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Wealth Inequality destroys Societies


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2014 Oct 12, 5:42am   24,812 views  95 comments

by MisdemeanorRebel   ➕follow (12)   💰tip   ignore  

Fabulous lecture by Professor Danny Dorling, Oxford Professor, on how wealth inequality creates problems in society.

http://www.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=2609

Great Visuals and "Maps" of the Wealthy relative to the rest of society. The correlation between Deregulation and the Gini Coefficient. The mortage holders vs. the landlords.
http://www.lse.ac.uk/assets/richmedia/channels/publicLecturesAndEvents/slides/20141007_1830_inequality1Percent_sl.pdf

Best point of the lecture: Helping the bottom 1% is a lot less effective than curtailing the top 1%.

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1   MisdemeanorRebel   2014 Oct 12, 5:43am  

Some select imagery:

Let me get this straight: 24 Russian and Indian Oligarchs, with a British Lord, produce more wealth and goodness for the world than the entire populations of Scotland, Northern Island, Cornwall, Wales, The North, etc. all combined?


Neoliberalism does not cut taxes across the board equally; it only cuts the taxes on the wealthiest:

2   MisdemeanorRebel   2014 Oct 12, 5:47am  

No link between economic performance and tax cuts for the wealthiest:

3   Tenpoundbass   2014 Oct 12, 7:12am  

Except you guys forget that Civilization was built on the backs of the poor.

There has never been a time in History where there was no diverse extreme of wealth and the poor, or a time where the financiers got down in the trenches and helped dig the ditch that they were funding.

You guys make it sound like wealth inequality is first a bad thing, and second something that just came along when Bush got elected.

That's a little too much whachu call "Commie Talk" if you ask me.

At least be honest if you want me to join your Rabble built on lies and deceit.

4   MisdemeanorRebel   2014 Oct 12, 7:15am  

CaptainShuddup says

You guys make it sound like wealth inequality is first a bad thing, and second something that just came along when Bush got elected.

That's a little too much whachu call "Commie Talk" if you ask me.

At least be honest if you want me to join your Rabble built on lies and deceit.

The greatest increase in living standards and economic growth was the 50s and 60s, a time characterized by deliberate government policy to restrain income inequality and push demand-side economics.

5   lostand confused   2014 Oct 12, 7:28am  

thunderlips11 says

government policy to restrain income inequality and push demand-side economics.

Yes, but the current argument is for raising taxes for the wealthy. Fine-but what is it going to do?? It is like the companies doing inversions and Obozo's call to stop them. if you are running a business and pay 100 million in taxes and you can legally move yourself abroad and now only pay 60 million in taxes and on top of that you can use the money you earned outside-without paying tax on them-which actually frees up your resources and lowers taxes on that money. Put up 10% or more import tax and remove taxes earned on money outside the uS for both companies and the individuals and voila not a single company will do an inversion. The same for service industry-if you are offshoring resource is paying 10-15% tax per hour and then state/city taxes-well millions will be back here.

Now you have no barriers to enter here-because of free trade freaks. Why would anybody stay here-only somebody really stupid will stay here.. Now that is just one way I know, the gubmtn is supposed to look at this and by hook or crook should be toiling to come up with multiple ways to bring jobs back. Free trade, capitalism, communism are all terms-as long a swe have freedom-we can pick and choose what serves us best at that point in time and then discard it when it no longer serves us. But with the firm commitment to freedom.

Corporations do not exist for the public good. That is supposed to be the gubmnt. But our gubmnt has become extremely perverse and the only fight is about gun control, gays, birth control -everything else they are one and the same.

Raising taxes will not bring millions and millions of jobs back-if free trade is putting us at a disadvantage, then start raising tariffs or some such-gubmnt should be discussing on what to do and how to fix this issue. Bush's way was to reclassify fast food workers as industrial workers. Obozo's is to ask folks to go to college and get more college loans and get some degree-that is supposed to make us magically better-notwithstanding the fact now that it is white collar work that is facing the brunt of offshoring. blue collar industries have already been decimated and bled dry.

6   MisdemeanorRebel   2014 Oct 12, 7:45am  

There is a lot of work to do, no doubt.

And of course I agree with an import tax, and bring back bilateral trade agreements and Fast Track is totally unconsititutional, IMHO.

7   Bellingham Bill   2014 Oct 12, 8:29am  

As Krugman says, an import tax is just the flipside of a strong dollar.

