Jump to content
House Price Crash Forum
Sign in to follow this  
R K

U S Income Gaps Between Rich And Everyone Else More Than Tripled In Last 30 Years

Recommended Posts

http://www.businessinsider.com/after-wage-hike-foxconn-moves-majority-of-workers-to-a-different-factory-2010-6

There is no reason to believe that Chinese labour will be immune from the wage arbitrage that other people are subject to. As their wage demands rise, their jobs will be moved to cheaper places.

Until we run out of warm bodies to abuse this process will not stop.

Also these ....

http://www.reuters.com/article/idUSSGE65N02Q20100624

Share this post


Link to post
Share on other sites

Depending on one's political beliefs, one could see this either as the purest form of capitalism and fairest society on earth, or an absolute outrageous example of theft, corruption, and nepotism.

That myth (the purest form of capitalism) has well and truly been busted.

Share this post


Link to post
Share on other sites

That myth (the purest form of capitalism) has well and truly been busted.

I agree completely.

I have an honest difference of opinion with some posters here. As a capitalist and a free marketeer I am probably at least as disappointed with how things have turned out in the last few years as they have been.

Private gains and social losses are a complete anathema to me. The politicians of the time should have forced senior and subordinated lenders to take massive losses when banks went bankrupt rather than bailing out lenders at par and implicitly forcing the general public to buy securities worth 0c to 50c on the dollar at par.

Instead of dealing with a massive problem for some over a 5 year period, governments have forced society to pay the price for 20 years. Brown and Darling bought all of us some zombie banks at the wrong price without giving us any say in the matter. King was the sole voice of reason who brought up the issue of moral hazard at the time and he was villified.

Share this post


Link to post
Share on other sites

I agree completely.

I have an honest difference of opinion with some posters here. As a capitalist and a free marketeer I am probably at least as disappointed with how things have turned out in the last few years as they have been.

Private gains and social losses are a complete anathema to me. The politicians of the time should have forced senior and subordinated lenders to take massive losses when banks went bankrupt rather than bailing out lenders at par and implicitly forcing the general public to buy securities worth 0c to 50c on the dollar at par.

Instead of dealing with a massive problem for some over a 5 year period, governments have forced society to pay the price for 20 years. Brown and Darling bought all of us some zombie banks at the wrong price without giving us any say in the matter. King was the sole voice of reason who brought up the issue of moral hazard at the time and he was villified.

Thats the thing I find difficult to handle. We all know the rules of capitalism. Some of us knew how the pyramid property scheme worked. We all understood that in a free market, if you get caught with your trousers down, you lose and someone else takes over your assets. Thats why when Woolworths went down, Justin King of Sainsburys made the point that bailing Woolworths out was bad for the market. Sainsburys should be rewarded for it business acumen by picking off the best Woolworths assets. If Sainsbury's failed in the future then the same thing could happen to them. Thats what drives a company to preform well i.e. the need to survive.

The bailout changed the rules so spectacularly that my jaw hit the floor! I just don't believe in the whole thing anymore. I dont have any respect for asset managers (I used to work for one), Investment banks, government etc... I just dont want to play by the rules anymore. Bankruptcy, defaults etc.. it's all utter BS to me. That one move crystalized the way I think from now on. It's not fair so why should I play fair?

The powers that be really dont know what they've unleashed with this move..

Share this post


Link to post
Share on other sites

We all know the rules of capitalism. Some of us knew how the pyramid property scheme worked.

capitalism is a pyramid scheme itself. Thats why it needs constant growth.

This requirement for growth incidentally has nothing to do with the debt based nature of the money system, and a capitalism with pure debt free cash is still a pyramid scheme.

Share this post


Link to post
Share on other sites

Thats the thing I find difficult to handle. We all know the rules of capitalism. Some of us knew how the pyramid property scheme worked. We all understood that in a free market, if you get caught with your trousers down, you lose and someone else takes over your assets. Thats why when Woolworths went down, Justin King of Sainsburys made the point that bailing Woolworths out was bad for the market. Sainsburys should be rewarded for it business acumen by picking off the best Woolworths assets. If Sainsbury's failed in the future then the same thing could happen to them. Thats what drives a company to preform well i.e. the need to survive.

