patrick.net

JohnLaw, I like your analysis to the point I read it to my hubby. I think you are right on money! Now, we have to get our guns and buy dry food and kerosene or get dual citizenship because we don't know what is going to happen.

marcus says

Does Peter P stand for Peter Plutocrat ?

I thought it stood for Peter Pithy, the master of the pithy oneliners. But Peter Plutocrat is pretty good, too. Peter is sort of the Yogi Berra of the right wing. What he says is amusing but does not necessarily make any sense.

marcus says

Peter P says

Medicare is just something for the special interests.

I hope if dogs ever take over the world and they choose a king, they don't just go by size because I bet there are some Chihuahuas with some good ideas.

Jack Handy

LOL. Jack Handy is the perfect antidote to Peter-isms. Briliiant idea.

Peter P says

No one needs to be in the working class.

Riiight. Everybody can be landlords or go to work for a hedge fund.

Just show up with an MBA and you'll get a big slice of the pie. You'll have your ed debt paid in no time and pay off your house in two years.

Nobody necessary to take out the trash, fill in the potholes, serve coffee, etc. etc. etc.

If everybody was a multi-millionaire, why would anybody get up at 3AM to dump banana peels, used tampons, etc. into the back of a dump truck?

JohnLaw says

The FIRE sector is largely responsible for wealth inequality. If you took the salaries and bonuses of NYC banksters, hedge fund managers, speculators and all the other parasitic paper pushing, gambling professions out of the equation then you would find it much less skewed. Having said that, the only thing that allowed this sector to flourish is the US Federal Government vis a vie loan guarantees for mortgages and student loans, regulatory capture, allowing the currency to be managed by a the banking cartel, legal tender laws and a currency that is not backed by gold and silver (which is a violation of the Constitution).
[...]

That about sums it up - great post. You can pretty much gauge how bad things are for any country/society by looking at banksters (and a large part of the rest of the financial sector who produce nothing) and politicians salaries and their golden parachutes. The more money allocated to them and the bigger their sector is relatively to others, the more the rest of the society have to suffer. We have passed the healthy size for the government and banking cabal sector long, long ago.

GraooGra says

you can torture any data any way you want.

data, who needs it!

GraooGra says

Fortunes were made and the bubble popped. End of story.

"Fortunes were made". From the Mines of Zanzibar?

Where do you think all the great incomes of the 1% are coming from???

http://taxfoundation.org/article/summary-latest-federal-individual-income-tax-data-0

shows the top 5% are collecting 33% of the national income.

One out of twenty households taking one out of three of the dollars.

Plus on top of that we have skyrocketing corporate profits. Here's profits (blue) vs. wages (red) as a % GDP:

http://research.stlouisfed.org/fred2/graph/?g=dE5

"fortunes were made" indeed. And yes, the 1% would like that to be "End of story.".

But it's not.

mell says

You can pretty much gauge how bad things are for any country/society by looking at banksters (and a large part of the rest of the financial sector who produce nothing)

Missing in JohnLaw's analysis is the understanding that the FIRE sector does not deploy its own assets, but the assets of the 10%.

It is the 10% who own 90% of the financial assets of this country:

http://www2.ucsc.edu/whorulesamerica/power/wealth.html

The "banksters" are largely powered by the 1%, who have 40% of the assets and are the ones looking for returns.

I'd rather pay 3.5% interest to Wells Fargo than pay 10% rent-rises to my %&$@*ing landlord, lemme tell you.

thunderlips11 says

Nobody necessary to take out the trash, fill in the potholes, serve coffee, etc. etc. etc.

The minarchist response to that is "Sucks to be You!".

funny how that message sorta flies in our politics, though when the bullshit "We Care" mask comes off long enough people are finally revolted by it.

Bellingham Bill says

I'd rather pay 3.5% interest to Wells Fargo than pay 10% rent-rises to my %&$@*ing landlord, lemme tell you.

