing concept. These aren’t laws of physics.
The validity is the correspondence between concept and real world behavior. Tools are capital because they are literally capital according to the basic definition of the word and we have no reason to say otherwise.
Capitalist A hires Worker X to generate some value (P) for them and they pay X: W (wage) - M (margin) (the difference being the surplus value SV). (So W+M = P, and P - W = SV) -- (Edit: Sorry to make that so confusing I could have done that better)
That is how capitalism works. I don't think you'd disagree.
Now A takes SV and hires worker Y and repeats the process and generates another lot of SV.
Why does A have rights to SV at all? The thing you are referring to as "Capital" is really just the "Right to collect others SV" -- where does that right come from?
I don’t disagree with the formula as presented.
> Why does A have rights to SV at all?
It is the wage he earned for arranging the components (factory, raw materials, worker who has agreed to work, salesman, etc.) in a way that generated SV. Many capitalists are competing to do this, and some of them are better at generating SV than others. Those capitalists make more money, and they invest in more businesses that generate SV. Some capitalists spend all their investment arranging to produce SV and they don’t make any, they lose money and lose their investment; however the worker still gets paid. The worker trades his labor for a guaranteed wage and the capitalist takes the risk of loss along with the possibility of profit.
Thats the long story, the short version is that he has a right to it because he has a right to the payment he received from the customer. It was a voluntary exchange.
> The thing you are referring to as "Capital" is really just the "Right to collect others SV" -- where does that right come from?
I disagree with this framing because “others’ SV” implies that the SV belongs to someone else. Thats something you should support if you believe it is so.
You frame “capital” as “ Right to collect others SV" but the SV came because the laborer was able to use tools that made him more productive. The only reason the capitalist got some of the SV is that he chose to buy a tool and then agreed to let a worker use the tool. This is a valuable activity and thats why it earns a reward.
Doesn't this frame of argument just lead back to the one of three scenarios:
- (a) The capitalist bought the tool from a (b) or (c) through hard earned wealth as a wage-earner (super rare)
- (b) The capitalist was born with more wealth because their parents were one of (b) or (c) therefore could be a capitalist not a worker (most common)
- (c) The capitalist just took the wealth because the opportunity presented itself. (Land grabs, resource exploitation, etc). (less common now, but the origin point for capitalism)
where else can you get "the means of production"? And thus the "right to exploit workers surplus value"?
That's for <= industrial-age capital.
In modern day information-era capital: What tool does a software company offer an employee that entitles them to SV... couldn't I just as simply frame it the opposite way: The Software Developer IS the tool, the Employer actually has no means of production themselves, but still claims that right.
We don't have to choose between America and Venezuela. That's a false dichotomy.
But that aside: the top 1% got their by exploiting the surplus value of the 99% regardless of whether wealth was being created or moved, it definitely wasn’t that 1% creating or moving it.
6% of the worlds population of (Aus, NZ, Canada, UK, US) owns over 50% of its wealth. The argument is always about why a fraction of that 6% that takes money from whats remaining of that 6%.
The actual problem is not really anywhere near the fractions of that 6% that grabs headlines. I would also look at anyone who is in that 6% complain about wealth inequality with a confused look on my face. It is such a divisive topic that can get anyone riled up and it completely misses reality.
> A general belief system about the antagonistic nature of social relations, shared by people in a society or culture and based on the implicit assumption that a finite amount of goods exists in the world, in which one person's winning makes others the losers, and vice versa ... a relatively permanent and general conviction that social relations are like a zero-sum game. People who share this conviction believe that success, especially economic success, is possible only at the expense of other people's failures.
Zero-sum bias is a cognitive bias towards zero-sum thinking; it is people's tendency to intuitively judge that a situation is zero-sum, even when this is not the case. This bias promotes zero-sum fallacies, false beliefs that situations are zero-sum. Such fallacies can cause other false judgements and poor decisions. In economics, "zero-sum fallacy" generally refers to the fixed-pie fallacy.
If you invest in the stock market, your wealth grows exponentially.
If you don't invest in the stock market, your wealth grows linearly.
Exponential growth >> linear growth
Who owns stocks? Mostly the top 10%.
https://www.nytimes.com/2021/01/26/upshot/stocks-pandemic-in...
Albert Einstein
...supposedly:
https://www.snopes.com/fact-check/compound-interest/
But you get the point: exponential growth is the key to building wealth.
[1] https://www.theguardian.com/us-news/series/americas-water-cr...
But you can't really calculate this transfer of wealth in the way they do it in this article. You can't simply change one parameter and pretend that the only thing that would have happened is that wages would be radically higher, for example.
Radically higher wages would have numerous effects. Many companies wouldn't have been able to remain profitable. Other would have been more profitable because they would have more customers. It's impossible to say exactly what the net effect would be.
It shouldn't matter how rich the richest people on earth are. I really love seeing people on the Internet try to convince themselves that because Bezos or Musk are worth $100B, they must be stealing it from poor people.
This is precisely the reason why Dengist reforms happened in China -- to foster getting a billion people out of poverty by market reforms that yes, would make a few hundred billionaires.
The thing is, America is getting poorer. And as poor America gets poorer, rich America gets richer -- and, coincidentally, everywhere in the world, rising inequality means higher societal instability, less cohesion, less happiness and, absolutely, more poverty for poor people.
So the question we need to ask ourselves -- is it a coincidence that rich people getting richer and poor people getting poorer go hand in hand? Or is it a law of nature? I'm not sure either way. But you shouldn't so quickly dismiss people that actually do think these are correlated.
https://www.npr.org/2018/10/02/653597466/amazon-sets-15-mini...
It’s a number based on the value of his ownership stake of the business itself.
It’s not a zero sum game. A successful Amazon creates jobs. Presumably if there were better jobs elsewhere, people would not work for Amazon.
It’s also part of the reason that low paid workers can shop at Amazon themselves.
Of course the world can become more productive and thus make everyone (in average) more "wealthy", but only for certain things.
Yes it is, but a few hundred billionaires with mansions and yachts don't really matter in the context of the broader economy.
It's the upper middle class yuppies with substantial amounts of discretionary income driving up the prices on things that makes people poorer in the relative sense. There simply aren't enough billionaires to move the needle on the goods and services people living paycheck to paycheck spend on.
We didn't have a toilet paper shortage because Warren Buffet stocked up. The used car market isn't all jacked because of Bill Gate's insatiable desire for compact pickup trucks.
The gulf between the "I can afford to care about what school district a house is in" class and everyone below them is the important one.
Billionaires buying up "stores of wealth" housing in the city I live in has driven up the price of property inordinately and almost priced me out. What you are saying here is not "they don't matter" but "I don't matter".
Then they tell people who grew up in these cities to just leave if they can't afford it.
Political power is also zero sum and they're buying up that too. This is the most terrifying part. I don't particularly want my country to become like Ukraine with two sets of oligarchs battling it out with their propaganda arms. That is what is happening.
They are not buying up toilet paper but then again toilet paper shortages only happened for about a week, didnt it?
Are you sure they are billionaires and not just millionaires? There are millions of people in USA with millions of wealth, they are what matters, and they can each buy up a large chunk of real estate in mid cost neighbourhoods.
All of the above also buy up rental property. And wealthy foreign criminals andtax evaders get in on the act by buying up property sight unseen as a foreign bolthole.
This is how we end up with cleaners and baristas having to share a room and commute 1 hour each wayway and property prices that are, like, 17x the average wage.
It's weird how so many people are apparently in denial about this.
It's worrying how many people think it's the way things should be.
I don't mind that at all. (Well OK I wish that rich people today would have more taste, and build Sistine Chapels instead of Mar-a-lagos) The problem is that when some people control more assets than entire countries, they will end up controlling government policies.
You could also afford to give away your time better than ever if you were so inclined.
People who are beating the drum about inequality are arguing this; isn't this what the elephant chart shows? For the American middle and working class they are as poor, if not poorer than their contemporaries in the 60s.
The plain argument is that productivity growth has exploded since the 70s, but wage growth has stagnated. People are producing more but being paid less; that might not be outright theft but I think people are beginning to understand that something isn't right.
It does. Bezos and Musk can influence Policy. They can influence for their own ends. Also, it depends on HOW they make their money too. Do they create things? or do they buy up everything such as Real Estate and then jack up the price. There's different kinds of "Capitalism". Rent-seeking is the worst kind. Producing goods that people can use is much better. Why are most people using Windows computers? Is it because it was so much better than other operating systems? Did Bill Gates make his $Billions because his operating system was so good? or did he use other "techniques?
If Amazon suddenly was nationalised with no compensation for shareholders, what would Bezos' assets be? I'm sure he wouldn't be destitute, but it's not like someone who's become wealthy by shuffling money around (like wall street billionaires).
A third, though this is much more an ideological standpoint and I don't expect everyone to agree with it, is the marginal value of money. If an increase in income has a greater marginal effect on the health/wellbeing/happiness of people who have less of it, isn't it better to prioritize growing their incomes rather than people who already have their entire hierarchy of needs met?
> Adjusted for inflation using the CPI, the numbers are even worse: half of all full-time workers (those at or below the median income of $50,000 a year) now earn less than half what they would have had incomes across the distribution continued to keep pace with economic growth.
Another aspect is the power that comes with money. People aren’t focusing on inequality in a pure “that’s unfair” view, there are also issues on how these ultra-rich people are completely outside of the reach of most rules and can sway whole economies basically at will.
Bezos’ fortune is equivalent to whole PIBs, that’s a lot of power concentrated in a single man.
the gov't isn't known to be a good resource allocator when it comes to efficiency.
but did those workers' productivity grew in line with the same economic growth? If said workers were _still_ doing the same jobs as they did before, and had the same output, does it make sense that their wage growth should keep pace with the economic growth?
Certainly not. We're semi-returning to fiefdom where the wealthy make the decisions for the masses, who they also happen to employ and market their goods to.
Sure, some good things can come of this, look at what Bill Gates has done for vaccines in the past decade or so, which is now making an actual difference when it comes to covid vaccination development and deployment.
You also have questionable things though, look at the Nevada bill would allow tech companies to create governments. We've seen company towns before, it generlaly didn't work out very well for the masses... I mean, look at the Battle of Blair Mountain where mining interests went as far as to hire private planes and drop bombs on miners in the United States in retalliatin to a labor uprising https://www.wikiwand.com/en/Battle_of_Blair_Mountain
I love what extreme wealth can do for a given cause, but do I really want a handful of individuals making the decisions? Ehhhh probably not.
And if he could have held Microsoft to making money through engineering more so than anti-recycling it would have been massively better for the environment rather than relatively destructive too.
Up to a point I definitely agree with this, but the issue with some people being billionaires is not that they can drive around in Cadillacs made of gold, it's that they can and do control government policies, and use that power to the detriment of common people.
It seems pointless right up to the moment that those on the losing side of the equation start baying for blood. High inequality is often correlated with violent revolution[1].
Flat tax? Raise income taxes ? Inheritance tax?
The fact of the matter is poverty is really what is sad an unacceptable. People you should access to free health care and their basic needs met if they cant meet them, but I do not see what is fundamentally wrong with Bill Gates earning 100000X more than someone that is making a good living wage, with healthcare, and a 401K in SV.
If anyone is interested, this book has some interesting ideas on how to tackle the current disaster:
https://www.amazon.com/gp/product/B07XRTTHL3/ref=as_li_tl?ie...
someone who is a very well versed orator and public speaker, can also have a disporportionate power, by convicing people of his point of view.
But in a democracy, everyone still only have one vote, and bill gates' vote is just as valid as yours. Compared that to the old days, where if you weren't born nobility, you do not get a say in affairs that affects you.
I think people here commenting or lamenting, does not appreciate what the _actual_ natural state of things are, and how much worse it could be.
I think of UBI and wonder about all of the people who do not know how to spend their money properly, and if they'll just end up homeless anyway. Maybe UBI is not the answer, but UBS -- universal basic services. UBI is the wrong metric. The best metric is how many people are living in unfathomable poverty. I bet that UBI will not be able to solve homelessness in and of itself.
Edit: the reliance on "taxable income" instead of gross is interesting. Wouldn't a progressive tax policy look similar to the paper's stats since more income would be taxable for folks with lower income?
This is a huge collection of charted data which shows that there may indeed be something going on that is a little harder to explain away than the average conspiracy theory.
The study of how wealth accumulates to capital holders has been reinvigorated by Thomas Piketty's "Capital in the Twenty-First Century".
Since then, a huge amount of research has been done on the driving forces behind wealth inequality. Skimming the surface, I'll throw out https://angrynomics.com/ and https://www.amazon.co.uk/Rentier-Capitalism-Owns-Economy-Pay....
Taxable income is gross income when you're pulling a wage. Even in a progressive tax system where, for example, your first $10,000 untaxed, it's still taxable income because even if you make $12,000 then the full amount is used to determine your tax bill.
> Wouldn't a progressive tax policy look similar to the paper's stats since more income would be taxable for folks with lower income?
I'm not even sure what you're trying to say here. Be specific.
I lost my place in the PDF but it looks like they calculated based on wages etc. and not a specific tax form line item. The source data is "Integrated Public Use Microdata Series, Current Population Survey"
https://www.irs.gov/publications/p525
https://en.wikipedia.org/wiki/Alternative_minimum_tax
https://ipums.org/projects/ipums-cps/d030.v6.0
A progressive tax policy might count more and additional income sources for high wage earners and reduce taxable income for low wage earners. The authors are more sophisticated than that though.
What exactly have "the rich" done to "take from the bottom"?
Let's say "the rich" would have done nothing.
Would Ford's Factories in Detroit still exist, churning out the same cars they built in the 60s, only employing more people doing so?
I don't think so. To keep "the bottom" employed at the same level as in the past, somebody had to create new industries and businesses. Why is it the responsibility of the 1% to somehow magically do that?
