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The Real Numbers of The Wealthy vs. the Middle Class and the Poor



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Ron Paul Was Right

Ron Paul, Schiff, Milton Friedman, et. al., were right: inflation shrinks the middle-class.

That's basically what I told my liberal step-father when he shared the above with me and a long list of his acquaintances, yesterday.

It's shocking to them because they remember when it was better and can't believe how bad it's gotten (tax bracket creep and inflation are just the karma one can expect to experience from "tax the wealthy" simplistic economic thinking and envy).

What do you think? http://consequeries.com/

Of course income distribution is getting more uneven...

what would you expect when the government keeps getting smaller and smaller every year!!!

Clearly, we need a larger government to reverse this trend...as the smaller government just isn't working!


Also, I should add, that the

Also, I should add, that the title is a bit decieving. From the 30s to the 80s, everyone saw their income rise, and their costs go down (ie, the value of their labor go up).

From the 80s to now, the income has skyrocketed for the top 1% and gone up for the top 10%, but costs have gone down for everyone. Your labor can buy more than it could in any point during that timespan (and before, of course, as well).

Consider that for the most part, wage inflation has matched with currency inflation (though the recession kind of muddles that up). Then, factor in the improvements in technology, etc, and the picture becomes clear.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

why was this even posted on the DP?

The whole assumption that anyone knows what the ideal distribution of wealth should be is absurd. Even if we all get together and vote on what we think the "ideal" distribution should be...its completely meaningless. Maybe the top 20 percent should make 1000x more than the rest of the population and everyone lives a middle class lifestyle with no one in poverty? Why should that be any less "ideal" then any other assumption? We are also forgetting that there isn't a fixed amount of wealth to be divided up. Wealth comes from purchasing power and purchasing power comes from productivity. What if wealth for all increased proportionately to amount the 1percent earned...every time the fat cats doubled their wealth your standard of living increased 10percent...would you even care? The video speaks to the massive growth in redistribution of wealth to the corporate/political class staring in the 1970's (you know, around the time we went off the gold standard and drastically started ramping up government programs, departments and entitlements). I wonder what the root cause of all this could be? ;)

Whose ideal wealth

Whose ideal wealth distribution are we currently in?

End the Fed.

End the Fed.

I have downvoted this. This

I have downvoted this.

This video implies that we need legislative remedies to the problems caused by too much legislation. The free market produces a much more balanced distribution of wealth. It is laws and bailouts that subvert the natural economic barriers to an imbalanced distribution of wealth. Banks would not be betting the farm on derivatives if they knew that they would have to eat their own losses. But since they know they will be bailed out by the Fed, they can gamble all they want. Win, and they will reap in untold profits, lose, and all their losses will be replaced by fresh Bernanke bucks.

See the free market works:

remember that study includes the slaves

"Banks would not be betting

"Banks would not be betting the farm on derivatives if they knew that they would have to eat their own losses. "

Who are "the banks"?

The people who make the decisions about where the Banks put their money are not "the banks". IF you are an executive at a bank, it is in your interest to "pump and dump" not build.

This is a major issue, IMO. When Citigroup commits and illegal or fradulent action, who pays? There is no "citigroup", there is just the investors and the executive. Moreover, investors, collectively, seem to allow the market to do all kinds of stupid things with their money.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

I agree with everything you

I agree with everything you said, except that the executives on Boards and in the decision making roles are somehow separate from the Institution making the decisions. I serve on the Board of the local Chamber of Commerce, but I doubt anyone would assert I am not "part" of the Chamber.

And still, the free market will produce more income equality than government.

The board of

The board of directors/executives of these publically traded companies are employees, not owners. That creats the separation.

I think it depends on what the definition of your free market is. I think that limited government intervention is necessary in the free market; courts, defense, anti-fraud, etc.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Yes you have courts when

Yes you have courts when someone else defrauds you. But I am having a hard time understanding what you are attempting to prove. How can anyone who professes to be a fan of freedom and down vote the statement that free markets produce more income equality and prosperity for all than a market managed by the government?

I didn't down vote your

I didn't down vote your comment.

Personally, I subscribe to a more free market-based economy; more Chicago/Austrian/French Liberal in nature. But I acknowledge that Keynesianism, neoclassical economics, American national, Germany historical economics, etc. etc. have valid points to make. Irrefutably, really, since some of the evidence at hand supports their views.