Sure, everybody loves to pay close to zero interest, but if we had a free market, interest rates would be close to 10% where they should be. You don't have to rent if you don't like your landlord raising your rent (I have been renting 12 years in 4 different spots in SF and never had a single rent-increase), you can buy your own house, but you should pay the interest rate that truly reflects the current risk of default, which is much higher than 3.5%. Also, the savings rate would go up in lock-step and I wouldn't mind putting some of my money to work (AKA being lent out in a responsible way) for returns in the area of 5-10%.

Bellingham Bill says

Missing in JohnLaw's analysis is the understanding that the FIRE sector does not deploy its own assets, but the assets of the 10%

I think that it implied within the analysis and don't see what difference it makes.

mell says

I have been renting 12 years in 4 different spots in SF and never had a single rent-increase

bully for you, LOL

meanwhile, here in the real world, rent are up 50% since 2000:

http://research.stlouisfed.org/fred2/graph/?g=dEt

mell says

but you should pay the interest rate that truly reflects the current risk of default, which is much higher than 3.5%

When mortgage is defaulted on the house doesn't vanish in a puff of smoke.

Well, it can:

but such events are rare.

mell says

I think that it implied within the analysis and don't see what difference it makes.

The difference is that FIRE is not some exogenous alien force, they are doing the bidding of the wealthy.

e.g. YOU, Mr "Returns in the Area of 5-10%".

Yes, we all want free money. That's our fucking problem. 5-10% returns have to come from people doing the actual work -- real-life goods & services wealth creation -- in this economy.

And the bigger the top 10% make their pile, the bigger these 5-10% returns have to be.

Soon the pile is going to fall over. Too many chiefs and not enough Indians in this economy.

GraooGra says

Peter, I agree with you but don't use their language. There are no
classes.

I think classes do exist, but only in the minds of individuals.

On the other hand, the us-versus-them mentality is very harmful. Individuals must make the best decisions for themselves.

GraooGra says

Upward mobility is possible in the modern time unless the administration is going to freeze people in their current predicament forever just to get more votes for the future.

Well said!

Bellingham Bill says

Where do you think all the great incomes of the 1% are coming from???

They're getting up at 1AM to collect extra trash, and people are so impressed with the early and reliable pickup they're tipping them $100 a month for every house they stop at.

Bellingham Bill says

The minarchist response to that is "Sucks to be You!".

Word. Or, you drink too much beer or get paid too much even at your laborious, shitty job. This asshole thinks so:

The comments were part of a treatise on what she sees as Australia's decline due to high taxes, high wages and over-regulation. Rinehart said taxes should fall, red tape should be cut, environmental rules relaxed and the minimum wage should be lowered. (It's currently AUS $15.06 an hour or $606 a week, about the same in U.S. dollars*).

http://finance.yahoo.com/news/drink-less-more-billionaire-tells-152654355.html

Naturally, she inherited every penny of her mining companies from her dad and has never swung a pick or operated a backhoe for more than 5 minutes. So she's very qualified to talk about how to become a billionaire. Be an egg or sperm cell of rich people, basically.

*CNBC is Clueless, the minimum wage is almost half that in the US. How does the Australian country function with $15/hr minimum wage? The Republicans would piss themselves if a $15/hr min wage bill came to the floor. And yet, OZ is booming.

John Bailo says

What we have now is a rigged lottery system that perpetuates winners, throwing up the occasional "self made" or lucky guy to keep the plebians in check.

Huh? It is convenient to blame the system. People have stopped trying. Or they have been trying the wrong things.

The root evil is that people allow an external value system to be forced upon them.

The rent-seeking 1-5% don't exist in the minarchist world.

They are the wealth-creators, not wealth-confiscators, LOL.

It's the gummint -- Obama -- keeping people down to win their votes.

What a fucked-up ideological attachment to an inverted reality, a belief system 180 degrees out of phase with what's really gone on here.

