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Extreme Inequality Helped Cause Both the Great Depression and the Current Economic Crisis

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Sat, 12/18/2010 - 17:11 | 815843 Peak Everything
Peak Everything's picture

A lot of words for something quite simple:

economic crisis = excess debt

excess debt = wealth transfer from poor to rich

Sat, 12/18/2010 - 14:54 | 815631 kevinearick
kevinearick's picture



"The following chart courtesy of Harry Dent demonstrates the powerful relationship between population and the stock market. As noted earlier, the 48-year-old demographic earns and consumes the most, and therefore drives economic growth. Notice how for this reason the early 90's spike in the Dow (in black) closely tracks births from 48 years prior - when the baby boomers were first born."

What are 48 year olds doing differently this time around(vs Great Depression)? What effect will the the second derivative baby bust have?

Sat, 12/18/2010 - 10:25 | 815322 TexDenim
TexDenim's picture

Most human beings, including Americans,  have a planning horizon that takes them roughly to the next night's six-pack. We are not good at responding to small problems until they become catastrophic problems. That's why there are wars. The next thirty years in the US are not going to be nice.

Sat, 12/18/2010 - 02:37 | 815145 CEOoftheSOFA
CEOoftheSOFA's picture

The initial cause of the Great Depression was due to the Hoover Administration’s refusal to allow the Gold Standard Mechanism to work.  Under this mechanism, the money supply should have been increased in accordance with the amount of gold brought into the US due to the positive balance of trade.  The money supply was instead reduced by one third.  This caused severe currency shortages in Utah and much of the West Coast.  This resulted in extensive bartering and creation of alternate currencies.


The currency problem should have only caused a recession.  The causes of the recession being transformed into a depression can be identified by examining the “accomplishments” of the Hoover and FDR administrations:




  1. Smoot-Hawley Act Increased Tariff to highest tariff levels in US history.
  2. Increased farm subsidies in order to raise farm prices.
  3. Forced wage controls and job sharing.  Pressured companies to raise wages in a deflationary environment, causing corporations’ financials to deteriorate, and worsening downturn. 
  4. Federal share of GNP increased markedly from 1930 – 1931.
  5. Revenue Act of 1932 - Largest peacetime tax increase in history doubled Federal income tax revenue.  Top tax bracket increased from 24% to 63%.  Reduced exemptions.  Abolished earned income credit.  Corporate taxes raised.  Auto tax raised. 
  6. NCC - National Credit Corp - Big banks forced to lend to small banks to avoid foreclosure.
  7. Reconstruction Finance Corp subsidized politically influential businesses.
  8. Federal Home Loan Bank Act was passed to spur new home construction, causing real estate bubble.
  9. Emergency Relief Construction Act authorized excessive funds for public works.
  10. Check Tax charged 2 cents for every check written (30 cents in today's dollars).
  11. Huge budget deficit weakened economy.
  12. Expanded public works construction by $547 million on the theory that government spending would boost the economy. 
  13. Expanded regulation of interstate electric power generation. 
  14. Ordered state governors to increase spending on public works.
  15. Attempted to pass laws making short selling unlawful. 
  16. Former President Coolidge called Hoover policies SOCIALISM.




