TED Conversations

Industrial Designer, Marc Newson Ltd.

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Some countries have a low "safety net". Do you think a "ceiling height" should also be established?

Many countries have established a safety net in which to prevent a certain population of people within a society to fall below a certain poverty line. Things like cash transfers, subsidies and public services are set up to support these people.

With the increased divide between low, middle and high income people, in real terms perhaps this safety net has not been lifted high enough to keep up. Often in tougher economic times certain programs and schemes that make up this safety net are reduced or given up completely in response to budgetary measures and debt.

There are many measures to try and maintain a certain equality amongst income distribution in a society such as a progressive tax system, however perhaps more is needed?

Perhaps a higher limit should also be established to try and close that gap in an aim to try to distribute money more evenly and direct excess money (if any) to re-invest in businesses and the economy.

In some sports a salary cap has been implemented for the aim to try and create a more even playing field amongst teams so that a single wealthy club cannot entrench dominance over players.

Could a similar idea be used to control income distribution within an economy? Opinions, ideas, suggestions and alternative examples of this idea would be very interesting to hear.

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    Jan 27 2014: Another attempt to create equality by bringing the top down instead of the bottom up.

    Why is this such an attractive answer to so many? It doesn't improve the human condition. It doesn't help the people on the bottom. But lazy people can label it as an 'equality' fait accompli and move on.
    • Jan 27 2014: Bring the bottom up by bringing the top down? Depends on what you mean.

      Take from the rich and give to the poor = bad.

      Getting the rich to spend, creating demand for goods and services, creating employment opportunities for the poor, allows the poor to pull themselves up = good.


      Allowing the rich to hoard money, making us dependent on unsustainable debt growth, creating economic instability, reducing demand, destroying employment opportunity, locking the poor into an inescapable state of debt servitude = very, very bad.
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        Jan 27 2014: "Allowing the rich to hoard money, making us dependent on unsustainable debt growth, creating economic instability, reducing demand, destroying employment opportunity, locking the poor into an inescapable state of debt servitude = very, very bad."

        I'm afraid you don't really understand macroeconomics, Darrell. the rich don't "hoard money," just sticking it into trunks under the bed and sitting on it. They use it to invest in new ventures, which creates employment opportunities and does exactly the opposite of all the symptoms you mention. Rich people get richer when the economy grows, and the economy grows when poor people have more money to spend. Rich people WANT poor people to have more. A rising tide lifts all ships.

        In your own words, "No man is an island unto himself. The spending and savings habits of each individual in an economy effects every other individual."
        • Jan 27 2014: I certainly do understand macroeconomics.

          If the rich person "invests" the money on property, plant and equipment, it creates employment opportunity... but that counts as spending it.

          If the rich person uses it to buy stock that already existed, then it is spent, but is then income to someone else that must now spend the money to actually create employment opportunities.

          If it is spent on newly issued stocks, the money ends up in a bank account of the business, which must now spent the money before employment opportunity is created.

          If the rich person just uses the money to buy near-money (bonds), the money is transferred to the seller of such near-money assets, and that person must now spend the money before employment opportunity is created.

          If the rich person just puts it into the bank, it increases the bank's reserves. It requires someone come in and take out a loan, creating new money and debt, then that new money must be spent before employment opportunity is created.

          The common denominator is spending. Only by spending is demand for goods and services, and therefore employment opportunity, created.


          " and the economy grows when poor people have more money to spend"

          Unfortunately, for the last 30+ years, far too much of that "poor people spending money" has been based on them having access to debt rather than them having employment opportunity.

          Do you honestly believe that debt starting to increase at 3x the sustainable rate and drastically reducing top marginal income tax rates just randomly happed at exactly the same time?

          Har de har har.

          We lowered top marginal tax rates, creating massive drains of liquidity from the economy. We replaced that liquidity by loosening lending standards to allow the masses to go into debt to create the new money needed to fund the imbalances that we created with the income tax changes.
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          Jan 28 2014: Your fundamental understanding of macroeconomics is spot on solid. If we live in a vacuum where there is no variance, your system works fine. If you have been paying attention, however, the large corporations are not adhering to economic principle. The are buying legislation that forces the competition out of the game. Without competition we are subject to poor quality at higher arbitrary costs.
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        Jan 28 2014: So what you're telling me is that however a rich person spends his money, it eventually becomes an employment opportunity for someone downstream.

        We agree.
        • Jan 28 2014: Yep. As long as he does something, anything with it, other than stuff his mattress or loan it out, it creates demand for goods and services and that is employment opportunity.

          This is why the tax code of the 1940s to 1965 was soooo effective at creating the vast American Middle class. Very, very high top marginal rate of 91%, but deductions for almost all spending (consumption or investment in PPE) that lowered the effective tax rates of even the highest income people to well under 30%.

          The high tax rates were not about taking from the rich. They were about getting the rich to spend to get the deductions.

          Lowering the rates and eliminating the deductions was great for the rich who became able to hoard vast sums of money and near-money, but was terrible for the macroeconomy that became dependent on unsustainable debt growth to create all the money/near-money that is being hoarded.


          Think about this. The rich said that if we let them get richer, they would spend the money creating jobs for others. If they had ANY intention of actually spending the money creating jobs, they would have preferred the high rates, with deductions for spending money creating jobs that we had for decades prior.

          In reality, as both logic and history shows, they never had any intention of spending the money to create jobs. They intended to hoard the money, loan it out, and live off the interest. The problem with that plan is that it has created unsustainable debt growth and economic instability with insufficient demand to maintain a high level of employment.

          Reagonomics is destroying the middle class.
      • Jan 28 2014: Darrell,

        I found something you just said worth delving into ... deductions for almost all spending that lowered the effective tax rates of even the highest income people to well under 30%... The high tax rates were not about taking from the rich. They were about getting the rich to spend to get the deductions.
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      Jan 28 2014: It is those who create the straw man. If you want to find the source of the meme just look to those who espouse the meme. It is the usual suspects.
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    Jan 27 2014: Mr. Silverman,
    You are correct, there is a position I hold that is challenged by many of the other commentators.

    I hold that the individual is superior to the state. The state exists to insure the individual has the opportunity to.... well... be all that he can be.. The state is not to guarantee that the individual be all he can be only that he has the opportunity.

    In the past and even today, there are those that hold the state is superior to the individual and should control the individual's situation in his education, work, health, relationships, ad nauseum, or at least provide "guidance". Further, the state has found that some individuals have been successful in acquiring wealth and some have not. So, the state has determined it would be "fair" to balance it all out by taking from those that have it and giving it to those who have not, skimming a little off for the state's own purposes.

    What surprises me, is that seemingly thoughtful people see some wisdom in this and go through all sorts of economic and mathematical gyrations to prove the benefits of stealing some people's money.. I would say I am speechless, but you can see that I am not.
    • Jan 27 2014: " So, the state has determined it would be "fair" to balance it all out by taking from those that have it and giving it to those who have not, skimming a little off for the state's own purposes."

      I hate those people. Communism was a dismal failure. By detaching work from reward, you reduce total work, and therefore total goods and services produced.

      I have seen many a bumper sticker proportion that the flaw of Socialism is that you run out of other peoples' money to spend. The statement is ignorant on its face. As soon as the government spends money, it is someone else's money, ready to be spent again.

      The flaw of Socialism is that you run out of stuff to buy with other peoples' money.

      As evidence, look at the old Soviet Union. Were there shelves full of goods, with no buyers with money? Or were there people with money standing in line, but nothing on the shelves to be bought.


      You should definitely be rewarded for producing more. However, where it seems you and I disagree is the form of that reward.

      You seem to think that money just is... without being created.. and that a few individuals hoarding vast amounts of money is not a problem.

      I know that, in fact, money is created, is offset by debt, and a few people hoarding large amounts of money kills an economy.

      I think that the reward for producing more than others, should be your right to enjoy more goods and services that are produced by others.

      A super-rich person having 10 extravagant houses, a fleet of luxury automobiles, a giant yacht, a private airplane, and spending $10K on a bottle of wine and $10 million on a work of art? Heck YEAH! Because he created demand for goods and services, creating employment opportunity.

      This is why my ideal tax code would allow someone of immense income to avoid all taxes simply by spending all of their giant income.

      So, so, so much better than just taking money form people and giving it to others.
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        Jan 28 2014: You are basing your theory on an open economic loop. When in reality it is a closed economic loop. In an open economic loop (which does not exist in practice) there are no network tiers. A closed loop would look like an inverted triangle. The further the currency flows upward, the further it moves from the base. The currency is still circulating but only in the next tier up and also up into the tiers above it. Today the only thing that flows back down is debt. The small and medium business are being absorbed. These are the very entities that provide stability in the economy, because there was a wider loop of circulation. Now it is narrow and spiraling away from the base.
        You didn't hear it here first, but entitlements need a ruling class to distribute it. Can't wait for all my decisions to be made for me....I grow weary of thinking. Love? when does honey boo come on?
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    Jan 7 2014: I would not set the ceiling for individuals, but rather for corporations. I would force a corporation to split into several entities when it reaches a certain limit in market capitalization. This would prevent the concentration of capital, prevent monopolies, and encourage economic growth.

    Individual wealth is good. But corporate behemoths "too large to fail" which require government bailouts with taxpayer's money because of inability to make efficient decisions and adapt to market are, definitely, a drag. This would be a safety measure to prevent big financial disasters like the one we witnessed 7 years ago. I believe, smaller banks would be less likely to commit a multi-billion dollar stupidity.

