I recently came across some graphs by former Clinton Labor Secretary Robert Reich designed to elicit a emotional response to the increasing income inequality in America. Reich split up economic distribution from 1947 to 1979, years dominated by Democrats, and 1980 to present. The years, according to his graphs, should have been split up from 1947 to 1971 and 1971 to present if the income inequality gap is the criteria that is to be focused upon.
Former Clinton Labor Secretary Robert Reich blames the rich and Republicans for everything
Reich points out that pay rose with productivity from 1947 to 1979. The actual split appears to be around 1971, the year Nixon took the United States off the gold standard, not 1979.
The first cause of the divergence between productivity and income would appear to be the size of the labor force.
Sure enough a little research reveals that “From 1930 to 1950, the foreign-born population of the United States declined from 14.2 million to 10.3 million, or from 11.6 percent to 6.9 percent of the total population. These declines reflected the extremely low level of immigration during the 1930s and 1940s. The foreign-born population then dropped slowly to 9.6 million in 1970, when it represented a record low 4.7 percent of the total population. Immigration had risen during the 1950s and 1960s, but was still low by historical standards, and mortality was high during this period among the foreign-born population because of its old age structure (reflecting four decades of low immigration).”
“Since 1970, the foreign-born population of the United States has increased rapidly due to large-scale immigration, primarily from Latin America and Asia. The foreign-born population rose from 9.6 million in 1970 to 14.1 million in 1980 and to 19.8 million in 1990. The estimated foreign-born population in 1997 was 25.8 million. As a percentage of the total population, the foreign-born population increased from 4.7 percent in 1970 to 6.2 percent in 1980, to 7.9 percent in 1990, and to an estimated 9.7 percent in 1997.” US Census Bureau.
In other words the foreign-born population reached a record low in 1970 of only 4.7% of the total population and increased up to 9.7% in 1997, when Reich was Labor Secretary, and 12.4% today. You would think a United States Labor Secretary could understand the relationship between supply and demand for blue collar labor, but he blames it on the evil rich capitalist and Republicans.
Robert Reich always blames the rich and Republicans, never the real culprit, government
One of the big fallacies that economists like to feed the public is immigration is good for the economy because increasing the population results in economic growth. This is the equivalent of saying John Wilkes Booth is a great actor, leaving out the fact that he assassinated Abraham Lincoln. Yes Wilkes was a great actor but he was also a cold blooded killer. A slight omission of the facts.
Estimates of the cost of services provided illegal’s range from $11 billion to $22 billion, plus $1.9 billion for food stamps, plus $1.6 billion for jail time (21% of US prisoners are illegal aliens), plus $10 billion from the federal government, plus $2.5 billion for Medicaid, according to the Center for Immigration Studies and the Personal Liberty Digest. There is nothing free about immigration.
Recently “There were 11.2 million unauthorized immigrants living in the United States in March 2010, virtually unchanged from a year earlier, according to new estimates from the Pew Hispanic Center. The number of unauthorized immigrants in the workforce, 8 million, also did not differ from 2009. Both the population and workforce estimates are below their 2007 peaks, apparently driven by a decline in the number of Mexicans, the largest group of unauthorized immigrants. The report also includes estimates of state populations of unauthorized immigrants and of annual births to unauthorized immigrants.”
“In the year following the end of the Great Recession in June 2009, foreign-born workers gained 656,000 jobs while native-born workers lost 1.2 million. As a result, the unemployment rate fell for immigrants while it rose for the native born. The reasons that only foreign-born workers have gained jobs in the recovery are not entirely clear. It could be greater flexibility among immigrants, normal business cycle ups and downs, typically more severe for immigrants, or a return of immigrant workers following a recent hiatus. But employment for immigrants remains below its level in 2008 and their wages fell sharply in 2009-10.” Pew Hispanic Center.
So we have increased immigration since 1970 from a low of 4.7% foreign born persons to 12.4%, but former Labor Secretary Reich blames capitalism, rich people, and Republicans for the lower wages and unemployment in the bottom 20 percentile of the population.
Really?