Eventually something not-so-pretty is going to happen and it's going to happen quickly. Just look at what and how fast things happened around George Floyd. The anger and mistrust just continues to grow.
You can already see some fintech startups attempting equity-based home "loans", in which the "lender"'s lien is on a percentage of the future sale value of the home, not a fixed dollar amount. It will be interesting to see how this develops.
I'm not sure how financing on consumer debt like credit cards and non-commercial vehicles would work, though. Perhaps discouraging consumer profligacy would be a feature, however, not necessarily a bug.
Just because you've been raised from birth to believe usury is necessary for the payment system (not the economy!) to function doesn't make it so.
[1] https://au.finance.yahoo.com/news/danish-bank-introduces-new...
[2] https://news.ycombinator.com/item?id=16414199 http://www.moslereconomics.com/wp-content/graphs/2009/07/nat... (link is broken in the HN post)
This isn't true at all.
https://ourworldindata.org/grapher/average-real-gdp-per-capi...
For wages to grow linearly, labor share of GDP would have to fall exponentially towards zero.
https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-...
I’m not convinced. Perhaps this is the case with a permissive central bank encouraging consumer credit.
In general, my attitude has been "yes, we should work to better help those in poverty move up, but I don't begrudge the Musks, Gates and Bezos of the world as long as I am free to start my own businesses and cheaply invest in index funds to share in the profit." In other words, I am not rich, but see a path available to me and don't see the barriers as being significant. The main barriers to me personally are not billionares, but myself and my goals.
I understand those below the poverty line may not have the luxury of opening a IRA, stock account, etc. or immediately starting their own online business. Certain people may feel additional barriers based on culture, education, etc. and those situations should be addressed. But for the majority of middle-class Americans, isn't greater access to markets and small/online business creation a big factor missing from this conversation? At no time in history has it been easier or cheaper for an "average joe" to start or invest in a business. For that matter, while getting a degree is expensive, self-education has never been easier.
I guess what I'm curious from the HN crowd: Make this article relevant to a middle-class person on track to retire in their 60s, who tinkers on weekends with a few startup ideas, and generally thinks their kids will be better off if they continue to have the same access to education, business and investing. Why should that person be personally concerned about income inequality? I'm genuinely asking here. (Again, assume some level of care for poor/underprivileged- we can agree some baseline should be assisted more.)
I believe this feeling is misguided and here is why. You would be richer today if there was more equality. But instead you are held back by the same forces that those at the bottom 50% are.
Even the rich managerial and technocratic class that you and I are part of (upper middle class) are poorer than we would be if it was more equal.
So in other words, you have been screwed too by the system. But because you don't feel screwed (despite evidence that you have been) is why it continues to keep going.
From a personal finance perspective, I'm aligned with you. I shovel my money into my 401k and index funds, and still have plenty left over to survive and buy things I want and need. By doing so, I can participate just a tiny bit on the finance side of capital and take in a bit of the upside.
>I understand those below the poverty line may not have the luxury of opening a IRA, stock account, etc. or immediately starting their own online business.
It's not just people below the poverty line. The vast majority of Americans, especially younger ones, are not making enough to substantially invest or feel secure financially. If someone does start their own business (an incredibly difficult venture), it will be at their own risk, with much to lose. Dabbling in side projects is a luxury, and I don't think it's reasonable to expect people who are more overworked and less financially stable than you or I to realistically use that as a way to lift themselves up. It's also not really a solution that scales, in my opinion. You can't expect everyone to start their own side hustle. Most businesses fail. Some lose money for years until eventually breaking even. Obviously, more opportunity is good, and I want to see people succeeding in starting their own businesses and innovating, but isn't having financial and social safety the biggest factor in encouraging that?
>Make this article relevant to a middle-class person on track to retire in their 60s, who tinkers on weekends with a few startup ideas, and generally thinks their kids will be better off if they continue to have the same access to education, business and investing. Why should that person be personally concerned about income inequality?
I'll take a stab at this from a couple angles. First off, you either care or you don't. Like you said, you're doing fine. I'm doing fine. I don't think anyone really owes you an explanation to make you care, because you don't have to. But I have friends who graduated at the same time as me who aren't doing great. They're working way harder at whatever blue collar job they could find than I ever did, for less money. Mental health isn't great. I'm not particularly different from them, other than I happened to like computer science as a kid, and my brain is sufficiently configured to churn out some code for an employer for 8 hours a day. I don't think I could look them in the eye and suggest that they just invest more, or consider starting their own business, or try online learning, when they're already down. I never did any of that.
The other side of it is that the middle class is still significantly more aligned politically and financially in their interests with the rest of the population than the 1%. I'm making a lot of money, but one bad trip to the hospital would still bankrupt me. I still worry about rent. How about everyone else who is worse off than me? The truly wealthy are playing a fundamentally different game than the rest of us, however you feel about that. One interesting aspect of the recent push for more progressive policies is that much of it is being driven by middle class white collar workers, and not blue collar. I see it as a sign of the increasing income/wealth inequality trending over the last several decades. The middle class has typically been 'placated' by being able to live a decent living, but even they're feeling the squeeze now.
I hope that was somewhat coherent and didn't come off as too combative. I really just want to convey my personal experience and how it's different from yours.
Similar with investing. Robinhood, et al have huge issues for sure (as we recently learned), but anybody can dollar-cost-average into some index funds and do better on average than sticking cash in the bank.
It's not so much that I don't _care_ about others less fortunate (I really do, and put my money where my mouth is on that). But I also genuinely think that one big way to help people is to help them have successful small businesses and invest, and encourage a mentality of self-education. I have definitely had that conversation with less financially stable peers. I don't push it on them, but if they are interested, we do brainstorm business ideas and talk about next steps, investing philosophy, interesting books and sites, etc.
I would get upset if they don't make a fair contribution to running and maintaining our society.
I get upset when I read that there are some very large organizations that don't pay tax.
I get upset when our government hands out bailouts.
I get upset when polluters don't pay to clean up their own mess.
I get upset when wealthy people use their wealth to exercise power and manipulate public opinion, so that my opinions are in the minority. :)
That's because it doesn't effect you.
You don't have to face death because you can afford insulin or food or housing.
Further, do we have "greater access to markets" and is that desirable, when those markets are largely selling the same things, and what variety exists usually also comes with questionable reliability/quality? How does that greater market access affect the ability of average Americans to start and successfully operate a small business when products are so easily copied and drop shipped from Asia?
The best chance at a reliable retirement and an equal or better life for your kids goes through a stable, broadly wealthy country. Inequality and corruption have toppled more ancient regimes than the US Republic, and all of your money exists in the form of "the full faith and credit" of the Republic. Your interests are aligned with the article.
Like what, though? How is Amazon unfairly stopping indie stores from succeeding?
Moreover, it's incredibly frustrating, as a merchant, dealing with an unregulated private bureaucracy like Amazon's. I know plenty of merchants who have had their inventory mixed with counterfeit competitors, received arbitrary account bans (including having funds frozen), and had to spend large amount of cash to comply with new policies that they invent with little warning.
If you want to start a small business to compete with amazon, then of course their logistics, pricing and SEO is better than you. That's like saying that you want to start a garage car manufacturing plant, but you are out-competed by automanufacturer's investment in robotization and automation, and streamlined inventory management.
That's not a 'barrier' per se - it's the point of amazon. As a small operator, if you do not have a value proposition, you don't have the right to exist.
You really don’t think small, independent merchants are affected by Amazon’s 2 day delivery or taking back any return? That’s naive.
Can we right the ship without devastating processes, or is our system doomed to slow incremental change whereby the generations slowly grind away at societal problems? Or are those problems growing worse faster than the slow grind?
In the long term, more and more of the federal budget is being paid for by the Fed. While this isn't necessarily unsustainable, it is fraught with danger. The main reason is that there is very little democratic control over Fed policy. Vesting Congress with taxing power places taxation under democratic purview.
I shudder to think of the corruption that will occur when the Fed funds most of the federal budget. There will be no democratic control over most of the government.
I’d argue a better formulation is “the bottom 90% failed to force the top 1% to hand over $50T to them.”
The majority of people in any society just do not create wealth, just as the majority of people in society do not create beautiful art or useful science.
The idea that wealth created by some is owed to everyone in the country is a morally bankrupt relic of nationalism. And thankfully the structure of the global digital economy is finally starting to reflect that fact. This is just the beginning.
Basically, because health insurance costs have exploded and it costs the same to insure a cashier as it does a corporate Vice President, health insurance cost increases has eaten away a lot more income gains at the low end than the high end. In numbers let’s say a cashier cost a total of $10k in 1970 with costs of $8k in pay and $2k in health care and a VP cost $50k with $48k in pay and $2k in health insurance. Now let’s say GDP per capita grows 3x but healthcare costs grew 6x between 1970 and 2020. Now the cashiers health care is $12k and base pay is $18k. The VP is $12k in healthcare and $138k in pay.
Now the cost of both employees rose proportionally, but the income portion of the cashier only grew by 2.25x while the vps income grew by 2.85x.
These aren't real numbers (I couldn't quickly find the paper I first saw with this analysis) but it is illustrative.
Fixing the health care cost issue and dissocating it from employment ties directly to fixing income inequality (although it is not the only issue.)
I think this populist “Don't tax you, don't tax me, tax that fellow behind the tree!” sentiment is probably the wrong focus. I hope people will eventually support broader policies to promote equality (https://www.niskanencenter.org/faster_fairer/agenda.html), antimonopoly policies, and broader tax increases (such as land value taxes and closing capital gains tax loopholes) instead of singularly focusing on bogeymen.
That's not how this works. Wealth isn't a zero-sum game.
In my opinion ;)
When the 1% fails, there is immediate push to bail them out with > 100% of their losses.
If the reckless investors are allowed to fail equitably, there would be far fewer billionaires and far more people without $100k of debt.
Isn't it strange that that's true? Why does jealousy stop at national borders? Why not more local borders? Why not people you personally know? Why not the whole world?
One is extortion under the threat of cops wielding violence and jail time. The other is a free choice.
It'a absurd to defend such a position, especially one rooted in a traditional of violence via arguments that were used to justify the enslavement of entire races.
> In the U.S. you have the option of leaving if you find the cost too high.
So you acknowledge that there’s no alternative, but you still act like people have the choice of an alternative.
> This is the system we have developed for people to pay for the privilege of earning in this society.
Some people believe that the freedom to earn a living is a right, not a privilege.
Earning a tax free living clearly isn’t a right according to the U.S. Constitution. Go elsewhere if the cost is too high or advocate for lowering the cost. It’s a strange position to take that the benefits of the society you live in ought to be free to you when those benefits have costs.
What if the cost of living is high somewhere else as well?
> Earning a tax free living clearly isn’t a right according to the U.S. Constitution.
The US Constitution recognizes rights, it doesn’t confer them or exhaustively catalog them.
> Go elsewhere if the cost is too high or advocate for lowering the cost.
This discussion could be an example.
> It’s a strange position to take that the benefits of the society you live ought to be free to you when those benefits have costs.
Its a strange position to be accused of wanting things for free when one identifies unnecessary waste.
The Constitution gives government the power to tax. Therefore in this society earning a tax free income is not a right as far as this society is concerned. I apologize for not making that clearer.
The person I responded to did not claim there was unnecessary waste and thus taxes ought to be lower. Their position appears to be that the act of taxation is theft (since it’s done through violent means). Then you chimed in without stating that your position differs. You didn’t give any indication to having a different position to the person I responded to.
Thank you for the discussion. I will read and contemplate your response but will not respond further. It appears to me that we have irreconcilable differences of opinion on the matter.
> Some people believe that the freedom to earn a living is a right, not a privilege.
There is also freedom in the security of living in a content and happy society that isn't setting up guillotines because massive underclasses have been pushed to their breaking points. The price you pay for civilization, and so on.
The existence of rights does not obviate the possibility that they will be infringed upon.
> There is also freedom in the security of living in a content and happy society that isn't setting up guillotines because massive underclasses have been pushed to their breaking points. The price you pay for civilization, and so on.
So I’d really like these leaders to quit pushing us to the breaking point but they keep doing things that benefit themselves and their cronies and telling me its for my own good. So I’m not really sympathetic to the idea that civilization requires central banks run by oligarchs or tax laws (written for the benefit of oligarchs) that punish productivity and reward sloth.
Validity in this case is not a fact it is an opinion or value judgment that implies that it is moral/ethical to use coercion to extract money from citizens.
You may agree with this. You may not claim it as a fact.
> taxation as a principle is not some sort of ludicrously unjust abomination
Thats your opinion and the oligarchs who decide how tax money is spent appreciate your conformity.
Sure, and it is an opinion or value judgment supported by millennia of social contract even before Enlightenment era thinkers came up with the concept of the social contract. If you're going against one of the basic mechanisms or tools for how society works, you might as well label yourself an anarchist. Which is fine, plenty of mutualist ideologies exist, but you should at least identify yourself so people will understand the very different ideological framework you're arguing from.
> Thats your opinion and the oligarchs who decide how tax money is spent appreciate your conformity.
And the puritans who dictate popular morality appreciate your conformity in wearing clothing. Again, people can oppose oppressive taxes and unjust tax systems, but to argue that taxes are unnecessary is seemingly arguing against all of human society since the development of agriculture. Unless you are a believer in Modern Monetary Theory? Good of you to realize the possibilities of fiat currency.
Yeah, so is slavery. So is monarchism. So is marital rape.
> If you're going against one of the basic mechanisms or tools for how society works, you might as well label yourself an anarchist. Which is fine, plenty of mutualist ideologies exist, but you should at least identify yourself so people will understand the very different ideological framework you're arguing from.
I’ll identify myself as an anarchist for being opposed to violent coercion of resources if you will identify yourself as a criminal for being in support. Sound fair?
> And the puritans who dictate popular morality appreciate your conformity in wearing clothing.
Norms of wearing clothing are not dictated by puritans but arise and are maintained by repeated intentional participation.