    Note that this does not involve increasing taxes on anyone.
    • Jan 7 2014: Would 'governances' applicable to corporations and groups extend to cities/counties/states/countries?
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        Jan 7 2014: You cannot legislate what happens to large empires. But they seem to fall apart naturally and, sometimes, painfully. Entities with large economic/ethnic/cultural/geographic diversity are, perhaps, best managed with some sort of federal structure similar to the United States, with clear definition of the central and local powers. I think, encroachment of federal government into areas which historically belong to state jurisdictions which is observed in the U.S. is detrimental to freedom and makes U.S. similar to totalitarian empires.

        My comment is not meant to have a detailed plan of how this should or can be done. It's just an idea.
        • Jan 7 2014: My comment sought to expand on the idea you put forth that sort of seeks to promote spins off ... and now that I write this maybe a good model to use involves 'families' ... an individual is born into one, develops in it and then spins off to join with other to create a new one while still remaining somewhat tided to the previous one and the partners one...
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    Jan 7 2014: After watching the talks, one still wonders by what means the "more" that would seem to be "needed" might be accomplished.

    True, the gap has continued to widen between the entry level and highest paid positions in corporate America, but it is the decision of the boards of these corporations how their officers are to be compensated. If the decisions made by boards are deemed to be reckless, or even unjust, shareholders can either vote to change the board or divest, and the consumers may, if they feel strongly about these issues, boycott the company’s products. This, in theory at least, is a democratic path.

    If, at some future point, a majority of the public concludes that a maximum ratio—whatever number is chosen would be arbitrary—between the highest and lowest salaries in a company be enacted into law, they may of course, vote for such a measure, which no doubt would be challenged in court. And while this step would not, strictly speaking, be a salary cap on high income earners, one can argue that it too would be a democratic decision, no matter how heavy-handed.

    But what about the independent contractor or commission-derived, results-driven employee or executive? Do we say to the best-selling author that, no matter how many more books you sell or get made into movies, your royalties will be diverted to the IRS? Do we tell the pop music star that, no matter how many CDs or downloads you sell, or how many concert venues you sell out, from this point on, you’re working for free? And what about the top sales performer in a company, or even the CEO who is compensated not in salary but in stock, and whose income depends on his / her performance and, most importatnly, that of the company? For these and so many other “non-salaried” individuals, placing a cap on earnings, no matter where it falls, seems to me to be particularly unjust.
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    Jan 28 2014: Darrel,
    Except for Scrooge Mc Duck and Jack Benny, I know of no very wealthy person who is not moving his money. No wealthy person has bales of cash in the basement vault.
    I could be wrong, so all you multimillionaires and billionaires jump all over me.
    And by the way, money is not an entity... for example, when you borrow money from a bank, you are not creating new money, you are just using someone else's money that he wasn't currently using. Maybe, one of those zillionares who are not storing their money in the cellar
    • Jan 28 2014: Yeah, you really, really need to get that money back from whatever college took it and didn't teach you any economics. Heck, this is high school level stuff.

      You put $1 million in a bank. The bank now has reserves and can make loans for $970K (3% minimum reserve requirement). I walk into the bank and take out a $900K loan. The bank now has an asset ($900K loan). The $1 million is still in your account, and now there is $900K in my account too. $900K has most definitely been created!

      Money is created whenever a bank puts an asset on its balance sheet, in this example, the $900K loan.

      Back in the bad old days of liquidity bank runs, it was possible that you would go in to take out your $1 million, only to be told that you could not get it until the bank was able to find a buyer wiling to buy my loan, or a lender willing to lend them reserves against the loan. The reason is, if they gave you money, they would no longer have the required reserves for the $900K loan.

      Then we created the Federal Reserve, the buyer of last resort, that absolutely guarantees there will be a bank willing to buy or loan against that loan... assuming the loan is still performing.

      Of course, this didn't protect you in the event I defaulted on the loan, as the Fed can not buy or loan against dead loans. This is the solvency issue that caused the bank runs in the crash of 1929.

      So, we created the FDIC, to cover your deposit (or at least a couple hundred K of it) in the event the bank went insolvent due to bad loans.

      Neither the existence of the Fed nor FDIC alters the fact that when a bank makes a loan, money is created.
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        Jan 28 2014: Love the way you count... so I am not asking for my money back.
        .
        OK, one more time for clarity... I deposit a million cash in the bank and you borrow a mil. cash from the bank, you walk out with my mil. interest, reserves, on the side. My money is physically gone, It is nothing but a bookkeeping entry...You even said so in your example.
        There is no "new" money.... you are saying that booking entries are new money?... I'll tell you what, take that bookkeeping entry down to KFC and buy a drumstick.
        Let's put it all out there, John K. came out with his BS to support the new progressive political agenda....Progressives needed some economic justification to get into the public pockets.
        • Jan 28 2014: "My money is physically gone, It is nothing but a bookkeeping entry..."

          The bookkeeping entries are every but as much money as the bills.

          "I'll tell you what, take that booking entry down to KFC and buy a drumstick."

          Not a problem. It is called check or debit card. If I really, really want green foldable currency, it would take the bank minutes to get a delivery of cash, or they could issue me a counter-check/certified-check that I could take to any other bank and exchange for cash.

          That ledger entry money is EVERY BIT as much money as the bank note money we call dollars. They are bother created in exactly the same way... a bank putting an asset, usually a loan it has just made, onto its balance sheet.


          If not by being borrowed into existence, then you explain to me where money comes from!
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        Jan 28 2014: New money is NOT created when the bank makes a loan. If it was, then the loan wouldn't need to be paid back.

        All of Darrell's strained logic is pinned on this one convoluted idea. Darrell's had thirty years of manic Reaganomics-hatred stewing in his mind to squeeze out this one unsupportable notion.

        Somebody show me a single macroeconomics book which tells me new money is created when the bank makes a loan. And then show it to the Federal Reserve, too.
        • Jan 28 2014: When the interests are paid new money is created ...
        • Jan 28 2014: You jump to wrong conclusions. Once upon a time, I was a big believer in Reaganomics, the Laffer Curve, supply-side, etc. It took a couple decades of actually seeing he results, then digging into the underlying mechanisms, to figure out why the economy was becoming so bubbly and unstable.

          Here is a hint. I'm a gun owning, meat eating, pick-up driving, commie hating, Cold War vet. Welfare was one of the biggest mistakes the USA ever made. I would love to see us abolish all kinds of social safety net programs. I am not a socialist in any way. I am pro well-regulated capitalism all the way.

          And the Fed already knows that loans create money:
          http://www.dallasfed.org/assets/documents/educate/everyday/money.pdf
          Page 11: "As each loan is made, the money supply is expanded."
  • Jan 27 2014: Darrell,

    Too crowded below:

    Note what you stated "When the debt defaults, the money it created is destroyed".
    1- What is destroyed is the debt value not the derivative values (interest generated and payed have moved on and been incorporated into the circulation)
    2- The value of the defaulted debt is realized when the debt note is redeemed and found insolvent, thus hoarding it keeps it's value intact. Of course changing it's face value is just a charade ('keep debt growing' rather than recognize the bad loans)
    3- 'As lending standards become too lose, fraud becomes the norm rather than the exception--eventually spreading throughout the economy'.

    'Deficit' is nice way of saying getting into debt to keep going... compounded and exacerbated by the interests rates being payed on the debt. I am sure many many economists will be quite disappointed to realize they where misguided and from what I have experienced will likely refuse to accept the truth of the matter rather than acknowledge it. Of course that doesn't change the truth of the matter; not the fact of which statements accurately correspond to the facts (and which don't).

    I envision an economy that is based on abundant resources rather than scarcity. I realize that this solution will and does break the link that every purchase transaction has a buyer and seller, where the seller spends exactly the same amount of money that the seller receives. In other words one can sells a cake, gets payed, gets to give it, gets to keep it, even gets to eat it and can repeat the process all over again. I also realize that this likely sounds quite absurd to you given the restrictive economic principles you seem to adore. Still it is possible. For example consider transactions and interactions where each receives more than what each gives, where the sum of the part results in more than the sum of the parts. Asserting someone deals with reality while the evidence shows they deal with an ideal dreamland be rather incongruent.
    • Jan 27 2014: Yes, in a world without money and scarcity of resources, then the point of the original post becomes moot. In that, possibly impossible, future, where resources magically appear from nowhere, then "no, there should be no upper limit on wealth".

      As long as resources are scarce, and goods and services take labor to produce, and as long as we use money created and backed by debt to give it value, then we should indeed limit the amount of money that is hoarded by a few.


      As for he other points, I'm simplifying here a bit in grouping money and near-money into a single category.

      If a loan is held by a bank and the bank is discharged via bankruptcy, then the bank has to use Tier 1 capital to replenish its reserves, converting the money (Tier 1 capital) into non-money (reserves), in effect destroying money.

      If that makes the bank insolvent, then the bank will be bailed out by FDIC, converting money in the FDIC trust account into non-money bank reserves. If the FDIC insurance account goes negative, then it will have to draw on the US Treasury, forcing the Treasury to issue new debt to replace the defaulted debt, transferring private sector debt to the federal government.

