patrick.net

tatupu70 says

Well, that makes sense. I'm not trying to enlighten you. I'm trying to get you to explain how exactly the Federal Reserve money printing benefits the "cronies". I've yet to hear an explanation (that corresponds with reality)

Sure I have you just can't hear it

First of all the main thing to know about income categories is that the people in those categories change especially at the top as that is the most volatile category. So measuring a category is irrelevant.

Second the GINI index is specious. E.G. I don't even see North Korea on the graph I bet they have the most equality of any country or maybe East Germany of the past.

As to the rest see my previous posts about inflation.

indigenous says

Sure I have you just can't hear it

I'm assuming you mean read it, but regardless, the only explanation you've provided was contradicted by the evidence I just posted.

indigenous says

First of all the main thing to know about income categories is that the people
in those categories change especially at the top as that is the most volatile
category. So measuring a category is irrelevant

First--I think you're wrong. Second--it doesn't matter. I don't care about the names of the 1%, just the level of inequality. The unequal distribution is what kills the economy--not the lack of mobility. Although I'd prefer more mobility over less too.

indigenous says

Second the GINI index is specious. E.G. I don't even see North Korea on the
graph I bet they have the most equality of any country or maybe East Germany of
the past.

Why is it specious?? Data on N. Korea is very difficult to obtain so I imagine that's why it's not on there. But who cares?? The point is that inequality in the US has been rising steadily since Reagan and now approaches levels usually seen in 3rd world countries.

indigenous says

Do you consider Marcus an unimpeachable source of information?

Did Marcus write the articles?? I think it's more appropriate to evaluate the author of the article rather than the poster that provides the link. Don't you?

indigenous says

As I stated that data is noise

lol--and what led you to that conclusion? Please explain why you feel that way.

indigenous says

Say What? So you are all riled up about a category?

Yep. When all the money is in the hands of just 1% of the people (whoever they are), they economy grinds to a halt. See 1929 for example.

indigenous says

It is specious because the people in N Korea are literally starving to death,
but they are very equal.

Really? Are you sure about that? My guess is that is not at all the case. Government officials probably have it quite well.

indigenous says

Equality is just a meme, head trash, a straw man for someone to make a buck
off of, i.e. the unions that Marcus belongs to, nope the real culprit here is
the overpaid government parasites.

I'm speechless. "Overpaid" government workers earn 1/100th as much as a well paid CEO gets with options. And we're worried about the government workers? Really?

tatupu70 says

Say What? So you are all riled up about a category?

Yep. When all the money is in the hands of just 1% of the people (whoever they are), they economy grinds to a halt. See 1929 for example.

Ok yes you are riled up about a category. Think of it this way a professional sports franchise changes players often as it is very competitive, the only thing that remains are the management. The management with the economy is the FED and Cronys

tatupu70 says

Really? Are you sure about that? My guess is that is not at all the case. Government officials probably have it quite well.

Quite

tatupu70 says

I'm speechless. "Overpaid" government workers earn 1/100th as much as a well paid CEO gets with options. And we're worried about the government workers? Really?

That well paid CEO creates jobs. The people who hire CEO's are not stupid they pick people who are going to make them money.

SoftShell says

The same can be said about marriage, circa 2013..

Not quite.

But even if what you are saying were true, the 14th Amendment is why same-sex marriages must be the law. See the Supreme Court decision Loving v. Virginia.

indigenous says

That well paid CEO creates jobs. The people who hire CEO's are not stupid
they pick people who are going to make them money.

That's interesting. Aren't you the one who posts all the time about how unemployment is much higher than actually stated? I guess those CEOs aren't doing a very good job after all.

tatupu70 says

That's interesting. Aren't you the one who posts all the time about how unemployment is much higher than actually stated? I guess those CEOs aren't doing a very good job after all.

The CEOs are not the problem.

From this:

http://www.shadowstats.com/alternate_data/unemployment-charts

Also

from this :

http://mises.org/daily/5112/

In the article Professor Murphy states:

"The last two recessions have changed that standard pattern. The blue line, at a February 2011 level of 108.3 million private-sector jobs, is lower than it was way back in June 1999 at 108.6 million jobs. In the more than 11 intervening years, through immigration and natural growth the (civilian noninstitutional) US population has increased by 31 million people. And yet we have fewer private-sector jobs in the country now than in mid-1999. Simple inspection of the chart above shows that there hasn't been a comparable period of stagnant job creation since the late 1930s."

indigenous says

The CEOs are not the problem.

