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Guest Post: The Key to Understanding "Recession" and "Recovery": The Wealth Pyramid
Submitted by Charles Hugh Smith from Of Two Minds
The Key to Understanding "Recession" and "Recovery": The Wealth Pyramid
The top 20% are prospering and spending money; the bottom 80% are not, but thanks to vast wealth disparity, the top slice of households can keep consumer spending aloft. This provides an illusion of "recovery" that masks the insecurity and decline of the bottom 80%.
There is statistical and anecdotal evidence supporting both a "we never left recession" and "the economy is recovering" interpretation. The key to making sense of the conflicting data is to understand that there are Two Americas.
Roughly speaking, we can divide the U.S. economy into "Wall Street"--the financialized part of the economy which encompasses the FIRE (finance, insurance and real estate) economy and its bloated partner in predation, the Federal government--and "Main Street," the looted, overtaxed remainder of the "real economy" which isn't a Federally supported corporate cartel (i.e. the military-industrial sector, the "healthcare"/sickcare sector, Big Agribusiness, etc.)
Main Street is small business, entrepreneurs, shopkeepers, small property owners (independent motels, vineyards, truck farms, etc.) and local service providers (dentists, accountants, etc.). This class of small business and their employees is in decline: Few Businesses Sprout, With Even Fewer Jobs (WSJ.com)
Needless to say, the Federal/financialized/corporate cartel tranch of the economy is doing very, very well, thank you. The number of Federal employees pulling down $150,000 annually is skyrocketing, hundreds of billions in revenues slosh into National Security and sickcare cartels, and Wall Street bonuses are in the tens of billions.
A thin, overhyped tranch of the tech economy is also doing well--Google employees just got a 10% raise, for example--but this overhyped tranch includes a razor-thin share of the 130 million person U.S. workforce. Google's global workforce is about 23,000, Twitter has a staff of roughly 300 and Facebook employs about 1,500 people.
There are two Americas in terms of wealth and income: In terms of income, the top 10% earn about half the total income, and in wealth, the top 5% own roughly 70% of all financial wealth.
I have prepared a Wealth and Income Pyramid of the U.S. to illustrate this reality. Notice that the "middle class" is mostly a figment of nostalgia and/or political illusion. Only the top quintile (top 20%) are really doing well in terms of income, and only the top 5% are prospering in terms of assets and unearned income (non-wage income).
This goes a long way to explaining how "consumer spending" can be "recovering" even as the incomes of the bottom 80% stagnate or fall. The top 5% of Americans by income are responsible for 37% of all consumer spending-- about the same as the entire bottom 80% by income (39.5%).
David Stockman, director of the Office of Management and Budget under President Reagan, recently noted in an editorial that the top 1% of Americans received two-thirds of the gain in national income from 2002 to 2006.
Over the past 25 years since 1985, the top 1 percent's share of national income has doubled; in 2007, it netted 23 percent of the nation’s total income. The income of the wealthiest Americans--the top 0.1 percent—has tripled in that 25 year period. This wafer-thin slice of Americans now earn as much as the bottom 120 million people.
Out of 113 million households, 1/100 of 1% rake in $10 million or more annually. As consumers, the top 5% carry the same weight as the bottom 80%. The top 10% take in 50% of the income. (The sources are listed in Two Americas: The Gap Between the Top 5% and the Bottom 95% Widens August 18, 2010.)
This explains how Nordstroms' earnings can rise by a healthy 43% while Wal-Mart's sales in the U.S. can decline. Frequent contributor Cheryl A. reported that on a trip to Wilmington, DE, the shopping mall was packed with shoppers and people dining out: "It's like there never was a recession."
Meanwhile, I took an old friend who was visiting the San Francisco Bay Area to a restaurant in San Francisco that has never failed to be busy in the past 10 years, and the place had more empty tables than customers. The sidewalks were crowded with people, but how many were spending money?
I think the answer is obvious: the top 20% are spending money lavishly, as per their consumerist lifestyle, while the bottom 80% are taking the kids to Costco for entertainment.
The top 20% pay the vast majority of the taxes: According to the Congressional Budget Office (CBO), the top 20% paid 86.3% of all Federal income taxes, 43.6% of Social Security, 87.8% of corporate taxes and 34.1% of Federal excise taxes. After including earned-income tax credits, the bottom 60% of households paid less than 1% of all Federal income taxes, and the households between 60% and 80% paid 13%.