I giggle and have to ask myself is Reich really this stupid or does he just believe the public is this stupid?
Inquiring minds want to know.
For the record labor is a impute, just like steel, glass, wheat, corn, apples, or any number of producer imputes. If the supply increased and the demand decreases wages will fall. If the supply increases and demand remains stagnant then wages will fall. If wages are not allowed to fall, such as during the Great Depression due to wage restriction imposed by FDR, unemployment will increase. Simple supply and demand analysis.
What else happened between 1948 and today?
Total government consumption of the GDP was increased from a average of 26% from 1948 to 1971 up to 31.4% from 1971. Currently the White House numbers show 35.4% of the GDP is consumed by government at the federal, state, and local level. This is certainly understated due to accounting procedures for the calculation of the GDP. Some organizations, including the Wall Street Journal, put federal, state and local consumption of the GDP at 42.6% to 45.4%. Whatever the exact number one thing is certain, Uncle Sam is getting a larger share of today’s workers income.
Reich ignores this and also ignores who gets the money. In 2008 Social Security recipients received 21%, defense 21%, interest on the national debt 8%, other mandatory programs 10%, Medicaid and Medicare 23%, and other discretionary expenditures 17%. Vote buying and special interest groups.
Where is Main Street in this picture?
According to the White House the percent of taxes collected as a percentage of the GDP, regardless of the top tax rate, generally falls between 18%, and in boom times 20%. The post WWII record is 20.6% in 2000 and the low 15.1% in 2010. Generally the percentage of tax collections rise and fall due to strong or weak “aggregate demand.”
So why blame the rich and advocate for higher income taxes when the rich do not pay income taxes, as Warren Buffett correctly points out. Income taxes are for the little people. They always have been and always will be. In the 1950s when the top tax rate was 90% the rich simply reinvested into their companies or received other compensation packages that were not taxable. Company cars, business trips, medical plans, dental plans, company lodging, and other benefits. 20% of the GDP is the upper limit for tax collections, in a good economy.
But what about going off the gold standard in 1971?
Consumer Price Index (CPI) increased dramatically after 1971 and the removal of the United States from the gold standard
Prior to 1971 the United States was on the “Bretton Woods System” where foreign central banks could redeem dollars for physical gold. This inhibited the Federal Reserve from printing too many dollars creating inflation.
The inflation rate, as measured by the Consumer Price Index Price Index(CPI-1982-84 dollars), from 1947 to 1971 averaged 3.5%. From 1971 to present the CPI inflation averaged 11.3%.
Gold prices increased an annual average increase of 0.7% from 1947 to 1971. From 1971 to present gold prices have increased 111.7% annually, despite the best efforts of the world’s central banks to suppress the price of gold.
Does Reich take into account this loss of purchasing power due to inflation?
Of course not. Reich would never blame the government, or the Federal Reserve, for anything bad that happens. It’s a con game by Reich and most politicians. The Democrats straw man is the rich and Republicans. The Republicans straw man is the Democrats and “big government.” It’s all designed to make the people ignorant and angry, and it works quite well.
But where does the “lost” purchasing power go?
Silly question.
I bet everyone reading this knew in a New York minute where the “lost” money goes.
The first, and most obvious beneficiary, is the Federal Reserve. When the Fed creates money out of thin air, and inflation, it buys bonds from Wall Street and the federal government. Wall Street and the federal government get the new money and get to purchase goods and services at the old price level. From these institutions the next in line are the politically connected contractors and powerful Fortune 500 corporations. It’s like a food chain and Main Street is at the anus part of the food chain. We get the crap, inflation, in the form of higher prices and the politicians, Wall Street, and Federal Reserve get to wine and dine in luxury.
Who created this unjust system?
Government. Something that neither party will ever admit.
Who gets hurt by a rigged inflationary system combined with unlimited low wage workers immigrating into America?
The poor and middle class. Most poor and middle class workers are struggling to make ends meet and generally lack the economic knowledge and skills to protect themselves from inflation like the upper highly educated government class and rich do. Inflation hurts the least educated and most venerable members of society. Inflation is a huge transfer payment from the middle and low class private sector workers to upper middle class government workers and the rich.
