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Old 2010-06-18, 17:13   Link #7861
synaesthetic
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Just remember to save your bottle caps. You know, for when after the bombs fall!
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Old 2010-06-18, 17:41   Link #7862
Bri
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Originally Posted by ChainLegacy View Post
. It is actually quite Keynesian in that the goal is to prevent any economic downturns through interest rate regulation. And the US certainly is going to pay that 'small price' if the dollar collapses. That doesn't sound too equal to me.
Keynesian theory also predicts that adding liquidity would have no effect at low interest rates. The expansion of the money supply by the FED is in strict contradiction of that theory.

There is no indication that inflation is getting out of control, it's been fairly stable between 2 and 3 percent during the last decade. If inflation were to increase in the coming years it would actually be beneficial in lowering the debt/GDP ratio. In fact the main reason the debt levels in the 1945-1955 period dropped from 105% GDP to 65% was a relatively high inflation of roughly 5%. Though this move would really screw over China and Japan. A strong depreciation of the dollar is unlikely as these countries would also pay the price.

Hyperinflation fears come from comparisons to the seventies where the FED did attempt to use the Keynesian policy to keep unemployment below NAIRU levels. The situation now is completely different as we are dealing with systemic failure and not a normal downturn. The FED is trying to stimulate recovery, not aiming to keep an overheated economy from going in to recession.


Quote:
Originally Posted by Kamui4356 View Post
You're misinterpreting keynesian theory there. The goal isn't to stop a market downturn, but to make is as short and painless as possible by stimulating the markets during said downturn, a method that's been historically proven to work I might add.

Also, the dollar isn't going to collapse anytime soon. Too many countries rely on it to let that happen, and while the euro was looking like an attractive alternative for a time, it's showing potential weakness too.
Agreed.
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Old 2010-06-18, 18:56   Link #7863
ChainLegacy
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The hyperinflation fears come from the combination of rising prices in all commodities, continually high unemployment (decades high level), the continuing increase in food stamp usage by American citizens, all food prices rising, over 13 trillion dollars of debt, with more to come due to the social security/medicare/medicaid financing crisis we already had to deal with. This can't just continue forever. The country is bankrupt. It's not crazy, as an above poster seems to be suggesting. What are all the countries that rely on the dollar going to do? Their reliance wouldn't change the outcome of hyperinflation. The combination of the current national debt, the Fannie/Freddie debt of 6.3 trillion dollars, and the 60 trillion from social security, medicare, and medicaid, leaves us with $70 trillion in government liabilities. In order to pay these off, we need to print money, thus causing hyperinflation. Essentially unavoidable.

Sure the official rates say we are at 2%. But that is because the government has spent the past two decades revising the CPI standard. Why? Because social security payment rates are supposed to be adjusted for inflation. Given that the debt for SS is already out of control, the government has eased the inflation rate continually to avoid the proper payout to social security receivers. There's a reason those SS payments don't go as far as they did 30 years ago. They understate inflation in a number of ways which you can look into further on your own if they interest you, including hedonics and geometric weighting.

And believe me, it wouldn't be beneficial... we're not talking ordinary inflation fluctuation, this is hyperinflation. The cost of living would run completely out of control. I think the idea should be put out there that our country is in financial tatters because it seems no one is willing or wants to admit that fact. Look into it on your own. I believe it to be a very real possibility.

Last edited by ChainLegacy; 2010-06-18 at 19:50.
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Old 2010-06-18, 23:34   Link #7864
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Quote:
Originally Posted by Kamui4356 View Post
You're misinterpreting keynesian theory there. The goal isn't to stop a market downturn, but to make is as short and painless as possible by stimulating the markets during said downturn, a method that's been historically proven to work I might add.

Also, the dollar isn't going to collapse anytime soon. Too many countries rely on it to let that happen, and while the euro was looking like an attractive alternative for a time, it's showing potential weakness too.
Keynesian works sometimes, and sometimes it doesn't.

-In Singapore, it worked 3 times in a row: New Singapore Shares in 2001, Economic Restructuring Shares in 2003, and GST Credits in 2007. All to combat excessive saving by Singaporeans. But the big boo-boo was to break the "war chest" this year. It's called a WAR CHEST for a reason!

-It resulted in FDR's New Deal.

----

But it also caused the failure of the Japanese economy - they threw money in Niigata, Hokkaido, Kyushu, etc. All the cash went to waste. Not even corruption - it was just poor planning and rural opposition.