But the top quintile's share of national income rose despite th tax burden. In other words, income disparity has widened even though the wealthy pay the bulk of Federal taxes.
The notion that American households are paying down debt is simply unsupported by the facts. According to the Fed Flow of Funds report, consumer credit (credit cards, auto loans, etc.) has declined a paltry 0.7% from $2.59 trillion in 2008 to $2.4 trillion--and most of that was not debt paid off but uncollectible debt written off by banks.
In other words, the households with substantial incomes may not be adding to their debt load but they certainly aren't paying it down much either--they're spending freely in the malls and in "fine dining restaurants" just like they did in 2007.
The top 20% of U.S. households are spending, so "recovery" is in the air. Those with household incomes of $100,000 or more are buying new vehicles (which explains why vehicle sales are rising) and spending freely, while the bottom 80% scrape by.
That's how you get a statistical "recovery" that masks the recessionary misery of the bottom 80%--the "real economy" left to rot as the Federal government channels the national income into politically powerful corporate cartels, Federal fiefdoms and Financial Elites.
For more on the Two Americas, please read:
Entitlements, Taxes, Inequality and Three-Way Class Warfare (September 20, 2010)
The Super-Rich (NYT)
Why We Keep Getting Poorer: High-Cost Housing (February 4, 2010)
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The beauty of America is that anyone can work hard and make it to the top 5%. Only Losers complain about the rich and their spending habits. Jealous Losers.
bout fucking time.....i have stated this over and over for the past year and will continue to do so....it is nice that someone has trotted out the data.....this of course is the basis of demographic gerrymandering - how the elite keep america compartmentalized and controlled....it fits perfectly with the article about how welfare recipients do as well as those making 60,000 usd per year.....
the strategic goal of this depression was to complete the impoverishment of america.....the elite have succeeded....
very good!
Jesus, does anybody remember the 70s? It sucked then, and it's only been smoke and mirrors since then. For Christ's sake, I95 isn't finished yet.
Air traffic control is a fucking joke. Half of the controllers are going to retire in a couple of years. There are like 10 jets on order by the major U.S. airlines. Bus terminals are like fucking demilitarized zones. Wander off at your peril.
Prices have risen at least 10x since the 70s after not having risen considerably since the 30s. Control inflation? That's a hard fucking joke, if you can joke about it at all.
The impoverishment of America was completed 40 years ago. We've stayed alive by cashing in chips from WWI and WWII. I don't think it's gonna last much longer.
Social justice and the ideal of fostering stability in society requires some form of progressive tax rates. Sorry, but that's the way it is. Call it a regrettable necessity, a form of recognition that some folks are just plain old better at making money than others (and once they get it, like the formation of stars from cosmic dust, they just keep getting bigger), but the bottom line is that if you don't use some form of progressive taxation, you end up with an unstable oligarchy/aristocracy. Not to mention, as those star clusterss grow, so does their gravitational pull, distorting reality and fostering things like tax loopholes, special interest legislation, corrupt politicians, and other anomalies that lead to societal instability.
How hard is this?
Ever hear of stamp scrip? It's basically like a tax on income you don't spend. It makes money fly through the economy, sort of like a reverse depression.
It's a beautifully simple idea: Tax income you don't spend, and the poor will pay no taxes. Even if property is not taxed, acquiring property eventually becomes a burden on the rich, so there will be a natural limit to their grasping. Tax property though, and fund society.
Provide price stability and tax-free government securities, and government will always be flush with cash. Black markets will wither and die.
Simply charging the rich with higher tax rates pales in comparison.
Of course, for something like this to be successful, you'd have to be able to track every transaction electronically, but that'll never happen, right?
interesting idea.
kinda goes against the general grain of the average american perspective on wealth management: work hard, keep what you earn, etc....
doesn't mean it's a bad idea, just not very likely. much like a lot of good ideas, e.g. accountability, transparency, honesty, constitutionality, etc.
fiat paper money favors those who get it first and borrow the most. fractional reserve counterfeiting allows bankers to create money out of thin air that others cannot.
small business people, family farms, and little old ladies scrubbing toilets for bread and milk money LOSE EVERY TIME.