  1. Devalued dollar by 40% in the first 100 days.
  2. First FDR budget had $10 billion in spending, $3 billion revenue. 
  3. Federal expenditures rose by 83% and debt rose by 73% from 1933 - 1936.
  4. Forced bank holiday for 9 days.  Resulted in 5000 banks failing to reopen, 2000 of which were permanently closed.
  5.  Federal Reserve did not live up to its promise of honoring gold backed bonds. 
  6.  Federal Reserve did not live up to its promise of redeeming paper money for gold. 
  7. Socialist Security Act created legal Ponzi scheme.  Treasury Secretary Morganthau advised FDR against the passage of the Socialist Security Act saying "The program will be broke by 1980.  I cannot put this burden on future Treasury Secretaries."
  8. Works Progress Administration gave jobs based on political patronage.
  9. National Recovery Act (NRA) - Forced companies into cartels in violation of anti-trust laws. Regulated prices.  Raised taxes.  500 codes controlled production.  Frequently interrogated factory workers, forcing them into the street during work hours for interrogation.  NRA headed by Hugh Johnson, who was an admirer of Mussolini.  Industrial production dropped 25% within 6 months of passage.  Poultry retailer Schechter of Brooklyn was charged under NRA and jailed for lowering poultry prices from the mandated 21 cents per pound to 19 cents per pound. Schechter case brought to Supreme Court.  Supreme Court found in favor of Schechter.  NRA declared unconstitutional by Supreme Court. The Supreme Court forced the NRA to drop 500 court cases. 
  10. Agricultural Adjustment Administration (AAA) forced farmers to plow under crops and kill livestock to be buried in mass graves.  Paid farmers not to work.  Initiated new tax on agricultural processors. Only helped large farms.  Caused food prices to go up at a time when many people could not afford enough food.  Outlawed by Supreme Court. 
  11. United States Housing Authority bailed out people from their mortgages. 
  12. Civilian Conservation Corp. created make-work jobs to improve employment data, weakening economy.
  13.  Excessively increased regulatory powers of FTC.
  14. Fair Standards Act created minimum wage increasing unemployment.  Caused 500,000 Blacks to be laid off. 
  15. Moved the control of the money supply from the New York Federal Reserve to the Washington Federal Reserve which increased the political influence of the money supply. 
  16. Retroactively made it illegal to take advantage of legal tax loopholes. 
  17. Nominated known bootlegger, stock swindler and inside trader to lead the Security and Exchange Commission, Joseph Kennedy.  When asked why he had tapped such a crook, FDR replied, "Takes one to catch one".
  18. TVA created government-owned and subsidized utility in violation of Constitution. Forced private utilities out of business.  Wiped out $650 million in market cap of southern utilities. 
  19. Public Utilities Holding Co. Act outlawed public utility holding companies. 
  20. Frazier - Lemke Act limited the ability of banks to reposess property.  Declared unconstitutional by Supreme Court. 
  21. Charged former Treasury Secretary Mellon for taking too many tax deductions.  The trial concluded that Mellon's deductions were all legal and that he didn't take advantage of all the deductions that he was entitled to.  FDR also was found to have taken illegal deductions, but charges were never filed. 
  22. Executive Order 6102 confiscated gold of every citizen and paid them below market price.  Made it illegal for people to own gold.  Found to be unconstitutional by Supreme Court, but Roosevelt ignored order.
  23. Works Progress Administration gave jobs to politically connected.  Forced workers to collect campaign contributions for Democrats. 
  24. In 1936 Federal spending surpassed all state and local spending for the first time, increasing by 50% as a percentage of the GNP. 
  25. National debt increased from 16% of GNP to 32% of GNP.
  26. Initiated 5% tax on dividends.
  27. Wagner Act of 1937. Took labor disputes out of the courts and into the NLRB, whose members were packed with pro labor socialists by FDR in violation of constitutional checks and balances.  The NLRB became prosecutor, judge, and jury in labor disputes. Workers were not allowed the freedom to get rid of a union, once a union was voted in.  Union workers were allowed to shut out non-union workers.  FDR encouraged the unions to commit acts of violence by saying "The refusal of employers to allow workers to organize will lead to strikes and industrial strife".    FDR passed this as retribution for the Supreme Court outlawing the AAA and NRA.  It became unlawful for any company to resist any demand from labor unions.  Labor union membership increased 10-fold in one year.  This resulted in labor unions going on a frenzy of threats, boycotts, strikes, and seizures of plant and widespread violence.  Resulted in reduced productivity and increased unemployment.  Caused "Depression of 1937 - the Depression within a Depression".  
  28. FDR passed an executive order to tax all income over $25,000 at 100%, but was struck down by congress. 
  29. FDR proposed a 99.5% federal Income Tax on all income over $100,000 per year.  Struck down by congress. 
  30. Personal Income tax top rate raised to 91%.
  31. Steel mill capacity dropped from 83% to 35% during 1937.  When this news was released, FDR was on a 9 day fishing trip. 
  32. Undistributed Profits tax of 1937, increased corporate taxes.  This was in response to companies hoarding cash and postponing capital expenditures due to political uncertainty.  According to the Boston Herald: "The Undistributed Profits Tax will deepen the depression by leaving companies unable to save for a downturn forcing them to lay off more workers, and suspend dividends". 
  33. Tried to pack the Supreme Court with 5 additional judges in violation of constitutional checks and balances.  Capital investment declined markedly until this issue was resolved. 
  34. Members of FDR administration published a book entitled "Nine Old Men" which was a smear of the existing members of the Supreme Court, calling them the "Four Horsemen of the Apocalypse".  The book was a smear of four members in an unconstitutional attempt to smear the Court.
  35. Treasury Secretary Morganthau admitted in 1939 that the New Deal was a failure.  A poll in 1939 blamed FDR for prolonging the Depression by a 2:1 margin. 
  36. US became unnecessarily involved in WW2 in Europe in violation of George Washington's warning concerning the avoidance of European alliances.  Should have instead remained neutral and watched Germany and the USSR beat each other into another Dark Age.  Winston Churchill later declared that the war was unnecessary.  The war caused a wartime economic bubble which resulted in inflation spiking at 6% per month. 
  37. Sold war bonds to finance the war so the next administration would have to pay for the war.
  38. Assisted the USSR in the take-over of half of Europe, causing the Cold War which substantially increased Federal defense spending for decades. 
  39. Allowed Hawaii to be attacked by Japan.  Should have increased defenses to a greater degree and should not have given away so many arms to the UK.   War with Japan could have been avoided if the invading Japanese fleet were destroyed before attacking Hawaii.


