Forum Post: The one percent are still getting richer. The lower ninety nine percent have lower income. This will cause the next Great Depression.
Posted 12 years ago on Oct. 22, 2011, 2:48 p.m. EST by ModestCapitalist
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This content is user submitted and not an official statement
The ugly truth. America's wealth is STILL being concentrated. When the rich get too rich, the poor get poorer. These latest figures prove it. AGAIN.
According to the Social Security Administration, 50 percent of U.S. workers made less than $26,364 in 2010. In addition, those making less than $200,000, or 98 percent of Americans, saw their earnings fall by $4.5 billion collectively.
The incomes of the top one percent of the wage scale in the U.S. rose in 2010; and their collective wage earnings jumped by $120 billion. In addition, those earning at least $1 million a year in wages, which is roughly 93,000 Americans, reported payroll income jumped 22 percent from 2009.
Overall, the economy has shed 5.2 million jobs since the start of the Great Recession in 2007. It’s the worst economic downturn since the Great Depression in the 1930’s.
Another word about the first Great Depression. It really was a perfect storm. Caused almost entirely by greed. First, there was unprecedented economic growth. There was a massive building spree. There was a growing sense of optimism and materialism. There was a growing obsession for celebrities. The American people became spoiled, foolish, naive, brainwashed, and love-sick. They were bombarded with ads for one product or service after another. Encouraged to spend all of their money as if it were going out of style. Obscene profits were hoarded at the top. In 1928, the rich were already way ahead. Still, they were given huge tax breaks. All of this represented a MASSIVE transfer of wealth from poor to rich. Executives, entrepreneurs, developers, celebrities, and share holders. By 1929, America's wealthiest 1 percent had accumulated 44 percent of all United States wealth. The upper, middle, and lower classes were left to share the rest. When the lower majority finally ran low on money to spend, profits declined and the stock market crashed.
Of course, the rich threw a fit and started cutting jobs. They would stop at nothing to maintain their disgusting profit margins and ill-gotten obscene levels of wealth as long as possible. The small business owners did what they felt necessary to survive. They cut more jobs. The losses were felt primarily by the little guy. This created a domino effect. The middle class shrunk drastically and the lower class expanded. With less wealth in reserve and active circulation, banks failed by the hundreds. More jobs were cut. Unemployment reached 25% in 1933. The worst year of the Great Depression. Those who were employed had to settle for much lower wages. Millions went cold and hungry. The recovery involved a massive infusion of new currency, a public works program, a World War, and higher taxes on the rich. With so many men in the service, so many women on the production line, and those higher taxes to help pay for it, some US wealth was gradually transferred back down to the majority. This redistribution of wealth continued until the mid seventies. By 1976, the richest 1 percent held less than 20 percent. The lower majority held the rest. And rightfully so. It was the best year ever for the middle and lower classes. This was the recovery. A partial redistribution of wealth.
Then it began to concentrate all over again. Here we are 35 years later. The richest one percent now own 40 percent of all US wealth. The upper, middle, and lower classes are sharing the rest. This is true even after taxes, welfare, financial aid, and charity. It is the underlying cause. If there is no redistribution, there will be no recovery.
Note: A knowledgable and trustworthy contributor has gone on record with a claim that effective tax rates for the rich were considerably lower than book rates during the years of redistribution that I have made reference to. His point was that the rich were able to avoid those very high marginal rates of 70-90% under the condition that they invested specifically in American jobs. His claim is that effective rates for the rich probably never exceeded 39% and certainly never exceeded 45%. My belief is that if true, those effective rates for the rich were still considerably higher than previous lows of '29'. Also that such policies still would have contributed to a partial redistribution by forcing the rich to either share profits and potential income through mass job creation or share income through very high marginal tax rates. This knowledgable contributor and I agree that there was in effect, a redistribution but disagree on the use of the word.
One thing is clear from recent events. The government won't step in and do what's necessary. Not this time. Book rates for the rich remain at all time lows. Their corporate golden geese are heavily subsidized. The benefits of corporate welfare are paid almost exclusively to the rich. Our Federal, State, and local leaders are sold out. Most of whom, are rich and trying to get even richer at our expense. They won't do anything about the obscene concentration of wealth. It's up to us. Support small business more and big business less. Support the little guy more and the big guy less. It's tricky but not impossible.
For the good of society, stop giving so much of your money to rich people. Stop concentrating the wealth. This may be our last chance to prevent the worst economic depression in world history. No redistribution. No recovery.
Those of you who agree on these major issues are welcome to summarize this post, copy it, use any portion, link to it, save it, show a friend, or spread the word in any fashion. Most major cities have daily call-in talk radio shows. You can reach thousands of people at once. They should know the ugly truth. Be sure to quote the figures which prove that America's wealth is still being concentrated. I don't care who takes the credit. We are up against a tiny but very powerful minority who have more influence on the masses than any other group in history. They have the means to reach millions at once with outrageous political and commercial propaganda. Those of us who speak the ugly truth must work incredibly hard just to be heard.
