patrick.net

jazz music says

The downward pressure on wages was the deliberate outcome of government policies designed to put U.S. manufacturing workers in direct competition with low-paid workers in the developing world.

Question: Why do American workers get paid more than the third world workers who do exactly the same work?

jazz music says

Our trade deals could have been designed to put our doctors and lawyers in direct competition with much lower paid professionals in the developing world.

That's what H1B visas do. Weren't you complaining about them?

jazz music says

We have a Federal Reserve Board that has repeatedly raised interest rates to keep workers from getting jobs and bargaining power.

If that was what they wanted, why the hell did they lower the rates in the first place? Rates are still at record lows.

jazz music says

A tax system that directly and explicitly subsidizes many people getting high six or even seven-figure salaries at universities, hospitals, and private charities and foundations.

Who do you think pays for welfare?
Jazz you are even more irrational than normal.

Strategist says

Question: Why do American workers get paid more than the third world workers who do exactly the same work?

Do C-suite people in America generally get paid more than the same in Vietnam , Bangalore or Indonesia?

GLobalization was the first in a long string of recent government lying to Us selling us one thing but delivering a whole different set of circumstances and realities, rather than what was sold.
It was the start of the billionaire Congress.

Wait till Obozo the clown gets the TPP passed-in secret of course. I wonder if it will be classified even after it is passed-will the clown order drone strikes on anybody who dares talk about what is in the TPP????

CL says

Do C-suite people in America generally get paid more than the same in Vietnam , Bangalore or Indonesia?

Or Japan, Or Germany, Or Sweden, for that matter? That the CEO of GM makes more than Toyota, which cleans GM's clock?

Global trade has been taking place ever since the Spanish sent sail boats from Acapulco across the Pacific to Manila 500 years ago: silver dug up in Mexico would be shipped to the far East in exchange for goods that could then be sold in Europe. . . That is, if we discount 500-1000 years before that when silver dug up in central Europe was traded for oriental consumer goods, because the Americas were not involved yet.

When transportation and communication technology progressed in leaps and bounds in the 19th and 20th century, the real choice was not between trade vs. not trading while maintaining out prosperity/superiority, but trade vs. having countries like Russia and China copying everything we have and then conquer us with their 5x population and 5x natural resources. Germany and Japan came fairly closely to upsetting the British order of the world with 2x the population and 2x the mineral resources while copying the British technology lead, as shown in WWI and WWII

Trade gave us an opportunity to move further along the technology curve while taking advantage of the capital advantage of exacting a pay while giving out technology transfers to the more backward countries.

The real problem is that we seem to have squandered the opportunity by wasting the resources on losers: subsidizing resource wasting financial engineering and subsiding people on welfare who make negative returns on capital . . . Thereby encouraging behavior patterns among the rich and poor alike to engage in negative - return activities, leading to massive destruction of capital over the years. The inability of the laid off workers to find new and more productive jobs (unlike their farmer ancestors did in finding manufacturing jobs after getting laid off from farming) is an indication of the lack of real capital. Money borrowed into existence via public debt is not real capital; those carry debt service burden as well as displacing real productive enterprises with crony capital claim on real resources. Every government subsidy carries with it the cost burden placed on real productive enterprises that can actually profitably employ workers!

VW, BMW, MB and Toyota are all still heavily owned by the families who owned the companies since the WWII era. Their annual taxable income may not be very high, but their net worth growth come primarily from capital appreciation, which is not taxed at all. It's a little like Warren Buffet making taxable income only 50 million a year but has net worth close to 50 billion. Obviously the guy has not worked at his current job/pay for 1000 years!

The real wealth growth, wealth disparity and low tax on such wealth is actually more lopsided among the European and Japanese tycoon dynastic families than American CEO's who typically cash out options quickly and get taxed right away.

Reality says

The inability of the laid off workers to find new and more productive jobs (unlike their farmer ancestors did in finding manufacturing jobs after getting laid off from farming) is an indication of the lack of real capital

You're not stupid-how can you write this with a straight face?? What is real capital and how is it different than any other measure of capital?

If there was a lack of capital, would you expect interest rates to be near all time lows?

Reality says

Every government subsidy carries with it the cost burden placed on real productive enterprises that can actually profitably employ workers!

So why are corporate returns at an all time high then?

Reality says

VW, BMW, MB and Toyota are all still heavily owned by the families who owned the companies since the WWII era. Their annual taxable income may not be very high, but their net worth growth come primarily from capital appreciation, which is not taxed at all. It's a little like Warren Buffet making taxable income only 50 million a year but has net worth close to 50 billion. Obviously the guy has not worked at his current job/pay for 1000 years!