      If the loan is owned by a non-bank, then it is near-money rather than actual money. Since near-money cannot be spent until it is converted into money, and the value of the near-money is destroyed/reduced by the default, the near-money has been destroyed.


      In the more complex reality I was hoping to ignore, it is not money = debt. In reality it is: money + near-money = debt + a tiny amount of other assets such as gold and real estate held by banks.
      • Jan 27 2014: Darrell,

        What about a world with artificial scarcity, say one that a few created to exploit resources while keeping others out of it?

        Let's keep in mind that: we use money created and backed by what gives it value, it isn't the debt that gives it it's value, it be the fulfillment of said note!

        We should indeed limit the amount of debt that an entity may get into, especially them public entities that take from everyone and give to a few...

        It is strange that everyone is made to pay for the bail out of certain business enterprises that made wrong business investments that lead them to go bankrupt when other businesses aren't bailed out... Federal Deposit Insurance Corporation is a scheme used by certain businesses that gives the individual depositor the guarantee that if they don't pay you, we will (up to a certain amount).

        I noticed you sort of brushed aside an economy that is based on abundant resources rather than scarcity, transactions and interactions where each receives more than what each gives, where the sum of the part results in more than the sum of the parts. Asserting someone deals with reality while the evidence shows they deal with an ideal dreamland.

        I am now sure that you did not recognize how I was pointing out that the economic model thought is an idealized dreamland that doesn't really consider what is happening in reality.
  • Jan 9 2014: Creating a cap in civilian life would be meaningless: those with the money and power would just find ways around it or ignore it all together. History has proven this with the communist and socialist experiments. Just look at Russia and Italy.

    The better approach is to raise the lowest common denominator rather than lowering the numerators, to use a mathematical metaphor badly.
    • Jan 9 2014: (when positives are involved) Add fractions less than 1, multiply fractions greater than 1
      when negatives are involved, do the absolute inverse- take the absolute value and if greater than 1 add it, else multiply it -

      When one multiplies fractions less than 1, one gets at best the highest one, though when one adds them one can get more than the highest one...

      BTW if one raises anyones level by x amount the overall level is shifted upwards ... evidently for the lowest ones a given level increase of x could seem to be quite significant where as to the higher levels it would seem to be quite insignificant. the argument to shift from the high to the low becomes mute for redistribution of wealth doesn't increase wealth it merely redistributes it. the better approach to raise wealth levels requires that we actually raise the wealth levels! Who do you think is better at making and managing wealth increases the wealthy or the un-wealthy? An argument at the individual level to increase one while decreasing another breaks down at the group level where every increase increases wealth and every decrease decreases it. Get the wealthy incentives to get the un-wealthy into the wealthy levels!
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    Jan 7 2014: If a tree grows tall but it has a shallow root system what happens?
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      Jan 7 2014: What happens? It depends. A Sequoia sempervirens has a root system of 2-3 meters, but can live well over a thousand years and grow to be 100+ meters tall.
    • Jan 9 2014: It will possibly grow strong and tall, but wouldn't it just one day fall?
  • Jan 5 2014: First time posting on anything like this but my view is a safety net is a necessity. It supports the countries work force when there not needed. Not to mention give a better quality of life and prevent crime. As for a ceiling height or income cap i don't think it a good idea why play the game if you've reached the end. More laws to prevent corruption and promote competition between companies and something that allows employees to rightfully share in the success of a company there part of to help spread the wealth. Basically cutting the fat. Your income should be justifiable. My interests in this topic have rocketed with the recession. Having worked various jobs since before i was even 16. Also at 25 i quit a job because it had no future and used my safety net to go to college. Which I'm incredibly greatfull for. Im sure in 2009 whoever got my old job was greatfull to.
    • Jan 26 2014: The ceiling is because:
      After a certain point (say $10 million wealth, $1 million income), wealth/income becomes self-perpetuating and not a reward for talent/skill/effort/entrepreneurship.

      It also is highly likely that it either resulted from an inheritance (self-perpetuating), a really good luck (even after accounting for skill/effort) or simply fraud.

      Also after that point it does not contribute to your well-being or even to your security, but to your political power and influence, thus diminishing democracy and increasing corruption.

      Further, the gain from rewarding and motivating so many other people with the income/wealth taxed at 100% above said threshold, would far surpass any gain from rewarding/motivating the 0.1% of the population that can't even appreciate that reward/motivator properly after being saturated.

      Let alone the fact that it will reduce taxes on a very large number of middle-class population, that actually is rewarded for skills and effort.

      Finally, since the tax won't go from 0% to 100% suddenly, but rather gradually/asymptotically, no person will ever reach that limit because it is mathematically impossible. So that will keep the motivator of a few extra bucks for the extra greedy! ..and anyone who puts much effort & skill into his work JUST for the money, after he is already filthy rich, is ought to be extra greedy!

      And more from a like-minded person (about inheritance, which is closely related to upper limits):
      http://www.ted.com/talks/jody_williams_a_realistic_vision_for_world_peace.html?c=186648
  • Jan 2 2014: Everyone has an opinion but no one has the authority to determine what someone else should or should not spend there money on. It is just no ones business. We can have an opinion and deep feeling but NOT the right to determine how much someone should be able to earn or what they should buy with what they earn. If someone earns an income equal to the poverty level should someone else tell them they can not buy beer, cigarettes or potato chips because we don't think that is a good use of their money?
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      Jan 2 2014: I believe the reason people establish social safety nets is as much to protect themselves from having to be exposed to poverty and ugliness in public space, as it is to help others. If cash is provided to the poor, taxpayers fear it may not be used to keep public space free of offensive people and smells. That, I believe is the primary reason people establish safety nets and want services vs. cash.
      • Jan 5 2014: I agree with you that the primary reason people establish safety nets and want services is as much to protect themselves from having to be exposed to poverty and ugliness in public space, as it is to help others.

        When one gives cash vs services it opens the door for the cash to be used in all sorts of ways whereas when one funds the services it focuses on a given set of ways that ideally will bring about an enriching transformation for everyone wellbeing. Evidently if one gives money to help someone buy a medicine and they go buy their drugs with it the problem can be exacerbated when they get the wrong drugs :--)

        give them a 'nudge' in the right direction, educate them and build positive institutions that encourage individuals to make decisions most beneficial for them and other. Help them to help themselves and help others to help...
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          Jan 6 2014: I think my point, however gently I attempted to make it, is that public entities and governments help "strangers" for selfish reasons, rather than to assist the less fortunate.
      • Jan 6 2014: Julie,

        Indeed some entities help "strangers" for selfish reasons, rather than to assist the less fortunate... in a way you could say they are taking care of the sick in the herd to milk them a bit more and to keep others from getting infected ... Of course thats akin to holding that a philanthropist acts as a selfish egotistical person seeking to feel good from the misfortunes of others by deriving personal benefits from helping the less fortunate ones. Then there are those who actively work to put on an act as being less fortunate and in deed to get strangers to 'help' them when all they want is for the strangers to fork over the money.

        Some entities DO help "strangers" to assist the less fortunate because of all sort of reasons that go from what they have gotten to what they will get from it. Though trough making an active effort to promote human welfare; a person can practice philanthropy for selfish reasons and eventually do it for unselfish ones. Without ever falling into (or for) emotional exploitative schemes.

        I sort of liked the underlying storyline within the point you are subtly making. I do need to work on a scheme to help the selfish to help out, rather than help them not to help. Thank you for letting me realize that "some help 'strangers' for selfish reasons, rather than to assist" will have to keep that consideration present from now on...

        I also have to work and incorporate that thing about 'gently attempting to make a point'. I seem to tend towards bluntly putting it and rubbing the issue which sort of leads to a reflexive rejection regardless of the facts involved.

        The idea of capping the top seems to seek and promote a limiting frame, likely stemming from those within a limiting resource frame ... seeking to use their limited frame on the others with abundant means and resources. Kind of like the 'no pain no gain mentality of those who suffer ' who still have to learn that there can be gains with joy and play mentalities.

        Again thank you
    • Jan 3 2014: You're right; the solution i believe is to give them a 'nudge' in the right direction. educate them and build positive institutions that encourage but not force them to make decisions most beneficial for them.
  • Jan 1 2014: My view is that it takes so much money to bring new ideas to reality through R&D that if you limit the monetary potential you may reduce the desire or even ability to create.
    • Jan 2 2014: I very much agree with this, but what I put into question is unnecessary "ideas" that are brought to reality. Namely luxuries and wildly overpriced goods and services. No one needs a 5 million dollar car. No one. It's beautiful and pushes the bounds of how fast we can go but give me a break, why does going fast in a sports car MATTER? I am not talking shit about supercars, I love them. Honestly, I do. However, they are unnecessary and puts brilliant minds behind projects that last YEARS completing try to make the fastest, best built and prettiest box with four wheels. The fact that I have these conflicting thoughts about a 5 million dollar sports car illustrates one of the many issues at hand in our society. We have put such a high value on goods that add no TRUE value to our lives. Yes, we now have the best and shiniest car in the neighborhood, but wouldn't you rather know that you just saved an entire village of hundreds of people who would have otherwise died of starvation? 'Cause if you don't, there is probably something wrong with you.
      • Jan 5 2014: Steve,

        When someone pays for a luxury car, they given to hundreds of people who would have otherwise died of starvation while getting a beautiful brilliant pretty box which requires highly specialized and expensive maintenance... what I put into question is unnecessary arbitrary levies that add to the price tag and reduce the ability to create sustainable businesses.
  • Jan 1 2014: David,

    A progressive tax system coupled with a robust safety net involves an underlying story line that goes against what ought to be promoted. Rather than incentivating If you work better you and yours will be better off it incentives lets punish those that do good and rewards those who do badly. The story of equality that ought to promote something more along the lines 'everyone has to contribute with the same percentile, if you are one of those well-off who does good then great for you; let's have an incentive for you to help those who do badly which bring you them and everyone additional benefits'! RobinHood economics of taking from the right/rich to give to the wrong/poor by robing the rich and distributing money to the poor is only justified when the rich got rich by robing the poor. BTW to change the protection-extortion rackets schemata into something that sounds like being something else only obfuscates what be going on; Arbitrary royalties imposed by the king levied on the commoners by royal decree as payment for protection from the king's racketeering is just a legalized move. Individuals taking possession of the tools and creations produced by a tools-master without the tools-master's consent involves a different king of extortion. Ideally every interchange ought to generate enrichment of every side and a bit more. Thing is many feel entitled to take more and more while giving less and less. Some even feel justified in 'robbing' the rich individuals while unjustified in robbing a destitute ones. Of course some feel justified in robbing and taking stuff from everyone if they can get away with it, especially when it's called something else. There are all kinds of racket schemes and stories around this notion that we ought to be aware of and cautious with, least we promote them schemata with our actions unaware of what we be doing!