And remember the 1973 Oil crisis? Its effects are still being felt today. The OPEC realised that they could manipulate the world economy by adjusting output every so often - and the world will still pay. Why? During the crisis, output went down. Governments threw money at OPEC.

----

So bascially, it's either Keynesian or Thatcherite economics for you. Keynesian economics is OK if you have ardent saves, and a strong state bank, like Singapore, China and Taiwan. Keynesian will be a fast recovery, but it slows progress and the state must jack up progress by state-led initiaves, like Singapore's R&D drive, China's "scientific" progress and Taiwan's support of entrepreneurism.

Oh and, always do it in June. These three countries all have their annual sales season about this time.

On the other hand, if your state bank is inherently weak, like US/UK, then it's not partically useful. That's because your money spent goes to the private sector, not the people sector. That means that your money flows out fast, and it's not enough to support a recovery.

(Unlike in strong state economy, where the money flows thru the public sector.)

Thatcherism is better here because it reduces the flow of money to the private sector since the people will spend less and save more (which the US and the EU really need to do right now.)
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Old 2010-06-18, 23:49   Link #7865
SaintessHeart
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Originally Posted by yoropa View Post
Somali pirate cook saves hostages, then disappears

I'd like to see more of these mysterious Ahmeds showing up to the rescue.
There's another case of bad guys with a heart where a German officer back in World War II stopped a Lithuanian soldier from shooting a Jew with his Kar98. It is uncanny to know that sometimes armed conflicts bring out the best and worst in people.

Quote:
Originally Posted by ZephyrLeanne View Post
Keynesian works sometimes, and sometimes it doesn't.

-In Singapore, it worked 3 times in a row: New Singapore Shares in 2001, Economic Restructuring Shares in 2003, and GST Credits in 2007. All to combat excessive saving by Singaporeans. But the big boo-boo was to break the "war chest" this year. It's called a WAR CHEST for a reason!

-It resulted in FDR's New Deal.

----

But it also caused the failure of the Japanese economy - they threw money in Niigata, Hokkaido, Kyushu, etc. All the cash went to waste. Not even corruption - it was just poor planning and rural opposition.

And remember the 1973 Oil crisis? Its effects are still being felt today. The OPEC realised that they could manipulate the world economy by adjusting output every so often - and the world will still pay. Why? During the crisis, output went down. Governments threw money at OPEC.

----

So bascially, it's either Keynesian or Thatcherite economics for you. Keynesian economics is OK if you have ardent saves, and a strong state bank, like Singapore, China and Taiwan. Keynesian will be a fast recovery, but it slows progress and the state must jack up progress by state-led initiaves, like Singapore's R&D drive, China's "scientific" progress and Taiwan's support of entrepreneurism.

Oh and, always do it in June. These three countries all have their annual sales season about this time.

On the other hand, if your state bank is inherently weak, like US/UK, then it's not partically useful. That's because your money spent goes to the private sector, not the people sector. That means that your money flows out fast, and it's not enough to support a recovery.

(Unlike in strong state economy, where the money flows thru the public sector.)

Thatcherism is better here because it reduces the flow of money to the private sector since the people will spend less and save more (which the US and the EU really need to do right now.)
From what I know about economics, money flowing through solely the public sector can be dangerous as it causes the country to be overly self-reliant, like Iran. It has money nobody else in the world is willing to valuate against.

Then again I could be wrong.
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When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2010-06-19, 00:20   Link #7866
ZephyrLeanne
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Originally Posted by SaintessHeart View Post
There's another case of bad guys with a heart where a German officer back in World War II stopped a Lithuanian soldier from shooting a Jew with his Kar98. It is uncanny to know that sometimes armed conflicts bring out the best and worst in people.



From what I know about economics, money flowing through solely the public sector can be dangerous as it causes the country to be overly self-reliant, like Iran. It has money nobody else in the world is willing to valuate against.

Then again I could be wrong.
No, no. Flowing THRU the PUBLIC to the PEOPLE is good. Flowing TO the PUBLIC isn't, just like Iran and DPRK.

Bascially, my point is that ALL STIMULUS MUST be directed by the PUBLIC sector to benefit the PEOPLE. It cannot be entrusted to the PRIVATE sector.
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Old 2010-06-19, 00:37   Link #7867
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Quote:
Originally Posted by SaintessHeart View Post
From what I know about economics, money flowing through solely the public sector can be dangerous as it causes the country to be overly self-reliant, like Iran. It has money nobody else in the world is willing to valuate against.

