Income growth of 1% vs 99%

[dre]

That's fine by me...I can ride the tide as long as it lasts and become an unemployed camper later. What's not to like about that? Life is good....

Hey, I wonder if tent sales are way up? Time to research some stocks!

Yup, definately some money to be made. Wish Id bought duct tape stocks before 911!

[Scotty]

Hey, I wonder if tent sales are way up? Time to research some stocks!

Try buying shares in Dollarama.

Unsurprisingly, it's been prospering as people get poorer.

[cybercoma]

They say a rising tide raises all ships, but....

The CBO looked at the years 1979 to 2007. It found that, whereas average household income after inflation grew by 62 per cent, the top 1 per cent of the population had enjoyed income growth of 275 per cent. The bottom 20-per-cent’s after-tax income had grown 18 per cent. Said the CBO: “As a result of uneven income growth, the distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979.”

read more: http://www.theglobeandmail.com/news/opinions/opinion/who-wants-to-talk-about-income-inequality/article2245133/

The CBO (Congressional Budget Office) has shown that the average houshold income in the United States has grown unevenly depending on your tier.

Some would say that those on the top tier should earn more than those below them and that's absolutely true. I don't disagree with that notion at all. However, let's go back to that original metaphor. Does a rising tide raise all ships? In this case, no it does not. Some ships are rising very, very slowly (the 99%), while others are being launched into the air by tidal waves. What's happening now is that a much larger piece of the economic growth is going to the top 1% than it has in generations. The problem isn't that the 1% makes more or has more, as they should. The problem is that their income is growing a hell of a lot faster than everyone else's.

Take a look at the numbers again. Families' incomes grew by an average of 62 percent, while the top 1%'s income grew by 275 percent. The mistake people make when they look at these numbers is to assume that people are criticizing the gap in income between people. That is a strawman. Only democratic socialists or communists would actually suggest that incomes ought to be all the same. What the 99%, economists, and more generally the Left are arguing is not that there shouldn't be a gap, but that we need to be very concerned with the fact that this gap is rapidly increasing in size.

There are numerous problems associated with greater stratification in society, particularly when it comes to larger economic disparities between classes of people. Some disparity is absolutely necessary for a number of reasons (ie, motivation, innovation, retainment, etc). Too much disparity, on the other hand, is shown to be absolutely destructive to society.

[peg_city]

No sorry thats wrong. Youre assuming that the money supply increased because of economic growth but since the fractional fiat system has been in place debt growth has vastly outpaced economic growth. For the first 200 years of Americas existance the purchasing power of the dollar didnt even move more than about 2%, and the money supply grew relatively slowly. And this was during a time of fast economic growth. Some of the fastest growth ever.

But youre right about one thing. The accumulation of debt IS an exponential trend. And the reason for that is simple... since debt can only be serviced from the general money supply, and since the general money supply is created almost completely out of bank credit, and since when the bank creates credit only the principle goes into the money supply... every single year new debt has to be created AT LEAST in the ammount required to to service the interest on existing loans.

Its possible for on actor in the system to pay down there debt, or even a few of them. But due to the fundamental rules of the system itself its a GUARANTEED FACT that the overall debt of all participants in the system will grow.

Heres an example with some Canadian data.

Now go back to the example I showed you before and follow it through carefully....

http://www.yesmagazine.org/issues/the-new-economy/how-banks-make-money.

Theres $171 dollars in the money supply (general economy) after step 5, that Susie and Joe have a chance to trade their goods and services for. The problem is between the both of them they owe 178 dollars. The only way they can ever repay their loans is if a new layer is added to the pyramid, and theres an every increasing ammount of borrowers and debt.

This should help you understand it as well.

FACT: Each year all outstanding debt must compound by at least the interest on that debt.

FACT: The ammount of debt in the system will ALWAYS exceed the available of dollars in the economy to repay it.

Some people have called this a ponzi scheme buts not. In a ponzi scheme the people that get into the system the latest are the ones that lose. But in this schema all holders of currency take the same losses. THe private federal reserve banks are essentially TAXING all producers in the economy, while providing nothing at all.

And if you dont want to take my word for it, then do a little research. Publications by the federal reserve will tell you the exact same thing.

Thanks for the links

The only issue I have with this is the assumption that we will not run a budget surplus and in-turn not need to borrow to pay existing debts.