> Again, people can oppose oppressive taxes and unjust tax systems,
We do. In fact we invite you to explain how any tax is just.
> but to argue that taxes are unnecessary is seemingly arguing against all of human society since the development of agriculture.
Not at all, one may as well say that arguing that slavery is immoral is arguing against all of human society since agriculture.
So is property. So is language. So is symbolic thought.
> I’ll identify myself as an anarchist for being opposed to violent coercion of resources if you will identify yourself as a criminal for being in support. Sound fair?
Anarchism is an existing ideology with many school of thoughts within it. You seem to be an anarcho-capitalist, to be precise. I, of course proudly admit to being a criminal (https://www.youtube.com/watch?v=EEXTt9OmJis&t=1m18s) insofar living in modern society makes criminals of us all, yourself included, even under duress.
> Norms of wearing clothing are not dictated by puritans but arise and are maintained by repeated intentional participation.
As is tax law.
> In fact we invite you to explain how any tax is just.
Because it's cheaper to provide social programs than to deal with rolling peasant revolts.
> Not at all, one may as well say that arguing that slavery is immoral is arguing against all of human society since agriculture.
And indeed so. So are you then an anarcho-primitivist? Or anti-propertarian?
Language and symbolic thought are not opinions or value judgments.
> I, of course proudly admit to being a criminal (https://www.youtube.com/watch?v=EEXTt9OmJis&t=1m18s) insofar living in modern society makes criminals of us all, yourself included, even under duress.
I’m not convinced that it is meaningful to make that assertion. But this is fine, I’m an anarchist because I oppose coercion and you’re a criminal for supporting it.
> Because it's cheaper to provide social programs than to deal with rolling peasant revolts.
And so that makes it moral to suppress peasants with unjust taxation regimes?
> And indeed so. So are you then an anarcho-primitivist? Or anti-propertarian?
I decline to identify as a proponent of any belief system because of the harmful epistemological consequences of group identity.
They are according to John Zerzan.
> But this is fine, I’m an anarchist because I oppose coercion and you’re a criminal for supporting it.
Anarchism, fwiw, is not meant to be a pejorative, but a reference to an actual ideological framework, albeit a radical one. One that has both left and right variants, including the aforementioned ancaps.
> And so that makes it moral to suppress peasants with unjust taxation regimes?
No, it's moral to provide people with food and shelter, health care and education, opportunities for social advancement, funded by surplus wealth generated by a society, in a manner deemed agreeable by societal consensus, so as to create a stable social order. A just tax regime would not be taxing peasants more than nobles nor burghers.
> I decline to identify as a proponent of any belief system because of the harmful epistemological consequences of group identity.
But by crowing "taxation is theft", you have clearly virtue-signalled yourself to be a libertarian.
Then it must be immoral to take food and shelter from people. How do you then justify taxation?
> funded by surplus wealth generated by a society, in a manner deemed agreeable by societal consensus, so as to create a stable social order.
And in order to maintain consensus, and order, anyone who doesn’t agree is subject to violence. No, thats not moral.
> But by crowing "taxation is theft", you have clearly virtue-signalled yourself to be a libertarian.
> you might as well label yourself an anarchist. Which is fine, plenty of mutualist ideologies exist, but you should at least identify yourself so people will understand the very different ideological framework you're arguing from.
So you continue to insist on labeling me, but the point is that the ideas exist independently of labels and must be dealt with on their own merits.
Presumably society comes with concepts of fairness, and that it is more fair to take someone's surplus means to share with those who are running a deficit. This need not be coercive either, as there are always incentives such as tax credits and deductions so forth to spur voluntary giving. I'm sure there are moral philosophers better suited to explain it than me.
> And in order to maintain consensus, and order, anyone who doesn’t agree is subject to violence. No, thats not moral.
We live in a society, as they say.
> the ideas exist independently of labels and must be dealt with on their own merits
But pattern recognition is a form of optimization, and labels are but filters created from reoccurring ideological patterns.
So your concept of fairness involves a person who has the power to assign and remove property from other people according to his judgments.
> This need not be coercive either, as there are always incentives such as tax credits and deductions so forth to spur voluntary giving.
Taxation is coercive, so offering relief from coercion as an incentive is coercion.
> I'm sure there are moral philosophers better suited to explain it than me.
There are moral philosophers in favor and opposed. You must take responsibility for your own moral judgments.
> We live in a society, as they say.
And marriage means that its not possible for a husband to rape his wife.
> But pattern recognition is a form of optimization, and labels are but filters created from reoccurring ideological patterns.
Its a lossy form of optimization and the labels have connotations that may not be justified.
Yes, and that person is Uncle Sam, Marianne, the Goddess of Democracy, it is me and you, because it is be formed from societal consensus and the republican process.
> Taxation is coercive, so offering relief from coercion as an incentive is coercion.
Coercion schmoercion.
> You must take responsibility for your own moral judgments.
Certainly, in the same way a fish takes responsibility for the water it lives and breathes in.
> And marriage means that its not possible for a husband to rape his wife.
Your entire stance is that marriage is unjust because it can be abused. While I'm arguing that abusive marriages do not necessarily form the majority, nor does it invalidate the concept.
> Its a lossy form of optimization and the labels have connotations that may not be justified.
I'm no audiophile.
Good, then you’ll have no objection to me helping myself to your surplus. For “the good of society.”
> Coercion schmoercion.
Its interesting how people are often quite concerned with someone else’s perceived lack of things, but references to someone being a victim of violence are dismissed.
> Certainly, in the same way a fish takes responsibility for the water it lives and breathes in.
The fish didn’t try to justify his aquatic lifestyle by reference to moral philosophers.
> Your entire stance is that marriage is unjust because it can be abused. While I'm arguing that abusive marriages do not necessarily form the majority, nor does it invalidate the concept.
My entire stance is that a moral wrong doesn’t become acceptable on the basis of someone asserting it as an integral component of some other thing. Theft/robbery doesn’t become ok because you believe it to be necessary or good for society, and rape doesn’ become ok because the victim is married to the perpetrator.
> I'm no audiophile.
Just deal with the arguments as presented rather than trying to link them back to some ideology as a convenient means of dismissal.
I don't evade taxes, so you're welcome to my surplus.
> Its interesting how people are often quite concerned with someone else’s perceived lack of things, but references to someone being a victim of violence are dismissed.
By all means, please expound upon the victims of violence caused by taxpaying in modern day America. Are you referring to those flag fringe-watching sovereign citizens and tax protesters still up in arms over the 16th amendment? Freemen of the land unjustly persecuted for courtroom creativity? Wesley Snipes?
> The fish didn’t try to justify his aquatic lifestyle by reference to moral philosophers.
Indeed, for the fish is far more wiser for not getting sucked into fruitless interminable debates with unyielding ideologues.
> a moral wrong doesn’t become acceptable on the basis of someone asserting it as an integral component of some other thing
Then you'll have to provide your alternative to taxation, and indeed your alternative to governments or societies, as those can't really exist beyond taxes, at least until we achieve a post-scarcity society.
Incidentally, I should note that being against the principle of taxation not only precludes income taxes, but sales taxes and other consumption taxes, property taxes, estate taxes, tariffs, public tolls. Even if I was to suggest a revolutionarily different society- say a maximal Georgist world where the land value tax literally was the single tax levied to fund government and alleviate inequality- you would call it theft and thus NASA would continue to go unfunded.
> Just deal with the arguments as presented rather than trying to link them back to some ideology as a convenient means of dismissal.
"Taxation is theft" is a meme well-known to the internet, and this conversation we are having has been repeated over and over uncountable times. Neither of us represent original ideas. We are just rehashing the same unanswerable debate many men have had before us.
To bring up technology into this discussion- memoization can be a way to expedite a solution.
The taxes were already accounted for, my claim is on top of what you already contributed.
> By all means, please expound upon the victims of violence caused by taxpaying in modern day America.
Its all very simple, if you don’t give them what they want, they threaten you at first and then they come take what they want.
> Are you referring to
This isn’t helpful.
> Then you'll have to provide your alternative to taxation,
Its the same as my alternative to rape. Namely, abolition.
> and indeed your alternative to governments or societies, as those can't really exist beyond taxes, at least until we achieve a post-scarcity society.
I thought you were familiar with alternative viewpoints? When you put out a fire, what do you replace it with? If your society is dependent on violence and coercion, then perhaps your society shouldn’t exist.
> Incidentally, I should note that being against the principle of taxation not only precludes income taxes, but sales taxes and other consumption taxes, property taxes, estate taxes, tariffs, public tolls.
Don’t stop there, I’m also opposed to bank robbery, grand theft auto, petty theft, burglary, larceny, fraud, theft by conversion, and rapine. You get a lot for your trouble when you give up aggressive violence.
> you would call it theft and thus NASA would continue to go unfunded.
I’m fine with NASA relying on voluntary sources of funding and ceasing to extort the working class.
> "Taxation is theft" is a meme well-known to the internet, and this conversation we are having has been repeated over and over uncountable times. Neither of us represent original ideas. We are just rehashing the same unanswerable debate many men have had before us.
If you think the debate is unanswerable then perhaps you would enjoy something else more. For my part, the only way to find an answer is to have the debate. Furthermore in my experience these debates tend to get derailed by people pattern-matching their interlocutor’s response to something they feel more comfortable responding to and in the process eliding nuanced arguments in favor of rehashing things that haven’t even been mentioned. Either “taxation is theft” or “taxation is not theft” (or some more compicated relation between ‘taxation’ and ‘theft’), but in no case does “‘taxation is theft’ is a libertarian idea” get use closer to a resolution.
> memoization can be a way to expedite a solution.
I’ll look, thanks.
Not according to you, as you view taxes as inherently illegitimate. Though if you have a Patreon or GoFundMe to validate your claim then by all means.
> Its all very simple, if you don’t give them what they want, they threaten you at first and then they come take what they want.
If you don't wear clothes, you'd be arrested for public indecency.
> You get a lot for your trouble when you give up aggressive violence.
Tell it to the Iroquois, sadly.
> If your society is dependent on violence and coercion, then perhaps your society shouldn’t exist.
Then say you don't believe in society.
> You get a lot for your trouble when you give up aggressive violence.
Then why not give away property, as well? There are arguments to be made that private property violates the NAP.
> For my part, the only way to find an answer is to have the debate.
There really isn't an answer to be had in a debate, because fundamentally both sides are operating from stances so alien from one another to essentially be in different languages. "Taxation is theft" and "taxation is not theft" is not really meaningful in this context, as there is no agreed upon definition of what theft is. Despite its unanswerable nature, it is still quite enjoyable.
I’m responding to taxes the way you responded to my request for some of your surplus. You’re asserting you already paid taxes, you don’t get to decide how much tax you pay.
> If you don't wear clothes, you'd be arrested for public indecency.
I concede that laws requiring clothing are akin to taxation in that one group of people imposes their values on another group without their consent.
> Then say you don't believe in society.
I’m fine with society, I disagree with you that taxation is necessary for society.
> Then why not give away property, as well? There are arguments to be made that private property violates the NAP.
Property is a consequence of animalian territorial instincts and human tool-using instincts. If someone can articulate a coherent vision of a property-less society, others are welcome to join them.
Mostly the problem is that the people who challenge notions of property rights seem to be motivated by the prospect of obtaining the property of others who would prefer to retain it. In essence, they don’t have a problem with property, but with certain people’s ownership of certain things because they would rather that other people own those same things.
> Despite its unanswerable nature, it is still quite enjoyable.
Glad you’re enjoying it and likewise.
Neither do you, let's get this proposal to the legislature.
> I concede that laws requiring clothing are akin to taxation in that one group of people imposes their values on another group without their consent.
Perhaps the same can be said of all laws.
> I disagree with you that taxation is necessary for society.
It's voluntaryism, then. The onus is on you to advance an alternative model and light a candle, rather than just calling taxation theft and cursing the darkness.
> If someone can articulate a coherent vision of a property-less society, others are welcome to join them.
As with taxes.
> In essence, they don’t have a problem with property, but with certain people’s ownership of certain things because they would rather that other people own those same things.
Not so with Proudhon, the originator of the phrase. His take was that those who owned those properties had no right to the wealth generated by those properties if the labor was undertaken by others. That is, rentier wealth via property was theft.
> I now saw that Bruenig's use of Proudhon's phrase "property is theft" made perfect sense from the perspective of an evolutionary theory of morality when "property" is defined as ownership by people who do not work yet become wealthier than the people from whom rent is collected.
https://www.psychologytoday.com/us/blog/cui-bono/201902/is-p...
I’m representing the interests of society to you, the same as the legislature. You’re no more entitled to say “no” to me as either of us is to say “no” to them.
> Perhaps the same can be said of all laws.
Perhaps this idea of consent and aggression could lead us to a way of making laws that do not impose values on people without their consent.
> The onus is on you to advance an alternative model and light a candle, rather than just calling taxation theft and cursing the darkness.
I’m identifying the same model as we used when we abolished slavery and marital rape. The model is already here, awaiting critical feedback. So far the only criticism is that people aren’t going to be able to avail themselves of other people’s property.
> As with taxes.
The problem is that people impose taxes on people who have not consented. That is to say that crime exists, independent of the understanding that it is crime. Right now I’m working to show you that it is in fact crime, so that you can stop enabling the criminals.
> Not so with Proudhon, the originator of the phrase. His take was that those who owned those properties had no right to the wealth generated by those properties if the labor was undertaken by others. That is, rentier wealth via property was theft.
Unfortunately thats an occasion of Proudhon dictating to others what they may and may not do with their property. In essence, Proudhon wishes to exert property rights over other people’s property by forbidding certain relations. Clearly this is self-contradictory and not a basis upon which to reject rents on capital.
> when "property" is defined as ownership by people who do not work yet become wealthier than the people from whom rent is collected.