By allowing illegal immigration, the elites have created a permanent second class citizen that can be exploited in the labor force and be used to drive down blue collar wages.
Where is the indignation from Reich and the Democrats?
There is none because Hispanics vote, often times illegally, overwhelmingly Democrat. In 2008 67% voted for Obama. Despite the popular belief that only Republicans are rich the fact is 7 out of the top 10 richest members of congress are Democrats. Cheap, exploitable labor appeals to both Democrat elites and Republican elites.
A third area that Reich ignores is transfer payments. According to John P. Hussman “22 cents of every dollar of U.S. personal consumption is now financed with transfer payments.”
Wage Income paid out as a percent of nominal GDP
Simply put government transfer payments are now substituting for wage income to the greatest extent ever observed in history. In 1970 the percent of wages received in relation to the GDP peaked at about 53.5%, and transfer payments accounted for approximately 6.4% of the GDP. Today wages make up 44% of the GDP, and transfer payments account for 15.7% of the GDP. The government is literally stealing money from the working peoples right pocket, taking their cut, and giving it back to their preferred recipients in the left pocket.
Needless to say this disincentive to work and incentive to becoming a member of a politically connected group produces nothing but injustice to the workers who rightfully earned their paycheck. Nothing is gained from this transfer of wealth and much lost for the workers without political connections. Politicians and the rich elites gain and the blue collar working-class lose.
Transfer payments paid out as a percent of GDP
I am sure there are many other factors involved in the shrinking middle class but the main message is government creates inequalities in society while professing to be for a “level playing field” for all.
The result of government intervention in the marketplace is almost always a concentration of wealth into the hands of a few and the creation of a large protected highly educated upper middle class of government workers. Both groups work in unison to extract wealth from the less educated middle and poorer classes of private sector workers.
There are two Americas, to quote John Edwards, the rich and upper middle classes of government workers, and the exploited middle and poorer classes of mostly private sector workers. Since 1971 this trend has accelerated alarmingly.
America, and Europe, got caught up in the illusion that government could provide for the masses. Government sold America on this promise. What people forgot is some very simple rules of economics, if you are not in the private sector producing something other people want then you have a negative drag on the economy. A parasite. Much like parasites invading a health host, sooner or later if there is no intervention the healthy host will get sick and die. We need to realize the problem is government and force government to go bankrupt and reorganize. Its not the politicians, its the system. Only when the federal system is reorganized will we become economically healthy as a nation.
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September 11th, 2011 at 10:08 am
Great work, Prof.
September 11th, 2011 at 8:00 pm
[...] Source [...]
September 19th, 2011 at 12:23 pm
[...] the American people are struck with two hammer blows — the hammer of an ever-weakening currency, and the hammer of an ever-greater military spending that strips wealth away from the working [...]
October 11th, 2011 at 1:43 pm
I am just gonna have to agree with you now!
January 24th, 2012 at 3:05 pm
[...] Obama bloviates about economic injustice the real creator of economic justice, the Federal Reserve, lack of an immigration policy, and [...]
March 3rd, 2012 at 5:53 am
This is absurd,
1) CPI increases, or inflation, does reduce purchasing power, but keep in mind that this also increases the profit margins of corporations. Inflation is quite independent of whether incomes or wages grow. However, cutting incomes/wages also increases profit margins. So this is happening due to corporate greed.
2) Transfer payments are going up PRECISELY due to declining incomes and wages, forcing families to look towards welfare, unemployment insurance etc.
You also fail to show how government consumption of GDP undermines growth, other than your moral rant on how government is robbing workers of their hard-earned money i.e taxes. But taxes pay for public services that you rely upon, like law enforcement, recreation, education, research and development, infrastructure, and defense. These investments by government enhance the economy.
March 3rd, 2012 at 6:11 am
The CPI doesn’t measure the actual price level of living essentials; it measures the price changes of living essentials by the share of income consumers spend on them.
The higher the share of income going to living essentials, the higher the CPI. So your graph on the CPI only illustrates that consumers have to take more out of their own pocket to pay for the essentials; proving Reich’s point about stagnating incomes and wages and introducing a grave problem in our economy.