Don't believe this outrageous crap about the rich paying 37% of the taxes in America and the poor paying none. It's a trick. A spin on statistics to make it seem as if the rich are overtaxed. They aren't. But they damn well should be. We're in this mess because of them.
Be careful when you hear or read anything regarding the PERCENTAGE of OVERALL FEDERAL INCOME taxes paid by any particular group, it's a terribly misleading statistic. The rich pay a larger PERCENTAGE of OVERALL FEDERAL INCOME taxes now than 10 years ago because they have a larger PERCENTAGE of OVERALL INCOME in America now than 10 years ago. That statistic regarding 37% of Federal Income Taxes is one of the most misleading in the history of propaganda.
When you account for all FEDERAL, STATE, and LOCAL taxes and fees, the middle class actually pay about the same rate (as a percentage of income) as the rich. The difference is within 5 percent. It shouldn't be that way. The rich should pay a MUCH higher rate simply because they are horribly over-paid. We aren't. They own 43% of all financial wealth in America. We share the rest. But it gets even more disgusting. The devil is in the details.
Corporate profits have been partially subsidized with federal, state, and local revenue. This benefit has been hoarded at the top. Business managers make up the largest group of one percent club pigs. Plus 40% of the market is owned by the top 1%. Their record territory dividends have been partially subsidized by federal, state, and local revenue. The benefits have not been shared proportionally with the little guy. The lopsided division of growth across quintiles proves it.
The highest percentile has grown more than 10 times faster than the middle percentile over the last 30 years. This is true EVEN AFTER taxes. When you account for inflation and the actual cost of living (tied to record high profits in energy, finance, and healthcare), the middle class have actually lost relative buying power while the top 1% have drastically increased their income and bottom line wealth.
In 1976 (when their taxes were much higher), the top one percent reaped 9 percent of all private income and held less than 20 percent of all private wealth in America. Now, they reap 21 percent of all private income and hold 40 percent of all private wealth. Meanwhile, the lower majority (those who are still employed) are working more hours and have less to show for it.
Just to make it crystal clear: The rich do not pay 37% of all taxes. They never have. They pay roughly 37% of all FEDERAL INCOME TAXES which account for less than 1/2 of total government revenue. The rest is drawn from a number of sources and across income levels. The rich harp on this 'Federal Income Tax' statistic because it leads people to believe that they pay 37% of ALL taxes. They don't. Their share as a group represents just over their share of income. The difference is within 5 percent. In fact, the 2nd percentile actually pays a slightly higher rate on average than the top percentile.
If the rich want to pay a lower share of the taxes in America, then they should get themselves a lower share of the income in America. In other words, don't be so rich to begin with. After all, this obscene concentration of wealth actually CAUSES economic instability. It CAUSES poverty. It will CAUSE the next Great Depression.
No more excuses.
RAISE THOSE GOD DAMN TAXES ON THE RICH!
This was the plan for the 1% and they have succeeded. What are we going to do with the next election coming up? We need to do something drastic otherwise this problem will continue.
I'd imagine most of you will vote for Obama since he's willing to appease the "gimme gimme" crowd.
How about instead of voting you all go out and look for a job. That will have more impact on your life than anyone who is president.
What you imagine couldn't be farther from the truth.
I hope I'm wrong.
Hey help me find a job as I have been looking for months!
The most profitable industries in the world (energy, healthcare, finance) have been given billions in government handouts and tax breaks. Meanwhile, they keep raising charges causing hardship for millions. With all those massive handouts, tax breaks, and obscene charges, profits rise to record high levels. Millions in bonuses are paid to the executives. With record high profits, record high dividends are paid. 40% of all dividends in the United States are paid to the richest one percent. The bottom 90 percent of Americans share about 10 percent (that's ten percent) of all dividends. The rest are paid to the top 5 percent and foreign investors. All of this causes a gradual concentration of wealth and income. This results in a net loss for the lower majority who find it more and more difficult to cover the record high cost of living, which again, is directly proportional to record high profits for the rich. As more and more people struggle to make ends meet, more and more financial aid becomes necessary. Most of which goes right back to the health care industry through Medicare, Medicaid, and a very expensive prescription drug plan. This increases government spending. This has been happening for 30 years now. During the same time, tax rates have been lowered drastically for the richest one percent. Especially those who profit from investments. These people pay only 15 percent on capital gains income. As even more wealth concentrates, the lower majority find it more difficult to sustain there share of the consumer driven economy. Demand drops as more and more people go broke. Layoffs results. Unemployment rises. This results in less revenue and more government debt.