The bailout changed the rules so spectacularly that my jaw hit the floor! I just don't believe in the whole thing anymore. I dont have any respect for asset managers (I used to work for one), Investment banks, government etc... I just dont want to play by the rules anymore. Bankruptcy, defaults etc.. it's all utter BS to me. That one move crystalized the way I think from now on. It's not fair so why should I play fair?

The powers that be really dont know what they've unleashed with this move..

I have always admired people who "give it a go" regardless of whether they succeed or fail. The recent assymetry between success and failure that this has unleashed will mean more risk taking in the longer run as there are now fewer costs of failure. Moral hazard has increased systemic risk. It is a crying shame.

Share this post


Link to post
Share on other sites

capitalism is a pyramid scheme itself. Thats why it needs constant growth.

This requirement for growth incidentally has nothing to do with the debt based nature of the money system, and a capitalism with pure debt free cash is still a pyramid scheme.

I don't follow?

My understanding is that if the bank has a seed capital of 100 pounds it can lend 900 pounds out. Because they are only required to have 1/10 of their

money liquid. So in real terms it has 1000 pounds on its balance sheet as an asset and has to keep 100 because the initial depositor might ask for it back.

If it lends the 900 pounds out to various other people with interest it will not only get back the 900 in say 1 months time, but 900 + 100 pounds of interest.

The trick is, the new loans are seen as assets so the banks asset base becomes not 100 pounds, but 1100 * 9.

That is 100 pound seed + 900 pound loan + 100 pound interest * 9 (the fraction it needs to keep liquid).

Essentially the bank is now good for 9,900 pounds worth of loans from a seed of 100 pounds. And it doesnt have to get the money in first to loan since they

are a trusted institution. Remember there was only ever 100 pounds of real money in the first place.

So everyone else is working/producing/digging up real assets and work to pay back debts to an institution that never had anything real in the first place. Just a lot

of promises to pay and an initial seed of 100 pounds.

When everyone pays back everyone as they say they will then everythings fine. But 2 things can happen. The depositors could ask for all their money back and that adds up to more than they actually have on them (e.g. Northern Rock). Or people default on their loans and the asset that the bank had to back its loans dissapears. There assets are basically devalued and they are in breach of covenants because even if they sold all their assets the bank couldnt cover their liabilities.

Finally, the interest added means that even if they liquidised all their assets they still couldnt cover the total amount they owe to everyone because they had been adding

interest to it. Exponentially the figure gets out of hand. So everyone needs to make more money to cover this extra interest. Its not an option to not "grow" in capitalism because you need to cover the interest which was just invented out of thin air.

Share this post


Link to post
Share on other sites

capitalism is a pyramid scheme itself. Thats why it needs constant growth.

This requirement for growth incidentally has nothing to do with the debt based nature of the money system, and a capitalism with pure debt free cash is still a pyramid scheme.

Some of the sources of growth are clearly finite : natural resources, population growth etc.

I am not sure whether some of the sources of growth are infinite : productivity gains, technological advances, capital market efficiency etc.

I do agree that the low hanging fruit in developed markets has already been picked. Growth will be much harder to come by in the future in these markets.

There is more low hanging fruit to be harvested in developing markets but it is also finite.

I do agree with your point that returns on capital are going to have to come increasingly at the expense of returns on labour as growth slows down. Markets with inflexible labour markets will probably see a flight of capital if it cannot earn adequate risk adjusted returns. In the end, there will be nowhere left for capital to go. It is at this point that it will probably be consumed which will bring a temporary return to growth. This cycle will probably repeat itself until enough capital has been consumed that there are adequate opportunities for the remaining capital to earn a reasonable risk adjusted return.

I don't know how far away we are from an era of capital consumption but I expect that it is at least two generations away.

Share this post


Link to post
Share on other sites

Simply because capital can be lent and demand a yield or simpy accumulated and re-invested to generate a yield. (?)

it has nothing to do with lending.

assuming an entirely private economy, a profit can only be extracted by business from the deficit of consumers no matter what monetary system is in place.

only growth and thereby the creation of new money can paper over that gaping flaw without inflation.*

one might assume that as long as business returns all profits back to consumers via dividends there would be no problem, which is correct, but of course that is not what actually happens. To see the truth of that, imagine a coin only economy - the business sector will end up with all the coins.