March 3rd, 2012 at 6:17 am
Sharm,
Inflation is a wage cut. Correct.
Corporations do not have to cut wages when inflation does it for them.
Wages are a product of the supply and demand for labor. Labor is a input into production just like glass, steel, wood.
Tell me how increasing taxes on working class people makes them better off? I did not catch that.
Think about what you just said. I am poorer, so I go to the federal government and demand payments, that comes out of my paycheck. Does that make sense?
Taxing Peter and paying Paul while the feds tax a cut of the loot makes the public poorer. Someday people will understand that, very soon.
Government spending makes us poorer because they have no incentive to invest and spend the money to make a profit, creating sustainable jobs and prosperity.
For example MacDonald s takes $1 million and builds a MacDonald s that feeds people.
The government takes $1 and pays three bureaucrats to sit in a office and write reports about labor inequality. Nice reports, nice information, but the three did not contribute anything to society, they TOOK from society.
Government is a negative drag on society.
Thank you for your interest, I teach economics and love the questions and comments.
March 3rd, 2012 at 6:25 am
Sharm,
Here is a free copy of “Money, Sound and Unsound.” In there is a explanation of the flaws and fallacies of the CPI. Basically it is useless, except to justify the Federal Reserve printing money.
http://mises.org/books/sound_money_salerno.pdf
A lot of what is taught in college is false information. I know because I teach it.
Please take the time to read the book and if you don’t like it, not a problem, it was free, you did not waste any money on it.
There is a section/comments on the CPI I would suggest you read.
March 3rd, 2012 at 6:39 am
Mark,
What I’m saying is that more people are looking to welfare and so forth because their wages and incomes are not growing with productivity. So they look for additional compensation by other means.
But the programs are not doing their job. Poverty since the recession has increased dramatically, now at the highest rate since before Clinton.
March 3rd, 2012 at 8:28 am
And the federal government has grown from 20% of the GDP to 25%. There is a direct correlation between increasing the size of government burden and poverty.
The GDP = Y + C + G + NX
Should read Y = C + I – G + lNXl
Government is a negative drag on the economy and when we expand government during a recession it will make our problems worse.
If we tax the rich, they have $1 trillion in income, that money that was in savings or investments now is consumed for consumption. We will be better off right now, but there will be less investment, and in the long run we will hurt our economy.
Printing money creates inflation, which hurts everyone.
Borrowing money for government consumption takes money from the private sector that would have been invested.
When you go through the possibilities you see that, in the long run, the way to lower poverty is to produce more goods and services. Government cannot do that. Only the private sector can.
when there are bad economic times we should shrink the government sector.
Also end transfer payments, which are nothing more than glorifies Ponzi schemes.
What works is simple, savings = investment.
With real money, gold/silver.
If you read the book you will learn the trick of how elites rip off the people. Inflation, regulations, government.
March 13th, 2012 at 1:42 am
[...] GINI coefficient number is also describing a symptom, not the problem. Wealth inequality is created by several factors but the three biggest [...]
April 19th, 2012 at 10:42 am
What’s more, the transfer payments pointed out go largely to huge companies, i.e Big Pharma, Big Oil, Big Agriculture, Big Manufacturing/Industrial…
These transfer payments aren’t going to the middle class or to everyday workers. They’re going to the wrong people right now…
April 19th, 2012 at 12:32 pm
44% of the federal budget is transfer payments, Social Security, Medicare. The 6% of the GDP used for transfer payments number comes from the White House numbers.
http://www.whitehouse.gov/omb/budget/Historicals
Table 15-5 breaks it down as a percent of GDP.
April 19th, 2012 at 12:51 pm
6.4% to 15.7%, I updated the blog for you.
May 3rd, 2012 at 4:55 pm
The soaring entitlement spending has to do with rising health care costs, and a booming retirement age population. The rest of the rise in transfer payments has to do with tax breaks/loopholes doubling since 1982.
http://www.americanprogress.org/issues/2011/06/low_tax.html
These transfer payments are going overwhelmingly to private companies i.e pharmaceuticals, hospitals, corporations, and the richest Americans.