Massive subsidies and tax breaks for Wall Street, massive tax breaks for the super rich, heavy concentration of wealth, record high charges along with record high profits and record high cost of living, more hardship for the lower majority, more government spending in the form of financial aid to compensate, more concentration of wealth, less demand, layoffs and unemployment. All of this results in slower economy and less tax revenue. At the same time more and more financial aid becomes necessary. It's a horrible downward cycle which gradually pushes the national debt higher and higher. The other big factors are the wars in the Middle East.
This post is not intended to excuse those who sit on the couch collecting welfare, make no attempt to find work, or squease out kids they can't provide for.
We have been mislead by Reagan, Bush Sr, Clinton, Bush Jr, Obama, and nearly every other public figure. Economic growth, job creation, and actual prosperity are not necessarily a package deal. In fact, the first two are horribly misunderstood. Economic growth/loss (GDP) is little more than a measure of wealth changing hands. A transfer of currency from one party to another. The rate at which it is traded. This was up until mid ’07′ however, has never been a measure of actual prosperity. Neither has job creation. The phrase itself has been thrown around so often, and in such a generic politicali manner, that it has come to mean nothing. Of course, we need to have certain things done for the benefit of society as a whole. We need farmers, builders, manufacturers, transporters, teachers, cops, firefighters, soldiers, mechanics, sanitationi workers, doctors, managers, and visionaries. Their work is vital. I’ll even go out on a limb and say that we need politicians, attorneys, bankers, investors, and entertainers. In order to keep them productive, we must provide reasonable incentives. We need to compensate each by a fair measure for their actual contributions to society. We need to provide a reasonable scale of income opportunity for every independent adult, every provider, and share responsibility for those who have a legitimate need for aid. In order to achieve and sustain this, we must also address the cost of living and the distribution of wealth. Here, we have failed miserably. The majority have already lost their home equity, their financial security, and their relative buying power. The middle class have actually lost much of their ability to make ends meet, re-pay loans, pay taxes, and support their own economy. The lower class have gone nearly bankrupt. In all, its a multi-trillion dollar loss taken over about 30 years. Millions are under the impression that we need to create more jobs simply to provide more opportunity. as if that would solve the problem. It won’t. Not by a longshot. Jobs don’t necessarily create wealth. In fact, they almost never do. For the mostpart, they only transfer wealth from one party to another. A gain here. A loss there. Appreciation in one community. Depreciation in another. In order to create net wealth, you must harvest a new resource or make more efficient use of one. Either way you must have a reliable and ethical system in place to distribute that newly created wealth in order to benefit society as a whole and prevent a lagging downside. The ‘free market’ just doesn’t cut it. Its a farce. Many of the jobs created are nothing but filler. The promises empty. Sure, unemployment reached an all-time low under Bush. GDP reached an all-time high. But those are both shallow and misleading indicators. In order to gauge actual prosperity, you must consider the economy in human terms. As of ’08′ the average American was working more hours than the previous generation with far less equity to show for it. Consumer debt, forclosure, and bankruptcy were also at all-time highs. As of ’08′, every major American city was riddled with depressed communities, neglected neighborhoods, failing infrastructures, lost revenue, and gang activity. All of this has coincided with massive economic growth and job creation. Meanwhile, the rich have been getting richer and richer and richer even after taxes. Our nation’s wealth has been concentrated. Again, this represents a multi-trillion dollar loss taken by the majority. Its an absolute deal breaker. Bottom line: With or without economic growth or job creation, you must have a system in place to prevent too much wealth from being concentrated at the top. Unfortunately, we don’t. Our economy has become nothing but a giant game of Monopoly. The richest one percent already own 40% of all United States wealth. More than double their share before Reagan took office. Still, they want more. They absolutely will not stop. Now, our society as a whole is in serious jeapordy. Greed kills.
shut up! like really though.
No. It's a big world and I have a lot to say. In fact, I'm just getting started.
[Removed]
income inequality didn't cause the depression.
http://www.brianrogel.com/the-100-percent-solution-for-the-99-percent
i don't disagree that around 1980 tax policy got too easy on the wealthy, i do disagree this leads to bubbles, and both this depression/recession were bubbles that then collapsed. if inequality actually led to them, then i would expect to see constant bubbles in countries with even greater income inequality, which is not what we see. i think our bubbles are a result of the fed moving us off a business cycle and onto a bubble cycle. and that much of the inequality of growth is a result of crony capitalism, where the system is structured to benefit the large and well connected people while screw everyone else. privatized banking profits and socialized losses for the banks for example. heads they win, tails you lose. other examples of this are sallie mae, who i'm not even sure can lose money ever, the way i understand how the student loan scam works. or how about agricultural subsidies, where half the recipients live in manhattan. perry got 80k worth and bachmann 260k worth. etc. it's not so much that the tax policy is wrong (and again i'm fine with raising it on rich people) - but the real problem is that money is funneled to these people. since 1980 there has been a massive growth in rent seeking. http://en.wikipedia.org/wiki/Rent-seeking
i think you are also not considering some of the ill effects of your proposed policies ie. you raise taxes during boom times - not during anemic recoveries or bad times. the capital gains rate is also not inflation adjusted; you could actaully end up paying capital gains taxes on transactions that were in reality losses, or small wins the tax would turn into losses. it may also lead to less investment in new companies, ie. you risk not funding the next google. the venture capital technology market is already in pain today.