Moreover, most major schools of economic thought have brilliant, learned, published, esteemed people in their ranks, and one would be imprudent to dismiss their theories out-of-hand. For example, many people on these forums have read Hayek and Rand (and what have you) in detail (and many more who haven't support them), but hardly any have read the works of Friedman or Keynes, which are also compelling and offer an abundance of facts to support their theories.

Another issue is the ideological purity within these schools itself (like these forums), where dissent is not tolerated. It seems that any school that doesn't have its foundings before the 20th century is very intolerant of other economic ideas. There is supreme confidence that their theory is the correct theory. Economics is a science, but it is not biology or physics...there is large room for doubt. Economic schools of thought are turning into a kind of religion (non more so than Keynesianism), and that is very detrimental to the progression of economic theories.

Sorry to go a little off topic there, but it is something that has been bugging me...

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Well, I guess then we just

Well, I guess then we just disagree. First, anyone who has taken any economics class has read Keynes because that is the only crap they shovel down your throat in College.

I personally agree with a purely Austrian philosophy. It is not free from its problems, but it creates the fewest problems. The problems that remain are restricted only to people who bring it on themselves, and they in turn deal with the consequences of their negligence, not everyone else.

This is THE major issue...

There...fixed it for ya. ;)

I respectfully disagree....

He said that we need to "wake up" but gave no further instructions. To me...if folks wake up the next step is the same as it ever was...stand up and rebel!! It is coming to the point of it no longer being left vs. right. It feels more like "us" vs. "Them". I feel we, the liberty movement, are here to try to ensure that lady liberty rises from the ashes.

Peace, love, and preparedness!!

You contradict yourself

The video makes no such implication. You inferred it. You then even contradicted yourself by explaining that the problem brought out by the video wouldn't exist in a free market. Maybe the point of the video was to put the free market back into place to stop the inequality it showed us.

Maybe you didn't catch the laugh after mentioning that we didn't need socialism, implying that was a crazy extreme solution.

No 'dreaded' socialism was in

No 'dreaded' socialism was in quotes. It was thinly veiled sarcasm. The guy is pro-socialism. Collectivist solutions will only make the problem worse by concentrating power even more.

Whatever. I disagree but it doesn't matter

Because, regardless of what this 'messenger' personally feels, it is absolutely irrelevant to the fact that the bottom 90% are getting raped by the top 1%. There was NO SOLUTION promoted in the video so I don't get where you are clamoring about how horrible his solutions are.

Or do you want to argue that this inequality is ok as well?

I swear! If a socialist passed around ballots for a referendum to the people on ending the fed, you probably wouldn't even sign it because of who was pushing it!

Look the guy is not saying

Look the guy is not saying anything we don't know and know better. But the links are all to collectivist sites. His solutions are the same violence based ones that got us here. We need to promote videos showing the correlation between wealth inequality and size of government and closing the gold window.

His solutions will make it worse. Concentrating power just makes things easier for the bad guys.

I am opposed to the stolen wealth. Yes, absolutely. And it has been. But the solution isn't more theft.

If you want to correct the inequality you need to end the theft. The function of the state is to protect concentrations of wealth from the market which would disperse them.

That's all it does and all it can ever do.

If you can maintain large amounts of wealth in a free society it is only because you are continually providing better value than your competitors. That is hard to do, and rarely can this talent be passed on to your progeny.

The prime example is Rockefeller. He amassed wealth in a mostly free market. He tried desperately to create 'natural' monopolies and failed miserably. His competitors who couldn't provide a better value had to use the government against him. He then went into the government business to protect his business inept progeny from having to compete in a free market.

Without the government and the progressive movement Rockefeller largely engineered his children would have psised all of his wealth away. They tried to do just that! Rockefeller, Morgan et al created the progressive movement, ie fascism/corporatism, to prevent just that.

I agree with the person

I agree with the person above. Pointing out a problem is less than half the battle. Anyone can notice a problem. The hard part is giving the proper solution to the problem.

The person who made the video, as mentioned above, put 'dreaded' in quotes, and said we need to give people 'some' incentive to work. I did INFER that to mean the video maker believes there needs to be some government(some socialism) to help equalize incomes.