THEY NEVER HAD A CHANCE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
It is rather amusing to hear these discussions about distributive justice, at this point in time. With a few exceptions, they take place as though there weren't a line of thinkers from Aristotle to Locke to Marx to Nozick to Rawls who have intricately mapped out the logical space of available positions. Perhaps if those who have put such effort into studying finance and economics had made a little time to study justice also, instead of doing the Pavlovian head nod to the utterances of Donny Deutsch, America and the World wouldn't be so completely FUCKED. Ah well, better late than never, and you gotta start somewhere. Where were we? Ah yes, "Nobody got no right to take my stuff."
* 1,000,000 - thank you.
+++ eb...
not only are most folks not bothering to look, but the ones that control the game are actively burying the wisdom/justice under the layers of american idol and 'lost'
"were friggin' doomed"
(roughly translated) -- mogambo guru
Should be 7% - a little more noticable.
I'm no super sleuth, my brothers and sisters, but I am here to tell you that I am in tune with the predilections of the American Populace, based on my circle of contacts - whom are all very tied in to such trends and matters.
The top 20% are not all doing well - not even close. And they're not confident spenders, right now.
The top 1% or so are doing well. Even here, they are reluctant to spend and more likely to sock away excess cash into savings with the world so FUBAR, and many of these people are in their 60s to 90s, and so yeah, they've seen FUBAR times before, but economically speaking, they've never seen FUBAR on this magnitude, economically speaking. They are preparing for the storm, if you will, and they won't be deterred in this endeavor. Many of these people own businesses of the manufacturing/distribution type, and they are not taking chances, as they're seeing their customers tighten the screws.
The next 5% or so are doing well by relative standards, but they really subjectively feel they're treading water, many in this bracket have a lot of debt to offset whatever income stream they enjoy, and they feel vulnerable to another shit storm. Again, no confidence.
The remaining 14% or so (of the top 20%) feel particularly vulnerable, as many of these people are the worker bees in the industries and areas, such as health care, IT, logistics and such, that are undergoing rapid consolidation and foundational change. They have underwater homes, sickly 401(k)s and they're dipping into their savings if they're keeping up their lifestyles.
The next 20% or so? They're pissed, insecure (rightfully so) in their employment, and getting absolutely hammered by taxation at every level, food/energy/health care/educational inflation, and they are the most likely to be swapping and even downgrading careers and getting hit with not only real, but nominal wage reductions, over the short term. These are the people Obama lost for good, and they're the types that will take their ball home rather than play much longer.
As for the bottom 60%, nothing much has changed for them. They don't pay taxes and never have, and they lower rungs extract way more out of the system than they ever put in. If there was ever a good time to be ignorantly blissful and unproductive in Amerika, it is here and now.
reasonable, TIS. well thought.
the only thing i would add to your discussion is that the bottom 80% are (and have been) intentionally bludgeoned into complacency and/or surrender to this circumstance over the last few decades.
the most effective lesson most parents learn is how to 'pick your battles'. perhaps the bottom 60% is a hint of intelligence and biding of time.
i witness many folks of both wit and means in here at ZH and hear them speak (and act?) of disconnecting (i prefer "disengaging"), and understand that they are neither lazy nor unmotivated in general, but clearly disenfranchised by the system they are *forced* to operate within.
oh, for a parallel universe where we really could live-and-let-live, where accountability and meritocracy reign. not here. not now.
i believe many of those 80% are lazy, but many *more* are tired and have bloody fore-heads, and have decided to quietly stage an economic sit-in revolt, rather than play in this losing game. fight the TSA? to what end? fight health-care? 70% tried and so what?
small business is broken, the market at large is owned and broken, most pensions are broken, as are the nanny state municipalities and their schools. that oft-mocked tea-party movement is the *only* indication to average folks that their neighbors actually give a damn, and has the potential to be a force that might start some motion. any motion.
but even the TeaParty is just an overly sloppy *symptom* of this 'picking of battles'. its membership contains large swaths of diametrically opposed ideologies (e.g. core libertarians and right-wing religious zealots) that agree that something is way-wrong, and are therefore united (for now) in an effort to do something/anything to "stop the madness". then what?
again, my thesis is that few of the folks at this bottom 80% layer are putting heart-and-soul into much anything they're doing, as they know the foundational system won't reward their efforts. not lazy or incapable, but merely resigned - until something happens. something. anything. you know, hope. change.
+ 5 basis points.
Be rich, live poor, and with luck you just might survive and be happy.