Thats not how property is defined; and its not surprising that people who collect rent on capital often accumulate more than people who sell their labor. Its fine for someone to think thats immoral, they are free to explain why they think it is immoral, and likwewise they are free to educate themselves and realize that restricting rent on capital because of its superior productivity impoverishes society by preventing society from accessing means of superior productivity. Capital collects higher rents than laborers receive as wages: then let laborers own capital and collect their own rents. Quite naturally the market has already commodified the ownership of capital and made it available to the meanest of laborers.
Unlike the legislature, I did not elect you, nor did I swear an oath to a constitution that empowers you.
> Perhaps this idea of consent and aggression could lead us to a way of making laws that do not impose values on people without their consent.
What makes taxation so much more objectionable than any other law? The vast majority of which you never consented to, and are backed by no more aggression than tax law? How many drones does the IRS have?
> The model is already here, awaiting critical feedback. So far the only criticism is that people aren’t going to be able to avail themselves of other people’s property.
You are imposing a model upon a category that does not apply.
> The problem is that people impose taxes on people who have not consented.
Again, you can say that about any other law that has been agreed upon a priori.
> In essence, Proudhon wishes to exert property rights over other people’s property by forbidding certain relations. Clearly this is self-contradictory and not a basis upon which to reject rents on capital.
By what basis is it self-contradictory? By what higher authority do you define the acceptable relations with regards to property rights? Is someone allowed to set fire to his house, so that all his neighbor's homes downwind are also consumed by conflagration? If you say no, then you have already begun to impose limits of what is acceptable or not to do with one's property.
> Thats not how property is defined
According to Proudhon, "[t]here are different kinds of property: 1. Property pure and simple, the dominant and seigniorial power over a thing; or, as they term it, naked property. 2. Possession. 'Possession,' says Duranton, 'is a matter of fact, not of right.' Toullier: 'Property is a right, a legal power; possession is a fact.' The tenant, the farmer, the commandité, the usufructuary, are possessors; the owner who lets and lends for use, the heir who is to come into possession on the death of a usufructuary, are proprietors."
> realize that restricting rent on capital because of its superior productivity impoverishes society by preventing society from accessing means of superior productivity
Regardless of the debatable effects of rent, Proudhon would argue that property is backed by force, which makes it inherently a product of violence and aggression. The same regime that forces you to pay taxes is the same regime that uses those taxes to safeguard property and the rents acquired through property; indeed, often force is also used by the state to accumulate property for its favored oligarchs and the conformists who support the state.
So you would agree with me that its immoral to collect taxes from someone who has neither voted for you not sworn an oath of loyalty? As opposed to the current system where the winner of the election exerts authority over the entire populace.
> What makes taxation so much more objectionable than any other law?
Its a mandate to appropriate someone else’s property. Its nonconsensual and results in one party benefitting at the expense of the other. The law codifies a differential status: a person who is required to produce value, and a person who is allowed to claim that value. The amount of the value is decided by the person claiming it, not the person providing it. Essantially this is a statutory codification of parasitism, Whereas an acceptable law, such as prohibitions against murder codifies conduct between peers (people with the same status). The law against murder says no one is allowed to murder, the law permitting taxation says one person pays and another person collects. Clearly this is abuse, just like a law specifying who we were allowed to murder.
> You are imposing a model upon a category that does not apply.
I’m not following. It seems like you’re pretending that its not possible to do without taxation without having identified any difficulties. I understand that taxation is literally what you want, that is to be able to avail yourself of other people’s money. I’m just not convinced that we would lose anything by choosing not to allow that.
> By what basis is it self-contradictory?
On the basis that he dictates acceptable use for a piece of property, which is exerting property rights. How come I’m not allowed to rent my machines, by Proudhon is allowed to tell me what I can do with my machines? Proudhon isn’t opposed to private property, he wants all the private property to belong to him.
> By what higher authority do you define the acceptable relations with regards to property rights?
The nature of property rights only begets logically consistent arrangments, on this basis logically inconsistent or incoherent arrangements are not recognized.
> Is someone allowed to set fire to his house, so that all his neighbor's homes downwind are also consumed by conflagration?
Once the effects of their actions have crossed crossed the boundary of the property line, conditions have been met for other people to intervene proportionately or tender a claim for damages. If someone inteferes with his actions because they anticipate the effects, then they incur liability for their inteference with his property. The specifics would depend on how the parties to the dispute felt about their particular circumstances. In essence, peer-to-peer dispute resolution.
> If you say no, then you have already begun to impose limits of what is acceptable or not to do with one's property.
The limits are other people’s property.
> According to Proudhon
Why would I or anyone else allow Proudhon to dictate the nature of property to us?
> Regardless of the debatable effects of rent, Proudhon would argue that property is backed by force, which makes it inherently a product of violence and aggression.
This is typical of the confused thinking that comes from many of these property revisionists. Property is a social arrangement and would be impossible to sustain by force in the absence of a suitable social environment. While it is true that property rights are usually/often enforced with force or the threat of force, characterizing this as aggression commits the fallacy of affirming the consequent. Its not aggression unless tou already agree that property is illegitimate.
So when you find a person who thinks property is illegitimate, try a simple experiment. Wait until they are eating then take some food from their plate. Better yet, get the food out of their refrigerator and put it in yours. When they object, remind them that property is illegitimate. When they distinguish between the property that they want to own, and the property that they don’t want others to own, remind them that property is a mutual social agreement and inform them that you decline to recognize their proposed version of the agreement, in exactly the same way as they decline to recognize the right of a landlord to rent out an apartment, or whatever.
> The same regime that forces you to pay taxes is the same regime that uses those taxes to safeguard property and the rents acquired through property;
Yes, its literally a protection racket. Which is why its so depressing for people to defend the protection racket when it extorts the working class (taxes) and then turn around and assert that the working class doesn’t deserve to own anything anyway because “property is a system of oppression used to oppress the working class.”
> indeed, often force is also used by the state to accumulate property for its favored oligarchs and the conformists who support the state.
Yes, and this is why we oppose taxation. This behavior is justified using the exact same arguments as you have made and I have responded to in this interesting and gratifying discussion.
Thanks for your replies and thanks for enduring the downthread squeeze with me.
The winner of the election is someone all citizens have indirectly sworn oaths of loyalties vis-a-vis the Constitution.
> Its nonconsensual and results in one party benefitting at the expense of the other.
Again, this is the same as nearly every other law in existence. When did you consent to laws governing public decency?
> Whereas an acceptable law, such as prohibitions against murder codifies conduct between peers (people with the same status).
What makes laws against murder acceptable? When did you consent to them?
> Essantially this is a statutory codification of parasitism
Right, like rentiership.
> Clearly this is abuse, just like a law specifying who we were allowed to murder.
The state holds a monopoly on sanctioned murder, via warfare and the death penalty. If your moral system believes the right to life to be more important than the right to property, surely those are of higher priority than taxation.
> its not possible to do without taxation without having identified any difficulties
No, the issue is your comparison of taxation to marital rape is a non sequitur explained by aforementioned reasons. Furthermore, the existence of a model for abolition does not mean there is a model for its replacement.
> The nature of property rights only begets logically consistent arrangments, on this basis logically inconsistent or incoherent arrangements are not recognized.
Who dictates the nature of property rights? Who determines what is logical?
> conditions have been met for other people to intervene proportionately or tender a claim for damages
That is steering dangerously into the territory of justifying taxation, on the basis of wealth inequality has detrimental affects for society. If you argue that it is harmful to destroy one's property in such a way that it negatively affects others', then you open the door to claiming that it is harmful to hoard one's earnings.
> Why would I or anyone else allow Proudhon to dictate the nature of property to us?
In the context of a discussion that mentions Proudhon, a clarification of his intentions is pertinent.
> So when you find a person who thinks property is illegitimate, try a simple experiment.
This sounds exactly applicable for someone who thinks taxation is illegitimate.
> Which is why its so depressing for people to defend the protection racket when it extorts the working class (taxes)
That is an argument to reforming a system so it doesn't act as a protection racket, but is instead progressive and correctly redistributes wealth in a way guided by fairness and ability and that is acceptable by all parties.
> assert that the working class doesn’t deserve to own anything anyway because “property is a system of oppression used to oppress the working class.”
But I don't actually believe in Proudhon.
> Yes, and this is why we oppose taxation.
So, if you oppose taxation, then you should also oppose property.
> Thanks for your replies and thanks for enduring the downthread squeeze with me.
Anytime. Here's to many more posts in this productive conversation.
Respectfully, this is nonsense. The constitution is not an oath, citizens have not sworn to it, and you have yet to substantiate its moral authority. Its just a document that doesn’t support what you’re claiming about it.
> Again, this is the same as nearly every other law in existence. When did you consent to laws governing public decency?
It is not the same as laws that prohibit crimes against persons, and I already conceded that public decency laws are analogous to taxation.
> Who dictates the nature of property rights? Who determines what is logical?
The nature of property rights is constituted by the human instinct for territory and assignation of the same innate moral value to all humans is the equilibrium result of repeated negotiations. As for logical thought, it is the emergent result of a species competing for resources in a universe with objective facts. Real-world logical consistency creates circumstances for creatures with brains that comprehend logic to make productive inferences about the world.
> That is steering dangerously into the territory of justifying taxation, on the basis of wealth inequality has detrimental affects for society.
Not at all. What I described is a process that individuals do with each other. If you feel that you have a claim on the basis of wealth inequality, then you’re free to tender that claim to whoever’s massive wealth is the cause of the alleged wrong against you. That gives you an opportunity to show damages, so you can substantiate your claim against the person whose wealth was so cruel to dare to not belong to you.
> If you argue that it is harmful to destroy one's property in such a way that it negatively affects others', then you open the door to claiming that it is harmful to hoard one's earnings.
You missed the point. Its not harmful for him to destroy his property. Its harmful for him to destroy others property. His act of burning his own house is fine. Whatever he does that affects other people is up to them to decided if they are fine with it or not. No one is arguing that he can’t (not permitted) burn his own house period. He can’t (is not per itted to) burn other people’s houses (against their wishes) period; even if the technique he uses to burn other people’s houses would be permitted otherwise.
> This sounds exactly applicable for someone who thinks taxation is illegitimate.
How? You’re already taking food off my plate, thats what taxation is.
> That is an argument to reforming a system so it doesn't act as a protection racket, but is instead progressive and correctly redistributes wealth
No, its merely an argument against the protection racket. You don’t get to bring in your own terrible system to replace another terrible system. We have agreed the protection racket is bad, now we get rid of that, we’re not putting you in charge of a protection racket so you can run it according to your preferences.
> in a way guided by fairness and ability and that is acceptable by all parties.
Well if you’re proposing taxes be opt-in, or even voluntary, then that changes everything. If taxes required consent then they would be fine.
> So, if you oppose taxation, then you should also oppose property.
Absolutely not, what part was unclear? I oppose the state expropriating people by force. How does that imply that I should oppose property?
Those who abide from it tacitly support the elected government, of which the people have delegated the powers of taxation to. And the constitution holds the ability to collect taxes, even prior to the 16th amendment.
> and I already conceded that public decency laws are analogous to taxation
And they are but the iceberg's tip of laws that are analogous to taxation.
> The nature of property rights is constituted by the human instinct for territory and assignation of the same innate moral value to all humans is the equilibrium result of repeated negotiations.
You can say the same about slavery.
> Real-world logical consistency creates circumstances for creatures with brains that comprehend logic to make productive inferences about the world.
And yet taxes are ubiquitous. So what does that say about the human ability to comprehend logic?
> If you feel that you have a claim on the basis of wealth inequality, then you’re free to tender that claim to whoever’s massive wealth is the cause of the alleged wrong against you.
Right, as in the case of San Antonio Independent School District v. Rodriguez.
> He can’t (is not per itted to) burn other people’s houses (against their wishes) period; even if the technique he uses to burn other people’s houses would be permitted otherwise.
Correct, and if it is shown that inequality caused by lack of taxation leads to the burning of other peoples' homes, then it would demonstrate that hoarding is functionally equivalent of burning your own home in a dense neighborhood.
> How? You’re already taking food off my plate, thats what taxation is.
That food on your plate was taken from someone else.
> You don’t get to bring in your own terrible system to replace another terrible system.
On what basis is that choice invalidated?
> If taxes required consent then they would be fine.
Taxes are consented, because unless one protests the tax overtly, evades the tax covertly, rejects one's citizenship, etc. then one is tacitly consenting to the state quo. That is as naturally, inevitably, and carelessly done as those who would reject property rights thoughtlessly and jealously guard the food on their own plates. To argue that society, which is a complex, interlocking, inelegant, flawed, ridiculous, teetering system is some sort of pure construct of logic where you can argue away one important component, while ignoring your own ineluctable benefiting from that component, is hypocrisy and folly.
Perhaps one can imagine a society where every single government service corresponds 1:1 to a tax. Maybe that is the society we should be working to build. Complete transparency and voluntarism. I see nothing wrong with that. But we don't live in that society yet. In the meantime, every time you are not getting your home invaded by a foreign power or by criminal gangs, every time your property is kept safe from fire, every time you type a letter over an information system created by public funding and powered by public utilities, you are consenting to your tax dollars guaranteeing your own life and livelihood. If you call taxes theft, then maybe you should complain about getting all of those public services you never consented to receiving in the first place.
If you do, then you have the right to exit. And so we come full circle.
> I oppose the state expropriating people by force. How does that imply that I should oppose property?
The state preserves property in the same nature that it expropriate taxes, through the monopoly of force. I think that's what Proudhon is getting at. The application of force through abstracted definitions of concepts of taxation or property are less offensive to me than say, government blatantly committing violence through war or covert action or police brutality, but it does seem that you and Proudhon share similar obsessions and thus methodologies of perceiving the world, and thus a compatible framework for discussion.
That would be nonsensical. We prohibit slavery on the exact same basis as we recognize the immorality of taxation.
> And yet taxes are ubiquitous. So what does that say about the human ability to comprehend logic?