It doesn't lead to bubbles, it leads to deficits and debt, which leads to a lack of confidence, and the lack of ability for the government to do stimulus to prevent minor downturns from damaging productive capacity, and therefore from becoming major depressions. That's where we are now. You'll see it over the coming months. More and more economists reluctantly agreeing that fiscal stimulus is badly needed. But hands are tied, because money that should have been paying down the debt went to tax cuts and military spending.
I know it's all about starving the beast for you guys, but your tax policy creates deficits, plain and simple.
Further, progressive tax polkicy increases equality, regressive tax policy decreases it. Inequality is definitely a factor in all sorts of societal ills, including a drag on economic growth:
http://news.firedoglake.com/2011/10/06/two-studies-on-economic-growth-income-inequality-and-deficits-tell-the-whole-story/
"It’s no accident that the highest two points of stratification of the distribution of wealth in America can be seen in 1928 and 2007, one year before both the Great Depression and the Great Recession."
Another eye-opener on inequality:
http://www.ted.com/talks/richard_wilkinson.html
EDIT: I actually take back my first statement - I think regressive tax policy does lead to bubbles, as well. That Brian Rogel link makes the case. Also the mortgage arguments fall flat. Individuals did not cause the bubble - speculators and bad financial instruments did. There was a market on Wall St. for bad debt, and plenty of predatory lenders to provide it.
Also, regarding raising taxes during busts. a.) 14% is too low, and deficits will keep balooning and creating more drag until we do, and b.) this is what was done after the collapse in 29, and the situation stabilized and growth returned, continuing pretty much unabated until the 60s.
i have no desire to create deficits, and as i noted above reason.com proposed just spending 19% of GDP, since twiddles with the tax code just end up with that much revenue anyway. you are kind of arguing a straw man with all this tax code stuff, i really don't care. deficits are from too much spending. bubbles and broken economies are not from tax codes. take in 19%, spend 19%, charge rich people more than poor, done.
the argument on that page you linked did claim capital gain and other tax twiddling led to bubbles, which is why i said that. ok looks like you are back into that argument by the end of your post anyway. why did the bubble wait until now to form then? why don't countries with worse inequality have more bubbles? did income inequality make other bubbles in the past? gold? tulips? sorry, it's a bad argument.
and what minor downturn are you talking about? this was never going to be one. and in a minor one i wouldn't want keynesian fiscal policy anyway, i would just let misallocated resources be liquidated and find their way to where the market actually wants them. in our present situation, i'd do a major stimulus on energy, transportation and communications infrastructure. what we have received instead is mostly a massive spendulus on a bunch of crap, which in no way produced any kind of long term stimulative environment, as something like more efficient roads would have. i don't expect the current congress or obama to produce that in either case. the one thing i think he finally does have that i really support him on that that republicans just shot down was the smaller (40 bil?) component of the jobs act that they just proposed. it's not big enough, but the only stimulus everyone should be able to get on and support.
inequality before the depression or recession are not what caused either. both events had entirely different problems leading up to them, and entirely different responses to them. if you took a more complicated look and better argument at it, you would note that the increase in credit was necessary for the average man to take - but that wasn't true for the 20s, the fed just created too much credit. and for today, the credit was used to buy houses - but that's not some kind of inelastic good that the average man had to take credit for either. so that still doesn't sound good. inequality is a symptom of underlying problems, it is not a cause.
individuals most certainly did contribute to the bubble. they were willing participants in this mess. i know plenty!
how is 15% too low or too high for capital gains? how do you know? if you want to talk about deficits, talk about spending. we are running well high of 19% of gdp for that. if we were low i'd talk about more taxes a lot more. that you attribute this to what happened after 1929 is silly because a zillion other things happened in that period.
Dude, you're grasping at straws to maintain your ideological position. I don't find conversations with you productive.
dude, you're claiming capital gains rates or income equality makes bubbles. i've never even HEARD that before.
Dude, a.) I'm claiming the fact that inequality creates economic drag.
b.) regarding tax policy and bubbles: http://www.thomaspalley.com/?p=107 (and this focuses only on tax policy w/regards housing prices and overleveraging, and my claim goes beyond this, to tax policy that rewards speculative gambling).