I am surprised that so many here can look at this insane level of income inequality, and defend it as "you are entitled to what you earn". This is not about the financial elite being smarter or more productive than the rest of the slobs on Main Street.
It is about the fact that the criminal financial cartels have consolidated an ever-larger percentage of the country's wealth through rampant fraud and outright theft. The Wall Street bonuses and insane hedge-fund profits of the past decade are a sham based on the largest fraud in world history. Not only did they get even richer without the middle class making any gains at all... they actually STOLE the middle class's money. Plain and simple.
A society where wealth is so concentrated among a tiny number of people (most of whom are crooks) is destined to collapse into violence or civil war. Only American stupidity and apathy have kept the violence at bay for this long.
Instead of the top 20% I wish analysts would concentrate on the 1000 wealthiest people. You know, the ones who have hundreds of lobbyists in Washington, teams of tax laywers and meg yachts in the French Riviera.
that sounds like pure populist class-envy, and has an obvious appeal. (and believe me... i'm not in that top *anything* bracket :^)
but if 'they' play by the rules (the rules that they made?), then perhaps it's the rules that need changing, *not* the folks that play them well.
i'm not defending the disparity, it simply seems that taking money from today's rich folk, without changing the rules, will simply make us into thieves and result in a new set of rich folks tomorrow. not very efficient. look to the real problem for the real solution.
cheaters, of course, should simply be publicly hung and their estates liquidated in the form of checks to the local citizenry (no, not the government).
too fucking true, WB7. too fucking true.
The topic of income distribution / redistribution is complicated indeed. If you say the rich pay too much and need tax cuts, you are an out of touch conservative. If you say the rich need to pay more taxes and should pay a higher percentage than everyone else, you are a socialist scumbag. The truth is, there is no easy answer. That said, hard work, innovation and ingenuity should pay off, it is one of the fundamentals that made this country so great. The problem is, the vast majority of the super rich seem to have become rich through fraud, lying, cheating and in many cases having mediocre to slightly above average talent (sports, music, etc) that is hyped by the media to make them millions. As someone pointed out above, the amount of money athletes, celebrities, ceo's, etc.. make now compared to what they made 20-25 years ago is absurd. Really, I consider myself quite fiscally conservative, but I have no problem stating that many of these people truly do not deserve the kind of money that they make. Unfortunately, the amount of money that these people make has actually led them to the delusional belief that they do deserve what they make, what they have and actually think that they offer the world some amazing and rare level of talent, intelligence of business savvy. For example, if I have to ever hear Paris Hilton on television telling the world that she has earned her wealther and she is a succesful business woman, blah, blah, blah....you get the picture, they actually believe this stuff.
The issue is that as the article stated, the rich have become wealthier and wealthier while the middle class (backbone of the country) has been held stagnant. The incredible wealth of the super rich has often (but not always) been built largely on the back of the middle class. Of course, the flip side of this argument is that I know dozens and dozens of middle class and below middle class people who can't get enough of their cable tv, movie viewing, music award shows, sporting events, etc. Too many people who have a difficult time paying their mortgage, but will gladly drop $100 for a ticket to a Yankees game and buy 4 $12 beers, 2 $10 hot dogs and 3 $9 bottles of water while at the game, all to fund grown men being paid millions to play a child's game.
At the end of the day, we are the fools that have allowed much of this to happen, so we share much of the blame. Maybe if everyone could wake up, start focusing on important things in life and stop revolving their world around the rich and famous, we could get back on track. Maybe if everyone refused to pay absurd ticket prices to watch their favorite sports team play in a stadium that was paid for with their own tax money, maybe things will change. Maybe, just maybe everyone will become enlightened and we will finally see the light. Haha, who am I kidding? Not a chance.
Did I forget to mention that Jersey Shore crap? Another fine example of American stupidity and how we share much of the responsibility for the current state of the country.
+++ you need to submit here more often. nice.
(disengage...)
it is important to consider weather wealth has been created, divided, or, in fact, detroyed by the individual who has gained capital resources.
Consider that large corporations are first in line to recklessly borrow newly printed money at the expense of little old ladies scrubbing toilets for milk and bread. This system is only possible because we have debt-based money which is printed out of thin air and counterfeited further through the (fractional reserve) lending process.
