patrick.net

True, but those 300% more people are still each 4 times as productive leading to 1200% as much wealth, so it does not explain the drop in quality of life.

Are grocery store workers really 4 times more productive?

errc says

Are grocery store workers really 4 times more productive?

Workers in general are. In any case, today's grocery store workers are at least somewhat more productive than those of 70 years ago with laser scanners, electronic payment, and large-scale grocery stores. They certainly aren't less productive.

mell says

When talking about today's lower wage jobs such as grocery store workers it is likely that increased influx from women, students (student debt anyone?) - possibly with largely useless degrees - and (to a lesser extent) immigrants has put enormous pressure on the demand for these types of jobs, therefore reducing the salary.

Which is just a fancy way of saying that the owner class is taxing the wealth producers (workers) an even more outlandish percentage of their wealth production than two generations ago. Saying supply and demand isn't a justification, moral or economic, for something. They aren't magic words that cause fundamental reasons to become inconsequential.

mell says

2008 the rents dropped to almost half of what they are today

Where exactly was that at?

bob2356 says

mell says

2008 the rents dropped to almost half of what they are today

Where exactly was that at?

San Francisco bay area. The have roughly doubled since then. They would have increased somewhat via an organic recovery anyways, but at least 50% of the increase is due to the Fed buying MBS and suppressing rates. Speculators and big boys have been loading up on RE as soon as ZIRP and QE/MBS buying was decided. They will also have no qualms getting rid of non-performing debt as soon as the next crash hits. Rinse and repeat.

mell says

bob2356 says

mell says

2008 the rents dropped to almost half of what they are today

Where exactly was that at?

San Francisco bay area. The have roughly doubled since the

So you are back where you started at? Hopefully you put the savings to work.

bob2356 says

So you are back where you started at? Hopefully you put the savings to work.

I put some into the stock market as soon as I heard that QE was a done deal. People should not be forced to play the markets in order to keep up with inflation though. Inflation is the only thing central banks actually deliver on. The CPI is worthless because it is no wonder that you see low/muted inflation for the broader basket after everything has been eaten up by raging inflation in the essentials (housing, healthcare, food and education/childcare). Hey, even gas prices are shooting up again.

Well, if you have an iphone, you can exchange it for a house in Detroit.

mell says

Absolutely 100%, because the jobs that survive and the new ones that are slowly created are the ones that are durable and add value, you will break the ever wilder boom bust cycle. Sound money is key.

lol--that is pure BS. A LOT of jobs that don't survive add more value than the ones that do survive. Sound money is a distraction like I said. It has absolutely nothing to do with the mess we're in. The boom-bust cycle we're in is because of wealth disparity. Fix that by going back to the policies and structure of the 1960s economy and we'll be fine.

mell says

Nope, in this globalized world you see inflation in goods that are easily shipped around the world within days. How was there deflation in 2008 then before the stick-save? The "structural imbalances" are created by the policies of the central banks and the government bailouts. If we had let 2008 play out, there wouldn't be 50% of every dollar be going to the top 10% right now.

There was deflation because people were defaulting on debt. If we let 2008 play out, the rich would have bought even more of the assets, so you're right--it wouldn't be 50% of every dollar going to the rich, it would probably be more like 60-70% of every dollar.

Dan8267 says

True, currency debasement steals wealth from the poor and the middle class and gives it to the rich, but for the guy living paycheck-to-paycheck that doesn't matter because he has no savings.

Isn't this a contradiction? The rich, almost by definition, have all of the savings. If currency debasement destroys savings wealth, wouldn't it affect those with the most savings most, while affecting those with little (or no) savings least?

I generally agree with you but I have always scratched my head about your opinions on central banking and reconciling with your other thoughts.

control point says

Isn't this a contradiction? The rich, almost by definition, have all of the savings. If currency debasement destroys savings wealth, wouldn't it affect those with the most savings most, while affecting those with little (or no) savings least?