Edited February 9, 2012 by peg_city

[Moonlight Graham]

10% of the population owns 80% of the wealth (in US).

Got that from a Rage Against The Machine video.

We are the 90%!

[Argus]

Those that speculate for investment spend a lot of time researching market trends, and the businesses they're investing in. I'm not sure why that's so hard to understand. It's still work.

It's not work if you pay someone else to do it for you.

And then you get to write off what you paid them on your taxes!

[CPCFTW]

It's not work if you pay someone else to do it for you.

And then you get to write off what you paid them on your taxes!

You do? Maybe if you're a business.

Is it work when someone pays you to do something for them?

Edited February 11, 2012 by CPCFTW

[CPCFTW]

Dre:

What I don't understand is why you keep ignoring the fact that central banks DO have the means to decrease money supply.

The results of decreasing money supply would be far less economically palatable for "the 99%" than the current situation.

What happens with a decreased money supply? Banks have less money to lend and can therefore charge more interest on loans. Home ownership becomes an impossibility for all but the wealthy. Money gets pulled from corporate stocks and bonds and reallocated to high interest savings accounts. Companies can't raise as much capital and start cutting costs and laying off employees. Millions of bankruptcies because, as you have noted, there is not enough money in the system to pay off the debt.

Make no mistake: the expansion of the money supply is for supporting the 99%'s spending habits only. The wealthy will always make money, whether that money is invested in stocks and bonds to create jobs for the 99%, or if it is in high interest savings accounts to benefit from the scarcity of money in your limited supply scenario.

[CPCFTW]

Speaking of the evil 1%.. How about Zuckerberg's potential 2B tax bill?

But it better be at least 30% of his income for the year, or jacee will be camping outside of the NYSE!! Why the NYSE?? Your guess is as good as mine..

Edited February 11, 2012 by CPCFTW

[dre]

Dre:

What I don't understand is why you keep ignoring the fact that central banks DO have the means to decrease money supply.

The results of decreasing money supply would be far less economically palatable for "the 99%" than the current situation.

What happens with a decreased money supply? Banks have less money to lend and can therefore charge more interest on loans. Home ownership becomes an impossibility for all but the wealthy. Money gets pulled from corporate stocks and bonds and reallocated to high interest savings accounts. Companies can't raise as much capital and start cutting costs and laying off employees. Millions of bankruptcies because, as you have noted, there is not enough money in the system to pay off the debt.

Make no mistake: the expansion of the money supply is for supporting the 99%'s spending habits only. The wealthy will always make money, whether that money is invested in stocks and bonds to create jobs for the 99%, or if it is in high interest savings accounts to benefit from the scarcity of money in your limited supply scenario.

Make no mistake: the expansion of the money supply is for supporting the 99%'s spending habits only.

Not at all. Currency debasement is actually extremely regressive. When the government dumps money into the economic system the ones that ultimately benefit the most are the ones in the best position to chase it. And those people are not the productive class, they are the ones that make money simply shuffling paper around. The "financial sector".

These overly favorable credit conditions fuel asset bubbles, and all kinds of malinvestment and shady behavior, and when those asset bubbles pop real people lose their jobs and homes, and the taxpayer bails out the banks and financial sector that just got done making a fortune inflating the bubble.

Whats best for you average Joe is sound money. Between WW2 and 1975 the ammount of money held by the top few percent in terms of wealth was dramatically shrinking, wages were increasing, and the middle class emerged. The second we moved to paper legal tender money they started heavily deficit financing and that trend reversed.

[dalitis]

From what I see in the above posts, some people isolate the financial aspect of the economy in order to explain the economic difficulties faced by the world today, and also to account for the growth of inequality.

I am not a financial expert, but my logic and knowledge tells me that the fractional reserve banking system was created in order to accommodate the needs of a much bigger and complex economy than that found in the 19th century.

If the Fed were to abandon fractional reserve banking, then my guess pertaining to the outcome would be a total economic meltdown.

[Michael Hardner]

I am not a financial expert, but my logic and knowledge tells me that the fractional reserve banking system was created in order to accommodate the needs of a much bigger and complex economy than that found in the 19th century.

If the Fed were to abandon fractional reserve banking, then my guess pertaining to the outcome would be a total economic meltdown.

I believe reserve banking is older than that, and your last point sounds right.