This list of “accomplishments” makes it appear that we were purposely trying to cause an economic downturn.  There should be no mystery as to the cause of the Great Depression.  Economic stagnation since WWII can be attributed to not repealing enough of the New Deal.  When people attribute the cause of the Depression to things like “the inequality of wealth distribution”, they are really trying to divert your attention from the real cause, which is excessive government intervention.


CEO of the Sofa

Writing from the Kingdom of Saudi Arabia

Fri, 12/17/2010 - 23:30 | 814824 keep the bastar...
keep the bastards honest's picture

Great post thank you GW. And Steve Keen is onto the banks and Economists.

Fri, 12/17/2010 - 23:26 | 814819 BigDuke6
BigDuke6's picture

i prefer to call them the 'predatory class' rather than elite or whatever.

the banksters i've met are dopey but went to the right school.

thats not elite.

Fri, 12/17/2010 - 22:53 | 814748 essence
essence's picture

First off ... THANK YOU George Washington blogger for your tireless efforts.
You rival your namesake in being a true patriot.

Sad to think that you (or I) have ended up on some HomeLand Security/CIA/Government GOON squad 'trouble maker list' (via them FORCING ISPs) to dump their traffic to Government Computers (i.e. paid for from OUR very tax money.
That's right folks, ... YOUR very tax money is been used to monitor and 'profile'
your actions & words ...... as you simply exercise 1st amendent rights.

And that's the cruz of the matter, no one has 'rights' unless they strive
to maintain & defend them.

As I read your article... the most pithy thing was your stating that the
government has been bought off.

Politicians (& regulators & judges) bought by the ultra rich is the crux
of the matter as far as I can tell. And the military (excepting times of draft)
and intelligence agencies ...have just about always been along the lines
of 'hired thugs' ... so their allegiance is straightforward to procure.

All sorts of bloggers and commenters and (even Ron Paul) get up and
expound on the troubles at hand.... and yet, far as I can tell, it stems from
the government having been bought off.

Obviouly it would seem that the first step to taking back the US would be
divorcing politicians from 'campaign contributions'. Alas, things might
be too far gone for that. It could very well be that only a severe,
systemic meltdown has the necessary force to break the
grip of the entrenched bankster interests.

Like it or not, it appears that scenario is close at hand.



Fri, 12/17/2010 - 22:50 | 814742 onlooker
onlooker's picture

What we have in our USA today is a perfect storm of left and right power structures ideology teaming up to sack the entire economy.