Middle class has savings too and they would be crushed in high inflation environment. The working stiff while living check to check will still get hurt by inflation because their wages (especially when taxes are taken into account) will not keep up with increasing prices so cumulatively they will be worse off as time goes on. Meanwhile the rich have most of their wealth in stocks and will beat inflation anyway as they pass on price increases to customer. So middle class and the poor will get hurt the most in that world.

control point says

The rich, almost by definition, have all of the savings. If currency debasement destroys savings wealth, wouldn't it affect those with the most savings most, while affecting those with little (or no) savings least?

The flaw in your reasoning is that the rich have savings. They don't. They have assets. They own companies, factories, land, and other means of production. They don't have most of their wealth in currency, whether in a bank or not. So the rich aren't harmed by currency debasement like the middle class is. In fact, the rich are largely helped by currency debasement because

1. The rich have workers and those workers salaries are automatically decreased every day by currency debasement.
2. The rich own stocks who's purchasing power is automatically increased every day by currency debasement.

I suspect that if we changed one little aspect of our banking system, the vast majority of those supporting currency debasement would suddenly shift against it. Image if all the purchasing power redirected by currency debasement was redirected to the poor instead of banks. I.e., the poor received all the interest payments of loans given out by the Federal Reserve or given out by banks. Banks can charge a nominal fee for the work of performing and maintaining the loan, something that's very small.

P.S. I don't know who disliked your comment, but I voted thumbs up on it because it's always a good thing to rationally challenge a belief. Even if the challenge is wrong, it still provides insight through its rebuttal.

dublin hillz says

Middle class has savings too and they would be crushed in high inflation environment. The working stiff while living check to check will still get hurt by inflation because their wages (especially when taxes are taken into account) will not keep up with increasing prices so cumulatively they will be worse off as time goes on. Meanwhile the rich have most of their wealth in stocks and will beat inflation anyway as they pass on price increases to customer. So middle class and the poor will get hurt the most in that world.

That's not true. Whether wages keep up with inflation has pretty much nothing to do with the rate of inflation. It has everything to do with the relative strength of workers vs. owners. If you look at the 1970s high inflation era, workers did fine.

And the working stiff, living paycheck to paycheck, will have a higher percentage of debt that will be inflated away.

Inflation is a distraction.

Dan8267 says

The flaw in your reasoning is that the rich have savings. They don't. They have assets

Well, that's not really true. They have savings and assets. They have a diversified portfolio which almost certainly includes fixed income securities.

Dan8267 says

The rich have workers and those workers salaries are automatically decreased every day by currency debasement.

Like I said on the last post--workers real wages have very little relation to inflation. They are determined by supply and demand/relative power of workers vs. owners.

Dan8267 says

suspect that if we changed one little aspect of our banking system, the vast majority of those supporting currency debasement would suddenly shift against it. Image if all the purchasing power redirected by currency debasement was redirected to the poor instead of banks. I.e., the poor received all the interest payments of loans given out by the Federal Reserve or given out by banks. Banks can charge a nominal fee for the work of performing and maintaining the loan, something that's very small.

Inflation doesn't change purchasing power as long as the new money is distributed equally. The problem is that we have structural imbalances that are causing money to gravitate to the top rather than remain equally distributed. Rather than rail at something that makes no real difference (inflation)--you should be focusing the anger at the structural issues with the economy.

Dan8267 says

The flaw in your reasoning is that the rich have savings. They don't. They have assets. They own companies, factories, land, and other means of production. They don't have most of their wealth in currency, whether in a bank or not. So the rich aren't harmed by currency debasement like the middle class is. In fact, the rich are largely helped by currency debasement because

Who has the savings then??? Who owns the debt? Savings = deferred compensation = debt. As tatu says, whether MOST (most added, mine) wages keep up with inflation has nothing to do with the rate of inflation. That is, the increase in aggregate wages IS inflation. That most wage earners are not earning an equal percentage of the wage pie is what makes increasing prices adversely affect them.