And yet you don't support raising capital gains rates

Reality says

The real wealth growth, wealth disparity and low tax on such wealth is actually more lopsided among the European and Japanese tycoon dynastic families than American CEO's who typically cash out options quickly and get taxed right away.

Source? Data?

Raising capital gain tax would not affect dynastic holders of capital, such as the owners of the IKEA fortune of Sweden, or the family that owns the largest chunk of BMW, or the mutually related Porsche and Piech families that are among the largest shareholders of VW, which was the most highly valued company in the world only a few years ago.

Those families that hold those fortunes do not trade them. The increase of their net worth faces zero taxation regardless how high you raise income tax or capital gain tax. In fact, the higher you raise income tax and capital gain tax, the harder it would be for some newcomer to challenge them.

Reality says

Raising capital gain tax would not affect dynastic holders of capital, such as the owners of the IKEA fortune of Sweden, or the family that owns the largest chunk of BMW, or the mutually related Porsche and Piech families that are the largest shareholders of VW, which was the most highly valued company in the world only a few years ago.

Those families that hold those fortunes do not trade them. The increase of their net worth faces zero taxation regardless how high you raise income tax or capital gain tax. In fact, the higher you raise income tax and capital gain tax, the harder it would be for some newcomer to challenge them.

A wealth tax would be better, but surely you can agree that raising capital gains is a worthy first step.

And it would affect them--they do pull out money.

No, raising capital gains tax would not be a worthy first step, any more than locking you up for 10 years because you are a man would be a worthy first step towards punishing rapists. In fact, assuming you are a law-abiding man, locking you up for 10 years would remove competition against rapists. Likewise, raising tax on highly liquid capital would remove competition to dynastic holders of capital.

Reality says

No, raising capital gains tax would not be a worthy first step, any more than locking you up for 10 years because you are a man would be a worthy first step towards punishing rapists. In fact, assuming you are a law-abiding man, locking you up for 10 years would remove competition against rapists. Likewise, raising tax on highly liquid capital would remove competition to dynastic holders of capital.

Horrible analogy aside, there is a huge supply of capital out there looking for somewhere to invest right now. I don't think we're in danger of running out of competition. Looking at interest rates should confirm that. Your fairy tale about dynastic holders of capital is BS, as usual.

Real capital is that which can profitably employ labor (include the owner's own labor). The Ultra low interest rate is indicative of low opportunity cost for money: i.e. there is relatively little real productive capital opportunity out there. Money and capital are not the same thing. Money having low interest rate means there are few real capital out there to buy or invest (and real capital that can be profitable is being bid up very high in price, once again illustrating the relative lack of real capital). Here is a simplified example:

If a company making widgets consumes $50k in natural resources and $50k in labor and can sell the output for $120k. The company has a profit margin of 20%. The real capital is 20% per annum on the labor and natural resources represented by the $100k. If central bank printing causes everything to double in price evenly, the amount of real capital would not have changed, just like if we use cents instead of dollar in accounting, the amount of real capital would not have increased by 100x. Of course, not all prices increase at the same time by the same ratio. It takes time for new money to propagate through the economy: often time with dire consequences for the widget maker if cheap money enables a marginal competitor that drives down the price for widget, drive up cost of input factors, while siphon industry gross receipt to banksters via debt service, all of which actually damage existing real captal in the industry.

Cheap money does not add to real capital; cheap money destroys capital via malinvestment and degrade existing real capital.

Reality says

Likewise, raising tax on highly liquid capital would remove competition to dynastic holders of capital.

Agreed. Moreover there should be no taxes or tax raises before most or all deductions are eliminated. The first step to a broad, fair and low tax base is to treat all legal forms of capital and debt equally. This also does discourage bubbles and crony capitalism.

tatupu70 says

A wealth tax would be better, but surely you can agree that raising capital gains is a worthy first step.

And it would affect them--they do pull out money.

The new American motto-beggars can be choosers. Not only they do they get to choose how much alms the givers should give and when, they think the givers owe it to them.

Corporate profitability is not a valid indicator of the vitality of the economy at all. Most actors/enterprises in the economy are not corporations, but sole proprietors and partnerships. They are the real drivers of new ways of doing business and real creators of jobs (including those for the owners themselves), along with small and new corporations. The old and big corporations are the consolidators and net job eliminators. It is little wonder that after the FED tilt the playing field in favor of the big established corporations, we have a job and pay crisis.