We know that the arguments are not logical, which is why taxation is coercive.
> That food on your plate was taken from someone else.
I obtained it through voluntary exchange. If the title is encumbered then that’s a reason for someone to tender a claim. Regardless I’m not convinced, I don’t survive on the basis of taxation. So I diagree and assert that my food was not taken from some one else.
> On what basis is that choice invalidated?
The same basis we rejected the last system.
> Taxes are consented, because unless one protests the tax overtly, evades the tax covertly, rejects one's citizenship, etc. then one is tacitly consenting to the state quo.
Not at all. I’m subject to violence for those things. Taxation is coercive. Consent cannot be obtained through coercion.
> That is as naturally, inevitably, and carelessly done as those who would reject property rights thoughtlessly and jealously guard the food on their own plates. To argue that society, which is a complex, interlocking, inelegant, flawed, ridiculous, teetering system is some sort of pure construct of logic where you can argue away one important component, while ignoring your own ineluctable benefiting from that component, is hypocrisy and folly.
I never said that, I just observed the logical flaws in a particular concept of society.
> Perhaps one can imagine a society where every single government service corresponds 1:1 to a tax. Maybe that is the society we should be working to build. Complete transparency and voluntarism. I see nothing wrong with that. But we don't live in that society yet.
If you think its a worthy ideal, then you can choose to pursue it.
> In the meantime, every time you are not getting your home invaded by a foreign power or by criminal gangs, every time your property is kept safe from fire, every time you type a letter over an information system created by public funding and powered by public utilities, you are consenting to your tax dollars guaranteeing your own life and livelihood.
Thats nonsensical. One might as well call you a pickpocket if I were to steal a wallet and use to buy you ice cream.
> If you call taxes theft, then maybe you should complain about getting all of those public services you never consented to receiving in the first place.
We do. We would like the busibodies to stop doing things they want, that we do not want, and then telling us it is for our own good. We are tired of having to bid for services on a market where we must compete with bureaucrats who spend our own money to compete with us.
Much has been written about the crowding out effect of government spending in markets.
> If you do, then you have the right to exit. And so we come full circle.
The problem with exercising that right is that the people who coerce taxes do not recognize the right of exit, and so they use threats and violence to prevent it.
> The state preserves property in the same nature that it expropriate taxes, through the monopoly of force.
Property is antecedent to state protection. We’re find with waiving state protection if it means no longer having taxes expropriated from us.
> I think that's what Proudhon is getting at.
Proudhon is wrong. Property is a social arrangement that is sustained through mutual participation. Taxes are extorted unilaterally.
> The application of force through abstracted definitions of concepts of taxation or property are less offensive to me than say, government blatantly committing violence through war or covert action or police brutality,
It is less offensive, thats why its a more effective means of appropriating value from people who are vulnerable.
> it does seem that you and Proudhon share similar obsessions and thus methodologies of perceiving the world, and thus a compatible framework for discussion.
Proudhon is mistaken about the nature of property. It’s a social arrangement that exists between persons. The government claimed the power to ajudicate disputes, and since then greedy people abuse that power to violate property rights. This power that is abused is the same power thatis used to collect taxes and violate people’s rights. Property rights are logically antecedent to this.
The human instinct for territory leads to slavery.
> We know that the arguments are not logical
Who is we?
> The same basis we rejected the last system.
No one has rejected taxation as a concept other than yourself.
> Consent cannot be obtained through coercion.
By that definition, all laws are coercive, as they all contain punitive measures. In fact, it can be extrapolated that all of society is coercive, as the societal contract is assumed pre-birth and never formally consented to, and is subject to violence at every level.
> I never said that, I just observed the logical flaws in a particular concept of society.
You did, because you are treating taxation as a critique of pure reason, rather than a concrete policy that exists outside of a vacuum.
> If you think its a worthy ideal, then you can choose to pursue it.
Who says I'm not?
> Thats nonsensical. One might as well call you a pickpocket if I were to steal a wallet and use to buy you ice cream.
It's as nonsensical as you demanding to receive national defense or the ability to drive on public roads while rejecting taxation.
> We are tired of having to bid for services on a market where we must compete with bureaucrats who spend our own money to compete with us.
And you can do all of that without holding the uselessly extremist position of all taxation is theft!
> Much has been written about the crowding out effect of government spending in markets.
Without having to resort to rejecting taxation as a concept from first principles.
> the people who coerce taxes do not recognize the right of exit
No, the problem with the right of exit is that every single society on earth recognizes the necessity of sustaining through taxation. Perhaps you can try exiting to terra nullis or seasteading in international waters. But any society you build will inevitably require taxation at a certain scale. At the very least then you will have accomplished a political experiment to validate your beliefs on the non-necessity of taxes.
> Property is antecedent to state protection.
Property is still dependent upon state protection, as again the institutions of national defense and public courts demonstrate.
> Property is a social arrangement that is sustained through mutual participation. Taxes are extorted unilaterally.
Taxation is likewise sustained through mutual participation. Contrariwise, property can also be extorted unilaterally, as in the case of rents.
> thats why its a more effective means of appropriating value from people who are vulnerable
Tell it to the vulnerable who are dependent upon social services funded by taxation.
> The government claimed the power to ajudicate disputes
That power was freely given by individuals to the government, as there is a need for a neutral third party and a higher authority to appeal to. Without an adjudicative force, the only resort is might makes right.
> Property rights are logically antecedent to this.
Property must originate from somewhere, which would be nature or the public commons. To acquire and then retain property thus requires the use of force. At least according to Proudhon's definition. If you are to accuse all sorts of common concepts of originating in force and violence, then you are living in Proudhon's world. You only have a different bugbear from him.
Negative. Territory is things, not people.
> By that definition, all laws are coercive, as they all contain punitive measures.
This is not true. You’ve neglected to consider laws that prohibit without specifying consequences for violation. You’re also neglecting to consider laws against coercion.
> In fact, it can be extrapolated that all of society is coercive, as the societal contract is assumed pre-birth and never formally consented to, and is subject to violence at every level.
Now you’re understanding why a “social contract” can’t be used to justify violating someone’s rights.
> Who says I'm not?
You’re arguing against it with me right here.
> It's as nonsensical as you demanding to receive national defense or the ability to drive on public roads while rejecting taxation
I haven’t demanded national defense, and roads predate the government that expropriated them from the commons. I shouldn’t need permission from bureaucrats to use the roads.
> And you can do all of that without holding the uselessly extremist position of all taxation is theft!
You’re losing the plot. Bureaucrats taxing and spending necessarily means that I’m competing, with bureaucrats, for goods, while the bureaucrats are using my own money to compete with me.
> No, the problem with the right of exit is that every single society on earth recognizes the necessity of sustaining through taxation.
So you agree that I do not have the right of exit.
> But any society you build will inevitably require taxation at a certain scale.
[citation needed]
> Property is still dependent upon state protection
No, it is not.
> Taxation is likewise sustained through mutual participation.
No, taxation is sustained through asymmetric threat of violence.
> Contrariwise, property can also be extorted unilaterally, as in the case of rents.
Rent is not a unilateral transaction, neither is it extortion.
> Tell it to the vulnerable who are dependent upon social services funded by taxation.
Those people well know that they are dependent on the scraps that the oligarchs throw once said oligarchs have ate their fill from the working class.
> That power was freely given by individuals to the government
How can some individuals give power over the rest of us to the government?
> Without an adjudicative force, the only resort is might makes right.
You think the government is an alternative to might makes right? Interesting.
> Property must originate from somewhere, which would be nature or the public commons.
Unowned property becomes owned through homesteading, owned property changes hands through voluntary transfer.
> To acquire and then retain property thus requires the use of force.
This does not follow from anything you have said, and indeed force is not required to acquire or retain property in all circumstances. Force is a primary means of retaining property when someone attempts to take it from the owner.
> At least according to Proudhon's definition. If you are to accuse all sorts of common concepts of originating in force and violence, then you are living in Proudhon's world. You only have a different bugbear from him.
I’ve made a solid case that does not rely on Proudhon (whatever his merits).
It is also a human instinct to treat people as things. Thus, we appear to be creating a society that can override baser instincts. Anti-propertarians would thus be claiming to transcend those instincts in the name of greater justice, in the same nature as you are claiming to transcend this instincts to abolish taxation.
> You’ve neglected to consider laws that prohibit without specifying consequences for violation.
Those laws are clearly in the minority.
> Now you’re understanding why a “social contract” can’t be used to justify violating someone’s rights.
Correct, and it means that your problem is with the whole of the social contract, and taxation is but a fraction of what it entails.
> You’re arguing against it with me right here.
I argue because I choose to, not because it actually reveals anything about my actual opinions or convictions.
> roads predate the government that expropriated them from the commons.
Much like private property.
> I shouldn’t need permission from bureaucrats to use the roads.
Then you are stealing from the actual parties who built those roads and maintain them.
> You’re losing the plot.
Tu quoque.
> Bureaucrats taxing and spending necessarily means that I’m competing, with bureaucrats, for goods, while the bureaucrats are using my own money to compete with me.
Yes, yes, the issue of private competition with public services does exist. All of which can be explored without denying the fundamental principle of taxation, as aforementioned ad nauseam.
> So you agree that I do not have the right of exit.
Yes, but you believe in it for the wrong reasons.
> [citation needed]
https://en.wikipedia.org/wiki/List_of_taxless_countries
> No, it is not.
Sure it is. Do you claim to be able to protect it if a foreign power assaults it? Can you take on an entire criminal cartel?
> Rent is not a unilateral transaction, neither is it extortion.
Rent is unilaterally determined by the rentier, who establishes a coercive rent regime due to monopoly ownership over the property in question. Thus, it is extortion because the other party is inherently at a disadvantage.
> You think the government is an alternative to might makes right? Interesting.
Even most minarchists who want only a night-watchman state will agree upon the necessity of court systems and law enforcement to enforce contracts. You are free to advance an alternative, if you'd like.
> Unowned property becomes owned through homesteading, owned property changes hands through voluntary transfer.
Homesteading is established through force, and voluntary transfer exist along relations that are backed by the violent force that is society.
> Force is a primary means of retaining property when someone attempts to take it from the owner.
Because in a Hobbesian state of nature all property is up for grabs, property is inherently in need of protection, and thus force is always on the table.
> I’ve made a solid case that does not rely on Proudhon
It certainly doesn't, but your case lives in the same moral universe as Proudhon's does, and has about as much relation to reality as his.
Your desire to override my baser instincts is misplaced. Concentrate on overriding your own base instincts, then you will be less inclined to expropriate from people and redistribute the wealth of others according to your subjective preferences.
I’m glad you’ve conceded that coercion is not a necessary component of laws.
It is true that private property also predates the government.
I’m glad you’ve conceded your earlier point about the right of exit.
You’ve yet to establish the necessity of taxation.
Rent is not unilaterally determined by the rentier. Its negotiated between the rentier and the renter.
How do you describe a government in a way that the government isn’t an instance of “might makes right”?
Homesteading is not established by force.
Voluntary exchange cuts across relations that are violently enforced by society.
Hobbes was mistaken about a state of nature.
Your fixation on Proudhon is detracting from your efforts to reply to my arguments.
Finally, property doesn’t require the state because property can exist in the absence of a state. The fact that states can expropriate people is the basis for this entire argument. Essentially you’re saying if I didn’t have a state expropriating me, I’d have a state expropriating me. Well, who is expropriating the state? Why not?
> They are according to John Zerzan.
Thanks for this.
>> If agriculture was the original sin of History, the Fall was our descent into Symbolic forms which created a psychological removal best expressed by the use of artillery. With the epoch of History proper, beginning with the Neolithic, internal abstractions are projected outwards onto a terra nullius, a void now dedicated to the manufacture of first commodities, the domestication of animals and conflict management, in terror of the silences of a world made ancient by representation and signs. The great farming apparatus of this era mirrored institutionalized ritual and the codes of orthodox magic, which are the ancestors of surveillance technology and remote control. Division of labor lead to the great land enclosures and the dawn of the money form, nascent surplus-value with its classes of guardians, warriors, magistrates, clerics. Greek books were read in boustrophedon, which means ‘after the action of an oxen plowing a field’, each line progressing and then reversing back in a bi-directional motion, equating the patterns of informational technology with the golden gizmo of sedentary humanity. The subsequent Bronze Age saw pottery, the production of rich varieties of armaments, the complexities of credit and written script, and the formation of the great elites – and naturally, slavery. Early statecraft was far more ‘modern’ than is commonly acknowledged: banking, proto-welfare, heated toilet seats, the wide application of credit and debt enslavement (we have conveniently lost the custom of the Jubilee write-down), micro-breweries, were all part of the ancient world.
You were supposed to be fighting each other neck deep in the trenches of the culture wars while this was happening.
Mainstream macroeconomics has not an accurately developed foundation, more appalling than ever as it progresses on its own.
Gold and Bitcoin fantasies can not further deride something that is self-deprecating due to poor math.
Any day now.
The premise is "had growth rates among the quintiles remained as they were post-war, then..."
That is nothing like "one quintile has taken from the others".
Growth rates change all the time, and the transition from a labour economy to a knowledge economy has the effect of reducing the pool of "winners" as the returns to knowledge form a greater share of total returns.
This same transition is visible in most developed countries. Some have welfare systems designed to prevent it, and their overall growth is lower for it. They contribute less of the global groundbreaking progress (like new cancer treatments, Covid vaccines, etc) commensurate to that fact.
This is a false premise. Do not fall for it.
Just because you are in a group whose growth rate has been higher than the other group, doesn't mean you "took" something from them.
is there even a difference between communism and fascism? y'all need to stop fighting each other.
operating range...
tear it the fuck down.
Huh? Literally everybody grasps this. This is the most widely parroted mainstream narrative about the economy right now on the internet.