Uneven inflation is a sympton of changing wage distribution.

You would think that with the total disconnect observed over the last 8 years of currency level and price inflation, everyone would stop thinking that currency debasement has anything to do with inflation.

The recovery is sluggish because not enough demand was generated. We should be so lucky to generate jobs at the rate of the high inflation 70s.

20MM jobs created in the 70s vs. 20MM in the last 20 years.

Dan8267 says

mell says

What happened is that the dollar has been devalued to the hilt and its devaluation

True, currency debasement steals wealth from the poor and the middle class and gives it to the rich, but for the guy living paycheck-to-paycheck that doesn't matter because he has no savings. So it still does not explain why the grandson can't live off his salary doing the same thing that his grandfather did and raised a family with.

I'll try to explain it: The problem is that nearly all of the extra dollars in public debt effectively end up first in the pockets of the 1%, and then in the assets owned by the 1%. Public debt, in the US, is in effect a mechanism for allowing lower taxes on the wealthy. For example, the long-term capital gains tax rate was limited to 15-20% at any level of regular income+gains from 1982 and most years thereafter until today, 33 years later. Employment income was taxed all the way up to 39.6%.

Said in another way, most of these new dollars, the cause of the "currency debasement" that people talk about, end up as property of the top 1%. This means that the top 1% end up owning a higher fraction of the total wealth . The bottom 99% now end up owning either nothing, or a house that cost so much to purchase that an ever increasing part of their stagnant-since-1980 income is consumed by the house.

I think that does explain why the grandpa of 2015 owns a house but the grandson cannot. The increasing debt, or "debasement" favors those who are already wealthy, and punishes those who are already poor.

justme says

Said in another way, most of these new dollars, the cause of the "currency debasement" that people talk about, end up as property of the top 1%. This means that the top 1% end up owning a higher fraction of the total wealth . The bottom 99% now end up owning either nothing, or a house that cost so much to purchase that an ever increasing part of their stagnant-since-1980 income is consumed by the house.

I think that does explain why the grandpa of 2015 owns a house but the grandson cannot. The increasing debt, or "debasement" favprs those who are already wealthy, and punishes those who are already poor.

Inflation keeps an unsustainable economy alive for longer by continuing to give the poor and middle class enough to live on. I guess you could argue that, long term, they would be better served by allowing the economy to implode. But that's not an argument I would make. I'd rather keep the economy alive in the small hope that Americans come to their senses and make the necessary changes.

control point says

Who has the savings then

The major banks own the debt, which is created out of thin air rather than by the actual money the banks have. This is the design and sole purpose of the fractional banking system. Like it or not, the banks generate loans that are ten times bigger than the actual money they hold, which is obtained from you and me.

Furthermore, the people saving up for a major purchase like a house or a car are disproportionately harmed by currency debasement. The top 1% are harmed far less, and arguable come out ahead because of currency debasement. The top 0.1% most certainly do. The poor would be helped by currency debasement if the interest on their loans weren't higher than the debasement rate, particularly credit card debt which is tied into debasement.

Please note that I'm talking specifically about currency debasement, not cost of living increases resulting partly from currency debasement. That's why I don't use the word inflation anymore. It's been thoroughly poisoned.

justme says

The problem is that nearly all of the extra dollars in public debt effectively end up first in the pockets of the 1%, and then in the assets owned by the 1%.

justme says

Said in another way, most of these new dollars, the cause of the "currency debasement" that people talk about, end up as property of the top 1%. This means that the top 1% end up owning a higher fraction of the total wealth . The bottom 99% now end up owning either nothing, or a house that cost so much to purchase that an ever increasing part of their stagnant-since-1980 income is consumed by the house.

Exactly. And that is the entire purpose of the modern banking system. Effectively, our banking system levies a huge tax on the working middle class and uses that tax, not to provide public services, but to increase the wealth of the top 0.1%.