Then again I could be wrong.
It depends on how the money is spent. For countries like the US it would probably be better if they had simply let the banking industry collapse and rebuild itself with limited support from the government in the form of jump start funds and updated regulation (to cover all the new markets that weren't covered under old law).

The real bailout would have been better spent on investing directly into the public sector with a nod to the private. Increased funding to stabilize the housing market (the current plans are woefully inept), programs to help stabilize the working poor and lower middle classes, that sort of thing. The US also needs help in infrastructure, education, and energy. They're typically considered Democratic talking points but they are in dire need of help.

There's also a whole host of social programs that simply aren't holding up and need to be redone or scrapped entirely, starting with the big three: Social Security, Medicare, and Medicaid. Despite the grumblings from the right we do need a more efficient and affordable health care system, but that won't happen as long as it ends up mired in misinformation like "Death Panels".

The debt isn't the problem, nor is paying it off. The real issue is that the money the government is spending has questionable long term value. Is dumping 700 billion dollars into the financial industry worth it after a few years, or could that money have been better spent for the future of the country?

Note that pretty much every industrial nation has a significant amount of debt. At this point money has become so worthless as a backed transaction that we simply value money for the writings on it and the faith in the country issuing it. If you were to actually break down the US debt and figure out how to repay it, you're still looking at an incredibly long time before the numbers go down noticeably. It would take several generations before the numbers came down to "sane" levels.

It's also important to note that the amount of money the US government spends on military and the big three social programs dwarfs the rest of their spending by a considerable amount. And between military and the social programs military wins by a good margin. We spend a massive amount on it really, but then again we're running two wars and spread all across the world....and paying the price for it back home. Sooner or later something will have to give.

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Originally Posted by justinstrife View Post
Meh. This post isn't really worth responding to. Poor people will always be poor. Even if you took all the money in the world and redistributed it equally among everyone, within a few short years, everything would go back to the way it is currently. Those who were wealthy, will build their wealth back up again, and the poor people will piss the money away and be poor again.
It's interesting you say this, since I just read this article:

http://www.reuters.com/article/idUSTRE65F5CC20100616

Granted, there's no obligations and it's for charity, but even the fact that this is being considered is absolutely amazing.
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Old 2010-06-19, 00:53   Link #7868
ZephyrLeanne
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Originally Posted by Solace View Post
It depends on how the money is spent. For countries like the US it would probably be better if they had simply let the banking industry collapse and rebuild itself with limited support from the government in the form of jump start funds and updated regulation (to cover all the new markets that weren't covered under old law).

The real bailout would have been better spent on investing directly into the public sector with a nod to the private. Increased funding to stabilize the housing market (the current plans are woefully inept), programs to help stabilize the working poor and lower middle classes, that sort of thing. The US also needs help in infrastructure, education, and energy. They're typically considered Democratic talking points but they are in dire need of help.

.
Yeah, this was what I was trying to get at.
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Old 2010-06-19, 00:58   Link #7869
SaintessHeart
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Originally Posted by Solace View Post
It's interesting you say this, since I just read this article:

http://www.reuters.com/article/idUSTRE65F5CC20100616

Granted, there's no obligations and it's for charity, but even the fact that this is being considered is absolutely amazing.
Buffett actually doesn't really care about the money he earns, he only cares about how much he loses.

He is one of the most eccentric rich people in the world, he earns money from the stock market just to give himself satisfaction, and he throws practically all the money back into the market again.

There is a recent article which a reporter blasted him for being "useless" and "pathetic" for not being able to make a concrete stand while testifying against Goldman Sachs, claiming that he's "doing it to protect his investments". From what I know, he doesn't invest much in financial firms because he already owns one (Berkshire Hathaway). It is funny that many people have illogical concepts about real philanthropists like him.
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When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2010-06-19, 01:16   Link #7870
ZephyrLeanne
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Originally Posted by SaintessHeart View Post
Buffett actually doesn't really care about the money he earns, he only cares about how much he loses.

He is one of the most eccentric rich people in the world, he earns money from the stock market just to give himself satisfaction, and he throws practically all the money back into the market again.