How could they not be the problem? They create the jobs! You just said so:

indigenous says

That well paid CEO creates jobs.

Are you now saying the CEOs don't create jobs??

tatupu70 says

indigenous says

The CEOs are not the problem.

How could they not be the problem? They create the jobs! You just said so:

indigenous says

That well paid CEO creates jobs.

Are you now saying the CEOs don't create jobs??

Talking to you is like talking to a kid who has discovered he can control the conversation by asking questions.

There are other factors, not the least of which is government. Read the article.

indigenous says

Talking to you is like talking to a kid who has discovered he can control the conversation by asking questions.

There are other factors, not the least of which is government. Read the article.

I won't say what talking to you is like. Since you've failed miserably at the whole CEOs create jobs, let's get back to the original question which neither you nor Turtle, nor homeboy, nor gsr seem to be able to answer.

How does the Federal Reserve contribute to inequality? I've heard explanations like--the cronies are first in line to receive it. Or inflation of money supply goes to the cronies.

We've since established that income inequality has been growing since ~1980, so any explanation should talk about Federal Reserve policies in effect since 1980. I'm afraid the bailouts are a very recent event that does not explain the 30+ year trend.

Can anyone help me out?

indigenous says

That is how the CBO thinks. The problem is that it is a dynamic problem in that
when the taxes get lowered the revenue goes up.

Even if that were true, which it is not, you are saying that corporate profits increased enough to offset both the lowering of the number in the "base" (by virtue of electing subchapter S) and the lowered tax rate in 1988?

Should be easy enough to prove with math. Lets look at it.

Corporate profits, 1987: 317.6B
Corporate profits, 1988: 386.1B

http://www.irs.gov/uac/SOI-Tax-Stats---Historical-Table-15

Corporate Tax Receipts, 1987: 83.9B
Corporate Tax Recepts, 1988: 94.5B

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=203

So the average Corporate Tax Rate is 26.4% in 1987 and 24.4% in 1988. A 2% drop.

In fact, there were 61,910 individual returns in 1988 with $1M or more in income for a total income of $150.8B. There were 34,704 returns with $1M or more in income in 1987, for a total income of $72.1B.

http://www.irs.gov/pub/irs-soi/88-89inintxrts.pdf
http://www.irs.gov/pub/irs-soi/87inintxr.pdf

Lets say all of that increase was because of the coversion to the pass through. $78.7B. That means, corporate profits, net/net, grew from $317.6B in 1987 to $386.1B + $78.7B = $464.8B in one year.

46% net corporate profit growth in one year, in a year in which GDP grew 4.1% and was not recovering from a recession. And unemployment fell from 6.6% to 5.3%. And the 30 year treasury increase from to 9.02%

So corporate profits before tax increased 46% in a year when their revenues grew at 4.1%, they increased hiring, and the cost of their debt service increased.

What costs did they save to generate these huge profit gains? Or is this subchapter S idea just a myth?

tatupu70 says

I won't say what talking to you is like. Since you've failed miserably at the whole CEOs create jobs, let's get back to the original question which neither you nor Turtle, nor homeboy, nor gsr seem to be able to answer.

It is just a fact? Are you saying that Steve Jobs did not create any jobs?

tatupu70 says

How does the Federal Reserve contribute to inequality? I've heard explanations like--the cronies are first in line to receive it. Or inflation of money supply goes to the cronies.

I explained this before to you, how many times do I have to repeat my self before you will get it?

tatupu70 says

We've since established that income inequality has been growing since ~1980, so any explanation should talk about Federal Reserve policies in effect since 1980. I'm afraid the bailouts are a very recent event that does not explain the 30+ year trend.

I also explained this before, how many times do I have to repeat myself before you will get it?

tatupu70 says

Can anyone help me out?

I would love to, which way did you come in?

indigenous says

I explained this before to you, how many times do I have to repeat my self before you will get it?

indigenous says

I also explained this before, how many times do I have to repeat myself before you will get it?

Yes, but I've shown that those explanations don't hold water. I was hoping you could do better. Othwerise, I'll assume that the Federal Reserve has no impact on income inequality and that the whole crony/first receiver stuff is nonsense.

The way it works is you present an explanation--usually with some facts/data that supports it. See David's post above for a good template. Posting a video with no explanation or guidance is not supporting evidence.

You might as well be "explaining" to me how the world is flat...

david1 says

What costs did they save to generate these huge profit gains? Or is this subchapter S idea just a myth?

That is because it is a dynamic problem. Your math seems to show my point about more people reporting as individuals.