    Do note that the example you used of wealthy clubs entrenched dominance involves competitions rather than competences.
  • Dec 31 2013: Let's just prohibit ANYONE doing better than anyone else in ANYTHING AT ALL!

    We can execute anyone with any talent or ability.
    • Dec 31 2013: Bryan, are you arguing that society justly rewards those who have given the greatest innovation?

      The long list of folks who have died paupers in need of the social support system described above, yet contributed immensely to society includes Henrietta Lacks, Edwin Armstrong, Nicola Tesla and goes on from there.

      Or do you argue that the wealthy do not require a support system to maintain their wealth?

      Perhaps you are claiming that wealth redistribution goes one direction, from the wealthy to the masses and never ever siphons from the masses to the wealthy.

      Whatever your case, state it without hyperbole and lets get to it.
      • Dec 31 2013: No, I'm arguing that there are jealous do-nothings who think that things will be better if only those who have more are injured. That's my case. A "ceiling" helps nobody. It is just a way to hurt people. This is different from a "floor", which keeps people from sinking into the mud. However, there are tiny-minded little whiners who can't stand the idea of anybody being prosperous, and these tinyminds demand that the "high" be chopped to pieces.
        • Jan 1 2014: Are you saying that folks do not have the right to complain against the wrong dealt them?
          How about a slight detour in history to why” tinyminds” are upset.

          S&L scandal … 338 billion lost
          Madoff …. 65 B
          London Whale 9 B
          Abacus Paulson & Co 2 B
          Joseph Nacchio 3 B
          Kenneth Lay Enron 34 B
          The tally from above, 471 Billion lost and that incomplete list only goes back to the 90’s Imagine how many hungry children that would feed, schools that would build.

          Now throw in the Eminent domain issues, ground water pilfering and poisoning, pay discrimination and many more. How dare they complain against the money mongers!!!
      • Jan 1 2014: People have the right to COMPLAIN. But complaint is not the same thing as using the violence inherent in government action to FORCE some silly "cap" onto anyone who DARES not be as mediocre as your average Jersey Shore fan.

        Of course, there will be those too dogmatic, lunatic, or just plain stupid to understand there is a difference between complaining and demanding that government use the monopoly of violence owned by a state to impose and enforce a "ceiling height".
        • Jan 2 2014: So far I have only heard unsubstantiated claims, in the vein of Unicorns and orbiting teapots. Give me concrete events which have happened in the USA to back your theories.

          Show me where the “monopoly of violence” inherent in the government, has kicked down the Tiffany Gates of Marthas Vineyard, and left with even so much as a wedgie being administered for their dreams.

          The low ceiling was a fire hose in Alabama
          A torch to the tents of Veterans outside of Washington DC
          The low ceiling has even been turned into bullets in Ludlow Co.

          Till I see the reciprocal treatment of the wealthy, I will continue to drive a schooner through your arguments without fear of scraping a fact!
      • Jan 1 2014: You and Bryan were really talking about different things. Some one like Maddox or Jon Corzine are really crooks who got their billions by plain cheating/scam. Then of course they they became the targets of complaint. And even the law enforcement wasafter them too. But Bryan was talking about the riches gained by legitimate talent or luck (but of course, if the person failed, he wouldn't get sympathy from those complainers, would he?)
        As someone already said that the progressive tax system has been already doing the income redistribution anyway, so this suggestion of a ceiling in income/wealth is really just so full of inefficiency and uncertainty about its practicability. Actually this kind of approach has been practiced by Stalin and Mao in their Communism "Great Leap Forward" campaign. Both of them, in fact, set the ceiling so low that nearly all so-called capitalists were given the life of forced labor camp or kept in the jail until they die. But THERE WERE STILL RICH PEOPLE THERE WHO WERE THE RULING CLASS OF THE COMMUNIST GOVERNMENT. AT THE SAME TIME, THE "FLOOR" FOR THE NO-ASSETS-PROLETARIAT'S NEW LIVING STANDARD FELL IN TO NO BETTER THAN STARVATION LEVEL.
        It is easy to say the noble idea of absolute equality, but who is going to lead us to this Utopia State? Remember, when Stalin and Mao were fighting "for the poor", very few poor people at that time believe what would happen next to them like it had. Even nowadays, there are still people, in North Korea, or some years before, in Cuba and Venezuela, who believed, and called, their rulers as their "great saviors", but still they are EQUAL but also POOR.
        • Jan 2 2014: Sorry, but rational discourse is not permitted by leftists. They're too busy creating demons to hate.
        • Jan 2 2014: Paulson & Co dealings were legal and could very easily be argued as the tipping point of the 2007 recession. The redistribution of wealth from numerous pensions and retirement accounts to the banks of a few is rarely mentioned. Why?

          If we accept the fact that no country can stand alone, no matter their political persuasion, then you must take into account that the collapse or rise of a society must be, in part, tied to outside influences. Whether they are punitive or constructive. We could even state that the hostile stance taken by Mao or Stalin was influenced by our equal reaction.

          A universal dismissal of a Utopian structure is not a valid argument. Only when Money is realized as a man-made structure that can be changed for the greater good instead of pursuit of wealth, then we can debate the Utopian life.

          Equally poor is a relative term, do you count dollars in the bank as wealth, if so then the divide will always be present.

          How does our embargo effect the Cuban's ? Is your valuation of their system still valid?
      • Jan 2 2014: Wow, now you like to blame all other countries in the world for being responsible for the failure of Stalin, Mao and F. Castro! Of course your kind of argument could win all the time, even though not many people would agree with you. Actually, I have already seen this kind of blaming the society for all the personal failures by the anti-social cultists or militants, and they used it as the justification for irrational doctrine or act.
        Wish you good luck, sir. Maybe, you would have the same luck to persuade enough people to agree with, and follow, you. Who knows.
        • Jan 2 2014: The human rights violation of Cuba are inexcusable. But since you claim
          they are alone in their troubles.

          Please enlighten me as to how a 51 year, total embargo, has no effect on
          an islands economy?

          Talk about imposed ceilings.
  • Jan 31 2014: "Yes, you caught Darrell!"

    I am not exactly sure what I got caught at. I got my info from an article I'd read, but just reconfirmed from bls data.

    If you have some secret stash of info on contractor counts, I'd love to see it. If not, you are making it up.

    BLS says.
    1950 58,918 2023 0.0343
    1960 65,778 2381 0.0361
    1970 78,678 2865 0.0364
    1980 99,303 3000 0.0302
    1990 118,793 3196 0.0269
    2000 136,891 2865 0.0209
    2012 142,469 2814 0.0197

    2013 was estimated in the article at 154M and 2.7M


    As I said, if you have data showing contractors, I'd love to see it.


    I suppose we could just do total government spend as % of GDP.
    http://www.whitehouse.gov/omb/budget/Historicals/

    Table 1.2 Receipts and Outlays as % of GDP.
    Year Outlays as % GDP
    1950 15.6
    1960 17.8
    1970 19.3
    1980 21.7
    1985 22.8
    1990 21.9
    2002 19.1
    2012 22.8

    Shall we talk % of that that goes to Social Security and Medicare?

    1950 1960 1970 1980 1990 2000 2012
    0.018 0.125 0.186 0.254 0.276 0.339 0.352
    781 11,602 36,483 150,637 346,725 606,536 1,245,083
    42,562 92,191 195,649 590,941 1,252,993 1,788,950 3,537,127

    So, we see that rather than a "bloated" government, we see the effects of longer life expectancy, the decline in the birth rate post 1950s, and normal demographic shift of aging population.
  • Jan 30 2014: Joe et all

    What if just one singular individual defines good for everyone (based on what be good)?

    BTW even when the majority defines good,
    acceptance would be a shared triad by everyone who accept it... be it someone form the majority or minority
    and there is the situation of if the definition of good by the majority actually correspond to what be good.