In other words, IF WE WISH TO BE REWARDED FOR OUR EFFORTS FOR 'MAKING THINGS' OR PROVIDING A VALUABLE SERVICE, THEN WE MUST FIRST OUTLAW THESE FRAUDULENT ATTACKS ON OUR FREEDOM. THIS WOULD VASTLY REDUCE THE UNFAIR LEVERAGE OF CORPORATIONS IN COMPETITION WITH SMALL BUSINESSES.
For example, it is very easy for someone to come in and buy up family farms when they are doing so with newly printed money. If you combine this with property and estate taxes against the family farmer, you begin to understand how small town america has been destroyed by this system.
A centralized corporate monopoly on our 'legal tender' has always been the biggest issue in America. The Federal Reserve Bank, the extended International Banking Cartel, and their Corporate and Labor cronies are destroying our liberty and ability to rely upon ourselves.
America is the very place that created the Gilded Age with competing regional asset-backed currencies, including gold and silver. In fact, the Bank of Louisiana's 10 dollar note used to be particularly strong. Hence, the name "Dixieland" from the French name for '10', which is 'dix'.
http://en.wikipedia.org/wiki/Dixie
Again, it is important to distinguish whether or not wealth is created through exporting or redistributed through corporate welfare, because there is a big difference.
Following is an excerpt from Bill Bryson's book "At Home" (pages 233 - 235). It highlights the period in America where there was no income tax or other major 'redistribution of wealth', and there was no monopoly centralized (communist) policy for money planning. Ideas and wealth were pouring into America with this more favorable business environment. The "gap" between the wealthiest people and the poorest was, of course, boundless, but the additional wealth creation came in from overseas via massive exporting, and, in addition to the entrepreneurial "rich" creating manufacturing jobs, they threw parties and built homes that created jobs, and they funded universities and hospitals to secure their legacies (as the mega-rich very often do). They also brought art and worldly treasures to our shores that sit in our museums today. Importantly at this time, ambitious immigrant workers were certainly no less "exploited" than anywhere else in the world and, unlike the restrictive class barriers and lack of upward mobility in Europe, new and existing Americans were becoming millionaires by the tens of thousands. This growth was not agrarian via slavery (this ended in 1865) or cotton, but rather industrial via steel and ingenuity and, most importantly, via the power of property rights (including virtually no taxes, i.e. "right to your own wealth") and free markets. This unprecedented growth happened decades before "the roaring 20's" of easy credit, and before the Federal Reserve was ever created.
Bill writes:
http://www.zerohedge.com/forum/how-do-we-arrive-eve-our-collapse-1
I plead guilty to being in the upper 20% of income earners. Actually, as a married couple, my wife and I are in the upper 1%. Neither one of us works for banks, Wall Street, or the Gubbermint. I busted my ass to get where I am at today, obtaining scholarships for my graduate degrees, and then making it pay via patents and trade secrets for my employer. My wife travels over 200k miles every year, going to sh*tholes across the planet where she makes stuck situations unstuck.
We have no kids, by choice. We paid down our debt ten years back, have 7 years left on the mortgage, and live in a nice modest neighborhood where our house price (new) was about 1.5 years worth of our combined pre-tax salary. I won't deny having encountered good fortune, and help from kind people in my life. But all in all, what we have obtained we've worked our butts off for, by having skills others lack, and by applying them successfully. We save more when others haven't, and consumed far less for our income level than is the American norm.
We are high income, but not rich. The various government take upwards of 50% of our income each year. We'd like to retire, but seem to be in a race against The Ben Bernank, the great savings destroyer.
How much is enough? Is there a limit to what the masses will insist on taking from the few? 60%? 70%? 80%? All of it?
Have you ever heard the name John Galt?
ZH once ran an article titled "The American's Guide to Expatriation", which details how to get a divorce (legally) from the United States. It involves renouncing your citizenship. That approach seems to be our only out from under the increasing levels of forced seizure. Seizure that is supported by the "us vs them" attitude being pushed as an agenda in this class warfare. Someone once said "Democracy is four wolves and a sheep, sitting around discussing what's for diner." I'm tired of being the nightly sheep. The Haves vs Have Nots is a simplistic view, one that cops out on the task of assessing the true underlying problems in our society. Go ahead and have your mob rule, but the moment I get within reach of the right net worth value, I'm leaving this country for good. You can tear yourselves apart without my taxes funding the process.
Seriously? You whine about how unjust it is being among the top 1% of earners?