We can get an import tax by just running a weaker dollar, but I guess problems with that include having to part with more of our food produce since foreign currencies would have more buying power and we'd also face higher energy import costs, too.

As for wealth disparity, it's not the wealth divide so much that is deleterious, it's the ongoing, continuous distribution of monthly income this divide creates. Wealth is a stock not a flow so it is not a double-entry item, but income is -- for every PAYEE there is a PAYER.

Great wealth is invested in the rent-seeking areas of the economy -- housing, energy, health care. These 3 sectors pull TRILLIONS out of the middle class paycheck economy every year, and I think we have our colossal gov't spending -- nearly $40,000 per working-age person -- as the only thing keeping the system even remotely sustainable.

real (2009 dollars) per-capita (age 25-64) total gov't spending

Unfortunately the critical importance of land economics completely sailed past Piketty's purview for his book. $2T+ sector of our economy, everyone's biggest line-item life expense, not important.

8   MisdemeanorRebel   2014 Oct 12, 8:54am  

In a similar vein:

9   MisdemeanorRebel   2014 Oct 12, 9:00am  

It's stunning. In just two decades, the number of renters more than doubles.

This look like a society with a prospering middle/working class? Where successive generations are becoming renters rather than owners?

10   Robert Sproul   2014 Oct 12, 9:31am  

The Walton family controls a fortune equal to the wealth of the bottom 42 percent of Americans combined.
What could go wrong?

11   Reality   2014 Oct 12, 1:42pm  

Bellingham Bill says

Great wealth is invested in the rent-seeking areas of the economy -- housing, energy, health care. These 3 sectors pull TRILLIONS out of the middle class paycheck economy every year, and I think we have our colossal gov't spending -- nearly $40,000 per working-age person -- as the only thing keeping the system even remotely sustainable.

LOL. Somehow you failed to realize that people receiving money via housing, energy and healthcare are often middle class employees themselves. If you decry housing, energy and healthcare as monopolistic, what do you think the government is? Compared to the government bureaucrats, the bureaucrats in housing, energy and healthcare at least have some competition and alternative that you are free to resort to immediately instead of having to wait for 4 years (if not forever).

12   marcus   2014 Oct 12, 2:02pm  

CaptainShuddup says

At least be honest if you want me to join your Rabble built on lies and deceit.

If only you had even an ounce of intellectual honesty.

What I hear from you is this.

I say that that Bush's tax cuts stole the Socoial Security surplus and gave it to the rich in tax cuts.

Your translation. I said that everything was perfect and workers and the poor had it great until Bush came along. I never said that or implied it in the slightest. A lot can be traced back to Reagan, but I don't place all of the blame on him either. He only reflected the selfishness of our culture and our shortsightedness, and the beginning of a swing towards the indebted fucked up place we are at now.

Maybe if it hadn't been for him, maybe things would be messed up in the otehr direction, with too much socialism. But those who try to claim that is the case now, are deeply disingenuous.

You're such a liar.

CaptainShuddup says

You guys make it sound like wealth inequality is first a bad thing, and second something that just came along when Bush got elected.

13   indigenous   2014 Oct 12, 2:30pm  

thunderlips11 says

Best point of the lecture: Helping the bottom 1% is a lot less effective than curtailing the top 1%.

There is welfare for both...

But by your reasoning North Korea should be the paradigm...

14   MisdemeanorRebel   2014 Oct 13, 12:51am  

indigenous says

But by your reasoning North Korea should be the paradigm...

Of course, just like in the 50s, 60s, and 70s, when Americans were starving under the Juche because the taxes on the rich were higher.

15   indigenous   2014 Oct 13, 2:45am  

thunderlips11 says

Of course, just like in the 50s, 60s, and 70s, when Americans were starving under the Juche because the taxes on the rich were higher.

What? Juche apparently applies to N Korea, meaning self reliance. Which apparently was double speak.

The US did fine in those time period other than the state caused inflation during the 70s

What is your point?

16   MisdemeanorRebel   2014 Oct 13, 2:52am  

The state didn't cause inflation. It was a storm of young people starting households all at the same time, an oil price shock (political; punishment for supporting Israel), and a dearth of housing which caused inflation.

Plenty of states did not abandon Keynes - and entered the 80s vibrant. They are still vibrant today, despite having much higher taxes, safe retirement, and strong unions.