Regarding inequality and bubbles:
Here are three competing theories, with the one I'm talking about described first: http://curiouscapitalist.blogs.time.com/2009/04/15/the-asset-bubble-theory-of-income-inequality/
In any of the three, it's hard to deny correlation. This one makes my case:
http://uk.news.yahoo.com/comment/talking-politics/inequality-real-cause-financial-crisis-104159225.html
"Yet the historical evidence points to a clear link from inequality to instability. The two most damaging recessions of the last century — in the 1930s and today — were both preceded by sharp rises in inequality.
So why do excessive concentrations lead to economic turmoil? The principal explanation lies in the impact of the growing gap between pay and economic output. First, a rising earnings-output gap sucks demand out of the economy. If wages fall substantially below the level of economic output, as they did in both the 1920s and the build up to 2008, purchasing power does not keep pace with the extra output being produced. Consumer societies suddenly find they lack the capacity to consume.
Secondly, high inequality leads to asset bubbles. In 1920s America, enrichment at the top fed years of speculative activity in property and the stock market. The build-up to 2008 followed a near identical pattern. Rising corporate surpluses and burgeoning personal wealth led to a tsunami of hot money that helped to create the asset bubbles that eventually brought the British and global economies to their knees."
dude, again i'm not disputing that inequality is a bad thing. and look above at my post 7 hours ago - i brought up the mortgage interest rate deduction already, which is in your palley link.
in regards to that last blurb about wages not keeping up with output, the author seems to ignore the fact that these outputs in productivity were false booms in the first place. we're not in this recession now because people's wages didn't rise up enough to match our increased production of homes, we're in it because we shouldn't have produced all these homes or an economy based around them in the first place.
i'm not sure what point you are trying to make with the time article. in previous posts you say income inequality causes bubbles - but that is none of the three theories in the time article. the first one, which you say you agree with, is that taxation has influenced inequality. i agree. but it says nothing of bubbles. the 2nd doesn't mention inequality or bubbles, and the 3rd doesn't say inequality causes bubbles, it says bubbles resulted in more inequality.
the yahoo article doesn't present anything but someone again claiming inequality caused a bubble. enrichment at the top fed years of speculative activity? what about easy monetary policy? at the top - what about the mass participation by everday men? the report by the government fails to mention inequality in its 662 pages because it wasn't a reason for this crash. here's the gini coefficient before and during the bubble just before the crash http://members3.jcom.home.ne.jp/takaaki.mitsuhashi/GINI07.jpg barely any change. instead of your links to some guys giving their opinions years after the crash, how about the opinion from 10 people from multiple backgrounds and schools of economic thought, that all called the bubble and crash years before most people had a clue? http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCcQFjAA&url=http%3A%2F%2Fmpra.ub.uni-muenchen.de%2F15892%2F1%2FMPRA_paper_15892.pdf&ei=3Jy1ToGCJvKA2QWKmsjMDQ&usg=AFQjCNFeMiuCSV7_z1ye-YwFDYJiuz9CbQ 51 pages and not a mention of inequality either hmm...
you accuse me of talking ideological bias, but methinks you are talking your own book.
I'm sorry, I thought it was clear. There's a correlation between income inequality and bubbles. The question of causation is the background for that Time piece.
Your gini chart stops at 2005. But anyway the long term trend is clearly visible. The crisis was the culmination of a.) unregulated speculation and mounds of cash to do it with and b.) years of the middle class being squeezed from both ends, becoming overleveraged as a result.
why would it? there are plenty of periods and countries where bubbles are not constantly being produced out of inequality. and we can find bubbles in things totally unrelated or in countries with greater equality. the gini coefficient of the UK is lower than the US has been for decades and they had a bubble there too. it's not that i'm not thinking critically, it's that i see little reason to believe this theory. as i posted you a pdf of 10 people from all sorts of macro backgrounds who called this early, and exactly zero of them even mentioned this theory at all, i don't really see how it likely i'm missing something. it just sounds like a bunch of people who believe equality to be paramount trying to go back in history and wedge their theory in. i will stick with the guys who saw the thing coming years in advance.
you are blaming the yield seeking cash of investors for creating the bubble. but this cash is not stupid. bubbles formed this way are more like spikes that are corrected quickly. real asset bubbles are funded on credit and by a source easier than the market would make it. let's say a market would actually make mortgages 8% - if you artificially set them at 5% and keep them that way forever, you will drive up the asset they are targeted for. let's say student loans should be 9%, but you make them 7%, any amount available, and unable to discharge in bankruptcy. then guess what? you start driving up the thing they are targeted for too. bubbles need fuel. this fuel comes from easy money. this was not provided by investors. they bought the balloons on the secondary market, but someone needed to fill them. and the one that filled them was the federal reserve, with its easy money policy. investors didn't make ultra low rates and hold them their ultra long, the fed did. in fact in an actual free market with investor set rates then rates would have gone up - because that's what you do when you have a ton of demand. you raise the price. when a ton of people want to borrow money, you up the price to borrow it. at least when you don't have a federal reserve with a monetary policy to hold it low.