A capitalist system without growth can only exist by turning consumers into slaves who don't get paid.

* [EDIT: and of course it is the public deficit which has papered over the flaw the last 80 years - the public deficit is largely the source of all profits these days, which explains the historically recent inflationary episodes )

Edited by scepticus

Share this post


Link to post
Share on other sites
<br />I don't follow? <br />My understanding is that if the bank has a seed capital of 100 pounds it can lend 900 pounds out. Because they are only required to have 1/10 of their <br />money liquid. So in real terms it has 1000 pounds on its balance sheet as an asset and has to keep 100 because the initial depositor might ask for it back.<br /><br />If it lends the 900 pounds out to various other people with interest it will not only get back the 900 in say 1 months time, but 900 + 100 pounds of interest.<br />The trick is, the new loans are seen as assets so the banks asset base becomes not 100 pounds, but 1100 * 9.<br /><br />That is 100 pound seed + 900 pound loan + 100 pound interest * 9 (the fraction it needs to keep liquid).<br /><br />Essentially the bank is now good for 9,900 pounds worth of loans from a seed of 100 pounds. And it doesnt have to get the money in first to loan since they<br />are a trusted institution. Remember there was only ever 100 pounds of real money in the first place. <br /><br />So everyone else is working/producing/digging up real assets and work to pay back debts to an institution that never had anything real in the first place. Just a lot<br />of promises to pay and an initial seed of 100 pounds. <br /><br />When everyone pays back everyone as they say they will then everythings fine. But 2 things can happen. The depositors could ask for all their money back and that adds up to more than they actually have on them (e.g. Northern Rock). Or people default on their loans and the asset that the bank had to back its loans dissapears. There assets are basically devalued and they are in breach of covenants because even if they sold all their assets the bank couldnt cover their liabilities.<br /><br />Finally, the interest added means that even if they liquidised all their assets they still couldnt cover the total amount they owe to everyone because they had been adding<br />interest to it. Exponentially the figure gets out of hand. So everyone needs to make more money to cover this extra interest. Its not an option to not "grow" in capitalism because you need to cover the interest which was just invented out of thin air.<br />
<br /><br /><br />

I don't know if you saw previous posts on this, but it was recently revealed the Banks have been lending out @ 1/50 NOT 1/10

(No wonder Brown/'they' closed the requirement to disclose getting emergency dosh from the B.O.E. (supposedly to avoid bank_runs!) as just a tiny percent defaulting on their debts - sends the banks to the Wall!

Share this post


Link to post
Share on other sites

Can someone please explain this thread to me? You posted some graphs showing that you poor people are getting more money than ever before. Yet you are still whining. What's up with that?

Additionally it shows that we more successful people are paying even more taxes towards your foodstamps and whatnot.

Is there anything that would stop you whingers complaining???

Share this post


Link to post
Share on other sites

Can someone please explain this thread to me? You posted some graphs showing that you poor people are getting more money than ever before. Yet you are still whining. What's up with that?

Additionally it shows that we more successful people are paying even more taxes towards your foodstamps and whatnot.

Is there anything that would stop you whingers complaining???

I think that the only thing that would stop the complaining is a complete collapse in wealth and incomes which would leave everyone massively worse off but the poorest less worse off in relative terms.

Welcome to socialist uptopia : we don't care if the poor are worse off as long as the rich are even more worse off.

Share this post


Link to post
Share on other sites

I think that the only thing that would stop the complaining is a complete collapse in wealth and incomes which would leave everyone massively worse off but the poorest less worse off in relative terms.

Welcome to socialist uptopia : we don't care if the poor are worse off as long as the rich are even more worse off.

No! Don't you get it? The socialist utopia is that there is less difference between the rich and the poor. The rich have created a system where they get to take the real assets produced by the poor in return for cash they didn't have in the first place. The poor think they are wealthier because they have access to credit. When the rich stop the credit line (which they are doing now) suddenly the poor start to realise that don't really own anything! They realise that their real salaries can't even buy them a garage let alone a house to live in. It was all an elaborate illussion.

It matters who you consider yourself to be in this game. Are you 5 per cent of the rich or are you in the 95 that is giving away your labour And assets for peanuts? The gap between the 5 and 95 is wider than ever before according to official studies and the only reason you don't see it is because you've borrowed the money to make up for the fact they are robbing you!