You may already understand this but what I said was the individual rates went from 50% down to 28%, not corporate rates.

What occurs with any business is that as they get above the break even point any money realized above that point is almost all profit.

As the taxes decrease investment is increased.

Also the difference in tax alone is going to be 22%. So the difference can be reinvested into production.

Other reasons are above my pay grade.

tatupu70 says

I'll assume

You keep doing that, that is what you are good at?

indigenous says

You keep doing that, that is what you are good at?

So, you have no explanation then besides the BS you've posted so far?

indigenous says

Your math seems to show my point about more people reporting as individuals.

My math shows that in order for the subchapter S argument to hold water, you must assume that corporate profits grew at a 46% annual rate, when their revenues grew at 4%, and their labor costs grew, and their cost of debt service grew. How is that possible?

You mentioned investment - investments (and the capitalization of costs therein) are a tax neutral. IE, if a company invests in a company, a portion of that investment, (depending on how long it is depreciated) is written off from taxes. That means expenses increased.

Again, the effect on any "investments" translated to a net revenue growth of 4%.

Revenue growing 4%, while costs increase, does not translate to a 46% growth in profits. It cannot, by math. Lets say that revenues are $100 and expenses $1. profit margins are 99%. If revenue grows 4% to $104, then profit grows 3.96 to 102.96. A growth in profit from 99 to 102.96 is a growth of 4%.

Outsized profit gains like that can only occur if profit margins also increased. In order for profit margins to increase, costs must go down. But labor costs went UP. Debt costs went UP.

What I am telling you is it is highly doubtful that the increase in wealth inequality is not real and is because of election to subchapter S as you said.

What you are seeing is the effect of "taking profits" in times of low taxation. This is the opposite of what you claim, that they "reinvest" in their company. In an economy that grows 4%, a 21.5% growth in corporate profits (if we back out your $72.1B subchaprter S elections) is a function of changing corporate tax policy. That is, corporations claimed carried over "profits" from earlier higher tax years.

To use a modern example, it is what would happen if there was a tax holiday for foreign profits. Aaple would realize all of the profits they have been carrying overseas.

To put it mildly, higher tax rates encourage investment. Lower tax rates encourage profit taking.

indigenous says

Talking to you is like talking to a kid who has discovered he can control the conversation by asking questions.

Ha ha ha ha.

indigenous says

Talking to you is like talking to a kid who has discovered he can control the conversation by asking questions.

What do you mean by that?

tatupu70 says

Posting a video with no explanation or guidance is not supporting evidence.

You asked for supporting information. That is what I provided. If I summarize it before you've had a chance to look at it then we risk you limiting yourself to my interpretation. Alternatively, you will be so focused on proving me wrong that you don't really pay attention to the material as a whole. I prefer not to post something, summarize its contents, and tell you what it means (which cable news station does that remind me of?). You asked for supporting information on how money is created, how the creation of that money benefits people as we head down the food chain, how it affects consumer prices, etc... These videos sprang to mind. Yes, they are long, as this is a very complex subject.

turtledove says

I prefer not to post something, summarize its contents, and tell you what it means (which cable news station does that remind me of?).

That's fine, but most people (myself included) don't alway have 2 hours to watch videos. And I'm not sure how you summarizing it is any different than you posting a video of some other random internet user summarizing it.

I'll try to get through them tonight, but what I've seen of the first one is not very illuminating. It talks a lot about fractional reserve banking. Not really on topic.

tatupu70 says

If that's the case, why did the trend towards increasing income disparity clearly begin around 1980 with Reagan's election?

The Federal Reserve wasn't buying bad mortgages back then. It wasn't bailing out banks back then.

So, again, I ask. How does the Federal Reserve cause increasing income/wealth disparity?

(As an aside, it looks like income disparity went DOWN during the bailouts...)

Wow. So many things wrong with your reasoning. The assertion was that the Fed buys securities from the big financial firms, and that benefits the wealthy. So you post a chart of income disparity that only appears to go to 2007?

Why would you assume there can only be one cause of income disparity? Reagan gave tax cuts to the wealthy; that's ALSO a cause of wealth disparity.

Wealth disparity did decrease when the banking industry collapsed. If your chart were up to date, you would see it go back UP after the bailouts. If we truly had a free market rather than a "privatize the profits and socialize the losses" kleptocracy, wealth disparity would have decreased even more. But government intervention restored the disparity and continued to make it even greater. If your chart were up to date, you would clearly be able to see that.

tatupu70 says

I'll try to get through them tonight, but what I've seen of the first one is not very illuminating. It talks a lot about fractional reserve banking. Not really on topic.

