patrick.net

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?

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.

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.

No you have it wrong. First of all high labor cost is NOT the cause of inflation. Increasing the money supply is the cause of inflation, let's get that part right first.

Second if labor costs are high, then jobs are eliminated and replaced by cheaper method, either by outsourcing, automation or complete elimination. So instead of a company hiring 100 U.S. workers to meet demand, they will look to outsource the jobs abroad or even automation and perhaps hire only 15 U.S. workers instead.

You're thinking it wrong as if the companies will hire all those high costs of labor and increase the price to balance the labor cost, they're not they're going to eliminate the high cost labor to keep prices low and affordable to meet or increase demand.

control point says

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

Of course cost is at an all time low, out-sourcing and automation is at an all time high.

tatupu70 says

No, it's not proof that the CPI is wrong. It's proof that you don't understand what average wage is. It doesn't mean what the average person makes. It is the average of the total US wages. But, since disparity is so high, that's NOT the average person's wage.

Ok, you're right it's the avg of the total US Wages. I worded it wrong, but lets be consistent at least. So if you're going to speak of the national average and use it into your CPI calculation then you have to be consistent. Which means the nation average income today is STILL higher than in the 90s when adjusted to inflation.

At least according to the CPI, which I know is wrong but still have to be consistent otherwise all this data and chart you provided me is moot.

Also I don't see how you can claim that the higher national avg is caused by the wealth disparity. That doesn't make sense. Yes, I am sure there are outliers when calculating the national avg, but outliers are placed on both sides of the spectrum, the rich and the poor.

So once again my previous post still stands. At least I am being consistent here.

spydah_hh says

Which means the nation average income today is STILL higher than in the 90s when adjusted to inflation.

Exactly. That's what I've been saying all along. Total income in the US is higher. We don't have an income problem--we have a DISTRIBUTION problem.

spydah_hh says

Also I don't see how you can claim that the higher national avg is caused by the wealth disparity. That doesn't make sense

It absolutely makes sense. There are a small number of people that make insanely high amounts of income and a large amount of people that make very little income. That will always give a higher mean than median.

tatupu70 says

Exactly. That's what I've been saying all along. Total income in the US is higher. We don't have an income problem--we have a DISTRIBUTION problem.

Funny i actually agree with you for once. However, this is also where you and I disagree as well.

The distribution is cause by the money supply and the mal-investments. However, you seem to think that the distribution has something to do with wages.

The rich don't even earn wages. Now that I think about it, I total forgot that the super rich and even most rich depending how high up the wealth scale you go don't earn a wage. They make money from investments which doesn't even count as wages if I am not mistaken. Hell remember the Zuckerberg and Steve Jobs $1 salary?

And if that is the case even with the WAGE national avg chart, most of the rich or at least many of them and of course none of the super rich are even included in the chart. Therefore, making the wealth disparity argument in that chart nullified.

Which again brings me back to my previous point that according to your model the CPI isn't accurate.

spydah_hh says

The rich don't even earn wages

That's obviously not true. The rich earn a disproportionate amount of their total earnings as capital gains certainly, but they do earn wages as well. Very healthy wages.

spydah_hh says

And if that is the case even with the WAGE national avg chart, most of the
rich or at least many of them and of course none of the super rich are even
included in the chart. Therefore, making the wealth disparity argument in that
chart nullified.

No, the chart isn't nullified, it just underestimates the real problem. It's much worse than what the chart indicates.

spydah_hh says

Which again brings me back to my previous point that according to your model
the CPI isn't accurate.

There have been several other threads on here trying to disprove CPI and they've all failed miserably. You're welcome to start another and look at prices from the past and compare them to today.

Most of the people who claim CPI is a lie don't even know how it's calculated--claiming that food, energy, and housing aren't included...

spydah_hh says

The distribution is cause by the money supply and the mal-investments.

OK-I've asked this several times. How exactly does money supply cause inequality? And please don't just say that "cronies" or the rich are first in line for the new money. I want to know HOW the new money gets into their hands, if that's your explanation.

Ditto for malinvestments--how does this cause inquality?

spydah_hh says

Second if labor costs are high, then jobs are eliminated and replaced by cheaper
method, either by outsourcing, automation or complete elimination.

If labor costs are high? If? This conversation between you and I started because you said labor costs WERE high. Are they high, or are they low? Lets answer this question first.

It is very hard to have a discussion with you given the diarrhea of the brain you seem to be suffering from. I am trying to keep my responses short - but even then you respond with multiple unrelated, unsupported arguments.

mell says

You gave a very specific example, the numbers look different depending on kids
and marital status and esp. mortgage etc. But for your example the answer is YES
- absolutely.