The traditional concept of the Left is that the general population is of an intelligence and educational level that the upper levels of the Left need to make the real decisions. Be it a Labor Union, State, or Federal Government, the Left thinks the masses need decisions made for them.


The traditional concept of the Right is that Americans don’t need restrictions but need the conditions of the Wild West to Rock and Roll and make American Great.


The Problem with human societies through history is that the smartest, most ruthless, and strongest Always rise to the top. Top usually is defined by money and power over the rest of the population or other countries populations.


The smartest always make more money be they left or right. The dumber usually make less money be they left or right. Those with more money focus on gaining more which is where power comes in handy. The lessors turn to others such as government to assist with their needs.


Henry Ford was and is an American Icon for the concepts of design and production that hired thousands of workers to make living wages. Henry Ford was a son of a bitch with thugs beating and shooting strikers of the Union intent. The coal companies and rail roads played in the same theater.


I will not argue the entitlement problems. But, the manufacturing loss leading to the job loss for the USA does need to be argued. The current TV news that the US economy is driven by the consumer need to be hanged.


The traditional concept of Industry is to make a profit for the owners. The concepts of positive government change is detered with elections creating a bi-polar switch back and forth----- making the needed long range plans and objectives difficult. This is where China has an advantage. This is where the USA failed.


There is no choice in our Nation but to force Business, and in this case the Financial Industry is the dam that holds the waters of the economy for quenching the thirst of business and consumers. The Government appears to doing everything it can to assist in this draught.


There is a political solution. This may have to be leveraged forward by voting activity, street activity, and joined forces with existing change groups such as the Tea party (or an alternative) to get them grounded and educated into the ugly and unlawful destruction of America.

Sat, 12/18/2010 - 00:43 | 814960 SofaPapa
SofaPapa's picture

"The traditional concept of the Left is that the general population is of an intelligence and educational level that the upper levels of the Left need to make the real decisions. Be it a Labor Union, State, or Federal Government, the Left thinks the masses need decisions made for them."


It's funny how these things work.  I was in a conversation just tonight with a posterchild for this comment.  He is intelligent and completely aware of the fact that he is working in the interests of a left wing imperial system.  What I found so alarming in the conversation was his (and by extension those who share this mindset) complete inability to acknowledge that there are forces in the world greater than a group of five smart guys in a room can solve.  His quote of the night was: "Actually, I think there's too much power being kept out of the hands of the two current parties.  We need to strengthen the authority at the center so as to have the ability to address the problems we face more directly."  I've never met someone from the Left who was so explicitly aware of their position as is this guy.  He openly espouses the concept of a benign one-world imperial government.  When someone knows that that is the endpoint of their ideology, it is meaningless to argue with them.  It is simple raw disagreement about the forces that lead to a successful society.  It's ironic to think that the French aristocracy under Louis XVI would have basically agreed to the premises upon which this guy was basing his arguments.  The Left and the Right often have more in common with each other than either do with the center...  and not surprisingly, this guy is practically a worshipper of Obama.  Like I said, a posterchild.  I guess people like this are not the myth that I thought they were.

Fri, 12/17/2010 - 23:42 | 814854 weinerdog43
weinerdog43's picture

I'm afraid I can refute your argument with 2 words...Paris Hilton. or Justin Bieber. or Dan Rather. or Rush Limbaugh.


I daresay that they all make more than most of the folks on this board put together, and they are '...the smartest among us...'??  No way.  China has slave labor.  I'm frankly not interested whatsoever in going that direction.

Fri, 12/17/2010 - 22:31 | 814711 gwar5
gwar5's picture

The results are skewed by the banksters. Channeling Ezra Klein is not the answer. Channeling Marxism is not the answer.

Channeling freer markets is the answer. When I go to the local grocers or hardware store that seems, to me, to be a freer market.

If the government controls 50% of the American economy, and the financial industry controls 30% of the economy, that only leaves 20% for the rest of us that wish to remain free.

BTW, the financial industry also controls the media, which includes Ezra Klein. He's a punk who is bought and paid for.