As a believer in Austrian economics, we do not believe in freedom of outcome but freedom of inputs. Government cannot give special operating privileges to any person or business. And, how ironic is it that promoting success and hard work and allowing people to keep the fruits of their labor leads to more income equality, rather than less.

I think an important Austrian

I think an important Austrian insight is that freedom of process is what will actually produce the greatest equality.

It's not outputs, it's not mainly inputs, but so long as the process is free, aggregations of capital will only exist so long as society on the whole is best benefited by those aggregations.

Without some regulatory apparatus to give you a comparative advantage against new market entrants you will only hold onto your wealth so long as you please the consumer best.

Yes I agree. I am not sure

Yes I agree. I am not sure what the people above are trying to prove or why my comments are getting downvoted. There is nothing wrong with stockholders owning stocks, buying and selling them as they please, as long as it is voluntary, and as long as they do not defraud anyone. But when executives of banks make risky investments, those investments and thus the company go bust, they have no right to try and get bailed out by government. That is what they do, but it shouldn't be that way. Freedom is about keeping your profits and eating your losses. And this process, as you correctly pointed out, creates the most for the greatest number of people.

And somehow that gets downvoted..

I don't pay attention to

I don't pay attention to 'voting' here, does it make any difference?

Anyway right the problem isn't securitization. The problem is corporations purchase liability immunity from the firm that claims a monopoly on violence. That has nothing to do with securitizing of ownership into stocks.

It's the liability immunity that is anti-capitalistic and which is just one of myriad methods the government protects capital aggregation from the market, and the state is paid to perpetuate those aggregations and protect them from the market.

I use anti-corporate rhetoric as much as the next guy, but I and all of us should be careful in doing so. The danger of corporations is all a result of state power.

It's of paramount importance that people understand this, else any solution must only make things worse.

I do understand the impulse to 'steal back' the ill gotten wealth. But any tool we would use to that end will be used against us. Further it's not needed, if we could create a free society that wealth will slip through their hands anyway.

Let's put some hard number to your test

If we followed a genuine free market (ran aside from the existing one), what are the estimates of how well that business would do vs. an entrenched monopoly already existing in that field?

As a general rule, public corporations have the following breakdown in expenses (% of wholesale price). Here's a couple givens from my research to get started:

They spend 40% on return for their investment.
They spend 20% on marketing/sales/promotion.
Those two above are often switched to a point.
They spend 6% on materials.
They spend 11% on labor.
They spend 3-5% on overhead.
They spend 5-10% on reinvestment. (capital improvements, R&D)
They spend the remaining on internal corporate profit. (execs, etc.)
Then the retailer usually adds 30-100% markup to get to sales price which the customer pays.

If you wanted to increase the wages paid WHILE reducing the price, what's the biggest pool you could reduce to free up that money? What items in that list are not needed (or lessened) in a locally ran company with great standing in their community? And finally, how could those same 'services' be dealt with in such a scenario?

Those givens aren't. It's

Those givens aren't. It's different for every firm and they change over time. Any firm that considers them givens either has government protection to keep them that way or is doomed.

But the question doesn't make sense anyway.

Why do you want to increase wages or reduce price? The goal of the firm is to increase total revenue. To that end you want all of your costs to be just sufficient to bid them away from other consumers of those capital goods. To that end you want your price to be just low enough so that your profit margin doesn't attract competition, which will usually enter the market with the latest technology and become a permanent problem for you.

Understanding that, then you understand that everyone providing labor is a firm. They want to get paid as much as they can, their 'price', without making so much that you attract competition ie tempt the consumer of your services to hire someone who may well have fresher skills.

In this free market model industry and prudence is rewarded. Any firm will be encouraged by nature itself not to over charge. All goods, consumer, or otherwise become cheaper. Purchasing power increases (assuming no central bank theft) for everyone and resources are used to best effect.

What the government provides is the ability for market actors to increase the price of their good or service by insulating them from competition. Over time preventing competition produces less wealth compared to a free economy, because market forces which push towards efficiency naturally, are prevented from doing so.

What's worse is the protection is not given equally, and is ephemeral. It changes with political tides and causes disruption. EG bubbles.

It's the unseen, it's the product which was never innovated, because competition never forced it, which is the problem.