This should help companies pay workers more, especially because these transfer payments=more savings for the top!
May 3rd, 2012 at 5:12 pm
These posts are more for myself to remember, so that they’re on the record and I won’t have to think about them as much.
Income growth and wage growth are based on Census Population survey data, as well as Occupational Employment surveys from the Bureau of Labor Statistics. It makes perfect sense. In other words, the data is tax and inflation adjusted.
Sales and payroll taxes have gone up for the middle class. This was likely done in part to finance these increasing transfer payments. Even with this into account, that leaves the fact that companies have benefited tremendously, meaning they should be able to pay their workers more.
What’s more, American workers have worked 500 hours more, a full 12 weeks more, by the last decade. This should mean more wages/incomes, not the same or less.
May 3rd, 2012 at 5:34 pm
To give this largely misguided entry some credit, wealth has been going upward through the transfer payments to the top. Government is to a great extent responsible for this. These transfer payments need to go down, which can be done by slowing health care costs, and by eliminating the special tax breaks/loopholes for the rich.
But again, these transfer payments have been going to to the rich. What’s more, people have been working longer hours, the simple claim that wages have declined to these transfer payments alone is weak.
After all, it only illustrates the rise in inequality, which makes more sense, as having eroded middle class purchasing power.
May 3rd, 2012 at 7:55 pm
The USA has gone from 26% of the GDP in the 50s for government to 41% today. 45% by some calculations.
The top tax rate means nothing, anything over 30% people will avoid paying.
Government collects more taxes at a lower rate, proven by many economist including Keynes, which is why cutting taxes is part of his fiscal stimulus theory.
The USA collects about 10.1% from corporations. Corporations do not pay taxes, they collect them from customers, its called double taxation.
Federal corporate tax collected was about $340 billion in 2011 or about 12% of the federal revenue for 2011. If you look at spending, $3.75 trillion corporate taxes were about 9%. Either way the blog is lying to you.
http://research.stlouisfed.org/fred2/graph/?s1id=FGEXPND
http://research.stlouisfed.org/fred2/series/FCTAX
I never rely on the work of others without first verifying that the work is true and accurate. NEVER rely on partisan web sites for serious academic work.
May 4th, 2012 at 9:30 am
Actually, to close, wage and income growth figures come from the Bureau of Economic Analysis of the Commerce Department. It sides very well with Census survey data of households.
Both prove Professor Robert Reich right: the problem lies at the breaking of the basic bargain linking pay to productivity; kudos to the graph you provided with your erroneous argument for proof.
May 4th, 2012 at 12:48 pm
There is no “basic bargain linking pay to productivity.”
The “bargain” was broke when the Federal Reserve was created in 1913, again in 1933 by FDR, and 1971 by Nixon.
The inequality you seek is the Federal Reserve, inflation, politicians looking for votes, and greedy businessmen looking to dilute the blue collar labor force.
Reich does not understand economics and never will. He is a idiot, plain and simple.
May 10th, 2012 at 3:14 pm
Your insults are pathetic, Mark.
Your claims are based on the absurd notion that living standards are a measure of currency. While the dollar has declined over 95% since 1913, living standards have gone up exponentially.
As Adam Smith, “The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. That this is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost importance in political economy.” The Wealth of Nations, 1776.
Currency devaluation affects suppliers, what is lost in purchasing power is also lost in the price level of goods/services. So nothing changes in a domestic marketplace.
You are pathetic. Really pathetic. Read some economics and stop living in a bubble. People like you are why this country is so divided. Look in the mirror and wake up, Mark. Please.
May 10th, 2012 at 3:18 pm
The following link serves to refute Austrians’ nonsense on currency and the economy:
http://www.youtube.com/watch?v=KENCCGbPIsU&list=UUxCFwx5fVfOzrzklTL3JeSA&index=3&feature=plcp
Care to view it, Mark, or would you rather live in your libertarian dream world? Such is the attitude of stamping, incessant, spoiled children.