This is the problem that no one wants to talk about. And if the return on the loans made through fractional lending were given to the poor as personal income, the bank lobbyists would be up in arms. Of course, no such bill would ever make it to the floor for a vote, nonetheless pass. No such discussion would even be allowed.

Dan8267 says

The major banks own the debt,

And who owns the major banks?

A few thousand extremely rich people own most of the equity of the major banks, particularly the preferred shares, which is what really counts.

As to who owns the Federal Reserve, that's kept secret, but it's pretty obvious that it's the same people who own the major banks.

Dan8267 says

A few thousand extremely rich people own most of the equity of the major banks, particularly the preferred shares, which is what really counts.

As to who owns the Federal Reserve, that's kept secret, but it's pretty obvious that it's the same people who own the major banks.

So all (most) of the savings is held by the banks which are owned by the rich. So how don't the rich have all (most) of the savings again?

Bottom line is total US credit market is almost 60T. Total market cap of US equities is 19T. Total value of US real estate is 26T. The rich own the highest % of debt, then equities, then real estate. Real estate and equities are positively affected by inflation, debt is negatively affected.

The highest % of the rich's wealth is OWNING debt. Devaluing this through inflation harms the debt owners. This affects the rich more than anyone else.

control point says

The highest % of the rich's wealth is OWNING debt. Devaluing this through inflation harms the debt owners. This affects the rich more than anyone else.

Absolutely false. The nominal value of assets and associated debt goes up while wages stay stagnant as the currency is debased, this is the worst deal for the ones owning the debt, esp. the new debtors. It would be far better to default and start over. The only point you can make is that current debtors who locked in a fixed rate (for housing mostly) would not suffer from this (though they still suffer from general inflation which will leave less for servicing debt), but that is pretty much the same thing as cheering on a pyramid/ponzi scheme as you NEED new debtors or you're screwed.

mell says

The nominal value of assets and associated debt goes up while wages stay stagnant as the currency is debased

History shows this to be false. There is no data that I've seen that shows real wage growth is correlated with inflation rate(if anything, real wages tend to perform better under inflationary time periods as that often means labor has the upper hand). As Dan and others have stated, wages are determined by leverage.

mell says

though they still suffer from general inflation which will leave less for servicing debt

Wrong. Their wages will grow with inflation so the fixed debt is a smaller percentage of income. I won't even comment on your misguided use of Ponzi scheme yet again.

control point says

So all (most) of the savings is held by the banks which are owned by the rich. So how don't the rich have all (most) of the savings again?

The rich own the banks. They don't keep their money there.

control point says

The rich own the highest % of debt, then equities, then real estate. Real estate and equities are positively affected by inflation, debt is negatively affected.

No bank loses money from currency debasement because the rate of debasement is always kept below the rate of interest charged to their customers. They may lose some profits, but not principle. Bankers are very good at ensuring that they are always coming out ahead under any monetary policy.

If banks actually lost purchasing power through currency debasement, then the Federal Reserve would never debase the currency. The Federal Reserve first and foremost serves the banks. Furthermore, the banking lobby is perhaps the strongest lobby in America. The government gives the banks whatever they want.

tatupu70 says

It has everything to do with the relative strength of workers vs. owners

Yes, that is extremely important; however inflation is the nails on a cross of the middle class and further exacerbates this power differential.

dublin hillz says

Yes, that is extremely important; however inflation is the nails on a cross of the middle class and further exacerbates this power differential

What makes you say this? I have yet to see any data that supports this view.

Dan8267 says

The rich own the banks. They don't keep their money there.

http://www.cnbc.com/id/100935856

"A separate study from Bank of America recently found that 56 percent of millionaires have a "substantial" amount of cash. Only 16 percent of them plan to invest that cash in the next couple of months. And only 40 percent plan to invest it over the next two years."