Fri, 12/17/2010 - 22:17 | 814681 Future Jim
Future Jim's picture

To be more effective at converting others, try not quoting laughable "experts" like Reich, Krugman, and Buffet.

To be more effective at converting others, your cause and effect analysis must include  the rise of China.

Fri, 12/17/2010 - 22:51 | 814744 weinerdog43
weinerdog43's picture

I'll take those 3 over your buddies, Stalin, Hitler and Mussolini. 


Fascists suck. 

Sat, 12/18/2010 - 02:02 | 815080 Future Jim
Future Jim's picture

Is this what you want then?

Economic initiatives cannot be left to the arbitrary decisions of private, individual interests. Open competition, if not wisely directed and restricted, actually destroys wealth instead of creating it.… The proper function of the State … is that of supervising, regulating and arbitrating the relationships of capital and labor, employers and employees, individuals and associations, private interests and national interests.… Private wealth belongs not only to the individual, but, in a symbolic sense, to the State as well.

Fri, 12/17/2010 - 22:16 | 814680 Troy Ounce
Troy Ounce's picture

George, according to merocratic principles, you CHOOSE to be be poor, stupid or ignorant, or rich for that matter , so what is he problem now the US is THE meritocratic society.

Fri, 12/17/2010 - 21:59 | 814647 rocker
rocker's picture

Thanks for this post. I do not have posting approval for charts. I would have posted it long ago.

The sad reality for the US is that with the lack of purchasing power or should I say a slice of the Cherry Pie American companies have no demand for their products. The elite do not want you to even have a cherry out of the pie.

The elite would rather have the FED print more money to pay their taxes which imports consumers who have a more valuable fiat currency.  Until fixed and the rich are taxed properly, it will only get worse.  We are as powerful as Rome.   Was.

Fri, 12/17/2010 - 21:47 | 814627 CEOoftheSOFA
CEOoftheSOFA's picture

Casual correlation does not equal causation.  It's true that there is inequality. but that in itself does not cause an economic downturn, it's a result of the economic downturn.  The problem is that the middle class isn't keeping up because we closed 43,000 factories in the last 10 years. 

Citing Krugman, Galbraith and Reich is flawed to begin with.  The three of them are idiots.  I also don't see a reason to quote Buffett.  He isn't a capitalist, he's a crony capitalist, aka facist.  He pushed the federal government for bailouts that went to his companies. 

Fri, 12/17/2010 - 21:42 | 814610 Catullus
Catullus's picture

I'd more offer the causality around concentration of wealth under the current system centers around the proximity to the money creation scheme.  Those that are closest to the Federal Reserve money creation mechanism are capable of creating money before the rest of the market becomes cognizant of the money printing.  So those closest to the Fed are consuming at price levels assuming yesterday's money supply.  It's as if everything is on sale. By the time the money flows to the average person, the prices have already risen.  Trickle down is trickle on.

Fri, 12/17/2010 - 21:29 | 814572 Mercury
Mercury's picture

But I believe there may be a fourth causal connection between inequality and crashes. Specifically, when enough wealth gets concentrated in a few hands, it becomes easy for the wealthiest to buy off the politicians, to repeal regulations, and to directly or indirectly bribe regulators to look the other way when banks were speculating with depositors money, selling Ponzi schemes or doing other shady things which end up undermining the financial system and the economy.

And after you cap personal wealth the tort bar, teachers unions, the SEIU and any number of corporate interest groups will still be able engage in the same behavior. 

If the problem is corrupt and corrupt-able politicians the solution is to make things more unpleasant for corrupt an corrupt-able politicians or to take away some of their power so that they can't do as much damage.

Besides, more confiscated income and wealth just means more income and wealth for the government which, traditionally, is not among the top entities I think of when the subject of great allocators of capital comes up .

Sat, 12/18/2010 - 01:56 | 815075 ArmchairRevolut...
ArmchairRevolutionary's picture

Only a tool can be sold the idea that teachers unions are our problem.

Sat, 12/18/2010 - 14:53 | 815603 Mercury
Mercury's picture

 Only a fool would be content with the state of American public education or fail to realize who the biggest player is in this institution which keeps delivering crappier results and getting more expensive at the same time.