Forced seizure? Have you looked at the history of tax rates in the USA?
Good luck wherever you end up. I'm not looking to expatriate, so I can't offer a suggestion, but just like you, I assume there are TONS of places on Earth where you can live rich, retire young, enjoy a high standard of living in relative security, and pay low taxes.
Break down where your "50%" goes, let's see it.
I smell bandini...
I keep saying this isn't your problem . I believe it is the top 5% of the top 1 % who aren't paying 50% and if they did you would probably be paying much less in taxes and again the largest publically traded corporations in the US haven't paid taxes (while producing record profits .) in over 20 years - . If they did there probably wouldnt be a deficit and you probably wouldnt have to pay income taxes . I haven't done the math it is just a hypothesis .
While I felt bad for the industrialists in Atlas Shrugged (and the middle class caught in the middle of it all), I think alot of people are bamboozled into equating them with business leaders of today.
John Galt created some amazing engine and, when he disappeared, he deprived society of a valuable piece of technology.
What has, say, Carly Fiorina created to move the computer industry forward? What did Rick Wagoner design to put GM at the forefront of automobile technology? What has Lloyd Blankfein done to revolutionize banking?
Nothing.
And what would we lose if those three assholes disappeared tomorrow?
Nothing.
That's the difference between the people that built American industry and the modern overcompensated parasite class.
SWC, you are part of the solution. Do not give up your homeland too quickly. Continue to identify solutions.
http://www.zerohedge.com/forum/how-do-we-arrive-eve-our-collapse-1
Timmay wishes to divert your attention back to your assigned "enemy". Which label have you chosen?: 'democrats' vs. 'republicans', 'christians' vs. 'muslims', 'old' vs. 'young', 'black' vs. 'white', 'gay' vs. 'straight', 'blue collar' vs. 'white collar', 'rich' vs. 'poor', 'bull' vs. 'bear', 'Jets' vs. 'Giants'.
divide. conquer. rinse. repeat.
...but NEVER small vs. big. NEVER EVER competing asset-backed currencies vs. monopoly debt-based paper currency.
http://www.bloomberg.com/news/2010-11-19/geithner-warns-republicans-against-politicizing-the-fed.html
The problem with most people here is they have never worked an honest day in their life for what they measure as their wealth. I'll wager most who are ahead inherited a leg up or more.
I'll bet most have sat on their ass bitching while they bet (invested, whatever) time and again on companies who outsourced, profited on needless war, held monoplies such as telcos and pharma, health insurance. .. or had no problem shorting or celebrating a destructive takeover for short term gain, etc.
Government fails us all when it lets everyone from little old short selling gold grubbers to the banksters, MIC, insurance and oil companies dominate our legal, moral, social and economic compass.
And all the while you absolutely foamed at the mouth over anyone who wanted a decent wage for a days work.... always pointing at the worst examples as an excuse to treat masses in such a manner of contempt... like Ronnie Reagan pointing at folk driving 15 year or more old caddy's as if they were in a getaway car.
Congratulations... you helped the criminals, you ignored your own culpability or downright assistance at the looting of our nations treasure and soul (what little soul we had), and perhaps above all else we all lost rule of law. The greed coup is complete, you won!
I said this last night in the 60k thread.
If a minimum wage earner from the early 70's rose with inflation, todays minimum wage would be over 20.00 per hour (40k per yr.). That's what happened to the working poor and middle. The purchasing power of everyone from the minimum wage to someone earning 60k is a shadow of it's former self. All while the rich folk are richer than any time in history, paying less taxes... and are making it at our demise.
Most of that bottom 85 percent in the pyramid are much more alike than these sorry excuses for libertarians would have you believe. When we all lose another 50 pounds (i'm already there) we will certainly take out a few million of each other needlessly. ZH threads alone are a continuous promise of that..... i just hope this time Versailles has no survivors.
We had everything in the hands of a few. It was called the dark ages. Once the rich can make the laws to keep themselves rich, it is a very stable system. They even come up with something like the Devine Right of Kings, or heredity prist kings, (see Egyptions, Maya etc. Not a system that appeals to everyone that is not heredity prist king material.
