The 1%…the zombies…and the rest of us…
Markets are counting on their hero, Mr. Benjamin S. Bernanke, to come to the rescue. They can practically hear the printing presses warming up…and smell the fresh $100 bills rolling off.
And where does all the money go? Long time passing…
Where does all the money go? Long time ago…
Where does all the money go? Gone to rich people every one…
When will they ever learn? Oh when will they ever learn?
But nobody seems to make the connection. Only here at The Daily Reckoning will we give it to you straight:
The working classes made substantial gains until the 1970s. Then, wages went flat for the next 40 years.
Wealth was shared out fairly evenly too…until the 1970s. From Wikipedia:
…data from a number of sources indicate that income inequality over all has grown significantly since the late 1970s, after several decades of stability.
A 2011 study by the CBO found that the top earning 1 percent of households gained about 275% after federal taxes and income transfers over a period between 1979 and 2007.
What happened in the ’70s that changed things? Take a guess. The feds changed the money. From a money that was limited – because it was connected to gold – to new money that would stretch as far as the feds wanted to pull it. In the event, they used it to increase US credit outstanding 50 times since the ’60s. Total US credit didn’t exceed $1 trillion until 1964. Over the next 43 years it rose to over $50 trillion.
Where did this new money go? Well, to lots of people…all over the world…
But more of it went to rich people than to anyone else.
And now everybody’s gunning for the rich…for the 1%. And what was their crime? Didn’t they just get lucky?
But the complainers act as though they did something wrong. As if making money was wrong…
And even if that were true, it doesn’t address the real issue: how come the 1% got to make so much money?
Even very rich people themselves don’t know. And very smart people, such as Nobel Prize-winning economists seem to have no curiosity about it. They just think it’s time for the rich to ‘give back’:
The 1 Percent’s Problem
By Joseph E. Stiglitz, Vanity Fair
Let’s start by laying down the baseline premise: inequality in America has been widening for decades. We’re all aware of the fact. Yes, there are some on the right who deny this reality, but serious analysts across the political spectrum take it for granted. I won’t run through all the evidence here, except to say that the gap between the 1 percent and the 99 percent is vast when looked at in terms of annual income, and even vaster when looked at in terms of wealth – that is, in terms of accumulated capital and other assets. Consider the Walton family: the six heirs to the Walmart empire possess a combined wealth of some $90 billion, which is equivalent to the wealth of the entire bottom 30 percent of US society. (Many at the bottom have zero or negative net worth, especially after the housing debacle.) Warren Buffett put the matter correctly when he said, “There’s been class warfare going on for the last 20 years and my class has won.”
That’s about as close as Mr. Stiglitz comes to analyzing the situation, as if it were the result of ‘class warfare.’ He doesn’t seem to realize that Buffett was joking. Or should have been.
Instead, he goes on to describe how wealth inequality is a problem: because people without money can’t consume…because it leads people to become zombies (rent seekers…rather than producers)…because it is “unfair”…and because it creates mistrust in the society, leading to dysfunctional institutions.
Then, he offers a solution. He pitches it to the 1% in terms of self-interest:
When invited to consider proposals to reduce inequality – by raising taxes and investing in education, public works, health care, and science – put any latent notions of altruism aside and reduce the idea to one of unadulterated self-interest. Don’t embrace it because it helps other people. Just do it for yourself.
He doesn’t explain how getting 1% of the voters on your side would make much of a difference in a general election. Presumably, the electorate or its representatives must approve these proposals. Nor does he bother to tell us how spending more money, or “investing” as he puts, on more education, more boondoggles and more health care will cause wealth to move from the 1% to the 99%. After all, the feds have been lavishing money on those programs for the last 30 years – just as income equality increased!
Nowhere did they spend more money than in the Zombie City itself, Washington, DC. For every dollar Washington pays in taxes it gets back $5 from taxpayers elsewhere. And nowhere is there greater income dis-equality than in Washington.
for The Daily Reckoning Australia
From the Archives…
When Capital Comes A Knocking
2012-06-01 – Greg Canavan
When the Pain From Spain Moves Across the Plain
2012-05-31 – Greg Canavan
Greek Game Theory: Default, Devaluation, Austerity, Deliverance?
2012-05-30 – Nick Hubble
Desperate Stock Market Traders Waiting To Be Made Whole
2012-05-29 – Murray Dawes
Greek Elections: The Fear of Uncertainty
2012-04-28 – Dan Denning