Teachers unions are but one division of the vast army of public sector employees which, in aggregate, very much are the problem. Teachers unions may not be the worst offenders in terms of under-providing value for taxpayers but it should be obvious at this point that the priority of American public schools is to serve as a jobs program for adults

Fri, 12/17/2010 - 21:05 | 814515 midtowng
midtowng's picture

Great post. Wealth inequality kills democracy. There will be those who find a reason why we should ignore it, but those people also want to ignore the loss of our democracy as well.

Fri, 12/17/2010 - 21:03 | 814507 minus dog
minus dog's picture

Can't say I really buy the premise of this.  

The current distribution of wealth is mostly one of the many symptoms of our many problems, rather than the cause of them.  

And our giant, corrupt, mutant octopus of a government is pretty far up there on the list of those problems - corruption feeds the inequality, which in turn means a large pile of wealth for the wealthy to fuel the corruption.  It's self-reinforcing; you can easily follow this crap all the way back to the machine politics of the 19th century.

To "fix" the inequality, you'd have to give the government more power when they've already shown that they'll simply use it to make the problem worse.

The distribution of wealth is half of the equation that drives government corruption and idiocy, but they're not a problem unless we let them be one.  They require this giant Kafkaesque government in order to exert direct influence on us.  I don't give a flying fuck how rich the wealthy are, as long as the government stays the fuck out of my way.  

Sat, 12/18/2010 - 01:45 | 815056 ArmchairRevolut...
ArmchairRevolutionary's picture

To "fix" the inequality, you'd have to give the government more power when they've already shown that they'll simply use it to make the problem worse.

This is the real problem.  There appears to be no mechanism to resolve the problems we face.  If there is no mechanism, then war becomes the only mechanism.  I am starting to believe that war really is quite possible.

Sat, 12/18/2010 - 02:13 | 815100 trav7777
trav7777's picture

did you guys read that chart?

Because right there it shows a leveling of income equality post-1930!

So, we really need the type of government that existed then.

Regulations are essential...but not "more" regulations, the right regulations.  We had some of those.  We need them back

Fri, 12/17/2010 - 20:51 | 814460 rogersails
rogersails's picture

     The analysis should be done comparing the wealth of the financial sector to the overall economy. I'll bet it shows the same skew as the "top 1%".

      When the parasite grows to large, the host dies.

Sat, 12/18/2010 - 16:17 | 815387 rogersails
rogersails's picture

Thanks for reminding me of the article on Bank Profits. I think there's a bigger picture, though, which needs to include such things as :

The army of "Mortgage Brokers" and financial advisors feeding the banks

Real estate, title insurance, appraisal, mortgage insurance and inspection companies collecting their shekles with each flip.

Tax preparers (a defacto necessity), lawyers setting up trusts (for those who can afford it) 

Lobbying by said industries 

They are all part of the ponzi that got us here, and the economic "Overhead" that has become a huge GDP component (and political master), but is strangling us.

Fri, 12/17/2010 - 20:31 | 814394 Future Jim
Future Jim's picture

The cause of measles is cleary and obviously the dots on one's face. I mean .. they both happened at the SAME TIME. What else could it be?

Fri, 12/17/2010 - 20:26 | 814379 Future Jim
Future Jim's picture

So ... the solution is to create a giant government that has the power to redistribute wealth and ... well ... to just make everything right.

And there's no way that wealthy people would be able to corrupt that government to make themselves more wealthy through force and fraud that they could never have perpetrated without the legitimacy and obscurity of government. Oh wait ... You don't think ... maybe that's what already been happening?

Fri, 12/17/2010 - 20:19 | 814362 Miramanee
Miramanee's picture

The sham of so-called free marketism and the coming of the 100 million Americans on food stamps:


Fri, 12/17/2010 - 20:03 | 814320 Mark Noonan
Mark Noonan's picture

Great inequalities of wealth are the result of a corrupt, unjust political class - and, so, even if one wants to hold that inquality causes economic problems, the reality is that the corruption in politics is still the ultimate problem.  If all you wish to do to correct the problem is seek a more equitable distribution of wealth, you'll be missing the target.  And, not only that, you'll also get is hideously wrong because you'll be trying to use the corrupt political system to distribute wealth equally.  Essentially, all we've done since the 1930's is try to spread wealth around more equally - the current mess is the result of that.  Seek ye first a just political system and a strong economy with equitable income distribution will be added unto you.