Thank you for the Keynseyan econ 101 refresher

and thanks also for completely disregarding my entire line of questioning. Unfortunately, none of that was worth my time reading (although I still did) because we're talking Austrian econ 790 level here.

Don't go spouting how it has been done as the way to solve things. And please don't discount my givens because as I labeled them as a "general" rule and only applying to publicly traded corporations. Yes, each industry has a different breakdown but in order to discuss any numbers at all, we have to start somewhere. That's what I did.

Now, back to the question. Because you're obviously a defensive debater, I'll just give you the answers. ...and I'm being brief until you show you deserve a full explanation.

You want to stop the big banks from taking the workers' money? Here's how. Scenario: product wholesale price of $100, retail $179.

You eliminate the investor expense: save $40.
You eliminate the marketing expense and replace it with a simplified online management process that the procurement and shipping departments can do in the course of their same duties: Save $20.
You reduce management positions (because of reduced regulations to deal with): save $5.
You cut the distribution chain by integrating shipping with other loads and by keeping the market more local: save $30.
Then you increase regular job positions, more than double pay and give the workers the task of R&D. cost $30.
You create worker perks (daycare, flex hours, peer review) and community support programs: cost $10.

So you saved $95 and paid back $40. The retail price is now $124 instead of $179 so the customer is happy. The workers get more perks plus $25 pay (instead of $11) so they're happy. The community is getting highly paid citizens and local business support so they're happy and word of mouth replaces pushy ads. R&D is now done by the people who know the product best, not sterile engineers and psychoanalysis driven dolts so quality, production rates and quantity rises. The owner(s) now gets higher personal profit so he's happy.

The big financial brokerage houses on Wall St. get nothing.

The biggest single factor, however, is that since everyone is making more money and being more productive, there is no requirement for perpetual growth. This allows the company to stay local and small. No longer is there any push for globalization just to survive. And because of that, the next local market (either a county away or a state away) can support an entire new factory of happy workers, owner(s) and community.

This slowly leads to higher wage scales across the town (rising ocean from increased sales, etc.) and increases savings and standards of living. It also employs more people in total than the previous paradigm. It cuts unemployment and gives all workers more say in what they get paid.

I'm not sure why you can't see that reducing price and increasing wages is a great thing. Perhaps you could share with us what problems that would lead to?

In short, it leads to competition among companies for workers, not the other way around. Today, companies can treat workers any way they can get away with and this would reverse that. The other main thing it does is robs the banksters to keep more money locally. Isn't this our overall, highest level goal here?

This is the ideal libertarian free market. Commercialization and PR promotion based economies is not.

I'm not defensive and it

I'm not defensive and it wasn't me who was insulting. I just said you're givens aren't. What I wrote was not the least Keynesian and what you stated, again, isn't remotely Austrian. It's an assertion of a hypothetical improvement to a hypothetical business model. Maybe it's an improvement, maybe it's not. It doesn't address the general problem, and the problem isn't low wages.

If you want to stop the banks from taking from the mouths of labor just STOP it. End the Fed. And don't replace it. Ever. Wages are being inflated away and redistributed to Wall Street. Stop that.

But increasing nominal wages is nothing to be desired per se. Each market actor, whether capital or labor is working to increase total revenue. In a free market this leads to greater purchasing power for all concerned over time. In a free market if your total revenue is too high, whether labor or capital you invite competition, which will enter the market with better skills or newer capital goods. Bad for you, but good for society if you overplay your hand.

From labors perspective increased TR is beneficial only so long as it's not so much as you price yourself out vs the competition. The ideal wage, like the ideal profit is just as high as you can get away with without inviting competition. In this way the most goods and services are produced and the wealth society is optimized.

But the ideal wage or profit is not determinable by any formula overall, for any specific market, or even any specific worker.

What we do know now is that labor is too expensive, empirically, because we have unemployment. It's too high because of government action such as minimum wage laws, unemployment benefits, and 'collective bargaining' protection, etc. Every intervention they take to minimize unemployment will further increase it sooner or later.

But you ARE being defensive

You're defending the current system with box thinking. You have to allow for the possibilities that some of the pieces you consider givens are not as such. For example.

You state that if you're paying your workers too high of a wage, you invite competition and essentially could under. No. If you price your product too high BECAUSE YOU PAID YOUR WORKERS TOO MUCH, then that is true but I didn't say the scenario I gave had its price too high. I said it was 30% LOWER. How is the competition going to put me under if my prices are lower than theirs?

