patrick.net

Homeboy says

Certainly the things you mention have an effect, but they cannot entirely explain what we see in this graph:

Interesting graph. I think it confirms my hypthothesis rather than refutes it. The top 10% really takes off in the early 80s, right as Reagan takes over and mucks up the tax code, and as manufacturing begins to go overseas.

It won't be a straight line because the top 10% earns their money from corporate stock values. Their income will go up and down based on the stock market... But as you pointed out, it's trending up while Aveage Joe is flat.

tatupu70 says

Interesting graph. I think it confirms my hypthothesis rather than refutes it.

Seems like you think EVERYTHING "confirms your hypothesis", whether it does or not.

tatupu70 says

The top 10% really takes off in the early 80s, right as Reagan takes over and mucks up the tax code, and as manufacturing begins to go overseas.

Actually, that's wrong. Reagan's tax act wasn't until 1986, after that spike has already ended. What DID change in the early 80s was the Fed discount rate - see my previous chart. Hmmm...very interesting, that.

tatupu70 says

It won't be a straight line because the top 10% earns their money from corporate stock values. Their income will go up and down based on the stock market..

Right, and the Fed influences the stock market PROFOUNDLY, to the point that even a whisper of the notion that the Fed is planning to change any of its policies can cause wild swings in stock prices. So no, none of that supports your position. Right now, the Fed is holding rates so low that banks can essentially get free loans (and keeping them there for so long that it can't reasonably be considered a temporary measure anymore), and wealth disparity just happens to be at an all time high. You really don't think there's any connection there?

Homeboy says

Seems like you think EVERYTHING "confirms your hypothesis", whether it does or not.

Well argued.

Homeboy says

Actually, that's wrong. Reagan's tax act wasn't until 1986, after that spike has already ended. What DID change in the early 80s was the Fed discount rate - see my previous chart. Hmmm...very interesting, that.

Is your argument that lower interest rates cause wealth disparity? I think it's probably true that stocks perform better under lower interest rate environments--but I disagree that the Fed is the cause of lower rates. The market sets the rates that matter.

Homeboy says

Right, and the Fed influences the stock market PROFOUNDLY, to the point that even a whisper of the notion that the Fed is planning to change any of its policies can cause wild swings in stock prices

True--as Bill said earlier, they do have control of rates on the high side to put the brakes on an economy. Any whiff that they are raising rates to slow things down will cause stocks to fall. And, similarly, if folks are expecting the Fed to raise rates and they don't, that could cause stocks to rise.

Homeboy says

Right now, the Fed is holding rates so low that banks can essentially get free loans (and keeping them there for so long that it can't reasonably be considered a temporary measure anymore), and wealth disparity just happens to be at an all time high. You really don't think there's any connection there?

I don't. Disparity has been rising for 30+ years. I don't think a condition that has only been happening for 5 years could be the cause. And, I don't see a mechanism despite all the crony nonsense that is spewed here.

tatupu70 says

And, I don't see a mechanism despite all the crony nonsense that is spewed here.

You don't believe being able to borrow as much money as you like at effectively zero interest, and invest that borrowed money, is a mechanism to increase wealth?

I don't think that's the only way wealth disparity increases - lowering the capital gains tax is another obvious one. But I think it is one way, and you seem to completely dismiss it out of hand.

Why do you say "crony nonsense"? It's a fact that wealthy members of the investor class move freely from key Wall Street positions to government positions and back again to Wall Street, and have a huge amount of influence on government monetary policy. Tell me what exactly is "nonsense" about that.