An equivalent scenario is the "house negro" who thinks he is in a better position than the slave in the field. On a micro level, he may feel better but the reality is he is still a slave. He can still be sold, killed or mutilated at will by his owner but is a fool because he can't see what his real status is.

I can see that some of you guys have fallen for the same trick.

Share this post


Link to post
Share on other sites

No! Don't you get it? The socialist utopia is that there is less difference between the rich and the poor. The rich have created a system where they get to take the real assets produced by the poor in return for cash they didn't have in the first place. The poor think they are wealthier because they have access to credit. When the rich stop the credit line (which they are doing now) suddenly the poor start to realise that don't really own anything! They realise that their real salaries can't even buy them a garage let alone a house to live in. It was all an elaborate illussion.

It matters who you consider yourself to be in this game. Are you 5 per cent of the rich or are you in the 95 that is giving away your labour And assets for peanuts? The gap between the 5 and 95 is wider than ever before according to official studies and the only reason you don't see it is because you've borrowed the money to make up for the fact they are robbing you!

An equivalent scenario is the "house negro" who thinks he is in a better position than the slave in the field. On a micro level, he may feel better but the reality is he is still a slave. He can still be sold, killed or mutilated at will by his owner but is a fool because he can't see what his real status is.

I can see that some of you guys have fallen for the same trick.

We get to an ideologigal impasse pretty quickly.

I believe that there is a limit as to how much wealth redistribution can occur before total wealth generation is impaired. Others don't.

As far as memberships in the 5% or the 95% group goes, I think that we get to a similar ideological impasse. In a free market, membership would be based on merit with promotions and relegations occurring frequently. Neither the left nor the right (as represented by current political parties) support free markets. I see the solution (admittedly idealistically) as the adoption of free markets rather than the entrenchment of the current system.

Share this post


Link to post
Share on other sites

We get to an ideologigal impasse pretty quickly.

I believe that there is a limit as to how much wealth redistribution can occur before total wealth generation is impaired. Others don't.

As far as memberships in the 5% or the 95% group goes, I think that we get to a similar ideological impasse. In a free market, membership would be based on merit with promotions and relegations occurring frequently. Neither the left nor the right (as represented by current political parties) support free markets. I see the solution (admittedly idealistically) as the adoption of free markets rather than the entrenchment of the current system.

It is an idealogical issue yes. Do we allow for what I would call the "modern capitalist algorithim" to preform it's duty of transferring wealth/assets from poor to rich?

I believe that because not all "work" is equal in effort we cannot pay people equally so communism is out of the picture.

But we do need better regulation / balancing of the systems in place to prevent the capitalist alogrithim running to it's fullest extent. Thats the job of governments, thats what a a real socialist government should be doing. Carefully massaging the system to keep things from overheating. Small incremental changes to the system rather than huge politically motivated changes in policy.

Strangely, the conservatives (after Thatcher) and now seem to be showing far more "socialsim" than any labour government. They seem to understand that socialism actually means being "fair" to everyone.. what a novell approach!

Share this post


Link to post
Share on other sites

I see the solution (admittedly idealistically) as the adoption of free markets rather than the entrenchment of the current system.

free markets with hard money simply develops into a tyranny in which everyone without money becomes the slaves of those with money, and the people with money never spend it, except occasionally amongst themselves, but demand a rent off everyone else.

We got rid of feudalism 600 years ago so why go back to it?

Share this post


Link to post
Share on other sites

Can someone please explain this thread to me? You posted some graphs showing that you poor people are getting more money than ever before. Yet you are still whining. What's up with that?

Additionally it shows that we more successful people are paying even more taxes towards your foodstamps and whatnot.

Is there anything that would stop you whingers complaining???

Brilliant satire on the landed gentry. I love it !

Share this post


Link to post
Share on other sites

...

3. If the wealth generating quintiles have ensured that the non-wealth generating quintiles are no worse off in real terms during a period of significant growth, they have met the minumum standard. I am not convinced that increasing the share of total wealth that goes to the non-productive segment of the economy during booms is sustainable in the long term. The goal ought to be to prevent temporary, speculative bubbles rather than to create the expectation that the gains are in any way permanent. The "benefit trap" may be one of the reasons that the lowest quintile remain trapped. I do not know who we can increase the share of wealth going to the lowest quintile without increasing the size of the benefit trap. I am very open to suggestions.