There is a recent article which a reporter blasted him for being "useless" and "pathetic" for not being able to make a concrete stand while testifying against Goldman Sachs, claiming that he's "doing it to protect his investments". From what I know, he doesn't invest much in financial firms because he already owns one (Berkshire Hathaway). It is funny that many people have illogical concepts about real philanthropists like him.
Buffett isn't a REAL philantrophist. He's a philantrocapitalist.
Paul Newman might be more suitable. http://en.wikipedia.org/wiki/Newman%27s_Own

He makes zero profit out of it, unlike Buffett, who still gets a small slice of the pie.
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Old 2010-06-19, 02:55   Link #7871
SaintessHeart
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Come to think of it, the financial system of US has become something like what Ozzy Osbourne sang in "Crazy Train"....

One person conditioned to rule and control
The media sells it and you have the role
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When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2010-06-19, 05:57   Link #7872
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Originally Posted by Bri View Post
But here lies the problem. The middle class did not become their own boss. Instead they acted like the poor or the rich in your example. They either consumed the extra income, or saved/invested it but they did not start new companies. I wonder what the reason for that is.
I think you are missing my point. They didn't squander it, they never got their money in the first place. The national wealth has been pretty extensively documented to have been redirected to the ultra-rich.

Consider (source):
Quote:
As of 2007, the top decile of American earners, Saez writes, pulled in 49.7 percent of total wages, a level that's "higher than any other year since 1917 and even surpasses 1928, the peak of stock market bubble in the 'roaring" 1920s.'"

Beginning in the economic expansion of the early 1990s, Saez argues, the economy began to favor the top tiers American earners, but much of the country missed was left behind. "The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007," Saes writes.
BTW, according to this more recent article the same researcher (Saez) should have data using the same methodology covering 2008 by the end of the Summer, but the early data looks really "frightening".

Quote:
Originally Posted by SaintessHeart View Post
(Buffett) is one of the most eccentric rich people in the world, he earns money from the stock market just to give himself satisfaction, and he throws practically all the money back into the market again.
This is what I was trying to get at. So much of our wealth (certainly America's wealth, but probably true on a global scale, as well) is tied up in the ultra-rich that it has become a structural problem. When the majority of the wealth is owned by the majority of the population, it moves in economically useful ways. When the majority of the wealth is tied up in the hands of a few, it gets moved into economically unproductive vehicles (e.g. commodity and equity bubbles). According to this source the top 1% own 70% of all American financial assets.

Free market Capitalism is predicated upon a strong Middle Class. The Middle Class creates the small businesses that employ people, and that does the real productive work of a healthy economy. The ultra-rich can be tolerated as an aberration when they hold a minority share of the wealth in society. In our case concentration of wealth has become a pathological condition. The money that normally would have been used productively by the Middle Class has gone into financial speculation. Check this image out (source):


Anyways, longish post because I'm truly worried about the consequences of this situation. (Hello, aristocracy? )
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Old 2010-06-19, 07:38   Link #7873
ChainLegacy
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Originally Posted by Solace View Post
The debt isn't the problem, nor is paying it off. The real issue is that the money the government is spending has questionable long term value. Is dumping 700 billion dollars into the financial industry worth it after a few years, or could that money have been better spent for the future of the country?

Note that pretty much every industrial nation has a significant amount of debt. At this point money has become so worthless as a backed transaction that we simply value money for the writings on it and the faith in the country issuing it. If you were to actually break down the US debt and figure out how to repay it, you're still looking at an incredibly long time before the numbers go down noticeably. It would take several generations before the numbers came down to "sane" levels.TRE65F5CC20100616[/url]
I agree with a lot of what you're saying here, but the fact of the matter is the US has far and away more debt than any other nation. Look at the current crisis in Greece, where we are getting all this turmoil over debt that represents something like 13% of their GDP. The only reason the US isn't currently facing that situation is because we aren't part of a union like the EU and we control our 'money printing press,' so to speak. We have avoided the problem by printing more money, which will ultimately bite us in butt if it leads to hyperinflation. The amount of money the US has in unfunded liabilities + national debt represents nearly 100% of our GDP!!! Far worse than Greece but as I said we keep sweeping it under the rug by printing more money. Our money can collapse even in the current FIAT system because whether we deny it or not gold/silver prices and precious metals are still the true world currency. The worst part of that debacle is that JP Morgan has been selling investors silver certificates of ownership when in reality they aren't storing physical silver. The US banking industry has been selling investors what they believe to be physical silver that does not actually exist. When the time comes for them to call in their silver, there will be a devastating short squeeze on the supply of physical silver. Even worse for the US, brother China seems to be catching wind of this and has reduced the US currency holdings for several months in a row now.