It was a typical nuclear family example. Median income, 2 kids, etc.

So why do you think that the tax burder on the typical nuclear family should go up while the tax burden on a high earner should go down?

tatupu70 says

That's obviously not true. The rich earn a disproportionate amount of their total earnings as capital gains certainly, but they do earn wages as well. Very healthy wages.

The super rich doesn't earn wage they make money from dividends, that's why most CEOs are paid in stocks. The rich yes, like I said depend on how high the wealth scale you go. But even when Zuckerberg was CEO of Facebook his wage was 600k before he reduced it to $1, which by the way is what most of the super rich and very rich do.

tatupu70 says

spydah_hh says

The distribution is cause by the money supply and the mal-investments.

OK-I've asked this several times. How exactly does money supply cause inequality? And please don't just say that "cronies" or the rich are first in line for the new money. I want to know HOW the new money gets into their hands, if that's your explanation.

Ditto for malinvestments--how does this cause inquality?

Already told you, you just refuse to believe it.

The first is that the Federal Reserve creates dollars and injects them into the economy. This is no secret. In Washington, inflating the money supply is considered a good thing; the Fed does it openly and proudly. Google “Federal Reserve money supply data,” and you will find plenty of evidence on the Fed’s own web sites.
figureA

The second fact is that, when Fed officials inflate, the new dollars do not descend on the country in a uniform blanket.

For instance, in 2009, when the U S population was 308 million, and the Fed injected an estimated $200 billion into the economy.1 Did someone from the Fed show up at your front door to give each member of your household their shares, $649.34 per person? No? Okay then, we know the money was distributed unevenly. Other people received your shares.

The federal government and mainstream press ignore the implications of this. Most newly created dollars are injected through the banking system, and no one knows where they end up. All we can say for sure is that you and I do not receive our shares, so our dollars must go somewhere else.

http://richardmaybury.com/feddisaster.html

What's even more interesting this is the same thing that's happened in 1924 through the 1920s. The government increased the money supply making it cheap to borrow. Much of the money went into the stock market. Just like today stocks are above 16,000 but yet bad economic news comes out every week, but the stock market and even real estate defy economic logic. Simply put stocks are in a bubble. When will it burst? I have no idea.

tatupu70 says

No, the chart isn't nullified, it just underestimates the real problem. It's much worse than what the chart indicates.

It's not underestimated. The chart talks about wage incomes and I stated before the rich and damn sure the 1% aren't paid in wages. The rich like those who make 400k-600k as a CEO yes they're paid in a wage, but sometimes they reduce that income and move it into a stock and are paid in dividends.

So all those people are not included into your nation wage avg. Therefore, you wealth disparity from the nation wage avg is bogus. So it is mostly accounting for the middle and upper middle class incomes which means that the middle class according to your CPI calculator is saying we're better off today than we were in the 90s. But you and I agree that isn't the case. But just goes to show how wrong most government statistics are.

spydah_hh says

The super rich doesn't earn wage they make money from dividends, that's why most
CEOs are paid in stocks

No they're not. Most CEOs earn a good salary--$300K+ with a good bonus (several hundred thousand) + stock options or stocks.

spydah_hh says

But even when Zuckerberg was CEO of Facebook his wage was 600k before he reduced
it to $1, which by the way is what most of the super rich and very rich do.

The super rich yes. Again--that just makes my argument even stronger.

spydah_hh says

Already told you, you just refuse to believe it.

You explained nothing.

spydah_hh says

For instance, in 2009, when the U S population was 308 million, and the Fed
injected an estimated $200 billion into the economy.1 Did someone from the Fed
show up at your front door to give each member of your household their shares,
$649.34 per person? No? Okay then, we know the money was distributed unevenly

This is a poor logic. The Fed didn't show up at anyone's front door giving anyone $649.34 per person. All that proves is that showing up at the front door is NOT how the money was distributed.

My question is how does increasing money supply increase wealth disparity. I want specific explanations as to how this new money gets into the hands of the rich.

Note: I'm genuinely curious.

spydah_hh says

Therefore, you wealth disparity from the nation wage avg is bogus.

It's not bogus--it just underestimates the true disparity because it doesn't include capital gains.

If you want to disprove CPI, then do some research and look at prices from 50 or 100 years ago and compare them to today.

tatupu70 says

spydah_hh says

Therefore, you wealth disparity from the nation wage avg is bogus.

It's not bogus--it just underestimates the true disparity because it doesn't include capital gains.

So your model still is bogus then because it doesn't include capital gains. Since your model does not include what you're trying to argument then it's bogus, find me another model that does.