Who are the wealth generating quintiles?

Share this post


Link to post
Share on other sites

Who are the wealth generating quintiles?

wealth is extracted from the slave quintile. the extractors are all the quintiles above. so who is generating the wealth depends on your point of view.

if you look carefully you will find the slave quintile that supports the free markets around the periphery of the anglo saxon capitalist empire, just outside the accepted boundaries of what we call the monetary economy. Back in the core, a large slave quintile has emerged, about 8 million in the UK alone.

We don't see this is a slave quintile because we chose to extend them monetary benefits, but they are slave dependant on handouts and we can stop the handouts and return them to their natural state whenever we all chose to do that.

Share this post


Link to post
Share on other sites

wealth is extracted from the slave quintile. the extractors are all the quintiles above. so who is generating the wealth depends on your point of view.

if you look carefully you will find the slave quintile that supports the free markets around the periphery of the anglo saxon capitalist empire, just outside the accepted boundaries of what we call the monetary economy. Back in the core, a large slave quintile has emerged, about 8 million in the UK alone.

We don't see this is a slave quintile because we chose to extend them monetary benefits, but they are slave dependant on handouts and we can stop the handouts and return them to their natural state whenever we all chose to do that.

The 'natural state' of 8 million starving people is to be taking food from the obscenely wealthy living next door, who 'generated' their wealth by exploiting the poor.

This is usually accompanied by a guillotine for the wealthy.

Share this post


Link to post
Share on other sites

Can someone please explain this thread to me? You posted some graphs showing that you poor people are getting more money than ever before. Yet you are still whining. What's up with that?

Additionally it shows that we more successful people are paying even more taxes towards your foodstamps and whatnot.

Is there anything that would stop you whingers complaining???

Not quite that simple is it?

Wages for the poor may have risen 25% (woohoo!)

But the cost of housing has risen 300%

The cost of public transport 200%

The cost of fuel 100%

The cost of food 75%

So the poor are not wealthier, they are poorer. They just have bits of paper with a bigger number written on them.

Share this post


Link to post
Share on other sites

Not quite that simple is it?

Wages for the poor may have risen 25% (woohoo!)

But the cost of housing has risen 300%

The cost of public transport 200%

The cost of fuel 100%

The cost of food 75%

So the poor are not wealthier, they are poorer. They just have bits of paper with a bigger number written on them.

I thought that the data was presented in constant 2007 dollars so the increase in income for each quintile is measured in real and not nominal terms.

Share this post


Link to post
Share on other sites
I believe that there is a limit as to how much wealth redistribution can occur before total wealth generation is impaired. Others don't.

Do you mean that the process of funnelling available wealth to a small number of people who then hoard it will eventually lead to collapse in demand and thus impair wealth generation? :D

You have a baseline assumption that if wealth is received by a group through the operation of the 'free market' this is prima facie evidence that the wealth was correctly distributed. But this simplistic view cannot capture even the more obvious ways in which those with wealth can leverage that wealth to distort the context in their favour.

So while it's possible to suppose this abruptly rising income inequality could be the result of a flowering of talent and intelligence amongst the gainers- some kind of sudden evoloutionary lurch forward that has allowed this group at the top to outperform their less evolved fellows. A more likely explaination is that they are the winners in an enviroment where the prevailing ideology was favaourable to their interests and weakened both the restraints on their gains and the bargaining power of their competitors. And this environment was in part engineered by the winners by leveraging their wealth to promote the ideology.

The accelerating income gap between the top and the rest is evidence that there is pathology in the system- not that a small group have suddenly developed super human abilities in the field of wealth creation.

Share this post


Link to post
Share on other sites

I thought that the data was presented in constant 2007 dollars so the increase in income for each quintile is measured in real and not nominal terms.

It probably is.

But you don't actually think the official 'real' inflation figure reflects reality do you?

How is that the most expensive thing we will ever buy, a house, was inflating at 25%-50% a year during the height of the boom and yet the official inflation figure was 2.5%?

How is it that any proper study (Daily Mail rants don't count) into lifestyle and household expenses indicate that the average working household has been getting a lot poorer over the last 35 years?

Pretty simple really, they lie about inflation.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.