Hell, you can't throw a rock at the Wall Street Journal (conservative) or the New York Times (liberal) without hitting a sentence that mentions wealth inequality brought on by fed policy. For further evidence, your comment has been upvoted to the top because everybody on HN believes the same thing as you.
Have you ever examined the idea that it could be you who lacks education? Have you thought about what the economy would look like right now if there had been no accommodative monetary policy from the Federal Reserve for the last 10 years?
You're angry because it feels like everybody is getting rich and you aren't. What you don't understand is that bull markets are always temporary. This stuff moves in cycles.
Sky high valuations on financial assets might be making rich people SEEM ridiculously rich right now, but this is not a permanent state of being. The companies and assets they own all exist in the real world and will eventually have to back up their valuations with real earnings.
The minute inflation starts creeping up, the federal reserve will have to increase interest rates and cut off the money printer. In an instant, wealth inequality will start shifting the other direction, and valuations will fall.
It's not like the majority of recorded history on the Gold Standard was noted for the bottom 90% enjoying relatively large shares of national wealth and income security.
Shipping technology has only gotten better since than too but that just hurts mom&pops and helps online retailers.
Because there was less competition on the international stage for the goods produced in the US. This meant that production companies could pay their workers more since they were earning more. Relatively low skilled labor would earn a lot more money. This lifted up the poor. Eventually those jobs started moving away from the US, because other countries could produce the same goods at lower cost since they could pay workers less.
>Shipping technology has only gotten better since than too but that just hurts mom&pops and helps online retailers.
None of it has been as revolutionary as the intermodal shipping container. Before that it took days and sometimes weeks to load cargo onto a ship. The main point with the shipping container is that it made international trade significantly cheaper.
But I guess when you can just readjust the definition and what's included it doesn't matter.
The fed won't be able to raise interest rates without crushing the same people they were lowered to support.
Obviously the purchase price matters, because the higher prices are, the more money you need to even get in the door with homeownership.
This reads like an oxymoron to anyone who's not a property owner, which is about half the country -- all of whom are in the bottom 90% referred to in the headline.
Should renters not have the opportunity to buy a home?
there should not be societal subsidies for people wanting to buy their home.
If rents are not growing at a rate that's higher than wage growth, then it is stable and thus acceptable. Owning a home is a privilege, not a right. Thus, the CPI calculations correctly only includes rental costs, and not ownership.
Nonsense. Theoretically if wages and rents grew 5% in step together yoy, but most other goods increased at >100% (say houses), your statement implies things would always remain stable. I'd think not...
The real reason CPI is garbage (for measuring total inflation) is because it doesn't track everything, and hence misses the inflation in things that the CPI doesn't track (such as houses). More specifically, it's a measure that only tracks what urban people CAN & typically spend money on. It doesn't track the things which some people have been entirely priced out of and hence don't spend money on (such as home ownership, as well as other assets).
It may be pandemic influence, but that's the world we live in now.
From USDA (source: https://www.ers.usda.gov/data-products/food-price-outlook/su...):
In 2020, food-at-home prices increased 3.5 percent and food-away-from-home prices increased 3.4 percent. The CPI for all food increased 3.4 percent over this same period. In general, food price inflation in 2020 was much higher than in 2018 (0.4 percent), 2019 (0.9 percent), and the 20-year average (2.0 percent).
The PCE fraction for "food and beverages" (home, away, alcohol) ranges from 13.8% to 17.0%.
That Wiki page also has a nice comparison to the consumer price index (CPI), which was previously used by the US Fed. US Social Security still uses CPI to adjust national pension payments.
Also, you wrote that food prices had more inflation in 2020 compared to other recent years. During the COVID-19 pandemic, many people had cheaper transportation costs, which would offset some or all of this food price inflation.
We have not. Your impression of prices doesn't necessarily correlate with actual inflation.
Well I guess wages usually go up for the same kind of job with the same experience when there's considered to be "inflation" and that really hasn't happened. Prices. Yes, they've gone up consistently, haven't we all seen the hard reality of that? And they show no signs of doing anything else. Price indexes used as a proxy measure of inflation may not be capturing that reality. Is it deliberate that the measure is failing to capture the reality? Or is it just poor baskets of goods and services in the index and a lack of will and talent to correct the issue? Anyone arguing about index values and what they mean still has to have a roof over their head quite literally at the end of the day. That has a cost. I haven't noticed the cost going down over any 5 year period. Then look at the cost of eating. Then the captial equipment you need for your job and to be able to pay required bills (some of clothes, vehicle, computing devices). Then look at essential consumables (some of fuel, food, electricity, telecomunications).
I can't see anything other than high inflation and a decrease in disposable income. Note that if you get promoted and get a raise for a new position the reference is how much /that position/ was paid previously not what you were paid fresh out of $whatever.
I don't ever see a measurement that reflects the reality we all see, experience and have to budget in inflation discussions in finance nor do I see a justification of why it's just plain wrong and in so far as these numbers represent anything they represent something else entirely other than the purchasing power of a dollar in your pocket this year as opposed some time in the past.
The people protesting are not protesting the Fed. No institution (i.e. media, grassroots, journalists) criticizes the Fed - it's always the 1%.
But, I guess you wouldn't understand, since you make baseless assumptions about internet strangers. How would you know my net worth - do you think there aren't billionaires that share my "mainstream" opinion?
Your fallacious logic and personal attacks against me do not diminish my argument. In fact, since you cannot attack the substance of my argument, you have already admitted defeat.
So how do you explain everything that happened on the wealth inequality front from the 1970s up to the financial crisis of 2009?
I don't agree with everything in the original article either, but many of the points it made are correct.
Which led to the removal of the gold standard by those who knew the outcome would proceed as it has.
If Reagan didn't shift the tax burden the very wealthy would not have been able to recover their massive losses as rapidly.
Are you able to articulate why you believe "because Fed policy" doesn't apply as a valid argument for 1970 through 2009?
In one word: computers. In tsunami after tsunami from 1975 to the present, computers have revolutionized everything we do. I remember one tsunami in 1975, when slide rules in September were $125 and by December they were $5 and in January they disappeared. The calculator had arrived. In 1980 at Boeing you could hear the roar of the tsunami coming in the form of CAD. Then spreadsheets, word processing, on and on.
It's no coincidence that the biggest companies in the world are all American, and all computer companies.
The big increase in wealth was created by the computer companies, and accrued to the people working in them and those smart enough to have invested in them.
BTW, according to Google: "The top 1 percent of taxpayers paid roughly $616 billion, or 38.5 percent of all income taxes, while the bottom 90 percent paid about $479 billion, or 29.9 percent of all income taxes."
Correction: Wealthy enough to be able to invest in them.
$1,000 invested in AMZN is now worth over $1M. or $10 in Bitcoin would have done the trick.
The survey also found 75 percent of people responded they were living comfortably or "doing ok".
"144 ICOs Launched During 2017 Failed Last Year" https://news.bitcoin.com/144-icos-2017-failed/
Do I really need to illustrate how dumb it is, the idea that the stock market and cryptocurrency are the cure to poverty?
Besides, you can just invest in the S&P500 via SPY.
If you know the future. Tells us a few stocks where investing $1000 today would give you a million in 2 decades.
https://www.calculator.net/investment-calculator.html
For $5,000 per year, you'll have $1,073,000 after 40 years.
7% is the average stock market return, adjusted for inflation.
If you invest $0.00, you'll have $0.00 after 40 years.
Robinhood enables buying fractional shares.
On the TV news a couple weeks ago was a 6 year old kid whose mom gave him $60 worth of Gamestock stock. He cashed it in for $3,000.
Besides, the article wasn't about some people. It was about the majority of people.
I'm not arguing that access in itself is bad. I'm arguing that new money speculating in the equities market often doesn't go well.
> new money speculating in the equities market often doesn't go well.
It goes better than lottery tickets, which target the poor and the mathematically challenged. Stocks at least have an upward bias, while lottery tickets have a strong downward bias.
BTW, wealthy people lose money in the stock market, too. Stocks do not come with guarantees for anybody.
What's that as a percentage of their annual increase in wealth? By my calculation, with a wealth increase of "$2.5 trillion a year" (from the article), that income tax amount works out as a flat 25% rate.
Of course there's never a single thing that explains a complex issue, but the root of the current Fed's monetary policy goes back to Greenspan, so the poster's argument could easily be extended to that iteration of the Fed.
Also, the 1980s is when (modern) wealth inequality really started to take off. And it's much worse today.
https://www.visualcapitalist.com/all-of-the-worlds-money-and...
https://www.ted.com/talks/maneesh_sethi_money_the_greatest_s...
The Fed is not the problem. Congress is the problem. The Fed seems like the problem sometimes because Congressional nonfeasance leaves the Fed, which has a narrow role and a narrow set of controls, the only player doing anything to deal with adverse economic conditions. But Congress’ nonfeasance is the problem.
This is patently false. Inequality has been expanding since the 1970s, long before the "evil bank bailouts" and accommodative monetary policy of the 2010s Federal Reserve.
I'm not sure anyone would consider that "easy monetary policy."
Also, you do know that inflation and boom-and-bust cycles still happened while we were on the gold standard right?
I never characterized the Fed as an "evil puppet master" - that is an exaggeration. However, the Fed is certainly responsible for wealth inequality. It's a simple concept that is 100% backed by the financial and socioeconomic data:
- Rich people (small percent of population, i.e. "the 1%") own the vast majority of assets
- Fed is pumping massive amount of money into financial markets, which pumps up asset prices artificially
- Cost of living sky-rockets since the rich use their increased net worth to buy more assets, causing housing prices and other assets to skyrocket
- Purchasing power of the dollar to buy assets is severely decreased. Wages are stagnant but assets have skyrocketed. This causes feedback loops where the poor / middle-class don't have money to buy assets and the rich keep getting more money to buy more assets, hence runaway wealth inequality and social unrest.
No reason to have so much contempt against this argument. It's based on the evidence.
We do know these are all the same group of people, right? Same social strata, same schools, same manners, same wealth, same worldview, etc. Party makes little difference here -- R's and D's are just two right-wing parties who mainly serve special interests (industry). Clinton gutted working people as much as Reagan did -- wages continue to stagnate under allegedly liberal presidential administrations, too.
For all this to be true I don't even have to appeal to the fact that since the 70s the institutions we're talking about are all revolving doors facing each other -- work in government, then work in private industry, then back to government, then I'm Janet Yellen charging Goldman six figures for speeches but pretending they don't influence me.
It's a bit reductionist, maybe -- but by and large they're all the same people and they serve the same interests.
On top of what you said about the effect of printing making valuations high, only temporarily and only on paper, the opposite lack of printing, is actual redistribution towards the rich in a much more real and persistent way.
Insufficiently inflationary money can be used as a way for the rich to withdraw from the private economy when things are getting too turbulent and park their wealth in government paper having greater than market rates of returns (on a risk adjusted, liquidity adjusted basis). If government money didn't exist, these people would have to stay in the turbulence when the economy hits a storm.
In a private economy, it's normal for returns on assets to occasionally turn negative. Wealth is sometimes difficult to keep constantly growing year after year. With low inflation, the rich can divest from private assets at the first sign of trouble, shrink or close businesses, kick employees to the curb and they get to park their wealth in government guaranteed paper. A deflationary government currency is basically a subsidy for causing unemployment and destroying careers, a subsidy that often gets indirectly paid by the poor. Money printer keep going brrr please.
The thing is, stable money that predictably loses value is a great thing to have for the economy as it allows people to negotiate contracts and conduct business in a predictable manner. Medium of account, medium of exchange etc. Money being a store of value is an unfortunate consequence of it being a medium of exchange that often has to be mitigated. Fiat should never be widely used for saving. Money is just an IOU. When everyone's savings are IOUs, on average everybody indirectly owes everybody else their savings. Instead, savings should be tied to real stuff such as businesses, inventory, production capacity etc. not just all be pure promises. When too many people hoard pure promises and all believe that it's true wealth, bad things happens.
Hard currencies while not good for conducting business since they are too unstable might be better as stores of value as they fluctuate and have negative returns when they should so tend to not crowd out other asset markets as much as government stabilized currencies do when inflation is not high enough. Just make sure the government does not try to stabilize hard currencies. That caused the great depression.
Def made me think alot. Seems you can replace your entire argument with crypto. Money printer goes brrr, money gets locked in crypto, does nothing for the economy, leading to massive inequality. Crypto can be though of as "Savings" in your analogy. BTC might cause a economic meltdown if $10T gets locked in'Savings'.
Then again, the potentially stronger network/memetic effects of cryptocoins, along with the amplification factor from markets being synchronized through instant all-encompassing global communications nowadays might make them dangerous to the economy without government involvement. We saw how much people can get hypnotized by these things during the Gamestop episode. I don't think unsophisticated investors' hoarding is enough to cause big problems but it is a bit unsettling that Tesla jumped on the cryptocoin train. If enough businesses follow suit, you get into scary territory. Last time it lead to Hitler and WWII. It makes me second guess my cybertruck reservation. I was on board partly because of Musk's audacious and epic attempts to bring humanity forward. This is a non negligible risk of going in the opposite direction of creating economic carnage that leads to new Hitlers (but with nukes).
"The Great Depression, exacerbated by Brüning's policy of deflation, led to a surge in unemployment.[8] On 30 January 1933, Hindenburg appointed Adolf Hitler as Chancellor at the head of a coalition government. "
or
"In 1933, the American economist Irving Fisher developed the theory of debt deflation. He explained that a deflation causes a decline of profits, asset prices and a still greater decline in the net worth of businesses. Even healthy companies, therefore, may appear over-indebted and facing bankruptcy.[59] The consensus today is that Brüning's policies exacerbated the German economic crisis and the population's growing frustration with democracy, contributing enormously to the increase in support for Hitler's NSDAP."
https://en.wikipedia.org/wiki/Weimar_Republic#Br%C3%BCning's...
Now the above paragraph puts emphasis on businesses with debt but even non-indebted businesses can get caught in these currents if they are put in a position where it's more advantageous to hoard currency than to invest in maintaining or growing production.