Reality says

Real capital is that which can profitably employ labor (include the owner's own labor).

lol. So, some dollars can profitably employ labor and some cannot? Is there a way for me to tell whether the money I have is "real" or not? Like a secret symbol?

Reality says

The Ultra low interest rate is indicative of low opportunity cost for money: i.e. there is relatively little real productive capital opportunity out there. Money and capital are not the same thing. Money having low interest rate means there are few real capital out there to buy or invest (and real capital that can be profitable is being bid up very high in price, once again illustrating the relative lack of real capital). Here is a simplified example:

No, there are few productive assets out there. Demand (or qualified demand, if you prefer) is low right now because of wealth and income inequality. Don't confuse capital with assets. Money having low interest rates mean there are few investment opportunities. Capital includes more than just cash, but cash is capital.

Reality says

If a company making widgets consumes $50k in natural resources and $50k in labor and can sell the output for $120k. The company has a profit margin of 20%. The real capital is 20% per annum on the labor and natural resources represented by the $100k

You're just making crap up now. That is complete BS. The rest of that paragraph is nonsense to try to change the subject from your previous idiotic statements.

Reality says

Cheap money does not add to real capital; cheap money destroys capital via malinvestment and degrade existing real capital.

More nonsense.

Reality says

Corporate profitability is not a valid indicator of the vitality of the economy at all

Yes, it is. It's not perfect, but it's a pretty good indication.

Reality says

Corporate profitability is not a valid indicator of the vitality of the economy at all. Most actors/enterprises in the economy are not corporations, but sole proprietors and partnerships. They are the real drivers of new ways of doing business and real creators of jobs (including those for the owners themselves), along with small and new corporations

Depends on your definition of small business. If you use the SBA definition of less than 500 employees then yes, if you use the traditional defintiton of less than 50 jobs then no, companies with less than 50 employees are less than 1/3 of jobs.

I'd recommend you re-read my post. I'm not the one confusing Capital vs. assets. Cash is asset in the accounting sense, but not capital. Capital is a way of doing business that can be additive to capital accumulation.

For example, horse and carriage as taxi service in the days before reliable automobile was capital. However, as soon as automobiles became reliable enough, horses and carriages as taxi were destroyed as capital: maintaining the horse would cost more than taxi fare would bring in. They were reborn as capital in the form of tourist attraction when air travel brought in enough tourists to New York City 60+ years later.

Government spending enough money to keep the horse cabbies in business during all those decades until some of them became profitable again as tourist attractions would keep the cronies in business while destroying capital overall via the taxation that would be required to make those subsidy payments.

1. Most sole proprietors and partnerships are not "companies."

2. Many, if not most, people are not in growth industries. That does not change the fact that their employers are net job eliminators. Those employees are just taking over from some other employee before the job is eliminated.

Reality says

Capital is a way of doing business that can be additive to capital accumulation.

Can you please share some references that discuss this usage of the word capital?

Reality says

For example, horse and carriage as taxi service in the days before reliable automobile was capital. However, as soon as automobiles became reliable enough, horses and carriages as taxi were destroyed as capital: maintaining the horse would cost more than taxi fare would bring in. They were reborn as capital in the form of tourist attraction when air travel brought in enough tourists to New York City 60+ years later.

The horse and carriage were productive assets before the automobile. And yes, as such, they would be considered capital as well.

Reality says

Government printing enough money to keep the horse cabbies in business during all those decades until some of them became profitable again as tourist attractions would keep the cronies in business while destroying capital overall via the taxation that would be required to make those subsidy payments.

Again--this is completely orthogonal to the original discussion and another effort by you to change the subject, besides being incorrect.

Capital is by definition that which can accumulate onto itself. Otherwise, it would not last long as "capital."

You are the one confusing Capital with money. Money having low interest rate is prima face evidence that the economic environment is having a shortage of real capital accumulating opportunity.

Reality says

Capital is by definition that which can accumulate onto itself. Otherwise, it would not last long as "capital."

You are the one confusing Capital with money. Money having low interest rate is prima face evidence that the economic environment is having a shortage of real capital accumulating opportunity.

Nope--as I posted earlier, capital includes cash, but it also includes assets.

I asked for you to provide a reference-not restate your incorrect definition.

Low interest rate is prima face evidence that the economy is having a shortage of investment opportunities.

Corporate profitability is actually a very poor indicator of economic vitality: corporate profitability is heavily influenced by the financial industry, whose profitability is far more volatile than other industries and at the peak accounted to nearly half of all corporate profitability therefore the vast majority of the ups and downs.