    In other words that the majority defines it as such does not imply the majority accepts it nor guarantees that it corresponds to what happens to be...

    the acceptance of condition “until everyone learns to love it” was more of an observation that
    the haters hate good... until they learns to love good... (and cease to be haters).
    • Jan 30 2014: I agree, but with a caveat, acceptance must be hand in hand with the geographical mobility of the minority.

      To sum up my thoughts on the ceiling, I see an upper limit as required, not in wealth accumulation but in where the wealth is used in society. I care not if you buy a six pack of Rolexes, but I draw the limit when market forces are swayed by one person or a trust to influence their needs, irrespective of collateral damage.
      • Jan 30 2014: YES!

        The collateral damage must always be considered.

        The rich do not mind government intervention when it is to keep them rich, such as Fed Reserve, SEC, FDIC, TARP. However, if we do anything to help anyone other than the rich, the rich scream that government should not be involved in the economy!

        Let it crash for all, or for none. This "prop up the rich and let the poor burn" is getting very old, very quickly.
      • Jan 30 2014: To sum it up... (if I got the gists of what you stated)...

        "draw the limit when market forces are swayed by one person or a trust to influence their needs, irrespective of collateral damage"; in other the line be set at the point where the sways shifts from promoting beneficial ways to exploitative detrimental ways.

        Such a line could even apply to the safety net standards... where individuals are 'encouraged' to actually benefit from the benefits... rather than just take the handouts ... Shift from being a dependent off the system into an enriching patron who chooses to enrich and be enriched by the association... in oder words shift from 'having to... needing to...' into 'picking to... desiring to... choosing to...' In a way move from the carrot or stick drivers towards a more fulfilling purpose one. Replace the SWOT with gains vs losses with A FAIR BID that brings benefits to everyone and especially to those that choose to embrace it.

        With that I would like to thank you very much for this has helped me to catalyze certain ideas ...
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    Jan 30 2014: Joe, Esteban, et. el.
    There is a lot of discussion on the role of the government and how it should effect it's citizenry.

    One position is that government should be very involved in the life of citizens with many social welfare programs. In the last 50 years, my government has created a number of Secretariats at the highest level of government addressing; health, education, housing, welfare, transportation, etc. etc. Hundreds of thousands of federal employees, are evolved in writing and enforcing thousand of regulations to address almost every aspect of life in America. I see this as problematic. I see too many Americans beginning to lay back and let the Government take care of them. In return, these people support the government's continuing to delve deeper and deeper into effecting the individual's life. This frightens me, could the government get so far into ... my life... that I have no life left of my own?

    My position is... let me relate it to a football game. We have a set of rules all the teams have agreed to; size of playing fields, number of members on the team, boundary's, scoring, etc. Now, we have a game, the teams come out to play according to the rules of the games. Referees are there to insure that the teams play fairly according to the rules. Good.
    But, the referee's see that one of the teams is not as good as the other. So, they begin to take actions to give the lessor team a more "fair" advantage... time, better field position, they level the laying field so to speak... the government are the referees in the game of life. When the referees effect the game, there is no longer a game among the teams, Now, it can be argue, what if one of players is sick or injured? Who takes care of that. Well, in football, the teams do, I have never seen a referee tend to injuries or illness. The referees are there to insure the rules are followed in the game.
    In life, people will need help, but not from the referees. ,
    • Jan 30 2014: Mike,

      Take your analogy and...

      Consider that the referee and some players have been payed by the bookies for the bookies to ensure the bad boys win and the good guys lose... Of course without exposing to the general public that the game is fixed... Thing is that the game outcome is known in advance and in the end the good boys win.

      The thing with the analogy you used is that the teams compete in a game of win-lose rather than a game where everyone wins... of course on a particular level the game isn't about the games being played on the field its about what happens around the games being played on the field. It's a monopolized franchise enterprise disguised as something else. BTW some players are played until they can't play no more and then replaced.

      What concerns me the most is who pays to be controlled to pay more... while getting less in return.

      This conversation has less than a day to go... and it may be vital to reach some shared conclusions.

      I for one am grateful to Darrell for helping me see 'loopholes' as designed stimulus schemata rather than as some means of evasion, means of avoidance or inadequacy in the law or a set of rules. From the different conversations I posit that most would agree that robin hood economics of wealth redistribution and having a ceiling height be rather bad ideas. Bluntly put I posit that the shared response to: "Do you think a "ceiling height" should also be established"? is a resounding NO, we here think establishing a "ceiling height" is a rather bad idea we consider a better idea involves designing stimulus schemata that induces everyone within a society to reach above a certain richness line. Things like cash transfers, subsidies and public services are set up to support help everyone and each one attain better standards... and feedback into the sustainable-desirable-congruent expansion of life...
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        Jan 30 2014: My analogy was to present the role of the National Government as a referee in the lives of the citizenry not a participant. When then referee (government) chooses sides then everybody loses the game.
        That means that all these government "support" programs like ceilings and nets and subsidies and tax breaks etc, ad nauseum, over the years has caused people to lie, cheat and steal to protect their wealth and others to simply lay down and let the government take care of them.
        We have always had our neighbors who needed help, and there has always been someone to provide help. Churches, private charities were just a few of the entities , The worse of it all is that the tax dollars wasted by the government wasted in trying to get involved is the most bitter pill to swallow.
        • Jan 31 2014: Mike,

          To make the analogy a bit more accord to the situation I introduced the notion of a referee who has been bought by the bookies with a bit of a bias for the game to play out a certain way... I also introduced a couple of key players who could also throw the game to go a certain way... heck we can even include establishing a compulsory seasonal ticket scheme that will invite the fans to attend the game else face the alternatives ... and while we are at it banish any other similar games... so how do we improve the games being played and possibly introduce game changers... stadiums are used for concerts ... where everyone sings and dances...
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        Jan 31 2014: Esteban,
        Don't over beat this horse. What I was trying to say is the the government has a responsibility to let individuals live their lives, not direct their lives.
        • Jan 31 2014: Duly noted ... what I was trying to say was that the referee was just another player on the game field that had vested interests as to how the game plays out. BTW I agree individuals ought live their lives without intrusions that force them to conform and fit within a particular level. There ought to be help for those who need the help to get going without such ways creating codependencies ... In other words yes to a safety net, no to a ceiling height, and incentives to promote everyone incorporate certain particular beneficial behaviors...
    • Jan 30 2014: I like the football analogy it gives a reference frame. So I shall add to Estaban’s logic (hopefully not detract from his logic).

      The referees dictate the rules within the separate leagues. These leagues are designed to promote advancement. The NFL benefits from NCAA and the NCAA benefits from High School. The rules are different within these leagues but the game is the same.

      The goal is to have the best players on the NFL, this promotes competition and makes the game more enjoyable for the fans and raises profits. The various leagues do not limit the pool of players to restrict competition. They actively seek talent then oversea the growth in all stages. To accomplish their goal the control exerted within the leagues are very real and necessary.

      The same goes for any business, you must be able to control what happens within your company.

      Laissez-faire governments lack the control over their businesses, the individual corporations within its borders.
      • Jan 30 2014: Joe,

        I see the separate leagues as just different parts of the same franchise ... and would disagree that the referees actually dictated the rules within the separate leagues... sure the referees may be the ones making the calls but they are just the puppets under the puppeteers control ... Of course the illusion of fair play makes the game more enjoyable for everyone and helps raises profits.
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        Jan 30 2014: Just to clarify, Adam Smith was trying to point out the the market is self regulating, if some one come into the market and provided bad goods or services, the market would shut him out. Markets only work it an exchange is beneficial to both parties.. Smith didn't preclude government standards and boundaries.
        • Jan 31 2014: From what I know the market regulation considered that there where multiple providers and diverse customer base... when there is only one provider or customer the rules change... If one has to buy something and there is only one producer ... well one has to buy it from them regardless of disliking the product...
      • Jan 31 2014: But the NFL system also help the owners and star players become super=rich, and that was the topic here tries to prevent. Actually this is similar to the case that tax government tax or regulation policies which, throughout the years, CAUSED THE INCREASED INEQUITY IN THE WEALTH OF THE CITIZENS HERE. If we want to redistribute, or restrict the the accumulation of, huge wealth by individuals, we better elect better politicians to revise the tax, and education policies that encourage them to improve their ethical and economic senses. By election, I do not mean that just only the executive branch, but also the intelligence level of all the congressional representatives and government officials, because only few good politician won't be able to do it alone.
        You see the basic problem here? Regardless how your suggested "remedy" here, can you really hope it will be carried out competently by this bunch of current politicians in the government here. As a matter of fact, substantial part of this mess, such as tax loopholes, pork barrel spending and huge debt, have been CAUSED BY THESE POLITICIANS WE ELECTED IN MANY YEARS.
        • Jan 31 2014: It can be a challenge to get the corrupt individuals to choose and establish just laws and regulations... that incentive and promote ethical ways... I suppose it is a bit like getting polluters to go green... they will do it if economically viable ... and incentivated...
    • Jan 30 2014: Not to let more facts get in the way of a good emotional argument based on dogma and misinformation, but....

      Currently, the USA federal government employes some 2.7 million people. While that may seem like a lot, it is actually 1.8% of the nation's 154 million person workforce. That 1.8% is the lowest in more than 100 years.

      By comparison, the rate in the 1960s was around 3.5%, 3% in the 1970s, and well above 2.5% for all of Lord Reagan, hallowed be his name.

      There is much talk of bloated government by one particular party, but like much of what they, and Faux news spews, the data is in 100% disagreement with their claims.