that there were no bubbles in the 3 decades after ww2 does not validate your theory. that's a short amount of time, and there were a ton of other things going on in the world. the rest of the world was fucked, they were all blown to shit and repairing themselves after the war. it's not like their blown up cities were tough competitors for us manufactured goods. we had a ton of war bonds maturing. all the pent up demand sacrificed for the war effort could finally be unleashed. all the soldiers fighting for years on foreign soil were able to come back and unleash their demands as well. monetary policy was less harmful. gold was part of the system and disciplined what the federal reserve and monetary policy could even do until 1971. after the sever to the standard we got the stagflation and high inflation in everything though. no bubble in x asset rising 5% a year, because everything was rising at 6 7 8% a year!
if by excess capacity you are citing the output gap, i don't see how you can blame reagan policies or income inequality on what went to fill it. when you have an output gap you need to liquidate your misallocated resources and have them reallocate to where the market wants/needs them. we can
4 is what happened after the .com bubble burst and we went into the housing one
i don't think there is. i have never heard that theory before. did it create the gold bubble? tulip bubble? south sea bubble? i don't think income inequality is any factor at all. you need an easy source of money, then a real or artificial froth in something, and the belief that the thing will keep going as it swings into a speculative mania. income inequality is really not part of that equation. it seems you have picked 2 data points in US history and determined there is some kind of correlation. which is not nearly enough data for one. and i still fail to see how the time piece is relevant, as the only bubble mention is in regards to income inequality produced by the bubble on ramp up to peak.
for whatever reason i had a difficult time finding GINI charts that went past that graphed, despite that the data is out there. but it didn't need to be to make my point - the bubble was all said and done by 2005, all that was left was the crash and crying. anything after 2005 is post-bubble, so it sure couldn't be claimed that it caused the bubble. you didn't need mounds of cash to participate, when making 65k i was offered up to 500k to go house shopping in 2005.
what caused the bubble?
what didn't?
I haven't picked anything. It's a topic of discussion out there that you'd prefer to ignore. The correlation is very real. If it doesn't make sense to you that the economy being top-heavy could cause an imbalance, followed by some sort of bubble, followed by a collapse, you aren't thinking critically, IMO.
The mounds of cash weren't in homebuyers' hands - inequality - they had no cash - reliied on credit - that's the point. I'm talking about the mounds of cash looking for risky investment vehicles based on bundled bad debt.
Like I said, it's not just me:
http://openeconomicsnd.wordpress.com/2009/12/23/the-inequality-bubble-link/
http://www.thenation.com/article/36891/right-prescription-ailing-economy
This brings us to the question of why we got the housing bubble in the first place, which goes directly to the issue of inequality. In the three decades after World War II, there were no notable bubbles in the economy. Productivity growth translated into wage growth, which in turn led to more consumption. The increased demand led to more investment, productivity growth and wage growth.
This virtuous circle was broken by Reagan-era policies intended to weaken the power of ordinary workers. Wages no longer kept pace with productivity growth, eliminating the automatic link between productivity growth and demand growth. This led to excess capacity in the economy, which was filled in the 1990s with demand generated by the stock bubble and in the 2000s with demand generated by the housing bubble.
you seem to imply that if the top margina tax rates go to 25% we have a bubble, or a recession, or both. yet all your tax policy really needs to do is cover what you are spending. reason.com has a good article noting that whatever you twiddle, revenues average 19% GDP so we should simply spend that. i have no problem with raising taxes on rich people (and even better, simplifying the tax code while it's done) but my progressive friends point to charts like yours (and a GDP one) and like to claim things like 90% tax = stable growth! but there were so many deducations during that time that nobody even really paid that. plus after ww2 we had maturing war bonds, massive demand from returning soldiers, a world to "compete" with that was blown all the fawk up, etc. we had lots going for our GDP then.
the tax cut to investment bubble part sounds way off. you certainly don't need a tax cut to make a bubble. and if you want to argue one that encourages it, you need not look any farther than the mortgage interest deduction (which all people get.) canada for example, doesn't have this. this is a lobbied for gift by the real estate industry. but as far as the bubble, all you need is froth to go to euphoria for an asset, and you need an easy supply of money, easier than a market would actually provide it. this was the fed fueling the stock market in the 20s (then cutting off the spigot way too late) and the fed fueling the housing bubble in the 2000s, then again cutting it off way too late. private borrowers and lenders did stupid things, but they could have never done stupid things without an easy source of money/credit - the federal reserve had chosen a monetary policy that was too easy, and held it for too long. you can't even take the proposed cause of the bubble in this article in the 20s and apply it to today - 2000 - 2007 had almost static tax rates. are we to believe this small change in 2003 (after the bubble was already growing) on capital gains led to the bubble? that made lenders and borrower (of the 99%) get silly? that's what made ultra low mortgage rates? no and no. also much of the pain of the depression can be attributed to various forms of government intervention, both fiscal and monetary policy. you can look at some of the dumb fiscal things they did (plow crops under while people starved) as well as dumb monetary things they did - which current fed chairman bernanke can tell you about as he delivered a speech on it (and wrote many papers.)