I'm actually surprised everyone is so nonchalant about our national debt. It is an astoundingly large number that we have no hope of ever paying off. Even if we got rid of every government institution, INCLUDING THE MILITARY, tax receipts would still not cover social security, medicare, and medicaid. Now if that isn't cause for alarm I don't know what is. We need to start taking action, fast, to be ready for an impeding disaster...

Last edited by ChainLegacy; 2010-06-19 at 07:48.
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Old 2010-06-19, 09:06   Link #7874
SaintessHeart
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Originally Posted by Joojoobees View Post
This is what I was trying to get at. So much of our wealth (certainly America's wealth, but probably true on a global scale, as well) is tied up in the ultra-rich that it has become a structural problem. When the majority of the wealth is owned by the majority of the population, it moves in economically useful ways. When the majority of the wealth is tied up in the hands of a few, it gets moved into economically unproductive vehicles (e.g. commodity and equity bubbles). According to this source the top 1% own 70% of all American financial assets.

Free market Capitalism is predicated upon a strong Middle Class. The Middle Class creates the small businesses that employ people, and that does the real productive work of a healthy economy. The ultra-rich can be tolerated as an aberration when they hold a minority share of the wealth in society. In our case concentration of wealth has become a pathological condition. The money that normally would have been used productively by the Middle Class has gone into financial speculation. Check this image out (source):


Anyways, longish post because I'm truly worried about the consequences of this situation. (Hello, aristocracy? )
Actually Buffett doesn't own most of his wealth : the money he has as a trader is largely handled by the companies he invested in. He became a rich bastage through sheer wit and rationality, unlike many others who set up business or trading plans without a future goal and planned to fail.
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When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2010-06-19, 09:32   Link #7875
Kamui4356
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Originally Posted by ChainLegacy View Post
Look at the current crisis in Greece, where we are getting all this turmoil over debt that represents something like 13% of their GDP.
Try more like 115% of their GPD, plus as you also said the whole being part of the EU thing.
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Old 2010-06-19, 10:33   Link #7876
ChainLegacy
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Originally Posted by Kamui4356 View Post
Try more like 115% of their GPD, plus as you also said the whole being part of the EU thing.
I've heard 12.8% budget deficit of their GDP if this is wrong I am sorry. Either way the example works; Greece makes up about 3% of European Union GDP, whereas California makes 13.5% of US GDP, and as you may have read recently Arnie is demanding a bailout for the state due to its debt.
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Old 2010-06-19, 10:46   Link #7877
Anh_Minh
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The debt (how much they already owe) is at 115%. The deficit (how much more they spend than they make) is at 13%. (The US are at 84% and 10% or so, I think.)
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Old 2010-06-19, 11:30   Link #7878
ChainLegacy
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Without counting unfunded liabilities and the Fannie/Freddie debt.
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Old 2010-06-19, 17:43   Link #7879
Bri
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Originally Posted by Joojoobees View Post

Consider (source):
Quote:
As of 2007, the top decile of American earners, Saez writes, pulled in 49.7 percent of total wages, a level that's "higher than any other year since 1917 and even surpasses 1928, the peak of stock market bubble in the 'roaring" 1920s.'"

Beginning in the economic expansion of the early 1990s, Saez argues, the economy began to favor the top tiers American earners, but much of the country missed was left behind. "The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007," Saes writes.
BTW, according to this more recent article the same researcher (Saez) should have data using the same methodology covering 2008 by the end of the Summer, but the early data looks really "frightening".

This is what I was trying to get at. So much of our wealth (certainly America's wealth, but probably true on a global scale, as well) is tied up in the ultra-rich that it has become a structural problem. When the majority of the wealth is owned by the majority of the population, it moves in economically useful ways. When the majority of the wealth is tied up in the hands of a few, it gets moved into economically unproductive vehicles (e.g. commodity and equity bubbles). According to this source the top 1% own 70% of all American financial assets.
Ah thanks for looking up the info, that makes sense. So policy of the last two decades has caused a concentration of wealth at the top incomes. Like an inverted progressive tax regime.

Gini coefficients do suggest that the US has a far larger inequality in the income distribution then the rest of the developed world. That at least supports Seaz's theory.
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Old 2010-06-19, 18:06   Link #7880
Vexx
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Welcome to neofeudalism, 21st century style, and "Robber Barons Strike Back".
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