      Now, the above is just for non-military. If we include military, which the USA has been shrinking, we find the military is the smallest it has been (as % of total population) since 1937.
      • Jan 30 2014: Of course the thing with facts and words is one needs to properly interpret and incorporate them into the argument ... some may be dazzled with shiny trinkets, specific numbers and rhetorical claims that seek to distract from the core of the issue by influencing individual considerations by seeding particular notions as givens.

        Having said that I have little idea of the numbers you put forth, how they be calculated and a couple of other relevant particularities... though I am quite aware about the existence of some cognitive illusions and how presenting information can alter the considerations individuals consider. which is why I mention it...

        I am not sure who is resorting to dogma and misinformation the most...
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          Jan 30 2014: Esteban,
          You went a long way to question Darrell facts and figures, I will say it like it is, they are.... Keynesian, " The government is too small, look at the numbers."
          OK, lets look, yes the number of non military federal employees are there. So how can Faux News complain about bloated numbers? Because Faux news like me found out about all those contract employees that do not count as Federal employees. and what Faux news did not report which I got an inkling was the number of contract employees under classified contracts. How many? Well at best its a SWAG, Looking at various Secretariats budgets, it seems that half their money is not spent on detailed services. Most Federal employees are General Services employees and are paid by OPM, so there is a lot of money available for contracts. So, could the number of contract employees equal the number of federal employees? I would take that bet and give you a 100,000...
          Yes, you caught Darrell!
      • Jan 31 2014: Mike, Darrell et all

        I realize the difficulties surrounding enriching interactions which can be conducted at different levels. Something that fascinates me is the display of quantitative and qualitative information and how the stories we use influence the decision we make. For example the word 'loophole' seen as 'inadequacy in the law or a set of rules' differs significantly from 'an incentive of a desirable behavior to be utilized'. Till recently I used to think of the former rather than the latter. The notion of hoarding money as hoarding property may serve as a useful analogy as to understand why some insists on putting the land to use... I learned that some like to use precision in numbers as a way to convey certainty in what is actually rather uncertain terrains.

        I also see this conversation as part of a broader one going on through multiple domains and would like us to collaboratively produce a exemplary case for others to imitate.

        BTW my comment above did not question the facts and figures; it questioned the act of resorting to facts and figures. There is a subtle but significant distinction there!
        • Jan 31 2014: "There is a subtle but significant distinction there! "

          Philosophers sat around trying to impress each other by thinking up grand explanations of things. They saw their assertions of truth as truth.

          Then, this pesky branch of philosophers came up with an idea that perhaps we should test our assertions to see if they actually are true. They designed tests, gathered data, analyzed results, found sometimes the data fits and sometimes it does not. They became known as the natural philosophers, as they were more interested in the real world than some imaginary made up place.

          And there is the subtle difference.

          Some people like to assert things as true. In reality, this is just making stuff up.

          Others like to test ideas against actual facts and figures, to discover what is actually true.

          It is the difference between truthy and true.

          True: Supported by test, facts and figures.

          Truthy: Just made up. It seems true, and is asserted as true with the justification that it feels right, it seems right, it is what other people (who provided no facts and figures) said. Usually believed because if it were true, it supports other strongly held (but unsupported by real facts and figures) beliefs.

          "The greatest obstacle to discovery is not ignorance;
          it is the illusion of knowledge."
          – Daniel J. Boorstin


          The key to real knowledge is believing only that which there is sufficient data to support belief in, and then only as strongly as the data supports.

          The key to the illusion of knowledge is to reject facts and figures that disagree with your beliefs.
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    Jan 29 2014: So, we are right back at the paradox of thrift which as noted has two sides.... of economists. And there is a strong justification to support those at the bottom of the economic pile.
    OK,
    Many years ago as a young man I went out into the world to seek my fortune,
    I didn't find it.
    So, old, broke and tired, I came to south Texas where it is warm and I could contemplate my naval trying to figure where I went wrong.
    The reasons why I am not wealthy, I made bad choices, I didn't take risks, these are some of my reasons.
    Now the question is... should a benevolent government appreciate my folly and reward me with some excess of wealth from someone who was better at wealth generation then I?
    I see two realities....
    The benevolent government will buy my soul and vote to allow them to insure there will be no more wealthy leaving me without anyone to be envious.
    The impartial government who will insure that all it's citizens will have an equal opportunity to excel or too fail as they are apt to do.
    • Jan 29 2014: "So, we are right back at the paradox of thrift which as noted has two sides.... of economists."

      Just as evolution vs. creationism has two sides. One side has data and logic, and the other has dogma and faith. One should not treat the two sides as equal.

      "The reasons why I am not wealthy, I made bad choices, I didn't take risks, these are some of my reasons."

      Perhaps the economy that rewards risk more than rewards labor is at least partially to blame. Why should a wild gamble pay huge, while sure and steady production of value be trivialized?

      I suppose I made bad choices too. I joined the military. I later earned a bachelor's in computer science with a 4.0 GPA. I married and raised 5 children. I have been steadily employed my entire life, never having collected even a single unemployment check. I have written software that has benefited virtually every American Citizen, from health care and telecommunications to national security.

      Am I rich? Nope. I have a good income, but have spent virtually all of it (the portion the government lets me keep) raising my children and enjoying my life.

      But you know what? I've had, am having a pretty dang good life.

      "The benevolent government will buy my soul and vote to allow them to insure there will be no more wealthy leaving me without anyone to be envious."

      Dogmatic and emotive, strawman fallacy. High tax rates on the rich are not about envy. They are about making the economy function better. It is not the poor that is buying government and then voting for handouts. It is the rich that is buying government, and then voting themselves the ability to hoard.

      "The impartial government who will insure that all it's citizens will have an equal opportunity to excel or too fail as they are apt to do."

      The impartial government watches as the economy collapses.
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        Jan 29 2014: At least one of us was successful...
        • Jan 30 2014: Mike I see no folly in your efforts. Quite the opposite.

          This brings me to the point, framing a person’s status as a ”work and rewards” issue perpetuates social exclusion.

          In essence it allows a simplistic view, that the poor do not work hard and the wealthy have worked very hard.

          The government cannot be impartial, history proves that, in its charter to protect the governed it must establish fairness.
          We must protect the children from forced labor, the minorities from persecution and the health of its populace.
          Left to its own regulation history shows the results, Chicago meat packing of 1900s, Ludlow mines etc… the list is tremendous of how the impartial government favors the tyranny or men.

          The government should balance the system. Far from impartial but required.
        • Jan 30 2014: Mike & Joe

          The claim of some individual successfulness without the others successfulness is akin to the 'delusional' claim the glass is half full or half empty... in actual reality the realists would claim that the glass is completely full and may proceed to provide the proportion of it's contents... say half water half air (to the more stingy- the glass would involve a definite constitutive bounded notion that includes this and excludes that ). Back to the central point being made.

          In a way for the government to be impartial requires them to treat everyone equally ... and it should treat everyone equally - as each ought to be treated! Of course 'how each ought to be treated' depends on each one and the appropriate ways to treat said one.

          Why should a government balance the system? Seems to me that the government should tip it in favor of certain ways ... that inhibit problems and foster solutions ... which cultivates opportunities into beneficial fructification.

          While we are with the notion of impartiality... lets keep in mind that the word 'impartial' actually has a bias towards equal; fair and just treatment... ironically equal; fair and just treatment... requires treating each as they ought to be treated which sometimes requires what seem to be different treatments ... be good to the good, be bad to the bad... just keep in mind that being bad to the bad involves one being good... thus one can just be good, give each one good and have the lovely love it and the haters hate it... until everyone learns to love it.
        • Jan 30 2014: Esteban

          In comparisons of equality and successfulness what is our metric, if not wealth? We could take up a life, harmonious with men and nature. If only men and nature were reciprocal.

          I agree the government should not equilibrate the system in goals, but it should balance in basic opportunity. How far out in the structure of society should they extend? I do not have the answer but I would argue that education and health could be the safety net.

          Your last paragraph intrigues me, the acceptance of condition “until everyone learns to love it”
          If the majority defines good, then acceptance is a minority trait. A victims creed.
      • Jan 29 2014: Darrell,

        I am going to throw another spin ball... using the ' evolution vs. creationism' metaphor... both use dogma and faith... it just happens that one recognizes it while the other denies it... and ironically uses a facade that obfuscates their reasoning... Let me see if I can settle this one using yet another metaphor... both the pessimists and the optimists are delusional going at each other erroneous claims... only the realists perceives that the glass is always full... half water half air. (and please lets observe the example seeking to get the intended meaning --- yea I realize some may object and present the notion that the glass is mostly full of empty space... or that their dogmatic belief and faith on the evidence proves this or that). A while back I gave up wild goose chases related to the burden of proof... when I realized that the truth of the matter doesn't change with a given proof... as you stated below it 'does not prevent others from ignoring the evidence'.

        I actually like quite a bit what you said "Doh! We provide the loopholes from taxes, not as a way for you to "cheat" the system, but rather to get you to do things with your money that helps the greater good". I just thing that many just did not get the point! Whats is even more troubling is that many are just looking for ways to cut deductions thinking that will increase their revenues rather than realizing they are altering the revenue stream into stagnation... a plane that stall falls like a rock... a shark that stop moving dies (yea there are shark that say alive without moving, though many understand the point)
  • Jan 29 2014: I know we are changing the subject, but just one more.

    http://qz.com/74271/income-tax-rates-since-1913/

    Look at the change in the top income tax rate, and how little effect it had on the average rate of income tax paid.