You don't think that fractional reserve banking plays a role in how money is created?.... the supply in circulation?... asset prices?

david1 says

In fact, there were 61,910 individual returns in 1988 with $1M or more in income for a total income of $150.8B. There were 34,704 returns with $1M or more in income in 1987, for a total income of $72.1B.

It would seem this indicates there were a lot more people filing as as S corp?

david1 says

My math shows that in order for the subchapter S argument to hold water, you must assume that corporate profits grew at a 46% annual rate, when their revenues grew at 4%, and their labor costs grew, and their cost of debt service grew. How is that possible?

You mentioned investment - investments (and the capitalization of costs therein) are a tax neutral. IE, if a company invests in a company, a portion of that investment, (depending on how long it is depreciated) is written off from taxes. That means expenses increased.

The investments increase production. If you buy a backhoe you replace how many shovels? If you buy CNC equipment you replace how many machinists?

david1 says

Revenue growing 4%, while costs increase, does not translate to a 46% growth in profits. It cannot, by math. Lets say that revenues are $100 and expenses $1. profit margins are 99%. If revenue grows 4% to $104, then profit grows 3.96 to 102.96. A growth in profit from 99 to 102.96 is a growth of 4%.

Outsized profit gains like that can only occur if profit margins also increased. In order for profit margins to increase, costs must go down. But labor costs went UP. Debt costs went UP.

A grocery store has a profit of 2% if your net goes up by 1% you hit that profit increase.

Again virtually everything above the break even point is profit.

david1 says

. In order for profit margins to increase, costs must go down. But labor costs went UP. Debt costs went UP.

Not true. A basic purpose of a business is to do more with less which is the opposite of government. Lean (management philosophy) manufacturing and really the free market which always produces more for the same money which results in a perpetual deflation.

david1 says

To put it mildly, higher tax rates encourage investment. Lower tax rates encourage profit taking.

The natural dynamic of investing is not directly controlled by taxes.

This is getting above my pay grade.

But the main point I was making is that the apparency of income disparity was because of tax changes in 1988 and a few other years. Which you demonstrated by showing that the number doubled in that year :

"In fact, there were 61,910 individual returns in 1988 with $1M or more in income for a total income of $150.8B. There were 34,704 returns with $1M or more in income in 1987, for a total income of $72.1B."

New Renter says

Talking to you is like talking to a kid who has discovered he can control the conversation by asking questions.

What do you mean by that?

He keeps asking questions without demonstrating any understanding. How come, How come, How come, How come,

Homeboy says

Wow. So many things wrong with your reasoning. The assertion was that the Fed buys securities from the big financial firms, and that benefits the wealthy. So you post a chart of income disparity that only appears to go to 2007?

I'll grant you that it's hard to tell the exact end of the chart. I think it's later than 2007, but I'm not 100% certain. If you have one that shows something different, please post it.

The assertion was that the Federal Reserve was the cause of increasing income/wealth disparity. And the explanation of how this occurs was the bailouts. A chart showing that income disparity was occuring since 1980 pretty much kills that theory.

Homeboy says

Why would you assume there can only be one cause of income disparity? Reagan gave tax cuts to the wealthy; that's ALSO a cause of wealth disparity.

I don't assume that. I was told that tax cuts weren't the cause, and that the Federal Reserve was the cause.

Homeboy says

Wealth disparity did decrease when the banking industry collapsed. If your chart were up to date, you would see it go back UP after the bailouts

Well, if true, that would just return it to the established trendline. The tax cuts are the cause.

turtledove says

You don't think that fractional reserve banking plays a role in how money is created?.... the supply in circulation?... asset prices?

Fractional reserve certainly plays a role in money creation. And the supply in circulation. And asset prices. Yes to all.

But none of those issues address the question at hand.

indigenous says

He keeps asking questions without demonstrating any understanding. How come, How come, How come, How come,

I guarantee that I understand more deeply than you do. I'm trying to show you that your understanding is superficial at best. You never question the propaganda that you are fed but always take it at face value.

I'll be happy to reasses my thinking if you or anyone can show me where I'm wrong. For gods sake--you can't even tell me how the Federal Reserve is helping their cronies. All you can say is that you already told me. lol.

For gods sake--you can't even tell me how the Federal Reserve is helping their cronies.

indigenous says

The money is printed out of thin air, it is then used to purchase bad mortgages through Freddy and Fanny, at the then value of the RE, from the banks.

indigenous says

Inflation is not even. The cronys, TBTF big banks, get their money through uncle Ben.