The attitude that you exhibit is why Easter Island has no trees, and we now get only one tuna for every 100 hooks deployed, where we used to get 96. The short answer is that if you are truly in business manufacturing and selling consumer goods, then you get considerably richer when taxes are higher and money is put in at the bottem, because the poor actually spend the money and the velocity of money (economic multiplier effect) is higher. You just have more customers. But some would rather be prist kings than build roads, bridges, do research and educate the next generation.
Translation: The non-productive locust-predators are consuming everyone and everything productive. The only solution is to stop feeding them. Do not comply. Let them starve. Convert all paper to real, physical assets like gold and silver, and hide them well.
Simple critical thinking:
1) A person's wealth and a person's income are two different things. Taxation works on income. People rail against the rich (the wealthy), but want to wrest money from people's revenue streams (income). If you really have a hate on for rich people, then institute a frickin wealth tax. Selfishly, that would start to miss me, where your current nut crushing isn't.
2) You do realized that individuals are having heated debate about who pays how much and bears so much pain, while corporations sit quietly on the sidelines, often paying minuscule taxes. Governments as well draw blood without giving. If you have outrage about freeloaders, maybe it is time to look to the bloated needs and teeny contribution from the other two massive players in our economic system. The fact that three groups (Gov, business, lower income private sector) all want to divvy up the pie of the fourth sector (tax paying private citizens and small businesses) can perhaps strike you as somewhat unfair?
3) Any system that is inherently and permanently pro-cyclical blows up over time. If you feel that our monetary/government/social systems are biased so that the rich get richer and the poor get poorer, then do something to alter the systems that are causing the imbalance. Taxation & redistribution doesn't correct imbalances. If anything, it gives a nod of acceptance to the flawed system underneath, as if to say "everything was working just fine up to the point where YOU ended up with too much money, so (yank!) we're taking some of that, and YOU over there, your life just sucks without your benevolent government so (plop) have a freebie on us". We live in a world where 90% of the cost of a box of cereal is due to marketing needs, 80% of the cost of medical care is to support the legal system that parasites off of it, and a banker can lend out $10 dollars at 5% interest for every single $1 on deposit, and the only fix you can think of is "He has, I don't, he therefore must be a cheat and a scumbag so gimmee!".
To paraphrase ancient Star Trek: "Yours is truly a superior intellect."
+1776
exactly. these outcomes are a function of the underlying mechanisms.
For example, in a debt-based monetary system, 'principal' is money. Before, money is placed in circulation amongst us, the private Federal Reserve Gosbank must receive a US Treasury Bond in return for their freshly printed, private Federal Reserve Note. Of course, eventually, the 'principal' of this Treasury Bond, plus 'interest', must be paid back to the private Federal Reserve Gosbank. However, in order to get 'interest', more debt-based 'principal' must be created to pay off the original Treasury Bond.Further, extinguishing all 'principal' with 'interest' will result in extinguishing the money supply. Keep in mind that a secondary money supply exist through the process of fractional reserve counterfeiting which only special individuals called 'bankers' are allowed to do.
my question is:
does anyone else see this as a clear ponzi scheme that will only end in tears when debt is unable to expand exponentially for an infinite amount of time? in summary: buy gold, silver, guns, greenhouses, and seed.what a great read, SWC. tnx.
i don't make the (non-mega)corporations out as being as-big-a-part-of-the-problem as you do, but fully agree that where 'they' (we?) are currently taking the 'blood' right now is most-certainly not very well-thought-out over the long-term. i tend to favor paygo/usage-based systems over what we do right now (e.g. i prefer so-called regressive gas-tax for road use, vs property-tax encumbrances, etc.) because even the corporations can't duck those obligations.
i'm still not sure where i stand on the debate that corporations who 'dodge' taxes are 'bad' when doing so through legitimate incentive investments keep the money flowing in the private sector, vs feeding the government via taxes. i'm honestly not sure the dollar flow would be any better/worse if these incentives were not in place.
another topic that your thoughts trigger, is whether or not the society that lives 'on top of' a resource (mineral, oil, timber, etc.) should share in the proceeds of those resources as a whole. of course the folks who mine and otherwise process those resources should get full compensation for their efforts and management, but shouldn't the folks who 'live' the resources and suffer the disruption/usage of their extraction/distribution see some benefit (direct check ala alaskan oil, or governmental income for services/parks/roads, etc.)? questions occur, such as what proximity unit is the base? private-lot/town/city/state/fed and where do the distribution amounts drops based on proximity? just thoughts...
your third point is friggin spot-on.