these other similarities are just data points taken out of context. home prices decreased 25.9% 1928-1933? that's because we had a deflationary spiral. decresed 2005-2010? that's because we had a popping asset bubble. these causes are completely unrelated. 1929 market crash - from credit driven boom, this was the inflated asset then. 2008 crash - a result of the credit driven boom in housing - the market was not the target asset, just a tangental one. 1930-1932 bank failures - as your paper noted, more papers were built than were required to handle economic growth in the first place. i don't want to get into the other reasons the paper notes, but again it's not like today, where banks had over leveraged themselves on producing toxic assets and still held them on their books. it's just a totally different scenario.
http://www.angrybearblog.com/2010/11/hausers-law-is-extremely-misleading.html
And by the way, revenue as a %GDP is the lowest in 60 years. Currently about 14%. 19% would be an improvement, but Hauser's "law" is a joke anyway.
Also, by the way, you know Reason is a front for Koch, right? Libertarians shilling for oligarchs, as usual. Good libertarians tell me that the Kochs are not really libertarians, but then you guys quote Reason and CATO to me. WTF? Neo-feudalism FTW.
i don't consider the koch brothers libertarians. neither do i shoot messengers. your angry bear link seems to be about swapping around tax rates for the top rate - i'm saying i don't care whether it's 25% or 90%, the government is spending too much, and the government should spend 19%.
http://reason.com/assets/mc/dpowell/2011_01/nick-vero-Fig1.jpg
The reason article is about Hauser's law. It is wrong. the angry bear article just makes the case that revenue as a %GDP is always higher than 18.6% (like, up to 5% higher) after a tax increase. It's lower after a tax cut. This undermines the premise that tax policy doesn't change the revenue as % GDP. It does, on the graph, clearly. It is human choice that makes Hauser's so-called law. If you collect data over a long enough time everything averages out, but it doesn't mean we have to accept it. And we certainly don't have to accept 14%.
i think that is hardly the case. you have red years going down too and grey years going up, and you are completely discoutning like, everything else in the world going on during these times. ww2 ending effects, vietnam and guns and butter policies, groth of the internet, etc. i'll stand by spending 19% is a good idea.
People will have to look at the obvious visual evidence on the graph and decide for themselves.
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is it worth arguing? nobody even claims or talks about this. go look at wikipedia there are multiple theories on what caused the misallocation of wealth, and what caused such a painful recovery. there's like 3 sentences on this theory because, well, nobody actually supports it. it's a dead theory.
Think again. Albert Einstein, Mariner Eccles, and Robert Reich have gone on record with similar views. If that's not good enough, ask any professor of economics to explain the link between distribution of income/wealth and economic stability. If that's still not good enough, play a game of Monopoly. Let me know what happens as one player takes a giant lead over the others.
Game over. Greed kills.
hey rocket scientist, the game of life has a static amount of wealth. let me know what your economics 101 professor thinks of your comparison of it to the real world. reich is bitching because he is a liberal. not that i don't think it's a problem, surely it is, but it didn't make the depression nor this recession. it wasn't rich people that misallocated funds during the bubble, it was all people. it's not rich vs middle vs poor that is making the slump continue now either, it's the fact that the government does everything to fight the necessary correction and bad debt liquidation, and has done near nothing to fix the broken structure of the economy. who cares about greed, as long as the risks are balanced out with the risk takers taking the losses? the problem we have now is because the system privatizes profits and socializes losses.
The game I refered to was Monopoly. Not life. And no. The game of Monopoly does not have a static amount of wealth. The economy grows with each round. But it slows drastically when the existing wealth becomes concentrated. Tell you what. Play a game with all existing pieces. Grab a pile of gravel from the driveway. Add one stone for each upgrade when all the game pieces run out. Continue raising the rent charges with each upgrade. There. Now you have the potential for unlimited wealth. Let me know how it works out.
I already know. The game will stop when one player accumulates too much wealth. The others will go broke.
Play it again. Play it 500 times. The game will end when one player accumulates too much wealth. The others will go broke. Every single time.
Every. Single. Time.
oops you still have a static amount of properties. oops if you keep adding properties you can play the game forever. oops the game is not realistic because you cannot afford to maintain buildings and charge prices no one can pay. you should try and figure out an analogy that works better than monopoly.
Bullshit. Monopoly is based on actual principles. Add the properties. Change the rules. No matter what you do, the game still slows down when one player owns most of the board.
actually in the real world you don't price hotels at static amounts that force people into bankruptcy (and a hotel that has zero customers), nor do people travel the country forced to stay in hotels. you should find a new way to make your analogy.