"According to research from American Express Publishing and Harrison Group, the savings rate of the wealthiest 1 percent soared to 37 percent in the second quarter. That's up from 34 percent in the second quarter of 2012—and more than three times their savings rate in 2007."

They will pass all price increases to the stiff. The middle class will get demoralized as their savings are worth less and they perceive societal pressure to consume to the max at the point of the gun. The wealthy with stocks have nothing to worry about as they will beat inflation guaranteed. Those with bonds funds will eventually see the funds buy new securities that yield higher or they will simply buy more and dollar cost average themselves out of a jam.

"What makes you say this? I have yet to see any data that supports this view."

dublin hillz says

They will pass all price increases to the stiff

Actually corporations are already charging the profit maximizing price so any increases will reduce profits.

dublin hillz says

The middle class will get demoralized as their savings are worth less and they perceive societal pressure to consume to the max at the point of the gun. The wealthy with stocks have nothing to worry about as they will beat inflation guaranteed. Those with bonds funds will eventually see the funds buy new securities that yield higher or they will simply buy more and dollar cost average themselves out of a jam.

The middle class has as much (or more) debt as savings so they will be OK. Further, the spread between savings rates and inflation generally doesn't change much regardless of interest rate. When inflation rises, so do the rates paid on savings.

tatupu70 says

"A separate study from Bank of America recently found that 56 percent of millionaires have a "substantial" amount of cash. Only 16 percent of them plan to invest that cash in the next couple of months. And only 40 percent plan to invest it over the next two years."

Millionaires? You think that mere millionaires are in the 0.1%? Your even more ignorant than I thought.

A billionaire is literally a thousand times as wealthy as a millionaire. It's a math thing.

Dan8267 says

Millionaires? You think that mere millionaires are in the 0.1%? Your even more ignorant than I thought.

A billionaire is literally a thousand times as wealthy as a millionaire. It's a math thing.

lol. Dan--you realize that a billionaire is a subset of millionaires, right? Someone with 1000 millions is still a millionaire.

Besides--where did I say that I was talking about the 0.1%? Is that your definition of rich?

tatupu70 says

lol. Dan--you realize that a billionaire is a subset of millionaires, right? Someone with 1000 millions is still a millionaire.

lol, your data doesn't generalize to billionaires.

tatupu70 says

The middle class has as much (or more) debt as savings so they will be OK.

yes, the 1970s was an immense gift to the middle class who had bought by 1974. The boomers were at most age 28 then, so not many had mortgages, alas, and of course revolving was miniscule then. So I guess the leading edge of the baby boom got discounted cars thanks to the 70s inflation.

But a $30,000 loan in 1970 was being repaid in 1/3 as valuable dollars by 1985 . . .

I'd rather keep the economy alive in the small hope that Americans come to their senses and make the necessary changes.

-------------

I guess it depends on what your definition of 'the economy', is.

Whats so special about 'The Economy', that youre fighting so hard to save? The way i see it, when people refer to 'The Economy', they're referring to the complex system of bullshit and financial gimmicktry; is it really worth saving?

Dan8267 says

lol, your data doesn't generalize to billionaires.

That would be a more effective argument if you actually had some data or sources to support such a statement.

Here's one that doesn't support you:

money.cnn.com/.../billionaires-hoarding-cash.../index.html

"Each uber wealthy person boosted their cash holdings by an average of $60 million over the past year, according to the 2014 Billionaire Census published by Wealth-X and UBS (UBS)."

"The Wealth-X and UBS report shows that on average, $600 million, or 19%, of billionaires' assets is sitting in cash."

tatupu70 says

That would be a more effective argument if you actually had some data or sources to support such a statement.

http://blogs.wsj.com/wealth/2007/06/12/how-the-rich-invest/
http://www.cnbc.com/id/102196033

Will you shut up now, or do you need to have the last word?

Dan8267 says

Will you shut up now, or do you need to have the last word?