Keep in mind where we came from - the late 19th century saw the rise of the gigantic corporations which corrupted the political class. Once that economic model screwed up, the gigantic corporations went in to partnership with gigantic government in an attempt to both keep the gigantic corporations in being while also placating the people.  What needs to be done is to return to a time of smaller government and smaller corporations - we Catholics call this "subsidiarity" and it is the cure for what ails us...but to fool around with complaints about rich people without address the whole scheme of what is wrong is a waste of time.

Sat, 12/18/2010 - 01:40 | 815048 ArmchairRevolut...
ArmchairRevolutionary's picture

Great inequalities of wealth can be explained by simple mathematics.  Quite simply, if you are of the wealthiest class and you earn a return that far exceeds  your cost of living, your wealth will grow at a rate that exceeds others. Ultimately it will result in extreme stratification. 1+ i to the nth power explains it.

This does not mean that the wealthy are not corrupt. Indeed, I think they are very corrupt as they spread the rumor that if capitalism were just on an "fair" playing field that this stratification would not occur. They keep pushing platitudes instead of telling people to just learn basic math.

Fri, 12/17/2010 - 22:44 | 814732 GreenSideUp
GreenSideUp's picture

Well said.

I have to wonder too, how many of our perpetual problems would have been solved long ago if CONgress was not totally beholden to Big Oil, Ag, Pharma, Health, Insurance, and so on, and had not regulated the free right out of the market.  

Fri, 12/17/2010 - 20:35 | 814406 Future Jim
Future Jim's picture

Very astute.

Going after the gap directly with government force, not only creates a larger and thus more corrupt government, but it also punishes those who make their wealth honestly, which is just about the worst thing one could do to the economy for everyone.

Sat, 12/18/2010 - 12:50 | 815453 Unlawful Justice
Unlawful Justice's picture

"honesty" is such a subjective word when laws are changes to make the crime legal.  When the few control the many, there is no justice.

Fri, 12/17/2010 - 23:03 | 814770 Mark Noonan
Mark Noonan's picture

So often missed by the statists....angry that, say, a few thousand rich people control so much they "solve" the problem by putting a few hundred bureaucrats in charge, instead.  Rather be a "wage slave" to a bankster than a bureaucrat, any day of the weak...the bankster, at least, can't send me to jail.

Fri, 12/17/2010 - 21:58 | 814645 Bearster
Bearster's picture

Whoever junked Future Jim and the other advocate of free markets prior to him is a coward.  State your position coherently (if you can).

The problem is not "inequality".  Some people produce much more than others--to the benefit of everyone.

The problem is that the government has become the biggest criminal gang, violating regularly people's individual rights, especially property.  There *IS NO* "equitable" way to loot some people by armed robbery and then somehow dole it out to those who didn't earn it.  "Need" is not a legitimate claim, much less a blank check drawn on anyone who isn't "needy".

The more "government and business work together" (isn't this what both parties have been clamoring for in the last few decades?) the more injustice and iniquity there is.  Doesn't anyone ask if government is working with business--who are they working against?  This is particularly important since the nature of government is force.  A company can do anything--except take out a gun and loot you or force you into prison.  This is the unique power of government.  People should be terrified that it would be used to advance the business interests of one company against the business interests of their competitors, their suppliers, and their customers.  Instead they either cheer it on, or turn away in apathy.

And what scares me is that the only proposed "solution" is more of the same.  More regulation, more taxation, more government redistribution, more controls.


Sat, 12/18/2010 - 12:48 | 815448 Doomer_Marx
Doomer_Marx's picture

This crisis has made me concerned with giving too much power to any large group, that it will always cause corruption. On the other hand, what we have now does seem to be the natural consequence of lazzaire-faire - without regulations, power and money will be concentrated by corrupt players.