    Why so little effect? Because when the rates were high, no one actually paid those rates. They spent/invested money in ways that let them take advantage of deductions to avoid the taxes. That spending created job opportunity and income for others.

    Lower the rates, and instead of spending/investing in ways that reduced the total tax burden, high income individuals hoarded the money, or mal-invested it in short-term bubbles.

    Now look at the top rates and compare to economic activity at the time.

    Top rate above 70% and we get the Roarin' 20s. Lower the top rate to 25% and we get the bubble that collapsed into the Great Depression. Top rate back above 70%, we come out of the Great Depression, win WWII, create the vast American Middle Class, almost pay off the national debt. Back to 50% in 1981, and we begin our long road of increasing total debt at 3x the sustainable pace, putting us on the road to debt collapse (a road we are still on, by the way. Debt is continuing to increase at 3x the sustainable pace, it is just government, rather than households, doing most of the borrowing.).
  • Jan 29 2014: Estaban said "I found something you just said worth delving into ... deductions for almost all spending that lowered the effective tax rates of even the highest income people to well under 30%... The high tax rates were not about taking from the rich. They were about getting the rich to spend to get the deductions."

    A light go on, did it?

    In another conversation, someone says to me "What is the point of the high top marginal tax rate? No one actually paid that rate, because they would take advantage of tax loopholes."

    Doh! We provide the loopholes from taxes, not as a way for you to "cheat" the system, but rather to get you to do things with your money that helps the greater good.

    Spending your money hiring a maid, butler, nanny, pet sitter, gardener, auto-detailer, etc. is NOT cheating the tax code simply because you get to pay them in pre-tax money, lowering your total tax burden. It is creating employment opportunity and income to all those people!
  • Jan 28 2014: "I looked a bit further into the paradox of Thrift and found a reference where it relates it to a prisoner's dilemma ..."

    Refreshing to have someone actually bother to know what they are talking about.

    "The 'paradox' is interesting because it runs contrary to intuition and because someone unaware of the stakes would easily be logically drawn to make the wrong choice based on what seems to be good for an individual while ending up being the opposite,"

    Exactly. There is a grand fight between economists that align into two camps. The Austrians assert that since total good is the sum of all good, anything that is good for an individual is good for the whole. The Chicago camp points out that some things that are good for one are bad for another, so what is good for one may be bad for the whole.

    Evidence is clearly on the side of one of these groups (The Chicago school), but that does not prevent others from ignoring the evidence (just as there are those that assert intelligent design over evolution despite all the evidence being on one side).

    "Question is does one pay the bill oneself or pass it?"

    I am more interested in the question from the national, legal, tax code perspective. Should we make it easy for a few to put themselves above all, damaging the economy? Or should we make it somewhere between very hard to downright impossible to let the few hoard money, damaging the economy.

    The Gilded Age (late 1800s, first bit 1900s) was very good for the top 10% that had 50% of the income and owned 80% of the nation's wealth. It wasn't that bad for the next 20% that had an additional 30% of the income and 10% of the wealth, but for the bottom 70%, that had 20% of the income and owned 10% of the assets, it was a pretty suck time.

    Post Wilson, pro-union, anti-monopolistic, Fed Reserve, 65% top income tax (with lots of deductions), that changed so that the top 10% only had 30% of the income and the bottom 70% had 40% of the income. Bad for the top, good for the rest.
    • Jan 29 2014: Darrell,

      It is indeed refreshing to have someone actually bother to know what they are talking about... or at the very least be willing to delve into the matter seeking to figure it out ... glad to see that you use a rather neutral assertion within the statement of '(just as there are those that assert intelligent design over evolution despite all the evidence being on one side)'.

      I noticed your declaration 'that you are more interested in the question of it being a stick or a carrot'. It leads me to consider that you overlooked a key fundamental driver more powerful than both of those two drivers. I mentioned the notion in a different post... of course you may just have not read it ... the point was that an individual firmly held belief or opinion can motivate more than the desires of gains or the fears of losses.

      The prisoners dilema metaphor I use as an example involves the notion of there being a cost to do good and a higher cost to do bad with the temptations to do bad tipped over by the determination to do what's right. The temptation is a bit exacerbated in one particular case though the righteous will do what's right independent of the exacerbations... the example does have 'what is good for one may be bad for the other'... and if each follows the WIIFM heuristic rather than FAIR practices they end up in a less desirable state. There may be a way to make it good for everyone!
      • Jan 29 2014: "the righteous will do what's right independent of the exacerbations"

        Unfortunately, not everyone is righteous.

        For some things, like keeping the streets clean, 90% of the people doing their part is good enough because those 90% cannot only keep their trash picked up, but also pick up after those that do not.

        In the case of economics, there are some people that have hoarded $ billions of money. $1 billion is 20,000 years of the median household income. Just 1% of the population doing that, and the economy is hosed.

        You are going to have far more than 1% of the population being non-righteous. Therefore, you cannot count on righteousness to provide a well functioning economy. You need law and regulation.
        • Jan 29 2014: Yes unfortunately there are still stinking slobs who can ruin almost everyones experience... and force others to pick up after them, or have to live with their aftermath... heck nowadays it seems some of them have even managed to get laws and regulations to protect their slovenly ways as rights rather than wrongs. It would be far better to induce self-restraints where each does their part and helps other do theirs... "the righteous (law and regulation.) will do what's right independent of the exacerbations"... Unfortunately, not ever law and regulation is righteous... and sometimes even the just laws and regulations burden more the righteous than the unrighteous... I can give multiple examples on that... the underlying point here involves the issue of control and power especially between the vociferous vulgar intolerant bigot bulling brat ways and the mellow nice tolerant humble kind childlike ways without involving the teachers, principals, parents... getting it done among the siblings.

          we can actually count on righteousness to provide a well functioning economy; using reason (law and regulations) with the unreasonable (the unrighteous)... is like seeking to legislate errors away rather than figure out the better ways to deal with such situations ... presenting the evidence to those who will reject it does not prevent them from ignoring the evidence... presenting the evidence to someone may be the easy part... getting them to accept it (rather than reject it)... can be a bit more challenging... though sometimes the real challenge involves putting it all into specific actions and taking the steps to do what ought to be done as it ought to be done when it ought to be done!
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    Jan 28 2014: I have found this long discussion about money fascinating and even made contributions to it, But since this conversation is winding down, shouldn't we get back on subject"
    To repeat what I said before, I have "reservations" on income redistribution.
    • Jan 28 2014: Second that... I too see with reservations the robin hood economics given the message it sends goes against rewarding good prosperous by taxing it more... and seems to seek to foster equality by lowing the bar for individuals rather than raising the performances of individuals pass the bar standard... in principle each ought to contribute proportionally the same... that would be a kind of equality...
      • Jan 28 2014: Yes, Income is a measure of input to society (that people in society are willing to pay for). Capping it is the same as capping the total good that you can contribute. Bad, bad.

        The issue comes, as long discussed here, what we allow the individual to do with the income. Hoard it? Make them spend it back into the economy?

        Should the reward for your input be hoarding money, reducing demand for goods and services, reducing employment opportunity for all, and trapping your fellow citizens in a permanent state of debt from which it is impossible for them to escape?

        Or should the reward for your high value input to society be the goods and services that other citizens produce (forcing someone of high income to actually purchase those goods and services, providing employment opportunity and possibility or repaying the debt that created the money)?


        If someone proposes taking from those with a high income to hand out to the poor, I'm again' it.

        If someone proposes we use a carrot and stick (tax deductions for almost all spending, but high top marginal rates) to encourage the rich to spend, to create employment opportunities, reverse the need for unsustainable debt growth, and save/rebuild the great American Middle class, then I'm for it! 100%!
        • Jan 29 2014: Darrell,

          I am going to throw a spin ball here ... shift gears ... and push a point into the table.

          The issue comes down to allowing the individuals to do what they want with what they got vs making them do something productive with their estates and even requiring them to as for the permission from someone else to do something with what they got. From what you said you basically are saying if someone has a large farm that they have to till it to produce something with it or pay some huge tax for doing nothing with it. By the same token if someone has a large estate they have to hire individuals to care for it or pay a huge tax for not doing it.

          I do understand the concept of hoarding land and renting it out basically trapping fellow citizens in a permanent state of debt from which it is impossible for them to escape. I also understand the concept of monopolization where the public is pushed to compulsory purchase a product/service/experience. I even understand these concept when obfuscated under different masks/names.

          I do wonder what can be done to change and improve the system, circumstances and individual ways currently in place?

          BTW when I hear 'use a carrot and stick' I also think of the third more powerful motivational driver of individual commitment to the cause. I just wonder what that could map into in this particular case...
    • Jan 28 2014: Agreed. Back to where I started.

      I have no problem with a wide disparity of wealth distribution, for the portion of wealth that is non-money/near-money. I do not think, for instance, that we should guarantee everyone will have assets worth $x. You want it, you have to work for it. Nor should we guarantee that no one has more than $y total net worth.

      If one person has $1 billion a year income, and wants to spend the money buying up 1000, $1 million houses, good for him... as long as he spends the money, creating demand for goods and services, employment opportunity, and the chance for people with debt to possibly repay that debt.