May 11th, 2012 at 2:51 am
Here are the alternate stats.
http://www.shadowstats.com/alternate_data/inflation-charts
When 10 million people no longer have a paycheck it keeps prices down.
When Europe is imploding and 10 year bonds sell for negative real interest rates that help the value of the dollar and inflation.
When inflation becomes a problem will be when people wake up and realize they are getting a negative return on their dollar investments and look elsewhere.
when the Fed can no longer ignore inflation and has to raise the Fed Funds rate that will be the beginning of the end.
If I were to predict the inflation rate in 2013-14, just a guess, I would say between 12% and 38%. This is based on the Feds own inflation program.
The CPI has always been like measuring a swarm of bees and hoping you get something resembling accuracy.
You know the pavement is running out for Bernanke’s little game.
1925-29
1715-20
2003-07
This little game by con artist has been played many times in the past and we know where it ends up. Enjoy your last few months of normalcy. I would recommend some Gran Marnier to go with the delusions.
3 years, 7 months and counting.
Not much more pavement ahead of us and Schiff will be right again. Remember the “Peter Schiff was Right” videos. “Peter Schiff was Right 2013″ coming up soon.
These monetary episodes take 3 to 5 years. Money doesn’t travel in a direct path to main street. There are many degrees of separation between the counterfeiter and the public.
But I will say by year 4, October 2012, it should be apparent to all but the dullest Keynesians among us that there is a very serious monetary problem.
I am sorry you do not understand money and inflation. I blame the university system which teaches propaganda. I use to be a idiot like you, you can educate yourself and change. There is hope.
Here is a blog I did, just because the thieves have been able to rip off the peasants and some of the peasants have overcome the rip off doesn’t mean that its right. There will be repercussions for the thieves in the next decade, from the left and right. I would not want to be a central banker in say year 2015.
http://usa-wethepeople.com/2012/05/why-a-gold-standard-is-good-for-the-people-and-bad-for-the-elites/
Adam Smith used gold for money.
May 12th, 2012 at 10:15 pm
“Corporations do not have to cut wages when inflation does it for them.”
You are conflating price changes with wage changes in the wrong way. When prices go up, that means companies retain more of its profits. This means that companies can afford to increase wages MORE.
But since wages have stagnated starting in the mid 70s, the link is fanatical and baseless.
Between 1970 and 1980, after Breton Woods’ Collapse, global trading volume climbed from 110 billion to 5.5 trillion annually, a 50 fold increase. (Rolf A. F Witzsche, The Disintegration of the World’s Financial System)
This, along with the money supply, lead to sharp rises in commodity prices of things like oil and real estate.
Unions have also started to weaken in the 1970s:
http://www.americanprogressaction.org/issues/2011/09/unionsmiddleclass.html
http://www.thirdworldtraveler.com/Chomsky/ChomOdon_Inequality.html
Finally, you have globalization. In the 1970s, the U.S trade deficit rose 24 fold. In the 1980s, almost 5 fold. In the 1990s, more than 4 fold. Finally, in the 2000s, the American trade deficit rose over 48%.
http://www.census.gov/foreign-trade/statistics/historical/gands.txt
This means that we sold a lot less to other countries than they sold to us. Breton Woods’ collapse opened up these new markets and led us to exploit them by taking jobs there. THESE are the main reasons for wage stagnation.
May 14th, 2012 at 8:41 am
The author of this post just deleted my comment on the REAL causes of wage stagnation in the 1970s. I wonder why?
The causes of 1970s era wage/income stagnation in the United States are:
1) The decline of labor unions:
http://www.americanprogressaction.org/issues/2011/09/unionsmiddleclass.html
2) Globalization. Advances in shipping and telecommunications have enabled businesses to hire abroad. The American trade deficit went up more than 24 fold in the 1970s. In the 1980s, the figure went up almost 5 fold. In the 1990s, more than 4 fold. In the 2000s the trade deficit only went up close to 5% but at one point over the decade more than doubled:
http://www.census.gov/foreign-trade/statistics/historical/gands.txt
The second point illustrates why workers have less leverage with businesses starting in the 70s, businesses can now export labor to foreign markets. This didn’t impact jobs: more than 21 million jobs were created in the 70s; workers have settled for lower pay in return for staying on the job. They had to start competing with cheaper workers who can make stuff from other countries.