Rents up 50% since 2000, corporate profits up $1.3T since 2000:

http://research.stlouisfed.org/fred2/series/CP

trillions ripped out of our economy thanks to our trade deficits with China, Japan, Germany, and oil producers, manufacturing jobs back to 1940s levels:

http://research.stlouisfed.org/fred2/series/MANEMP

the bottom 50% actually losing wealth in 2010 vs 2009.

But it's the "administration" keeping people down.

You people are completely disassociated from any reality at all.

Most of the wealth being created today is at the expense of tomorrow. Some of the largest and most profitable investments in history were occurring via real estate based collateralized debt obligation financial instruments entangled with massively over leveraged derivatives.

If you sell the same thing to one hundred people as an investment and more than one of them shows up and asks for physical delivery, you're screwed. It seemed fool proof to chop the real estate into bits that can't actually be collected upon! I'm sorry middle eastern investor, you can't collect the collateral on this defaulted loan, because 99 other people own it with you.

Ah, but what happened when the tide turned in a major way? The super rich called Bernanke and he in turn called congress into secret sessions with a dire warning. "Some of the world's richest people and organizations have been making gigantic gambles and the majority are about to lose everything. We need the little guy American taxpayer to go into debt another 800 Billion dollars by next Wednesday or the financial world is going to come to an end!"

Why? Because the rich can abuse the little guy when their bets go sour.

That's stealing. That is getting and keeping your money at the expense of poorer people - usually future workers. The poor who do nothing and vote for endless subsidies are no different. "Everyone in favor of someone else paying for dinner, say Aye. The aye's have it. Surprise surprise. We love democracy!

Get rid of fiat currency, force the big investors to actually cover their bets with baskets of real commodities, and I won't be as critical of them.

The bill gets passed down and down to the working taxpayer. The treasury issues a trillion in new debt, the Federal Reserve buys up the bad investments from the super rich bet losers, the banks end up with their asses covered by the new worker funded credit line and Joe American Hardworker still has his graveyard shift to cover. What Joe doesn't know, however, is that his children just took out a massive loan to cover some super rich asses.

Everything holding stable for the moment, but eventually you have Bastille Day.

Talk about drive and determination! Joe and his buddies building a guillotine in the city square instead of a new parking garage. I highly recommend not insulting Joe's intelligence. Certainly when you discover he out scored you on his SAT's.

thunderlips11 says

If everybody was a multi-millionaire, why would anybody get up at 3AM to dump banana peels, used tampons, etc. into the back of a dump truck?

Because someone will always happen to do those things.

Peter P says

The root evil is that people allow an external value system to be forced upon them.

The root evil is the acceptance of evil.

You realize you never make any fucking sense, right?

deepcgi says

Everything holding stable for the moment, but eventually you have Bastille Day.

I usually have Country French for dinner on Bastille Day, even though I prefer Provençal food.

Bellingham Bill says

And going into debt at a $500-$800B/yr rate to the rest of the world is also consuming now at the expense of tomorrow, unless we stiff our creditors down the road, which most debtors eventually are forced into doing.

With that debt level the creditor is at best a dominatrix. We can say the safeword at any time.

Bellingham Bill says

The root evil is the acceptance of evil.

There is no evil except the self-limiting thought in people's heads.

GraooGra says

This is incorrect right there. You are implying that the rich are making their money on the backs of the rest of the people. You are implying that they gouge them, steal from them. That's Marxism my friend.

What Bill doesn't understand is that if a family is struggling say with two wage earners busting their butts every day for survival level (barely) pay,... that doesn't benefit the rich. They aren't contributing anything productive to society the way that capital can. In fact these people are takers. If the guy or his wife is out of work for even a short time, they will be sucking at the govt tit with food stamps or unemployment, just taking again from the truly productive people who have money working for them.

What are you going to do with these people who can't even take care of themselves? If they had any gumption, intelligence, or motivation they should be millionaires by now, and they only have themselves to blame if they aren't. Anyone who doesn't realize how easy it is to move up in to prosperity in this country just isn't paying attention.

And for those who can't cut it, hey, deal with it, this is what we like to call social Darwinism.

