patrick.net

spydah_hh says

The price is only reduced because production increased.

And none of that cost reduction was because the cost of labor was reduced.

spydah_hh says

Which means to a business owner he is worth 50% more than he currently makes. In
other words he'll get a raise.

lol--you don't actually believe that do you??? What it means is the owner gets to pocket more profits.

spydah_hh says

Inflation does not account for a raise increase because the costs has not
gone down. The business man has to account for the inflation so the price goes
up, however the cost goes up too so everything is the same, just at a higher
equilibrium (however, demand will most likely fall). If a inflation increased by
10% then the price and cost of the cell phone goes up 10%, which means you're
back at square one. However; the workers wages does not increase because he did
not DECREASE COSTS.

This is gibberish.

spydah_hh says

Actually this doesn't make any sense. How can inflation increase demand? I mean
listen to yourself, if the cost of labor and inflation is high how DOES THIS
INCREASE DEMAND?

Because market participants have more money to spend.

ECON 101, supply and demand, is all fine and dandy but in ECON 102 you will learn about macroeconomic behaviors. If wages increase, demand increases. When demand increases, prices increase. One leads to the next, which leads to the next.

spydah_hh says

In other words he'll get a raise.

Except when he doesn't get a raise, a la since 1975.

spydah_hh says

Another example think about athletes. The better performing Athletes are paid
very well. Some positions on avg. are paid more than others like the
quarterback. However, those who don't perform are eventually cut and replaced by
someone who performs better. Inflation has nothing to do with an athletes pay,
none so than his performance which are tied to wins and more merchandise
purchases.

Again--wtf are you talking about? Inflation does correlate with wages, but that's not what we're discussing.

control point says

Because market participants have more money to spend.

How can they have more to spend if their wages does not increase? We hear time and time again wages have fallen behind against inflation for the past 30-40 years. That's because inflation does not increase wages, production does.

spydah_hh says

We hear time and time again wages have fallen behind against inflation for the
past 30-40 years. That's because inflation does not increase wages, production

No--that's because wages aren't determined by productivity like you believe. They are determined by leverage.

And with increased automation as well as manufacturing going overseas, there is an oversupply of labor. So owners are taking more and workers less. Leading to the wealth disparity that we see today.

spydah_hh says

How can they have more to spend if their wages does not increase?

Also be careful understanding the difference between real wages and wages. Nominal wages have most definitely increased.

tatupu70 says

No--that's because wages aren't determined by productivity like you believe. They are determined by leverage.

And with increased automation as well as manufacturing going overseas, there is an oversupply of labor. So owners are taking more and workers less. Leading to the wealth disparity that we see today.

tatupu70 says

Also be careful understanding the difference between real wages and wages. Nominal wages have most definitely increased.

tatupu70 says

It depends on what you mean by wages. Median? Total income? In any event--who is arguing that point?

Don't be fooled into thinking that becuase I disagree with you that I can't think for myself.

Lol, okay dude. If you say so. We'll just have to agree to disagree.

spydah_hh says

Lol, okay dude. If you say so. We'll just have to agree to disagree.

We can disagree about causes, but you can't disagree that nominal wages have grown. That's a fact.

tatupu70 says

spydah_hh says

Lol, okay dude. If you say so. We'll just have to agree to disagree.

We can disagree about causes, but you can't disagree that nominal wages have grown. That's a fact.

Nominal doesn't matter, it's the real wages that matter and that is the fact.

It's like saying that you can own or even make $1 million dollars in nominal terms but if that $1 million dollars doesn't buy you food then who cares.

spydah_hh says

Nominal doesn't matter, it's the real wages that matter and that is the fact.

Yes--I agree, but you just have to be careful to use inflation adjusted numbers in all of your discussions then.

And be careful when talking about total income--that has grown even when adjusted for inflation. The increasing wealth disparity has caused medians to be stagnant, but the top 1% has gown significantly and overall income has grown.

tatupu70 says

spydah_hh says

Nominal doesn't matter, it's the real wages that matter and that is the fact.

Yes--I agree, but you just have to be careful to use inflation adjusted numbers in all of your discussions then.

I am.. And real wages have declined in the last 30-40 years, in fact I was speaking about real wages, not nominal because i could care less about nominal wages.

spydah_hh says

And real wages have declined in the last 30-40 years, in fact I was speaking
about real wages, not nominal because i could care less about nominal wages.