You missed the part where I financed my company without the traditional (bastardized) method of high finance. As such, you assumed that some large percentage could not be lopped off my expenses. In fact, such a large percentage can easily be cut that I can now make this scenario work by paying more to other costs (wages) and keeping the workers happy.

You do realize that the central bank system robs us not only by inflation but through the cost of every single purchase indirectly as well, right? If inflation was, say 10% of our wasted expense, then through aggregation of that across our suppliers and workers and their costs and those suppliers and their costs and so on down the chain, that by extension, our TOTAL AGGREGATE COSTS are about 90% wasted! By 'ending the fed', we can eliminate much of this but the business mentality of 'retiring off of investments' (which is the market's half of the cause of inflation) would continue. What I'm suggesting above solves both problems.

By cutting the endless growth paradigm (e.g. the scenario), we both end the fed (they starve and die off) and we cut the commercialism and globalism that fuels inflation. (I'm not talking about the inflation that results from printing money here. That ends with the fed dying off. I'm talking about costs rising which leads to price hikes. That's more of a result (short term) of businesses surviving from over marketing - selling to people that really don't want their product.)

This is all stuff that one company can do by itself. (Micro-econ) but as other companies learn it's a win-win-win-win, it may be adopted more and become pervasive to the point it affects the entire economy (Macro-econ). What I see you doing is arguing with macro principles that it can't be done before considering the micro aspect of it.

Thinking I, or anyone here,

Thinking I, or anyone here, is defending the current system is merely the most glaring evidence of your confusion. I'm not saying you're bad or ill intentioned, you just are really confused. This is not unusual, given the quantity of mind fcuking people get by our benevolent public institutions. I'm not defensive, on the contrary I'm trying to help you get out of the real box.

First and foremost you think wages are some magical thing. Wages like the prices of all costs of the firm are merely prices for previous stages of production from other firms. A laborer is merely an atomic firm, ie proprietorship, that sells labor. A union is a corporation that provides labor.

Again like all prices, you set your price to maximize TR over time. The reason you don't set your price of labor or capital goods or consumer goods too high is because you don't want to invite, essentially subsidize, competition. Just as Home Depot has no idea where their customers went when they charge too much, the prospective employee has no idea who got the job because they asked for too much. Everyone is playing the same game of blackjack, employees, employers, all firms.

The second thing you are profoundly confused about is this idea of 'waste'. Flatly you have no idea what waste is for anyone else is and never can. Now, if you guess properly and provide a product or service that captures this correctly, you may profit from guessing right. You would be an entrepreneur. But you never know what other people consider 'waste' because you have no idea what factors go into the decisions of consumers. All such decisions are weighed against continually changing options, for one reason because entrepreneurs are continually trying to provide those very options.

Now, in moral terms, what waste is for someone else is none of your damned business. If you can't figure out how to solve an efficiency need for someone else in a way they perceive has value, you will fail, and you should fail.

I agree we should end the fed. But I suspect you might want to replace it.

I agree we should fight 'globalism' but only because it's destructive and wrong to plan for others. Again I suspect you want to replace globalism with some other collectivist 'ism' so you can implement your own 'plan' or 'paradigm shift'.

I am indifferent to 'commercialism'. However free people, who are not forced to subsidize their oppressors, and not forced to consume the produce of cartels, decide to act is fine with me. Much of the evils we see today are a result of corporatism/progressivism/fascism which promote large corporations via regulations and other government action, which would otherwise collapse of their own weight.

The calculation problem poses a natural limit to the size of firms. To overcome this, corporations seek artificial economies of scale that are provided via regulation.

Put simply, I do not seek to replace a big plan with another big plan. I wish to destroy the current plans and leave it up to individuals and families to plan for themselves.

The problem isn't that the current central planning we labor under need to be replaced with better central planning. The problem is plans themselves that rely on coercion. The plans which rely on coercion are exactly the ones that are the wrong scale.

The right scale for plans is the one that prevails among free people without violence. The right scale can never be pre-determined, and is always changing. Planners hate this, so they impose arbitrary plans, which cause disorder because people don't like them and continually try to undermine them as is their natural right to do.