So what if middle class incomes haven't gone up at all in the last few decades, and incomes for the 5% have more than doubled? That's just a testament to the power of capital and wealth. We all know that investment in equities, real estate, and emerging economies is what drives employment in this country. Without these job creators, we are in big trouble.

GraooGra says

There is no social struggle right now. Upward mobility is possible in the modern time unless the administration is going to freeze people in their current predicament forever just to get more votes for the future.

Yes, that corrupt monster Obama is only thinking of ways he can hurt the economy, by taking from the job creators and holding the middle class down so that they will continue to be takers that vote for democrats. Evil evil democrats !

Our only hope is that republicans can figure out how to increase the income and wealth gap even more, so that the job creators can help more people pull themselves up to the top 5%.

Bellingham Bill says

Where do you think all the great incomes of the 1% are coming from???

Contract between willing parties.
I agree that government shouldn't bail out the Wall Street. Let too big to fail fail. Let the market correct it. We would be already over the crisis by now.

Bellingham Bill says

Plus on top of that we have skyrocketing corporate profits. Here's profits (blue) vs. wages (red) as a % GDP:

Profit is not greed or maybe 'greed is good'. If markets are normal there are competing players and prices are equalized so the profit is right. When market is not in balance then there is 1% and 99%. Who makes imbalance?

Peter P says

There is no evil except the self-limiting thought in people's heads.

If you must choose between two evils, pick the one you've never tried before

.
.
.

A conclusion is the place where you got tired of thinking.

Steven Wright

Peter P says

deepcgi says

Everything holding stable for the moment, but eventually you have Bastille Day.

I usually have Country French for dinner on Bastille Day, even though I prefer Provençal food.

My family tradition on Bastille day begins with a hearty breakfast of brains and eggs, followed by a day trip to the local memorial park where we walk around and laugh at the gravestones of the richest people in the cemetery.

GraooGra says

If markets are normal there are competing players and prices are equalized so the profit is right.

this is free marketeer theology with a tenuous relation to reality.

Profits from mere ownership of natural wealth -- resource rents -- are never "right". We just allow it because we are stupid.

How can one "compete" in the land market anyway? Land cannot be manufactured and it cannot be imported. It is where it is.

Housing can be constructed but each construction actually lessens the value of neighboring lots, which is why increasing density is subject to NIMBYist restrictions (everyone wants to be the last to build in a particular area).

In Soviet America, it is the top 5% skimming ~30% of the economy for their own benefit:

http://taxfoundation.org/article/summary-latest-federal-income-tax-data-2012#table1

In Soviet Russia, it was party insiders skimming ~30% of the economy for their own benefit:

Membership in the party ultimately became a privilege, with a small subset of the general population of Party becoming an elite class or nomenklatura in Soviet society. Nomenklatura enjoyed many perquisites denied to the average Soviet citizen. Among those perks were shopping at well-stocked stores, access to foreign merchandise, preference in obtaining housing, access to dachas and holiday resorts, being allowed to travel abroad, sending their children to prestigious universities, and obtaining prestigious jobs (as well as party membership itself) for their children. It became virtually impossible to join the Soviet ruling and managing elite without being a member of the Communist Party.

http://en.wikipedia.org/wiki/Communist_Party_of_the_Soviet_Union#Membership

Well aside from the foreign merchandise thing, we're looking pretty Soviet these days!

When market is not in balance then there is 1% and 99%. Who makes imbalance?

THE MARKET CAN MAKE THE IMBALANCE.

Markets are not perfect wealth-distributing machines. If you believe this your understanding of reality is completely defective, and for that matter your understanding of history ca. 1800-now is utterly lacking.

To fix things, we have to fix the leaks in the 99% economy, where the 1% are siphoning wealth out of the 99% via their many rent-taps, in land, health care, energy extraction, and other high-rent "necessity" areas of the economy.