17   zzyzzx   2014 Oct 13, 3:02am  

Wealth equality destroys societies:

18   indigenous   2014 Oct 13, 3:47am  

thunderlips11 says

The state didn't cause inflation. It was a storm of young people starting households all at the same time, an oil price shock (political; punishment for supporting Israel), and a dearth of housing which caused inflation.

That is where your ignorance shows. Inflation is caused by excess money supply period.

One of the primary causes is war. In that time period it was LBJ and Vietnam

19   MisdemeanorRebel   2014 Oct 13, 5:56am  

indigenous says

That is where your ignorance shows. Inflation is caused by excess money supply period.

So, where is the inflation now? QE created a shitpile of money, a hulluva lot more than in the 70s.

When the theory doesn't explain reality, dump the theory.

20   Nobody   2014 Oct 13, 7:41am  

thunderlips11 says

where is the inflation now?

What? Where have you been? Damn, this goes to show you it is absolutely a waste of time to teach idiots.

21   MisdemeanorRebel   2014 Oct 13, 7:57am  

Nobody says

What? Where have you been? Damn, this goes to show you it is absolutely a waste of time to teach idiots.

Wow, you sure ponied up the evidence that there is widespread inflation across the board. Consider me enlightened.

22   dublin hillz   2014 Oct 13, 8:51am  

Inflation in rents/home prices, education, medical insurance has been significant. Some of these things can be moderated to some extent by not having kids or having fewer kids. Entertainment, movies, cable/satellite service - all significantly up in last 10 years, same as gasoline. Food - not as much of an increase relatively speaking as the other items that I listed, but still higher.

I define inflation as increase in prices and deflation as decrease in prices. Change in money supply may result in inflation or deflation but in in of itself is not a sufficient pre-requiste to cause either.

Problem is we have certain interests who try to fear monger people into believing that drop in prices (deflation) will result in some plague calamity that will cause layoffs. We all know who these interests are - they are the debtor gliterrati and are afraid of falling asset prices like a condemned man is afraid of a needle.

23   dublin hillz   2014 Oct 13, 8:53am  

Wealth inequality by itself does not destroy societies. Horrible purchase power parity if representative of significant part of the population destroys societies whether there's inequality or not. For instance, many soviet workers were bunched between earning 100-120 rubles per month. Their lives sucked. They were equally poor.

24   MisdemeanorRebel   2014 Oct 13, 10:21am  

It does, because the wealthy use their superior incomes and ever building wealth to bid up the price of housing, of stocks (creating volatility) beyond their Fundamentals, and buy up assets. These items do go up enormously in value relative to the incomes of the 99%, and it creates even more income streams going upward and less circulating among the majority of the population.

As was said on other threads, it wasn't unusual for a guy in a town to own a couple of duplexes, maybe even an older home or two rented out. What is unusual is Wall Street getting involved with buying up SFHs for rental income. And not just luxury apartments but ordinary Suburban SFHs. This is a symptom of the problem.

25   Bellingham Bill   2014 Oct 13, 10:33am  

"But by your reasoning North Korea should be the paradigm..."

Norway and Denmark, actually.

http://www.cnn.com/2014/03/20/travel/happiest-countries-to-visit/

I was actually doing some deeper self-study this weekend on the actual difference between "socialism" and "communism" since I realized I didn't have much of an understanding of what Marx wrote and what the communists themselves were thinking; it's a subtle answer, actually.

Communism as preached is the utopian cloud-cuckoo system as achievable as libertarian anarchism (and quite indistinguishable one from the other since they are both equally bullshit)

Communism as practiced for most of the 20th century by the Soviets, their European satellites, the PRC, Cuba, and Vietnam was supposed to be, technically, a transitory socialist economic regime where society increased its capital sufficient to transform itself into the Communist end state they were ostensibly working towards.

Of course this was bullshit since the actual Communist Parties were basically thugocracies and required everyone's total acceptance of the dogmatic, totalitarian party line as handed down by the strongman running the place.

AFAICT Gorbachev was the first reformer of the Soviet system to actually move away from "the Communist Party is Always Right" dogma, and after he unleashed people thusly, the soviet system there wasn't going to last long.

China is a more curious example, as their party thugocracy is still holding onto power there even though they've backed off a lot on the whole big-C Communist program thing.

26   Bellingham Bill   2014 Oct 13, 10:50am  

Also, I was reading on how Stalin ran the USSR 1927 ~ 1953. I'd known about the Ukrainian holodomor, the party and Red Army purges of the late 1930s, but didn't realize how thorough he was in basically liquidating anyone who was a potential threat to his personal control of the Communist Party.