You mean median--right?

tatupu70 says

spydah_hh says

And real wages have declined in the last 30-40 years, in fact I was speaking

about real wages, not nominal because i could care less about nominal wages.

You mean median--right?

median the average it doesn't matter which method you use, you'd still see a decline.

spydah_hh says

median the average it doesn't matter which method you use, you'd still see a
decline.

The data I can find disagrees with you.

http://www.ssa.gov/OACT/COLA/central.html

It shows the difference between mean and median income. And if you inflatoin adjust the 1990 wages of 20,172.11 to 2012:

http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=20172.11&year1=1990&year2=2012

You get $35,435.31 which is significantly less than the average compensation of $42,498.21

spydah_hh says

How can they have more to spend if their wages does not increase? We hear
time and time again wages have fallen behind against inflation for the past
30-40 years. That's because inflation does not increase wages, production
does.

First you are talking about labor costs being high. If labor costs are high, wages are high, right? Remember:

spydah_hh says

Not to mention the cost of labor is high.

My entire point is this: if labor cost is high (causing inflation) then demand has increased, not decreaesd. Not the other way around as you said.

Production has absolutely nothing to do with wages. The price of labor is market driven just like everything else. The supply of labor is high right now compared to demand for labor, this is why labor costs are LOW.

control point says

My entire point is this: if labor cost is high (causing inflation) then demand has increased, not decreaesd. Not the other way around as you said.

No costs are high because of increased costs of operating expenses (regulations, government sponsored monopolies etc.) and raw materials, i.e. inflation, which wrecks the economy. Wages have shown not to keep up. Of course longer term there will be a countering deflationary force as people simply cannot afford anything anymore, esp. essential services and goods, then you have stagflation, equally bad. Ideally you want the economy to not have maybe 0.5%-1% inflation at most to be stable, with occasional periods of no inflation to deflation as well. The 2% target is pure theft.

mell says

Wages have shown not to keep up

Only because of increasing disparity. In the late 70s, wages may have lagged slightly, but they kept up.

But the economy is not just wrecked by inflation, but by making promises to forward production and labor for longer and longer timeframes which never materialize and cause immense uncertainty. The budget needs to be balanced every year and spending adjusted. Middlemen have been taking their share immediately (real estate agents, banks) while offering nothing in return except for a promise form the por debt serf to pay off the debt 30 years along the line. This leveraged debt propelled by the Fed's continued debasement and government deficit spending is also wrecking the economy, probably the main "driver".

tatupu70 says

mell says

Wages have shown not to keep up

Only because of increasing disparity. In the late 70s, wages may have lagged slightly, but they kept up.

The disparity occurs due to those who siphon of a part of the leveraged money immediately while leaving it up to the debt-serfs and highly taxed middle-class and upper middle-class wage slaves to make good on their promises of forward labor. If you stop the deficit spending and let the markets adjust, this whole thing will stop fairly quickly and disparity will begin to reduce as shown in 2008.

mell says

If you stop the deficit spending and let the markets adjust, this whole thing
will stop fairly quickly and disparity will begin to reduce as shown in 2008.

What you saw in 2008 was temporary and letting the markets "adjust" as you call it would lead to far worse disparity.

The rich may lose 50% of their wealth but the poor lose 100%. Their labor is their only asset--without a job, they have nothing.

It really kills me that so many people think things just "adjust" painlessly in short order.

mell says

No costs are high because of increased costs of operating expenses (regulations,
government sponsored monopolies etc.) and raw materials, i.e. inflation, which
wrecks the economy.

Costs are at an all time low. How do I know? Well, profit margins are at an all-time high:

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

control point says

mell says

No costs are high because of increased costs of operating expenses (regulations,

government sponsored monopolies etc.) and raw materials, i.e. inflation, which

wrecks the economy.

Costs are at an all time low. How do I know? Well, profit margins are at an all-time high:

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

Sure, for big global companies. Not for small business and those self-employed. Plus there is a lot of debt-leverage despite great profits (company bonds etc.). Doesn't contradict that regulations costs (health care, insurance, rent etc.) and goods for those who can mostly only shop locally (small businesses etc.) are high and impeding mobility.

mell says

Sure, for big global companies. Not for small business and those self-employed.