For people who want to know why profits are at record highs, there is an explanation. The economy is in the tank with high unemployment. This naturally puts pressure on wages. Most of the jobs lost in the '08 and '09 crash are slow to come back, many of them will never come back. Businesses are not in a hurry to hire and invest in new production capacity because they know that the only thing stimulating the economy is artificial government backed debt stimulus. Therefore they know that it is unsustainable. Furthermore, government has put further cost burdens on private business through new healthcare requirements. So why would any responsible business executive hire more people and ramp up production under these circumstances?

So don't worry; these "evil" profits, which happen to be putting food on the tables of millions of retirees through their pension plans, are paying for things like dividends and stock buy backs instead of new production. But don't worry about those horrible, horrible profits. They will disappear once the stimulus ends. Then the evil capitalists won't have any profits to give back to those undeserving retirees, pensioners and savers ... and all will be well in the minds of progressives everywhere.

GraooGra says

Contract between willing parties.

LOL, the 1% figured out a long time ago how to avoid that unpleasant loss of their power position.

It took the Black Death killing off half the population to make labor valuable again and an equal bidder in these "contracts between willing parties".

Or perhaps some people lack the will to power.

JohnLaw says

So don't worry, these "evil" profits, which just so happen to be putting food on the tables of millions of retirees through their pension plans

This is particularly odious bullshit, wheeling out grannie in front of the 1% who've enslaved the population.

While I agree the baby boom pensions have to be paid out of the surplus we all make, we can tax the 1% to pay for a helluva lot.

If the top 5% paid a 40% tax burden instead of 20%, we'd have another $550B to go around.

If corporations faced double their current tax burden, we'd have another $350B.

Together that's $900B, which would close the deficit completely if we could get our overall economy back on track and more people back to work.

marcus says

Yes, that corrupt monster Obama is only thinking of ways he can hurt the economy, by taking from the job creators and holding the middle class down so that they will continue to be takers that vote for democrats. Evil evil democrats !
Our only hope is that republicans can figure out how to increase the income and wealth gap even more, so that the job creators can help more people pull themselves up to the top 5%.

Oh yes! And who is John Galt?

Peter P says

Or perhaps some people lack the will to power.

The sooner you fall behind, the more time you'll have to catch up.

again, Steven Wright

Peter P says

Or perhaps some people lack the will to power.

"Will to power" leaves you firing a Smith & Wesson into your temple while biting on a cyanide capsule.

Who is John Galt?

That is a good question.

This past Halloween I was Altas Shrugged. I actually shrugged and dropped the Pilates Ball I was carrying on my shoulders.

Will to power is the driving force behind everything in the universe. It is just amazing so many people thought their only purpose in life is to procreate.

That is just like littering.

GraooGra says

And who is John Galt?

Things can go too far to either extreme.

Bellingham Bill says

In Soviet Russia, it was party insiders skimming ~30% of the economy for their own benefit:

Membership in the party ultimately became a privilege, with a small subset of the general population of Party becoming an elite class or nomenklatura in Soviet society. Nomenklatura enjoyed many perquisites denied to the average Soviet citizen. Among those perks were shopping at well-stocked stores, access to foreign merchandise, preference in obtaining housing, access to dachas and holiday resorts, being allowed to travel abroad, sending their children to prestigious universities, and obtaining prestigious jobs (as well as party membership itself) for their children. It became virtually impossible to join the Soviet ruling and managing elite without being a member of the Communist Party.

http://en.wikipedia.org/wiki/Communist_Party_of_the_Soviet_Union#Membership

Well aside from the foreign merchandise thing, we're looking pretty Soviet these days!

GraooGra says

Profit is not greed or maybe 'greed is good'. If markets are normal there are competing players and prices are equalized so the profit is right. When market is not in balance then there is 1% and 99%. Who makes imbalance?

Greed is just another name for the will to power. It is not only good, it is the defining property of anything.

There will always be the 1% and the 99% though. But only technocrats are obsessed with such numbers.

When I'm not in my right mind, my left mind gets pretty crowded.

Steven Wright

I don't want to bury my question:

Who creates/who is responsible for imbalances in the free market economy?