Reality says

Corporate profitability is actually a very poor indicator of economic vitality: corporate profitability is heavily influenced by the financial industry, whose profitability is far more volatile than other industries and at the peak accounted to nearly half of all corporate profitability therefore the vast majority of the ups and downs.

This whole discussion is dumb because I didn't provide that chart to show as an indication of economic vitality.

So you agree with me then on low interest rate is indicative of lack of (profitable investment opportunity == Real Capital).

Capital is by definition profitable enterprise opportunity (therefore can afford to employ new people in order to expand). A horse carriage set is capital if it is profitable in the free market; it ceases to be Real Capital ( via capital destruction when the new Real Capital the automobile emerged) when it was no longer profitable. Now you see the relevance of my earlier point.

You brought us a chart that showed essentially the financial industry is highly profitable under the FED system, to be paid by either run - away inflation or another crash to be bailed out by the government later.

You wanted to cite that as a reason why tax on the rest of the economy should be raised to pay for the financial bailouts of the past, present and future.

Reality says

So you agree with me then on low interest rate is indicative of lack of (profitable investment opportunity == Real Capital).

Capital is by definition profitable enterprise opportunity. A horse carriage set is capital if it is profitable in the free market; it ceases to be Real Capital ( via capital destruction when the new Real Capital the automobile emerged) when it was no longer profitable. Now you see the relevance of my earlier point.

Again--please show me a reference that defines capital as "profitable enterprise opportunity".

I disagree that that is a definition that is in wide use.

Low interest rate is an indication of a lot of available capital that has very few investment opportunities. This happens when inequality reaches current levels as qualified demand is low and cash is hoarded at the top.

Reality says

You brought us a chart that showed essentially the financial industry is highly profitable under the FED system, to be paid by either run - away inflation or another crash to be bailed out by the government later.

You wanted to cite that as a reason why tax on the rest of the economy should be raised to pay for the financial bailouts of the past, present and future.

lol--Both of those statements are absolutely false. How about you stick to explaining your idiotic definitions and let me post what I'm saying.

Low interest rate is indicative of too much money chasing too few profitable enterprise opportunities.

Defining profitable enterprise opportunity as capital is by far the more straight-forward way of defining Real Captial: as the profitability enables hiring of new additional labor . . . Thereby completing the Capital - Labor conceptual dual. Real Capital is that which can employ Labor in a sustainable way; in other words, profitable enterprise opportunity.

Defining money as capital doesn't work in a fiat money system. The most obvious example is the flood of monopoly money not being able to raise employment. Money by itself, not merely as a payment device in a sustainable profitable enterprise, does not complete the Capital -Labor conceptual dual.

What? Low interest = glut of capital, dearth of opportunities.

If there was abundant demand for investment/capital and a dearth of capital, you'd see high interest rates.

Low interest rate means glut of money, dearth of opportunity.

Don't confuse money with Real Capital in a fiat money system. The FED printing up $8 trillion didn't suddenly increase the US Real Capital stock by $8 trillion. They wish. LOL

Reality says

Defining profitable enterprise opportunity as capital is by far the more straight-forward way of defining Real Captial: as the profitability enables hiring of new additional labor . . . Thereby completing the Capital - Labor conceptual dual. Real Capital is that which can employ Labor in a sustainable way; in other words, profitable enterprise opportunity.

Hey-you can make up your own definitions whenever you want, just don't expect anyone to know wtf you're talking about.

"Hoarding of cash" is supposed to be irrelevant / cured in a fiat money system.

Looks the like the real problem is glut of money keeping unsustainable businesses in business reducing industry profitability (too much competition from marginal players driving down product/service prices while driving up input factor costs) while letting the financial industry collect a tax on other industries' revenue stream via debt service payment from the marginal players.

Reality says

Don't confuse money with Real Capital in a fiat money system

Nobody is confusing anything except you.

The separating of fiat money from other forms of capital (Real Capital) is an important first step towards understanding what's really going on.

Counting money as part of capital worked during the era of market money, but not during out current fiat money era, especially when talking in the macro sense for the economy as a whole.

Reality says

"Hoarding of cash" is supposed to be irrelevant / cured in a fiat money system.

Fiat money system discourages hoarding, but when inequality gets to current levels, there's not much that can be done.

Reality says

Looks the like the real problem is glut of money keeping unsustainable businesses in business reducing industry profitability (too much competition from marginal players driving down product/service prices while driving up input factor costs) while letting the financial industry collect a tax on other industries' revenue stream via debt service payment from the marginal players.

Nope. As I already showed you, industry profitability is high. The problem is lack of demand because of inequality.

You were counting money as capital then telling people not to confuse capital vs. assets. Talk about confusion!