You're trying desperately to discredit my analogy because it's too good. Way too damn good.
Tell you what. Sometimes, you have to go to extremes to make a point. So that's what I'll do.
Let's say that the richest 1% didn't own over 40% of all US wealth. Let's say that one man owned all of it. How many cars, trucks, washing machines, computers, cats, lawnmowers, spatulas, and waffle irons do you suppose he would buy? Please rate the demand on a scale from 1-10.
Now, let's say that all US wealth were divided more reasonably. 50% for lower 90%. 30% for next 9 percentiles. 20% for top 1%. How many cars, trucks, washing machines, computers, cats, lawnmowers, spatulas, and waffle irons do you suppose the entire group would buy? Please rate the demand on a scale from 1-10.
Now, let's see you dance your way around this one. Of course, you will. No doubt. I just want to see those crazy dance moves.
modest, that's because your queries are pointless. they are not even about our original disagreement. i'm not saying income equality is good, which appears to be the straw man you are attacking. i'm saying income inequality didn't cause the depression, and it didn't cause this recession. i'm saying that the government has a lot to do with malinvested capital that creates a fake boom where we must suffer a painful bust. and government and corporations have worked together to create systems that are termed "rent seeking" in economics and funnel money towards people who have not added value. i think income inequality is bad. i think those things caused it, and we should fix those things to right it. god knows why you want to have a pointless conversation on why income inequality is bad and point to monopoly as some representative model of the real world. this is a pointless conversation anyway as we both agree inequality is bad, and i have never said otherwise, which you seem to imply in your silly examples. so i am going to go get pancakes now.
i love how you think your examples are so damn good, yet you bring up a childhood game with static wealth and unrealistic rules. then you have this question which you think is, just so damn good! as i said before, if you have a hugely wealthy society it wouldn't what %, because the amount you did get would still be a lot, and you'd be able to buy the things you want. so you have once again framed not a brilliant question, but a stupid question. in your 1 man owning all the wealth scenario you ignore that people still have human capital, plus this guy would be the 1 guy that runs the government that probably would have been overthrown/killed long before that happened. let's get rid of your cheesy examples and back to the real things that matter. i'm not for income inequality, i'm just saying it caused neither the depression nor this recession. the problem is the poor distribution of income gains, so let's forget about your (bad) examples, and work on that.
so what causes us to have uneven income gains? and my answer is the government grabbing power and handing out special favors to corporations. much of occupy's answer seems to be, give the government more power! but with more power corporations will just buy even more egregious favors. occupy also says make it harder for corporations to buy influence! i agree and have no problem with that - but corporations are always going to find a way to buy some anyway. besides, some of the favors are made just from politicians thinking the rule or mandate they make is good. it is well intended, but not intelligently designed. so my answer is to remove powers from the government to make these special favors. then they can't do something well intended but stupid, and the corporation doesn't have anything to buy in the first place.
Sickmint. You're either a coward or a moron. Too afraid to answer two simple questions or too stupid to understand a simple analogy.
Lets try one more: This one is right up your alley:
Billy and Joey visit 'play time' arcade after school with a bucket full of quarters.
Johnny, Tommy, Danny, Jimmy, Sally, Mary, Ricky, Shelly, Chucky, Willy, Marky, Timmy, Bobby, Nicky, Debby, and Kelly visit 'fun time' arcade after school with a bucket full of quarters.
Which arcade do you suppose takes in the most quarters that day? 'play time' or 'fun time'?
no, your analogy is terrible. and this example is stupid, it takes no dancing around. the percentage of wealth does not limit them to how many cats they can buy. the whole society may be extremely wealthy. at that point even if the bottom 90% owned 50% of the wealth, they'd still have more than enough to get all the cats their hearts desired. aww.
Either that garbled up mess is just another strategy to avoid the issue or you need some time to gather your thoughts.
Please try again. This time answer each question one at a time.
You're trying desperately to discredit my analogy because it's too good. Way too damn good.
Tell you what. Sometimes, you have to go to extremes to make a point. So that's what I'll do.
Let's say that the richest 1% didn't own 40% of all US wealth. Let's say that one man owned all of it. How many cars, trucks, washing machines, computers, cats, lawnmowers, spatulas, and waffle irons do you suppose he would buy? Please rate the demand on a scale from 1-10.
Now, let's say that all US wealth were divided more reasonably. 50% for lower 90%. 30% for next 9 percentiles. 20% for top 1%. How many cars, trucks, washing machines, computers, cats, lawnmowers, spatulas, and waffle irons do you suppose the entire group would buy? Please rate the demand on a scale from 1-10.
Now, let's see you dance your way around this one. Of course, you will. No doubt. I just want to see those crazy dance moves.