I'm fine with you getting the last word, but that source doesn't say what you think it says. Showing how the rich invest in mutual funds doesn't prove that they don't keep significant dollars in cash. Do you disagree with the source saying that 19% of billionaires assets are in cash? That's $190MM+ per billionaire.

For someone as well versed in logic as you, I'm surprised at your posts here.

errc says

Whats so special about 'The Economy', that youre fighting so hard to save? The way i see it, when people refer to 'The Economy', they're referring to the complex system of bullshit and financial gimmicktry; is it really worth saving?

Agreed--the financial gimmicks economy isn't worth saving. That would be the part that needs fixed. When I refer to the economy, I'm referring to the overall system where my labor is translated to money that can be exchanged for goods and services.

tatupu70 says

Do you disagree with the source saying that 19% of billionaires assets are in cash? That's $190MM+ per billionaire.

You clearly don't read the articles that you quickly Google to support your suppositions. From your article,

According to research from American Express Publishing and Harrison Group, the savings rate of the wealthiest 1 percent soared to 37 percent in the second quarter.

The article you referenced is making the case that in 2013, when the article was written, some of the 1% were drastically increasing their cash reserves. The article speculates that the reason for this is that those individuals were profit-taking after recent stock market rallies and perhaps preparing for a stock plunge and buying opportunity. This move to liquidity was covered on many news outlets including NPR in 2013-2014. Once in a while big players make big moves into and out of markets including real estate, stocks, gold, and cash.

You really need to adjust your Google searches so that you aren't causing confirmation bias in your results.

Here are two articles that explain why currency debasement -- they refer to it as inflation -- hurts the poor more than the rich.
Why Inflation Affects the Poor More Than the Rich
Inflation May Hit the Poor Hardest

And then there's the common sense argument. The bankers are the ones making money off of currency debasement. I allows them to get interest on money they just printed out of thin air -- well, that the Fed printed out of thin air and lent to them at a deep discount like 0.25%. The bankers charge our government and private citizens way more than the 0.25% interest they owe to the Fed, so the bankers end up making huge profits using money they didn't earn and having little skin in the game. If I could borrow $1 trillion from the Fed at 0.25% interest and loan it out to the government at 3.75% interest, I'd never work again. But the bottom line is that accounting ticks are zero-sum games; the don't increase the economic pie, rather, they just redistribute it

Dan8267 says

You clearly don't read the articles that you quickly Google to support your suppositions. From your article,

According to research from American Express Publishing and Harrison Group, the savings rate of the wealthiest 1 percent soared to 37 percent in the second quarter.

The article you referenced is making the case that in 2013, when the article was written, some of the 1% were drastically increasing their cash reserves

I read that. That's why didn't make a big point about the 37% number. Whether it's 10%, 19%, or 37%-it's a HUGE number and dwarfs the amount of cash that the middle class is saving. To claim that the rich don't have cash is just ridiculous--I'm shocked that you continue to make such a claim. Rich have diversified portfolios that will always include a fair percentage of cash. And a fair percentage of a LOT of money is a LOT of cash.

The first of those articles is poorly written and makes the same incorrect assumptions that others on here have made--primarilly that real wages increase less in inflationary times.

The second article is much more interesting--did you read it though? Its point is that, right now, is an unusual time because the inflation rate on the typical basket of goods for poor people seems to be increasing more than the basket for a typical rich person. It's speaking only to a very unique situation that may be occurring now (last 2 years) and is not generalizing that inflation affects poor people harder than rich.

Dan8267 says

The bankers are the ones making money off of currency debasement

Bankers make money regardless of what the currency does. They pay less in savings than they charge for loans.

Dan8267 says

I allows them to get interest on money they just printed out of thin air -- well, that the Fed printed out of thin air and lent to them at a deep discount like 0.25%.

The Federal Reserve doesn't loan money to banks. Almost NEVER. It's a sign of weakness so banks very, very rarely ever take a loan from the Fed.