This allows them to invest the money ahead of inflation. As more money is invested, mostly in RE or Equities, the price rises giving their investment a rise in value.

tatupu70 says

you can't even tell me how the Federal Reserve is helping their cronies.

The Fed “prints money” by purchasing large assets from big banks and the ultra-rich. Like with QE3, where the Fed spends billions per month on “mortgage-backed securities.”

Are mortgage backed securities a cash flow instrument of the rich? Or are they an investment vehicle of the Average Joe?

So the Fed buys the mortgage backed securities… and the ultra-rich get the newly “printed” money in exchange.

And they need somewhere to put it…

… so it flows to stocks and real estate – boosting or “inflating” the price of these assets even higher.

Who is this benefiting first? No one is buying MBS's from me! Are they buying them from you? So who is getting the cash first? What are they doing with it after they receive it? After they've leveraged their wealth to create new wealth, what are you left with besides increased cost of living?

turtledove says

Who is this benefiting first? No one is buying MBS's from me! Are they buying
them from you? So who is getting the cash first? What are they doing with it
after they receive it? After they've leveraged their wealth to create new
wealth, what are you left with besides increased cost of living?

So, after all that, we're left with the toxic mortgage buyback as the Fed mechanism for increasing income/wealth disparity. A one-time, highly unusual event that has only been happening since 2008. That's the cause of 30 years of increasing disparity? You see how I don't buy that, right?

tatupu70 says

That's the cause of 30 years of increasing disparity? You see how I don't buy that, right?

About the same time frame as Dick took the U.S. off of the gold standard. Coincidence?

indigenous says

About the same time frame as Dick took the U.S. off of the gold standard.
Coincidence?

lol--OK, now we're going with the gold standard as the cause? Great--please state your case. What is the mechanism?

tatupu70 says

lol--OK, now we're going with the gold standard as the cause? Great--please state your case. What is the mechanism?

The debt has hockey sticked since then. This has created inflation by government borrowing and printing money to buy treasury bonds out of thin air to make up for the ones that were not purchased.

Oh and go light on the hubris I cannot for the life of me see where you have earned a modicum of it.

indigenous says

The debt has hockey sticked since then. This has created inflation by
government borrowing and printing money to buy treasury bonds out of thin air to
make up for the ones that were not purchased.

Well, to be fair, the debt skyrocketed because of ridiculous levels of defense spending. But, in any event, please detail how inflation or government debt causes income/wealth disparity. I'm all ears.

tatupu70 says

Well, to be fair, the debt skyrocketed because of ridiculous levels of defense spending.

Yup except theoretically the war ends.

Government growth
and subsidies

The other big one would be entitlements.

tatupu70 says

But, in any event, please detail how inflation or government debt causes income/wealth disparity. I'm all ears.

Explained that multiple times you don't hear what I'm saying, so be it. It is not my job to learn you anything

indigenous says

Inflation is not even. The cronys, TBTF big banks, get their money through
uncle Ben.

This allows them to invest the money ahead of inflation. As more money is
invested, mostly in RE or Equities, the price rises giving their investment a
rise in value.

Is this your explanation? If so, my question is how do the cronies and the TBTF banks get their money through Uncle Ben? You realize that Ben isn't running presses and handing out money to his friends, right?

The Federal Reserve buys government bonds, injecting liquidity into the system. So, how does that increase income/wealth disparity?

tatupu70 says

Is this your explanation? If so, my question is how do the cronies and the TBTF banks get their money through Uncle Ben? You realize that Ben isn't running presses and handing out money to his friends, right?

He has/is bought/buying toxic assets. He pays interest on their excess reserves. The found money then allows them to invest ahead of inflation as with RE and Equities.

Whoa. Wait a second. You stated:

indigenous says

The debt has hockey sticked since then. This has created inflation by
government borrowing and printing money to buy treasury bonds out of thin air to
make up for the ones that were not purchased.

Then you follow up with this?

indigenous says

He has/is bought/buying toxic assets. He pays interest on their excess
reserves. The found money then allows them to invest ahead of inflation as with
RE and Equities.

How did you get from the gold standard and inflation being the cause back to the toxic assets??

indigenous says

TARP was one and a continuation was QE which kept the interest rate artificially
low and gave an advantage to those who could borrow at low rates they are also
getting interest to the tune of about a .75 of a trillion on their excess
reserves

You can't have it both ways. Low rates help borrowers and hurt savers. The wealthy are savers. The middle class are borrowers. QE should help reduce wealth disparity.