This went well beyond what the Nazis did to terrorize Germany, Stalin and his henchmen actively went after their Communist Party brethren directly, since Stalin rose from relative obscurity in the 1920s and the people like Trotsky knew he wasn't any mainspring of the revolution, just a man willing to out-thug anyone else.

Basically anyone who crossed -- i.e. disagreed with -- Stalin in the 1920s got whacked in the 1930s. The place was so nutty the NKVD actually ran secret prison camps that skilled political prisoners worked out of -- e.g. Tupolev and Theremin

http://en.wikipedia.org/wiki/Sharashka

27   indigenous   2014 Oct 13, 11:21am  

thunderlips11 says

So, where is the inflation now? QE created a shitpile of money, a hulluva lot more than in the 70s.

It is in the Stock Market and RE

thunderlips11 says

When the theory doesn't explain reality, dump the theory.

The theory is the touch stone of economics.

28   indigenous   2014 Oct 13, 11:21am  

Nobody says

What? Where have you been? Damn, this goes to show you it is absolutely a waste of time to teach idiots.

Hmm I was thinking the same...

29   indigenous   2014 Oct 13, 11:23am  

thunderlips11 says

It does, because the wealthy use their superior incomes and ever building wealth to bid up the price of housing, of stocks (creating volatility) beyond their Fundamentals, and buy up assets.

Temporarily, to think otherwise is folly

30   anotheraccount   2014 Oct 13, 11:30am  

indigenous says

Temporarily, to think otherwise is folly

Well, how about 40-50 years? I would say that's not temporary.

31   indigenous   2014 Oct 13, 11:44am  

Bellingham Bill says

"But by your reasoning North Korea should be the paradigm..."

Norway and Denmark, actually.

Norway and Denmark are actually high on the freedom index, so are doing more right than wrong.

Socialism is a charade. There are 3 things you can do with resources you can spend it, save it, or invest it. With socialism one way or another it is the first one, IOW they are eating the seed corn.

If you want to understand Karl Marx look at dialectic materialism. It is shit but it is the vehicle Stalin used to rule with an iron fist. And yes he was insane and should have been shot by reasonable men.

32   indigenous   2014 Oct 13, 11:46am  

tr6 says

Well, how about 40-50 years? I would say that's not temporary.

Yup since Nixon took us off Bretton Wood. Temporary in the scheme of things, it will end with the collapse of the country, IMO about 15yr.

33   Reality   2014 Oct 13, 12:39pm  

thunderlips11 says

It does, because the wealthy use their superior incomes and ever building wealth to bid up the price of housing,

If the wealthy person is living in the same housing as the average guy, then he is not really consuming more housing supply than the average guy; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply. The same housing units that may well have been abandoned because the renters/ex-owners could not afford to or did not have the good habit to maintain the houses.

of stocks (creating volatility) beyond their Fundamentals, and buy up assets.

Then we are talking about the wealthy being foolish and paying for a bubble. The market place would normally soon administer medicine via bubble burst. . . except you are also for the government bailout of the wealthy gamblers on taxpayer dime via the FED! You are the idiot who support the ideology of privileged gamblers (too big to fail).

These items do go up enormously in value relative to the incomes of the 99%, and it creates even more income streams going upward and less circulating among the majority of the population.

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

As was said on other threads, it wasn't unusual for a guy in a town to own a couple of duplexes, maybe even an older home or two rented out. What is unusual is Wall Street getting involved with buying up SFHs for rental income. And not just luxury apartments but ordinary Suburban SFHs. This is a symptom of the problem.

There is a price for everything. When the market hit the 2009-2011 bottom, you were too chicken little scared shitless to buy, so someone else stepped into the breach. The trade was over by late 2013, so there is little point decrying it a year later.

34   MisdemeanorRebel   2014 Oct 13, 2:49pm  

Reality says

; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply.

The fallacy is that Joe Potential Homeowner is bidding against another Homeowner. He's not. He's competing with either cash-flush wealthy local investors, or more frequently, professional, well capitalized Wall Street Firms handling huge amounts of money and buying properties in bulk to rent. In some areas, he's competing with Russian and South American Oligarchs (Miami) or Chinese Businessmen (West Coast Cities) as well who are looking to park their illicit gains.

Joe's Household makes $60k/year, not capitalized to $600M with leverage.

Reality says

The same housing units that may well have been abandoned because the renters/ex-owners could not afford to or did not have the good habit to maintain the houses.

