Yet Another Looming Crisis

asdfg

Tue May 13 06:15:13 -0700 2008

YALC. You should trademark that. Could be bigger than three-peat.

Yet Another Looming Crisis

Timothy Brownawell

Tue May 13 07:59:06 -0700 2008

Looks like people have forgotten that the only way for investments as a whole to increase in value is if they create value, instead of just trying to redistribute it.

Yet Another Looming Crisis

David Leppik

Tue May 13 08:38:27 -0700 2008

Yes, if you are an individual planning your retirement fund. If you are a professional commodity investor, you don't make much money most of the time. Then, one day, there's a natural disaster in Florida and you're in a position to buy up the California orange crop before the folks who make the orange juice. And that lets you retire quite well. It's not pretty, but commodity investors have been making a living off of other people's suffering for a long time.

Yet Another Looming Crisis

duhavid

Tue May 13 08:18:00 -0700 2008

Say they add regulation that eliminates the problem. ( Sounds like it is needed ).

What will that money chase next?

Yet Another Looming Crisis

phred14

Tue May 13 13:42:54 -0700 2008

Perhaps the problem isn't "What will that money chase next?" but rather "that money", itself.  The past 7 years have seen precedented, but uncommon concentrations of money in the top percent of the US population.  (Precedented - like in 1929.)  Those people have to do something with all that money, and by your assertions, they're dumping greater amounts of money into markets than those markets can stand.  Since Technocrat has a significant ham radio participation, they're putting too much signal into the circuitry.  They're not just violating small-signal assumptions, they're driving it deep into clipping.

How to fix it?  Heck, this is only one symptom of over-concentration of wealth, and it's not the worst.  IMHO much worse is that "the rest of us" are moving toward a condition where we don't have enough money to keep the "real economy" - you know, goods and services as opposed to investments, running.  Part of the Great Depression was a bunch of people with no money to buy goods and services, and providers of goods and services that nobody had the money to buy, and therefore they couldn't afford to hire anyone.

Robert Heinlein once wrote that it's easier to convincingly raise your status than to lower it.  By the same token, there's very little that can be done to de-concentrate wealth.  It just moves that way - like gravity.  Unfortunately it's what needs to be done, and historically the most workable way seems to have been sufficient death to significantly increase the cost of labor.

Yet Another Looming Crisis

Uncle Entity

Tue May 13 15:15:10 -0700 2008

The past 7 years have seen precedented, but uncommon concentrations of money in the top percent of the US population. (Precedented - like in 1929.)

Second time I've heard that in the last 12 hours or so...

The '29 crash followed a period of high monetary inflation by the Fed to help out the Brits, they went back on the gold standard at a rate that was unrealistic and were bleeding gold so the US gov't decided to try to prop up their system.

The current crash followed a period of super low interest rates from the Fed caused by high monetary inflation, the method they use to influence rates since people aren't going to just start loaning money at low rates without an overabundance of supply.

Both of these times have a few similarities in that the income gap between the rich and poor reached 'unprecedented' levels.

While correlation doesn't prove causation it would seem that the common theme between both of these is the Fed's monetary policies leading to an increase in the income gap through artificially low interest rates causing wealth redistribution.

So instead of inducing 'sufficient death to significantly increase the cost of labor' perhaps all we need to do is abolish the Fed to fix this problem.

Robert Heinlein once wrote that it's easier to convincingly raise your status than to lower it. By the same token, there's very little that can be done to de-concentrate wealth. It just moves that way - like gravity.

That's a pretty fatalistic view...

Keeping up with the theme of abolishing the Fed, what would it take for wealth to naturally follow its path to its 'rightful' owners?

First, in order to make money people would have to invest it into productive activities — no more creating 'wealth' out of thin air and using it to make more money. For these productive activities to succeed they would have to serve the needs of the consumer public (eventually, since not all goods are consumer goods). The consumer gets what they want and the wealth gravitates towards those who do the best job of serving their needs...win, win situation, right?

Second, well...there is no second unless you want to talk about the coercive influence of the government and corporatist partnership that is another enabler of this 'gravitational' phenomena.

If you really want to de-concentrate wealth all you have to do is ensure that the only way to make money is to serve the 'public good', the fickle needs of consumer preference. Then those who just don't get it will consume their capital trying to keep their lifestyle going while those who do will take their place as the not so spectacularly rich but pretty damn rich.

Yet Another Looming Crisis

phred14

Tue May 13 16:45:47 -0700 2008

The past 7 years of "economic expansion" are unique, in that they have sunk far more boats than they have floated, contrary to the usual, "a rising tide floats all boats."  I would argue that the past 7 years of economic expansion haven't really been real, rather it has been a bunch of financial trickery.  Part of me suspects that this whole banking meltdown won't really be over until most of the economic gains of the past 7 years are wiped out.

Incidentally, I've seen reports that the "housing boom" was caused by - as you indicate for other reasons - low interest rates combined with loosening of lending regulations.  When more people find that they can buy homes, the prices go up.

causing wealth redistribution

Funny... Most times when people use that term, they're referring to "Robin Hood" programs that give benefits to the poor funded by taxes on those wealthier.  For me, this illusion was flattened during the savings and loan bailout.  I saw my tax dollars funding Resolution Trust, which was repaying swindled people.  It seems to be that by and large, the swindlers got away scott free.

what would it take for wealth to naturally follow its path to its 'rightful' owners?

Of course the wealthy think that they are the 'rightful owners.'  From another perspective, these people excel at aggregating wealth - at that they're the best.  So in that circumstance, in any non-straigtforward economy, including the one we have, they're going to win.  Seems to me that money has gravity.  I've always heard that the way to make your second million is to start with your first million.  Gravitational energy.  If I could make a change, and I have no idea whatsoever how to do this, it would be to make monetary space "flat".

Serving the public good is, I fear, a fickle criteria.  Public good is defined differently by every sector of the public.

Yet Another Looming Crisis

Uncle Entity

Tue May 13 17:59:04 -0700 2008

The past 7 years of "economic expansion" are unique, in that they have sunk far more boats than they have floated, contrary to the usual, "a rising tide floats all boats."

That only really applies to real growth as opposed to inflationary growth like we've had for the last 25 years or so, after the fiasco of the '70s got all worked out.

Funny... Most times when people use that term, they're referring to "Robin Hood" programs that give benefits to the poor funded by taxes on those wealthier.

It goes both ways. Government is inherently a wealth redistribution machine. Now the Robin Hood model is 'steal from the middle class and give to the rich and the poor'.

Serving the public good is, I fear, a fickle criteria. Public good is defined differently by every sector of the public.

That's why you need to ignore the labels and aggregates and let individuals serve other individuals through mutually beneficial activities. If two people make an exchange in the absence of coercion then it can be assumed that they are both better off or else the exchange would never been made. If you throw in some other third party to tell either one (or both) of these market actors what is in their best interest (since they aren't qualified to do this themselves) then one person will gain while the other will lose through this exchange. You create a zero-sum game where one didn't originally didn't exist.

A 'managed money supply' is an example of this. Those who get the new money first benefit at the expense of those who get it later or not at all since the 'liquidity injections' cause an increased amount of money chasing the same amount of goods driving up their price. The whole system is designed to concentrate wealth at the top else the big bankers and businessmen would never have agreed to a central bank that allows the government to tax the people through inflation because they would lose out just as much as the rest and the government needed the backing of the bankers to start up the Federal Reserve.

As to 'serving the public good', I just like taking the socialist slogans and turning them around to mean the exact opposite from what they intended. The 'public good' isn't really what is in the best interest of the public but what is needed for them to justify their wealth redistribution schemes.