What is the solution that causes decentralization of power but has enough control to stop corruption? The free market won't do it by itself because of the nature of people, the greedy will always find a way to game the system unless you do something to stop them and the market itself will only reward them. I honestly don't know - does anybody?

Sat, 12/18/2010 - 02:09 | 815094 trav7777
trav7777's picture

This is ALWAYS the retort to the obvious inequality, relying on the specious assertion that we will be "robbing" people who "earned it."

Look, when your basic premises are wrong, how the hell can you expect to get anything that follows therefrom?

Obviously, the government has assisted in the robbery; the solution is *not* this phony "deregulation" that everyone insists is a panacea

Sat, 12/18/2010 - 00:30 | 814932 Bring the Gold
Bring the Gold's picture

A company can do anything--except take out a gun and loot you or force you into prison. 

That's ridiculous. Xe could very easily pull out guns, loot you and throw you into a private prison. There is nothing about either the private or the public sector that prevents one or the other from raping, murdering and pillaging. It's the social contract and the rule of law that prevents both government AND the private individual from harming others.

There is nothing magical about either private or public status that makes an entity evil or good. Having a sane society with rule of law is the answer. A purely corporate world scares me every bit as much as a pure totalitarian central command economy. You need both aspects private and public, but only with a sane society, an intact social contract and rule of law.

Fri, 12/17/2010 - 23:12 | 814791 Mark Noonan
Mark Noonan's picture

Yep - "government and business, working together" is always ominous.

Fri, 12/17/2010 - 22:46 | 814736 weinerdog43
weinerdog43's picture

Good grief.  Are you seriously arguing we should not have laws?  Why not just let murderers and rapists run free and let the public settle it out in the streets? 


I've got news.  Your nirvana is Somalia.  I suggest you get your ass there post haste. 

Fri, 12/17/2010 - 22:30 | 814708 Future Jim
Future Jim's picture

"need is not a legitimate claim"

I recently learned that a few people think that, assuming a fair election, 51% should be able to take all of the wealth from the other 49%. So, I added a poll with this question on my site: http://www.endofinnocence.com.

Fri, 12/17/2010 - 20:25 | 814377 suteibu
suteibu's picture

Exactly.  Free market capitalism is a fair opportunity for all.  When the politicians go to bed with any part of the market it ceases to be free.  Those who look to the goverment to solve a problem that it created are the worse kind of fool and a useful idiot to boot.

Fri, 12/17/2010 - 23:00 | 814763 Mark Noonan
Mark Noonan's picture

My only quibble here is that I'd ditch the word "capitialism" - just too infused in the public mind with super-rich people.  I like to emphasize "free market".  I go with Chesterton on this - the problem with capitalism isn't too many capitalists, but too few - we want more and more people engaged in a truly free market - that, in and of itself, will ensure a more equitible distribution of wealth...though, even there, I have a word I dislike "distribute", as if wealth is something doled out...it is created, of course, and so the real economic problem is to figure out a means of making wealth creation possible for ever larger numbers of people.

And so - more private property, less government property; more ability for anyone who wants to earn his keep by the sweat of his brow (in farming, manufacturing or mining, eg) to do so without the tax man or the regulator getting in his way. 

Fri, 12/17/2010 - 22:40 | 814725 stoverny
stoverny's picture

Most of the inequality came from a financial industry that earned its md-boggling wealth through fraud and outright theft. The greed was so all-consuming and so insatiable that in the end it nearly drove the entire world to the point of collapse.

This coincidentally coincided with the elimination of government regulations. Maybe a little more govt, not less, would have saved s lot of innocent people a lot of misery.

Sun, 12/19/2010 - 12:46 | 816923 psychobilly
psychobilly's picture

Because as we all know, bad, insatiably greedy, power-hungry men magically transform into selfless champions of the public good when they go to work for the government.



Fri, 12/17/2010 - 19:59 | 814311 blindman
blindman's picture

thanks george

Fri, 12/17/2010 - 19:29 | 814238 YHC-FTSE
YHC-FTSE's picture

Thanks George, it looks like I may have found my doppelgänger.

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