Or, the prices would drop to normal levels of affordability for the John Doe family.

Reality says

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

When homes are too expensive for Joe Schmoe to buy, he has to rent. Since many Joe Schmoes are priced out or wisely refuse to gamble on a mortgage payment when they don't know if they'll be laid off tomorrow, or simply can't afford the price, they are all trying to rent at the same time, so rents go up along with the home prices - for a while, anyway.

This explains why mortgage rates are so damn low, but homeloaners aren't buying.

Reality says

. When the market hit the 2009-2011 bottom, you were too chicken little scared shitless to buy, so someone else stepped into the breach. The trade was over by late 2013, so there is little point decrying it a year later.

I brought a home in 2009 and I rent it out. :)

My only regret is the market I brought it in. If I had brought in Miami, I would have doubled my money.

35   MisdemeanorRebel   2014 Oct 13, 2:53pm  

indigenous says

Temporarily, to think otherwise is folly

Temporary is right, but guess who will feel the pain?

Remember who felt the pain the last time?

36   indigenous   2014 Oct 13, 3:00pm  

thunderlips11 says

indigenous says

Temporarily, to think otherwise is folly

Temporary is right, but guess who will feel the pain?

Remember who felt the pain the last time?

Yup but this time there will not be any subprimes. This time there will not be any TBTF MBSs. But the investors who are leveraged will get hurt. If not leveraged then their balance sheet will change a bunch.

37   Reality   2014 Oct 14, 1:12am  

thunderlips11 says

Reality says

; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply.

The fallacy is that Joe Potential Homeowner is bidding against another Homeowner. He's not. He's competing with either cash-flush wealthy local investors, or more frequently, professional, well capitalized Wall Street Firms handling huge amounts of money and buying properties in bulk to rent.

Joe Potential Homeowner does not have to own a house to be living in a house. If the bank mortgage rate is 4%, property tax is 1.5%, insurance+maintenance is 0.5-1% . . . while the landlord is charging only 3-5% rental yield, most readers of Patnet should know that it is better to rent than buying. I did rent when given those parameters. I was quite grateful to my then landlord despite having paid him $180k+ over 6.5 years renting from him; the cost of ownership would have been higher still. I documented that quite extensively back in 2010-2011, just before I flipped around on the rent-vs.-buy position. It was a good summary on how to "short" housing during a bubble in one's life, via renting.

In some areas, he's competing with Russian and South American Oligarchs (Miami) or Chinese Businessmen (West Coast Cities) as well who are looking to park their illicit gains.

Joe's Household makes $60k/year, not capitalized to $600M with leverage.

If Joe makes $60k/year, he has no business trying to compete in the most sought-after zip codes in terms of ownership. Those zip codes have huge stocks of rental houses that compete to such a degree that the rental yields are typically in the 3% range. The foreign buyers of real restate are usually the bag holders in an economic cycle. The dollars they earned from exporting whatever stuff to the US have to be repatrioted and liquidated somehow; wasting it on a RE bubble on prize properties that have little bearing for most middle class Americans is better than them trying to buy up all sorts of commodities and drive up PPI and CPI.

38   Reality   2014 Oct 14, 1:14am  

thunderlips11 says

Reality says

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

When homes are too expensive for Joe Schmoe to buy, he has to rent. Since many Joe Schmoes are priced out or wisely refuse to gamble on a mortgage payment when they don't know if they'll be laid off tomorrow, or simply can't afford the price, they are all trying to rent at the same time, so rents go up along with the home prices - for a while, anyway.

This explains why mortgage rates are so damn low, but homeloaners aren't buying.

If Joe Schmoe can not be certain about his future income, he is of course better off renting instead of buying on mortgage borrowing. Why would you want him to buy, and then get foreclosed and also getting the housing stock ruined. Your position seems to be rather emotional, instead of rational.

39   Reality   2014 Oct 14, 1:16am  

thunderlips11 says

I brought a home in 2009 and I rent it out. :)

Then aren't you just a little hypocritical?? ;-)

My only regret is the market I brought it in. If I had brought in Miami, I would have doubled my money.

I see. Well, at least you didn't buy pets.com stock.

40   MisdemeanorRebel   2014 Oct 14, 2:07am  

Reality says

I see. Well, at least you didn't buy pets.com stock.

I brought the Iraqi Dinar to back freedom (and fund my retirement) --- and I lost it all!

https://www.safedinar.com/

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