I see. So regulations are higher for small business? Small business hires from a different labor pool from big business? Small business pays higher tax rates than big business?

Shop locally? WTH are you talking about? There are regulations that prohibit small companies from entering nonlocal markets? Big business has ALWAYS had buying advantage over small business. Its called the economy of scale and it is a free market phenomenon.

You guys never admit you are wrong...

control point says

mell says

Sure, for big global companies. Not for small business and those self-employed.

I see. So regulations are higher for small business? Small business hires from a different labor pool from big business? Small business pays higher tax rates than big business?

Shop locally? WTH are you talking about? There are regulations that prohibit small companies from entering nonlocal markets? Big business has ALWAYS had buying advantage over small business. Its called the economy of scale.

You guys never admit you are wrong...

If you don't understand the difference between a global, multi-national corporation and a local daycare or dog-walking business, or small restaurant/bar owner, then we just have to leave it at that. But if you want to think I'm wrong on that, that's your prerogative.

mell says

If you don't understand the difference between a global, multi-national
corporation and a local daycare or dog-walking business, or small restaurant/bar
owner, then we just have to leave it at that. But if you want to think I'm wrong
on that, that's your prerogative.

Corporate profits are not just large multinationals - it is all U.S. Corporations. This would be all entities required to file corporate returns. Basically everything except LLCs, partnerships, and sole proprietorships. S-corps included.

mell says

You are aware that the republican tax-reform plan includes a surtax levied on
the most-wealthy, and reducing specialized deductions while doubling standard
deductions. You should be on board with that.

Reposted analysis on this tax "reform"

"Effective capital gains tax rate increase from 23.8% to 24.8% for ultra-rich? Yawn. This will most likely be offset by the reduction in their ordinary income rate from 39.6% to 25%.

i.e. if 90% of your income is taxed 1% higher but 10% of your income is taxed 14.6% lower, .9% increase offset by 1.46% decrease. In order to pay more under this plan, the "mix" of income must be greater than about 93.5% capital gains and 6.5% ordinary income.

Anytime you see a reduction in the EIC, you know who is going to have an increased tax burden. With the EIC the working poor have an effective negative tax rate. You could make the standard deduction $100k, but you are never going to get a negative tax rate through deductions.

Lets look at a median income family of 4. $55k income, $100k mortgage balance, 6% state income tax rate, 1.5% property tax rate.

Under Camp's plan, this family would have standard deduction of $22k, taxable income of $33k and a tax rate of 10%, so taxes due $3300, less 2*$1500 child tax credits, taxes of $300.

Currently, this family has 4*personal exemptions ($3900) = $15,600. They have $4k in mortgage interest, $1.7k in property taxes, and $3600 in state income taxes. They take the standard deduction of $12,200 since it is greater. So $55k - $15.6k - $12.2k = $27,200 in taxable income. They pay $1,785 plus 15% of (27,200-17,850) = 1402+1785. Total 3187 less $2k in child tax credits, taxes of $1187. Plus they get EIC of $4455. This median family would get a refund of $3268.

Current law, they have net tax rate of -5.9%. Camp's plan would have a median income family of 4 PAY .5%. Effectively, the tax rate for a median income family of 4 would increase 6.4%.

Beware wolf in sheep's clothing..."

control point says

S&P 500 up 230% since January 20, 2009.

Thanks, Obama!

Or, if you Austrians prefer: S&P/Gold

.94 to 1.40, a 49% increase.

Thanks for what exactly?

Diluting the hell out of the dollar, to bail out speculators?

For monetizing billions and trillions of bad mortgage debt, enriching the wealthy, running up housing expenses, making us all collectively poorer.

Yea, thanks A LOT

errc says

making us all collectively poorer.

My 401(k) balance and home equity is looking pretty good compared to 2009. Hell, even compared to 2005 or 2000...

So not making ME collectively poorer.

So yeah, thanks Obama!

tatupu70 says

spydah_hh says

median the average it doesn't matter which method you use, you'd still see a

decline.