It's a fairly low probability that cryptocoins could create this kind of disastrous Nash equilibrium without the involvement of a powerful central bank. However, when I see the fervor in parts of the cryptocurrency movement and the fact that businesses are starting to hoard large amounts, I wonder...
Which is already happening.
Financial institutions are already extending credit (aka 'printing money') based on bitcoin and other cryptocoin collateral.
Bitcoin is not necessarily deflationary.
>we prevented the extension of credit based on bitcoin collateral...
>Which is already happening.
Is in direct contradiction to:
>Financial institutions are already extending credit...
Regardless, the amount of bitcoin is set to be capped and finite - therefore unless this changes it is inherently deflationary. Aside from mining out the remaining unmined bitcoin, no institution is "extending credit" (aka 'printing') bitcoin, they're extending credit via (as you mentioned): other collateral.
You can't make more bitcoin, but if you extend credit to someone based on the bitcoin they have, that's CREATING NEW MONEY.
In that sense, bitcoin is like gold.
In the gold standard, the supply of gold was fixes, but the supply of dollars was not. Because bank's create money when they allow you to borrow.
For bitcoin to be truly deflationary, you would have to prevent all financial institutions from extending credit
Bitcoin is EVENTUALLY deflationary. Right now, about 900 coins are created every day leading to inflation of ~$45M a day that buying pressure needs to eat up. Every four years that inflation is cut in half, but it's still inflationary.
And isn’t that the main way normal people’s savings can be tied to “real stuff?”
If you add up all the IOUs in the economy, financial assets are cancelled by financial liabilities and what remains is real stuff which in economics is called "investment". The nomenclature can be a bit confusing because in finance they use the same word to mean the contract, the claim or the IOU not the physical asset.
The equation for GDP is Consumption plus Investment (sometimes government consumption and investment and exports are broken out). Investment is not financial assets or money or bonds which all cancel out at the global level. Investment means factories built, equipment built, less tangible things like knowledge and intellectual property count too in theory but are sometimes hard to measure. It's important to have a good level of investment. Promise hoarding can crowd it out when things get too speculative. The economy can get into a bad Nash equilibrium where people are chasing IOUs instead of producing real value.
The thesis of your post is literally a fallacious argument - the argument from authority. The textbook definition.
Yes, the "experts" are always right, like the experts that ran LTCM, the hedge fund run by rocket scientists that crashed the economy (until being bailed out by the Fed) /s
I would go on with more examples of fallacious "argument from authority" logic gone wrong, but I don't have the time.
An economic theory is not right or wrong, good or bad, or otherwise based what the "educated, mainstream experts" believe. The history of human knowledge is essentially a history of paradigms (sometimes temporarily useful) being proven completely wrong, with some non-mainstream ideas being proven right. QE and mainstream economics, in my opinion, will turn out the same way, and end up causing the destruction of arguably the wealthiest nation in human history.
It's only a "burn" if you actually think it's a legit argument. I was just pointing out that it is not.
"One of the great commandments of science is, "Mistrust arguments from authority." ... Too many such arguments have proved too painfully wrong. Authorities must prove their contentions like everybody else." - Carl Sagan
The crises we're getting are the price to pay for government interference in a self regulating market.
Peter Schiff currently believes Bitcoin is going to collapse, that anyone who buys it is a fool and charlatan, that hyperinflation is around the corner, and the only solution is a return to the gold standard. Do you agree with this?
I don’t like Bitcoin (too many grifters) but even I can admit it has value as a hedge asset against systemic shocks. He just doesn’t like that it may supplant Gold.
Yes. That's what I said.
You said he was consistently wrong for 15 years.
I don't know who to believe regarding gold and bitcoin, but it doesn't help me trust your opinion when you go overboard in your criticism of Schiff.
1. US Equity Markets Crash.
Okay, that happened in 2008. But, did it he get the reason why?
He claims it is all about Debt and easy money. That interest rates should be up and ultimately we should be tethered to hard currency. That’s a really, really simplistic and ahistorical take. It’s like saying, let’s cause issues with the financial economy to completely wipe out the real economy because it is “healthier that way”. Seems to be a big price to pay for a very nebulous benefit. Thoughts like that led to World War 1. (I highly suggest “Lords of Finance” from Liaquat Ahmad and “The Great Transformation” by Polanyi).
As opposed to what we ARE doing loosening the liquidity strings to allow the real economy to continue to function, albeit damaged by the lack of regulations + greed in the financial economy causing it to make terrible risk exposure decisions.
Yes there was plenty of bad behaviour in the housing market and in the whole Lon trading and mortgage trading market (which I was a part of in the past, as a wall st software dev). The interaction of mortgage backed securities and collatorized debt obligations propped up too many balance sheets and weren’t properly valued for systemic risk, and amassing credit default swaps as a hedge quickly unravelled the institutional insurers like AIG .... requiring a massive liquidity injection by the Fed and Congress so that everyone from Wall St to Main St didn’t wind up completely broke. Ultimately it was the only practical solution available given the political will.
2. US Dollar will crash (Hyperinflation)
Completely false and made him and his investors lose their shirts
3. Decoupling of foreign economies from the US slowdown
Also false, the US rebounded far quicker due to a variety of Obama era policies, the world still is not really decoupled as Eurozone troubles and Trump’s trade wars showed.
4. Foreign equities and commodities (gold) will grow and are where you should invest.
Except foreign equities crashed worse than US equities back in 2008! And austerity policies prolonged their suffering.
My criticism isn’t “overboard”, this is public record. If you are an investor and listened to Peter Schiff, you’ve lost a lot of money.
Gold has also done pretty well hasn't it?
You can list wrong predictions all day, but if the guy is occasionally right you need to give credit.
There is no “there” in Austrian economic reasoning or modeling: the fundamental premise is to reject empirical evidence in favour of Praxeology. This is useless for forming economic policy.
Getting the timing right is not easy, sure. He was right about 2008.
You may choose to believe that 2008 was an isolated event or it was just another systematic failure. I think we'll see another one soon, following the way governments treated covid.
I wish Bitcoin would succeed and bring us a step closer to anarchy - but Bitcoin doesn't have any backing and it's not a physical asset which can be used, worst case scenario, as jewellery. Its technology can be replicated entirely by a different coin (and it has, already). Its intrinsic value is null.
The reason the price is so high is because people hope to speculate on it and make money (which they have!) and because people expect the market and currencies to do badly, given the high point they reached. Also, governments' stimuli brought a lot of money in the hands of rich people; this money needs to go somewhere given the risk of inflation, so rich people are investing in growth stocks (eg. tech) and cryptocurrencies.
I'll be honest, I was expecting governments to destroy cryptocurrencies by now, but even without government intervention, I don't see Bitcoin ever holding any value or being stable, without backing. Maybe stable-coins will solve this.
I agree that going back to the gold standard would be an improvement, even better, I'd prefer if private companies could just print and back their own currencies. Instead of backing currencies with gold, you could back them with different commodities (eg: wood, iron, oil, etc). The machinery of freedom has an interesting chapter about how such a system may work.
Schiff on Bitcoin:
https://www.foxbusiness.com/markets/bitcoin-is-a-fools-gold-...
Going back to the gold standard would not be an improvement. I highly recommend reading Karl Polanyi’s The Great Transformation for an analysis of the problems of the gold standard.
This statement is so vague, I don't know what it means. Are you implying that all "mainstream actually educated economists" (whatever those are) are all in agreement about something? What exactly are they "right" about here?
The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump.
Should the government have done nothing? Absolutely not, but aid should have been better targeted. Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up. The business cycle is no longer a cycle at all, things just go up.
Was the virus a predictable event? Not at all, but pretty much every bust in the business cycle is due to a new unforeseen tail risk that materializes. That's why it's prudent not to excessively leverage yourself in the good times, because bad times will come.
Certainly businesses such as restaurants, that were forced by the government to close, or travel, where it truly was an apocalyptic scenario, should have received the bulk of the aid.
The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies. Just as everyone expected. Did fiscal and monetary policy help smooth things out? Sure. But again, earnings are normalizing, like we knew they would. Markets discount the entire future, not just what's going to happen next month.
> Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up.
Most companies pre-COVID were nowhere near "excessively leveraged." I think you (as well as OP) are conflating 2009 with COVID. These are two distinctly separate things. As are monetary (The Fed) and fiscal policy (Congress).
> The business cycle is no longer a cycle at all, things just go up.
So you're saying "this time is different." Let's see how that plays out.
Main difference from the past recessions is that today the main way to store money is index funds. In recessions people pump money into savings, ie into index funds, ie into the stock market making stocks value increase rather than fall. As long as people believe that index funds are a more stable currency than the dollar this will continue to be true in future recessions.
We're assuming the crash in March was due to COVID - though there's no proof this was the case. This very much could have been a correction to more realistic valuation.
> So you're saying "this time is different." Let's see how that plays out.
Agree here - I think we're in for an interesting year. We may have amplified the upswing dynamics with Fed action, but I'm pretty sure we'll see amplified downswings, as a result.
Those earning are structurally very different from an accounting perspective than normal earnings (one example being ppp loans). I'm not saying your wrong that these earnings are justifying PE based valuations but I don't think anyone is arguing that propping up earnings won't work in the short term. I think a lot of people are arguing that propping up earnings will backfire in the longer term.
Is this not a bit of a false dichotomy though: "accommodative monetary policy" (as it is done), or nothing? There are numerous different ways we could achieve "accommodative monetary policy", each of which would have different outcomes.
This is uncharitable. In fact most middle class folks who sign on to this frame are motivated by basic ideas like justice and fairness. Realistically policies designed to address wealth inequality are going to make very little difference to anyone here making a typical engineering salary.
It's easy to sign on to "a rising tide lifts all boats" when you hear it the first time. But after decades of waiting, the dinghies are just plain sunk at this point as the yachts are pulling out of the harbor. It's time to try something else.
The only difference is that you now have a direct connection to the few that have risen faster - there have always been those people. But you now see them. They are still the 1% but they are in your face like never before.
"it's time to try something else" What else is there? Socialism? Tried, failed worse. Communism? Even worse. In all systems man has created, there's inequality. "equity" (equal outcome) has been proven an unmitigated disaster time and time and time again.
Capitalism is the worst system ever.
Except for all the other systems which are worse.
And if this the best system that mankind can come up with, then the future looks bleak.
Calls that it's not sustainable are like cries of impending starvation and privation... yet "famines" haven't happened because advances created by... capitalism. Better crop yields, better farm results, etc. Driven by "greedy capitalists".
can we do better? Sure... fight crony capitalism? coporatism? absolutely...
But end of day... the alternatives? have proven worse - unless you have proof otherwise and history isn't with you on that...
Calling it the "best" we got is rather short sighted.
Are you citing absolute numbers? The study people usually talk about most here is the Pew one: https://www.pewresearch.org/social-trends/2020/01/09/trends-...
Over the past half century, the middle third of the income distribution has dropped from 62% of aggregate income to 43%, mostly at the expense of the upper third (the bottom third is mostly flat, but certainly not "rising").
> "it's time to try something else" What else is there?
The New Deal seems to have done pretty well. Minimum wage laws used to be vastly more effective due to inflation, and we grew just fine in the 60's. Some of it is just fairness: Upper incomes and short term capital gains used to bear a much larger share of the tax burden, and those cuts seem to have done nothing but make rich people richer.
This canard is so tiresome. Someone does the peasant "I think we should improve society somewhat" thing and inevitably they get accused of being a (pause for breah) COMMUNIST. Every time.
https://medium.com/the-radical-center/the-triumph-of-the-mid...
Plenty of info out there that wealth is getting distributed globally. The absolute poor are decreasing and the middle class globally is increasing - absolute numbers and by the %'ages.
> inevitably get accused
If you use the ideas and thoughts of it... then of course you're going to get accused of it.
And your "why you gotta call me a communist" doesn't answer the question... what other options are there?
> what other options are there?
How about a "democrat"?
Unless you mean DS: "democratic socialism" - which is still socialism. Look at the Green New Deal where DS wants to go - control of industry "for the people" by massive expansion of government into various industries.
While you may have a point about the article being American focused, the fact remains that the middle class is expanding and the lower/peasant class is shrinking globally - all boats are rising due to "evil capitalism" and that horrible capitalism, despite being the worst idea ever... is still better than the alternatives that have presented. It's global success compared to the global failure of other "better" ideas is self evident at this point.
Socialism is the perfect theory... until it meets reality... and other setups are in the same boat: Better than capitalism until you look at real world results.
Need to fight cronyism? corporatism? Monopolies with reasonable government controls? Sure... I'm not a PURE capitalism person - My thoughts are based on reality where restrictions keep things reasonable (like restrictions on free speech and owning guns).
Most of my family are clueless about this stuff; do you think Fox News - their and many peoples only news source - are sharing that bit of insight with their audience?
Heck, much of it (the parts that aren't confusing the Fed with other repairs of government) has been echoed by Fed board members and other (in the minority, at the time) government decision makers. Overreliance on the Fed and top-down monetary policy to do the economic job for which fiscal policy is better suited has been a recurring, mainstream criticism for years.
> Hell, you can't throw a rock at the Wall Street Journal (conservative) or the New York Times (liberal) without hitting a sentence that mentions wealth inequality brought on by fed policy. For further evidence, your comment has been upvoted to the top because everybody on HN believes the same thing as you.
You just named three institutions that cater to highly educated people. I don’t think much of this is understood by a huge portion of the general population. I’m not talking down about people who didn’t get a higher education (I didn’t finish mine). I’m just pointing out that this is a pretty weak argument for “everybody”.
Edit: a word, a punctuation
That may be the case but traction on this narrative was near zero if not negative even say two months ago. "Inflation? The poor are in debt, so it's good for them right? Lel"
More importantly the professional pundit class (neoliberal economists like krugman) and even the socialist-adjacent MMT theorists do NOT see things this way and push hard for policies that while well meaning will likely result in stealing even more from the working class. The media of course feeds off of this class so it may (finally) be part of the "internet discourse", it's not part of the "mainstream discourse".