May 15th, 2012 at 6:50 am
Nothing should have been deleted.
Immigration is very important in blue collar wage stagnation.
If there was a fence and labor was restricted during the boom years of the 90s and 2000s there would have been a significant increase in American blue collar wages.
Both parties are guilty.
Corporate profits have nothing to due with wages. They are two different issues.
corporate profits can be caused by a growing economy and increased productivity/profitability or simply the Federal Reserve (like today) pumping billions into the economy hoping corporations will over expand (housing boom/bust) and over hire workers so the politicians look good at election time.
Corporations have to determine if their profits are as a result of good economic growth or phony inflation created by the Federal Reserve. Seems to me like their verdict is overwhelmingly in the belief that the profits are phony inflation driven profits artificially created by the Federal Reserve
Trade is good for the average person and their standard of living. An explosion of trade is good for everyone on the planet. We all benefit and resources are utilized more efficient.
If you want jobs cut the corporate tax rate to zero.
If you want higher wages then produce more goods and services.
A wage rate is just a number. Increasing the number from 10 to 20 does nothing. Increasing the goods and services the wage rate can buy increases living standards.
Stopping international trade would lower living standards.
You have been indoctrinated by the elites way to make profits. Tariffs, trade protection, exploitation of workers, feeding false information to the peasants. Its a good plan and it works.
To increase living standards you have to produce more goods and services, everything else is bs designed to confuse you.
May 16th, 2012 at 4:08 pm
“Corporations have to determine if their profits are as a result of good economic growth or phony inflation created by the Federal Reserve. Seems to me like their verdict is overwhelmingly in the belief that the profits are phony inflation driven profits artificially created by the Federal Reserve”
Their profits were driven by cost cutting measures i.e globalization and technology. While leveraging fed more into corporate profits, the fact remains that money is money, no matter where it comes from. In the 19th century, banks issued loans not based on commodities to improve profits and to get people to improve productivity.
Besides the fact that inflation can result, printing money can be good for the economy, especially when it’s in despair.
In the 1920s profits were very high for the richest Americans. Because most folks did not share in these profits, they could not go back and buy what was being produced. So, as a result, they fed the economy by leveraging and drawing down savings.
This is of course unsustainable, as we’ve seen. The solution is to simply have pay rise with productivity.
This is common sense. Why is that so hard to understand?
May 16th, 2012 at 4:52 pm
During the Great Depression the monetary base was increased 26% from 1929-33 and 155% from 29-40. unemployment averaged 17.2% in the 30s.
Printing money creates inflation and reallocates resources in the favor of the counterfeiter. Printing money does not increase economic productivity, it reduces efficiency by distorting resource allocation.
Corporations during the recent housing boom thought those profits were real. They learned their lesson the hard way fake growth evaporates faster than a ice cube in the Mohave desert.
You learned your economic propaganda at your university well. It was a lie. I teach economics.
The Gini coefficient distribution of wealth has no correlation to middle class wealth and poverty.
The bottom line is more stuff needs to be produced to raise living standards. We need more manufacturing if we want higher living standards. This means we need to cut corporate tax rates to zero and make it in America.
Demonizing corporations accomplishes nothing. We need more machines making stuff that is wanted by consumers to increase our living standards. This is not related to printing money.
The problem with Keynesian economics is it assumes there can be “autonomous” injections of cash into the economy to close the GDP gap.
This is false. Government spending comes from borrowing, taxes, or printing. Borrowing moves money from a saver to a spender. Zero.
Taxing moves money from person A to person B. Zero.
Printing moves money into the hands of the counterfeiter allowing them to outbid others with the new cash for existing resources. when the money makes it to main street it will inflate prices and reduce the purchasing power of the consumers not lucky enough to be in the chain of spending.
I apologize for the propaganda you learned at the university and hopefully in the next 10 years the text books will reflect reality.