The data I can find disagrees with you.

http://www.ssa.gov/OACT/COLA/central.html

It shows the difference between mean and median income. And if you inflatoin adjust the 1990 wages of 20,172.11 to 2012:

http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=20172.11&year1=1990&year2=2012

You get $35,435.31 which is significantly less than the average compensation of $42,498.21

You went from wages to compensation. What does this mean? My compensation package includes 5k+ per year my employer pisses away on "health" "insurance". I don't count that compensation as wages, because its absolutely worthless to me. I can't spend those health insurance dollars,,,they just evaporate down the rat hole

errc says

You went from wages to compensation. What does this mean? My compensation
package includes 5k+ per year my employer pisses away on "health" "insurance".

Next time, click the "Net Compensation" link for a definition of what it is before giving us the opportunity to make you look stupid.

"Net Compensation" is W2 wages. Health insurance premiums paid would not be included in W2 wages.

mell says

Getting rid of specialized deductions is the way to go.

And your opinion on the elimination of the EIC?

control point says

errc says

making us all collectively poorer.

My 401(k) balance and home equity is looking pretty good compared to 2009. Hell, even compared to 2005 or 2000...

So not making ME collectively poorer.

So yeah, thanks Obama!

What did obama do that you are crediting him with a thanks?

My stock gambling accounts are at record highs. My home equity is also at record high. I don't live all alone on an island, do you?

Higher housing costs make us all collectively poorer. You can confuse yourself otherwise, but you are not immune.

errc says

What did obama do that you are crediting him with a thanks?

Gosh, I'm a simple fella - he got elected - things got better. What else matters?

control point says

mell says

Getting rid of specialized deductions is the way to go.

And your opinion on the elimination of the EIC?

This is a difficult topic. Generally it is prone to fraud and falls into the "special deductions" category. Plus, you should not take on a mortgage or any other debt because you can deduct in from the taxes, that is what I mainly want to get away from. It pushes up prices canceling out gains and creates enormous shortfall on the next housing bust or job loss. I think it's fair for them to pay close to zero taxes. but yeah, if you are a big fan of negative effective tax rates., then that's not the plan for you.

Any plan that taxes capital gains less than labor is not the plan for me.

mell says

I think it's fair for them to pay close to zero taxes. but yeah, if you are a
big fan of negative effective tax rates., then that's not the plan for you.

So you are in support of the middle, lower middle and poor paying more taxes and the upper class and ultra rich paying the same or less taxes than current law?

Why?

theoakman says

Yeah, meanwhile, all 401k managers piled their customers into bonds earning 2% this entire time.

Do a lot of people have 401(k) managers who do this for them? I manage my own. There is an active management choice that is new this year, but it seems like mostly a way for someone to get a fee -- most people stayed clear.

tatupu70 says

Think about it this way--the cost of labor is also the income of your customers.

Right, this is a chief principle behind the American economy. A large percentage of our GDP has historically been consumption. It also goes way back -- think of Fordism (Henry, not Gerald).

spydah_hh says

It doesn't matter who wins the next election after Obama, the next president will spend like hell just like the previous presidents.

Again, constitutionally, please provide the mechanism which allows any president to "spend like hell"? Presidents can propose budgets, but Congress is able to adopt them or not adopt them.

corntrollio says

please provide the mechanism which allows any president to "spend like hell"?

http://research.stlouisfed.org/fred2/graph/?g=sI4

fed spending since 1993

Clinton: $1.6T to $2.0T, up 25%.
Boosh: $2.0T to $3.6T, up 80%
Obama: $3.6T to $3.8T, up 6%.

tatupu70 says

The data I can find disagrees with you.

http://www.ssa.gov/OACT/COLA/central.html

It shows the difference between mean and median income. And if you inflatoin adjust the 1990 wages of 20,172.11 to 2012:

http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=20172.11&year1=1990&year2=2012

You get $35,435.31 which is significantly less than the average compensation of $42,498.21

Wtf is this? Are these numbers for wages adjust for inflation? All I see are nominal averages and medians of wages, nothing about wages being adjust for inflation to determine real wages compared to a previous decade or year..

spydah_hh says

Wtf is this? Are these numbers for wages adjust for inflation? All I see are nominal averages and meridians of wages, nothing about wages being adjust for inflation to determine real wages..

OK--take a timeout and re-read my post. Notice how I list a link to the bls inflation adjustment calculator and how I inflation adjust the 1990 wages.

Do you see it now?