> In an instant, wealth inequality will start shifting the other direction, and valuations will fall
No, if you understand the mechanism of how inflation steals from the labor class, you would know that "it doesn't work that way". It is not an "instant reversal" of wealth inequality, except for if the crashes brought out by the interest rate hikes are accompanied by not bailing out the wealthy, and we all know how the track record on that has been going.
I dont feel that's a mass read category. But go to the mass right news you wont see much on inequality at all (obviously you do on the left). Right news like Fox tends to be more about taxes taking your hard work away type rhetoric. And the 'bigger pie' arguement which sounds great but lacks practical application.
> The minute inflation starts creeping up, the federal reserve will have to increase interest rates and cut off the money printer. In an instant, wealth inequality will start shifting the other direction, and valuations will fall.
Really? My understanding is inflation tends to bring wealth inequality on the other end. People who own assets see these protected from value erosion while wages tend to get eroded.
I believe if you want to reduce wealth inequality you need many things but the core is around 1) strong progressive taxation, 2) market regulation to stop monopolistic and similar behaviour and 3) employee protection/regulation to allow workers to have some teeth in the wage negotiations.
>You're angry because it feels like everybody is getting rich and you aren't.
You could have made your point without these personal attacks.
Also, I don't understand what the parent comment said that you think was wrong. Inflation is basically a flat percentage tax on everyone with USD (and subsidy to debtors as percentage of your debt). If the government is printing money to pay back its own debts through bonds and such, it's taking money from everyone and then giving it back to only the wealthy.
You responded with, paraphrasing, "have you though about if the fed had no accommodative monetary policy?" But the parent didn't say the fed should have done nothing, (s)he said what they did do exacerbated wealth inequality. The monetary policy we got could have been one that bailed out the people whose houses were about to be foreclosed instead. Or a stimulus check to anyone who earned under a certain threshold of income. Or a more conservative approach of letting the banks fail, become liquidated, buy the bank's assets and then auction them off. There are tons of outcomes besides the false dichotomy of "no accommodative policy for the last 10 years" vs the ones we got.
These are fiscal policies, not monetary policies. The fed cannot do these things. The fed can only buy and sell securities, including its infinite supply of Treasury bonds, and raise and lower interest rates. It lacks the capacity to actually help individuals.
I find this hard to believe. The narrative of the doves, the current administration, and most of the Democratic Party is that these bailouts are necessary. That’s the entire reason they are doing this.
Your post reflects current mainstream thinking in neoliberalism. There is nothing special here and it’s just a disagreement on whether near term depression is worse than supporting the inequality.
I've benefited massively in financial terms during the pandemic and resulting fed action and I still think it's dangerous and misguided. You are painting with very broad, simple strokes here.
Regardless of the fact that there is press coverage, the average American could not in any meaningful terms describe what the fed is or what it does, while maybe a quarter might know that it has something to do with "printing money" (obviously anecdotal). The idea that the complex consequences of fed policy are well understood by the average American is preposterous. The "experts" can't even agree on basic facts about what the consequences will be or have been.
Case in point, go ask financial twitter if we should be expecting inflation or deflation and watch that aisles divide.
We detached this subthread from https://news.ycombinator.com/item?id=26103730.
>If I earned $10,000 a day it would take me 273.97 years to have earned 1 billion dollars. Meanwhile, Elon was worth about 20 billion a year ago, last month he was worth an estimated $185bn. Oof. In reality, I make a little over $17 an hour
His net worth increased an estimated 4.66 million times my annual gross income in the past year. I've been at my job 15 years.
When you stop and think about it, it can quickly approach the territory of crippling. I'll probably have to work until the day I die, or until I physically can't, whichever comes first.
My wife does a little bit better than me as a public school teacher, but she also probably logs 70-80 hours a week of work once you factor in grading/lesson plan/meetings/coaching track for an extra $1500 a year/Friday detention/etc.
If someone gave me 100,000 USD, my stress level would freefall. My quality of life would drastically improve. My financial security would be able to weather any realistic event sans aggressive cancer treatment. Mr. Musk had his net worth increase 1.6 million times that amount last year. (Edit: This is an example, I'm not begging for money, so stop using it as a means of attacking my entire post)
Some days I just "can't even". With my faith, my wife, my friends, I try to be upbeat and positive when it comes to the future but when I see people like Musk, Bezos, even Gates and then I start worrying about replacing the roof/well pump/affording a mower come spring/why does one spot of the kitchen floor dip a bit when I stand on it and how much is that going to cost me/how long is my wife's car going to last/how long is my car going to last/is it going to warm up anytime soon because we've already filled the propane tank twice since November/etc and I just start to want to fully disconnect from reality and wish catatonia upon myself to escape it.
Then if I think about how fortunate I actually do have it, then I start getting depressed that there are people out there making 2.5x less than me in my own state, that there are homeless populations here in the U.S., and then I think but what about the people in 'third world countries', our minimum wage and homeless have it even better than many of them, then that catatonia starts sounding really nice again. If I can't even seem to improve my own situation to have even a fraction of a percent of the financial security that even some people I personally know have (people that have posted on this very forum) then how the heck am I ever going to be able to help enough even less fortunate than me to not feel like crap when I remember they exist and have it worse than me?
So using survivorship bias to compare yourself to Elon Musk which is an atypical result when it comes to business formation doesn't make sense.
You should probably compare yourself to the average business creator and see how you fare compared to them.
It's like saying I'm not that great at Basketball, but let me compare myself to Michael Jordan.
It's like pointing out the absurdity of 1 man, over the past year, having his net worth increase 2.32 million times the annual median household income (of the U.S.) of $68,703 (2019, per census.gov).
While something like 20% of the planet doesn't even have access to reliably safe drinking water and something like 800 million lack the amount of food require for an active life.
Also if you look historically over the past 100 years overall rates of poverty have declined everywhere.
If you look even further back in time the amount of rights that global citizens enjoy today is fundamentally a million times better than it was 100, 200, 300, 400 years ago.
Humans were ruled by kings and queens, where land was inherited, there was no upward social mobility, slavery of peoples was much more rampant than it is today.
Humanity was never equal, in it's history, but today if you ignore the top 1% we as a people actually enjoy fundamentally more equality than our predecessors who weren't part of the 1%.
Also, while the inequality exists between the 1% and the 99% today, today actually have upward social mobility to become part of the 1%, where 400 years ago that wasn't really all that possible.
I'm not saying the world is perfect, but if you look at it has actually gotten better overall.
I'm also pretty sure that the implied worth of Rockefeller and some of those old guard monopolists on a inflation adjusted and power adjusted basis was probably many times higher than even Elon Musk's net worth today.
That someone was me, in the same text I also mentioned homeless persons and individuals living in "third world" nations.
And I only have access to reasonably safe drinking water because I added filtration equipment totaling about 2.5% of my annual gross to reduce the nearly 'unacceptable' lead levels in my well for my drinking water and have to, with some regularity, test that water on an ongoing basis to make sure the well hasn't been contaminated by any number of natural and man-made pollutants (chemical spills, chemical fertilizers from neighboring farms, etc). I don't have the luxury of turning on the tap and knowing that an entire industry is testing and chemically treating my water on a daily basis but I still have it a lot better than at least 1/5 of the world.
> individuals born in 1980 have only a 45% chance of outearning their parents at age 30, compared to 93% for those born in 1940. https://www.weforum.org/agenda/2020/09/social-mobility-upwar...
The language you use here is concerning and not empowering. Why would someone 'give' you $100k? Despite some arguable edge cases (hft, etc.) money is only earned by creating value.
> Some days I just "can't even". With my faith, my wife, my friends, I try to be upbeat and positive when it comes to the future but when I see people like Musk, Bezos, even Gates ...
Comparison is the thief of joy. My (unsolicited) advise is to narrow your focus to doing whatever you can to make you and your family's life better.
It's an easily divisible example of what 1/1,600,000 of his net worth increase in the past year could do for a given individual.
The language you use here is concerning and not empowering. Why would someone 'give' you $100k? Despite some arguable edge cases (hft, etc.) money is only earned by creating value.
> Some days I just "can't even". With my faith, my wife, my friends, I try to be upbeat and positive when it comes to the future but when I see people like Musk, Bezos, even Gates ...
Comparison is the thief of joy. My (unsolicited) advise is to narrow your focus to doing whatever you can to make you and your family's life better. Leave Reddit/Twitter/whatever, stop consuming media and focus exclusively on what is right in front of you.
Where are you looking away each time they pour another few trillion into the stock market?
It breaks my heart (out of its cold iron shell) to read about regular people busting out the checkbook for schools for kids halfway around the world (and typically of a different religion!) who have pretty much nothing.
"Don't let the turkeys get you down!" :)
My man, do what you can to improve your situation and if/when you can help out, do so. You will help the less fortunate by relentlessly improving your life. When you catch a breathe and life becomes fun, then spread some joy to others, but until then you are not in a position to feel guilty about it.
I remember seeing a meme the other day about two justice systems in America, one black kid getting held for 3 months in jail, while a white kid with a more serious charge got out on bail immediately. Of course the meme framed it as a racial issue. The actual root cause was ya know, the white kid has a family who could pay or put up the bail while the black kid didn't, which means it was income inequality issue. But it sure seems there's a dedicated group that really really wants you to think its a racial issue.
And that you should spend your precious time, political capital, and energy fighting that racial issue over the wealth inequality one. And that you shouldn't ever ever ally with someone who would work with you on the inequality issue but disagrees with you about it being a racial one, because they are an icky nazi.
I wonder what exact group of people benefits from this perfectly engineered storm of division?
Trump got elected due to ultimately populist anger over wealth inequality. But telling a poor struggling white family that they are privileged is a great recipe for them to ignore actually prescriptive solutions to their problems and turn to people like Trump.
Ultimately, it's wearing on you. Because it's supposed to wear on you. It's supposed to remind you what happened to the kulaks last time income inequality was addressed. And not so subtly remind you that white men are the kulaks of the modern age.
TIL.
IOW. The middle class. Small business owners. People who have acquired a tiny amount of capital.
So they were snuffed no differently than a Tsar would have done.
Poor white people hearing about "white privilege" does alienate them, it implies they've failed even with a kind of starting advantage and can be taken as an invalidation of the hardships they face. Rather than inviting them to be empathetic to the additional issues faced by others it instead prompts them to be defensive of their own difficulties.
When GP frames the issue as one of income inequality and not racial inequality, he's partially correct. On the surface it is an income inequality problem, but for the black community that income inequality is the result of wealth inequality that is itself a product of historic racism.
The same goes for the wage gap which he's dismissive of. The usual argument here is that women simply choose lower paid work. But if we look past that surface level analysis there are still issues with employers not wanting to hire women because they think they might get pregnant, underpaying them because they're less likely to complain, or whether the types of work performed by women should be lower paid in the first place.
I remember to be in the global 1% an annual income of 45k usd would be the qualifier. However, this is an US centric article so the following applies... "To be among the top 1 percent of U.S. earners, a family needs an income of $421,926, a new report from the Economic Policy Institute finds."
On the bailouts, every time I hear a passionate right winger saying the bail outs are necessary, I know they would turn into fully fledged communists if it would be the trendy thing to do and if that kinda government were in place.
It was never left center or right , people do not care beyond maybe closest family. They care about money, net worth, assets , power and status. How they get hold of that was always secondary.
The 2008 crisis was caused by irresponsible lending by the 1% with the effect of inflating costs for the 99%.
A bailout and a decade later we now see irresponsible lending by the Fed having the effect of inflating assets for the 1%.
Tails you lose, heads I win.
They don’t give $100,000 40 minute talks
Oh wait...
The reasons for specific actions can be read and understood by the majority of people on HN, assuming they are willing to devote the time required to read through the research which guides the Fed's actions.
Stating that it is the Fed's policies which have taken $50T of wealth from the bottom 90% is, in my not so humble opinion, an extremely naive and shallow assessment of the situation.
There is very little debate that the Quantitative Easing and ZIRP of the Fed and other central banks generally hurt savers, it also likely prevented significant harm to any equity holdings they had, which would account for the vast majority of the volatility in their portfolios.
To place the blame at the feet of an institution which is controlled by congress is silly. The tax policies of the last fifty years get a pass? The protectionism that helped usher in the demise of the american steel industry? The excessive power of unions to push wages well above the global market, without the support of politicians to penalize offshoring of jobs? The general trends of automation of repetitive, moderately skilled work? The explosion in software which has a marginal cost of production approaching zero? The willingness of the populace to ignore where and who made their trinkets, so long as they can buy a dozen for the cost of one locally made? The willingness of state and local politicians to hand out tax incentives to mega-corps at the expense of small businesses? The shift toward knowledge work, which study after study has shown has significant network effects, pushing people into more densely populated cities, harming small towns and the tax bases of rural communities? I could go on. None of these things matter? It's all the Federal Reserve?
[1] https://www.federalreserve.gov/faqs/what-economic-goals-does....
Imagine if you wanted to manufacture a car, which takes a long time to make. If you didn't have capital, you'd have to find/forage for food, and have very little spare resources left to actually do the car manufacturing. If another person, with a large storage of food, gave you said food, but ask in return, for the car, it would work (it's just a matter of negotiating an exchange rate between the food and the car).
But I still disagree with your framing of the definition of "taking" as an ideological question and not a factual one. People have choice on where they live, what work they do, what they spend their money on, how they manage their free time, and so forth. If one person saves up, takes a risk, starts a small business, and offers employment at a certain exchange of money for time, that's not "taking" because "taking" implies an involuntary action or theft. The employer is offering a trade, and the employee is accepting it voluntarily, giving their time and labor in exchange for pay. That simply doesn't fit the definition of "taking".