      I think all our focus on limiting wealth should be in the aspects that actually harm others, for example, using their high income to hoard large sums of money and near-money, trapping their fellow citizens in debt, reducing total demand for goods and services, and reducing employment opportunities for others.

      I would go beyond this simple answer to the question, and say that I am also against a social safety net in the form of government hand-outs to able bodied, working aged adults. I would attack the lack of demand in the economy by fixing the tax code (returning it to a 1950s style code), then when you can't walk out your front door without tripping over a help wanted sign, remove or greatly reduce programs such as AFDC, food stamps, housing assistance, long-term UI payments.

      Per-child tax credits and earned income credit would be long gone with the return to the 1950s tax code.

      Only "hand outs" would be to people that we do not expect to be in the workforce: children, elderly and truly disabled.

      I would love to see a "living wage" established that is used for minimum wage, Social Security pay out, AND the size of tax brackets. Oh to dream the impossible dream.
      • Jan 29 2014: I think the tax brackets consist of everyone pay in the same proportion....
  • Jan 28 2014: Read your USA bills. Federal Reserve Bank Note. This note is legal tender for all debts public and private. Our fiat money is bank note money!

    Bank notes are issued whenever a bank puts an asset on its balance sheet. The asset could be gold, real estate, certain mutual funds. However, 98% of the assets on USA banks' balance sheets are securities (someone's debt).

    In the beginning, banks took in gold and silver and issued notes. The notes were deposited into the bank, becoming ledger entry money and reserves. The bank issued loans against the reserves, expanding the money supply. (See Fractional Reserve Banking Money Multiplier.) Ledger entries and notes are money. Both can be spent.

    The problem was that we limited the number of bills to the gold/silver. This created panics, The 1800s, the golden age of the gold standard, the USA spent 46 years in recession or depression because of the gold standard. So we got rid of the destabilizing limitation.

    Poof, Federal Reserve, the bank that can put assets on its balance sheet without having reserves. The number of bills in circulation is no longer limited by the amount of gold. A bank can always sell or borrow against a loan, as long as the loan is performing.

    When you take out a loan from a bank, the bank gets an asset and issue new money in return. Debt and money are created.

    When you take out a loan from a non-bank (government or businesses selling bonds), near-money and debt are created.

    Money and near-money transform into the other whenever a bank buys or sells securities.

    Quantitative Easing is money creation because the Fed is buying near-money with money. We can undo the money creation by having a bank sell bonds.

    Money + near-money = debt + the small amount of non-debt assets that banks hold.

    And that IS the way it works!
    • Jan 28 2014: It used to be the case that bank puts an asset on its balance sheet when they got the asset. It used to be the case... that dollars where backed and convertible to gold... then a unilateral decision was made that dollars would be convertible to dollars!

      Ledger entries and notes are money WHEN there exists TRUST that the entries and notes have the required backing to serve as tender/payment. In some cases one may require a cashiers check as a safety measure. I see what you call near-money similar to getting an advancement on the month's wages... which presupposes that the individual has a job and will continue to have a job for the whole month... Of course the loaning agent does check to ensure that the investment will perform and be payed in full ... sometimes additional collaterals are required, which may be Repossessed if payment isn't done. Of course there are all sort of clauses and service fees that kick in to ensure the loaning agent thrives in just about every situation. The recent financial crisis surfaced because of ' the loaning agent' practices .... the incentives used and a couple of other factors.

      It used to be that the collateral sufficed to settle a debt until changes where made that inverted the equation... before money equals assets; now assets equals money ... heck now even debts are considered assets... when in reality debts are only assets if one collects them assets.
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    Jan 28 2014: The net was never intended for man to lay on, but as you see today many people are laying on it. It's is about to break. The net was intended for disaster recovery. How ironic that it is the net itself that has become the disaster.
    • Jan 28 2014: Take away the net, without fixing the insufficient demand problem plaguing our economy, and what do you think will happen?

      Are the recipients the only people that get hurt if we cut food stamps? Grocery stores? People that work for or own stock in the grocery stores? Farmers? People that sell gasoline to farmers?

      I'm all for destroying much of the social safety net.* I just understand that we first need to fix what ails the nations.


      The portion I would disassemble is the portion that discourages the young and able bodied from working. I would leave SS, MC, and things like foster programs in place.

      Reduce the dependence on government by reducing the need for government, not abandoning the economy in its time of despair.
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        Jan 28 2014: I never said remove the net. But I will say bacteria will grow and spread in the right environment. If the net is perceived as never ending, this will provide no incentive to rise up off of it. People used to come across our boarders for a fair chance at life. Now they come for the net.

        I am in complete agreement where we need to fix leaks in the system. But the net as it is today, is one of the problems and it is self perpetuating. I think we are preaching to each other's choir on this one.
        • Jan 28 2014: it'd help if work was more attractive. the number of workers needed to produce the goods for america is larger than the population of america, the problem is so many of those workers are overseas. the justification for this is that goods are then cheaper in america, but this is a false benefit because i everybody is employed and making a fair wage, they ca afford to pay higher prices and there is also the additional benefit that sales increase. a person making $1 on welfare is actually costing more than that $1. first the welfare, then add that person's not earning a wage which means they have no real disposable income to spend (generating more sales, profits and taxes), and also not earning a wage means they are not paying tax either - not only are we paying out for them but we're missing out on getting paid back double. this means it'd be much cheaper to just increase wages, because we'd get back much more than the cost.
  • Jan 28 2014: Game theory:
    Many games are designed to have an ending. We start with a set of conditions, play the game for some time, sort out winners from losers, and the game ends.

    With the invention of the internet, many games have been developed that the developer hopes will not have an ending. These are actually much, much harder to design. If an older player is not given some advantage for his tenure, he will stop playing. No one wants to be forced back to square one all the time. On the flip side, if there is no chance of a new player eventually catching up to an experienced player, then no new players will join the game. The balance has to be in the level of effort that it takes for the new player to catch up to the older player. The game must provide opportunity for the new player to work very hard at catching up. Of course, the older players would prefer they forever be the masters of the game, with the new players forever denied opportunity to catch up. But, if we give the older players that guarantee of always staying ahead, the game will die as we have actually set up a game that ends when winners and losers are established.

    Now, which kind of game do we want the modern economy to be?

    I have mine, safely sitting in the bank, constantly earning fat interest, so there is no risk that anyone will ever be able to catch up?

    Or, I spend mine, enjoying the fruits of my labor, but purring the money back into the economy where it can be earned by those people that produce the fruits that I enjoy?
    • Jan 28 2014: Darrell,

      Given you mentioned game theory... look tit-for-tat...

      the strategy that couldn't win won! the kind of game where everyone plays fair and be nice...
  • Jan 27 2014: For all the problems society has accepting persons that have a bounty these are the same persons that have given our culture those prizes that have endured for centuries. Private homes that even by today's standards are unreachable by most are their legacy, and it is there endurance over centuries of that bounty. The majority of monuments that are left for us today are the homes of those persons whose bounty at one time exceeded all expectations. Our banking system, commercial transaction systems all had their beginnings servicing the well heeled. I think controlling income by distribution a bad idea but not that I don't disagree for "gettin mines" the price is just too high to try and eliminate a tradition that began with the Pharaohs.
  • Jan 27 2014: Microeconomics is easy. It is intuitive. We all live it every day.

    I can reduce my spending, and that has no immediate effect on my income. In this way, it is easy for me to accumulate money or pay down debt.


    Macroeconomics is hard. It is counter-intuitive. It works exactly the opposite of how we all live our lives every day.

    Macroeconomics deals with the sum of all purchase transactions. For each purchase transaction, the amount spent must equal the amount received. At the macro level, one individual spending less immediately reduces the income of at least one other entity in the economy.

    At the macro level, the ONLY way one individual can spend less than they earn is if another individual is spending more than they earn.

    In an economy like the USA, where a few individuals are hoard mass amounts of money, then others in the economy must be going deeply into debt. A quick peak at the Federal Reserve Z.1, table D3 shows this perfectly.

    IF we want to turn this around, an make it possible for the people I debt to repay their debts, then we need the people with money to spend down their massive hoarded amounts of money.

    Note that I did not say that we TAKE from the rich. That is not just political correctness, but rather my actual goal. I want to use stick and carrot to get the rich to spend, and only take IF they absolutely refuse to spend.

    For there to be less debt, there has to be less money. For there to be less money, it has to move from the people with money to the people with debt. I prefer this to be done by the people with money buying goods and services from the people that have debt.

    There are 2 options other than the rich spending.

    1) Take from the rich. BAD!

    2) The people with debt stop even trying to pay. Poof, default, bankruptcy, and the money and debt both poof our of existence.

    Put in that context, getting the rich to spend really is the best option.
    • Jan 27 2014: Darrell,

      You omitted to mentioning that interests and fictitious service fees create more debt and takes it from people with debt and gives to people with assets...
      • Jan 27 2014: Interest is just another loan, but instead of the debt and money going to the same person, the debt is added to the person that is already in debt, and the near-money interest due is given to the person that was owed.

        So, trade imbalance is possible when one entity is going into debt, and then the interest on the debt just widens the imbalance.

        The only way the debt can be repaid is if the imbalance is reversed This means the person with the money spends it so that the person with the debt can get the money. If the people with money refuse to spend, then the debt can not be repaid.
        • Jan 27 2014: Darrell,

          The debt can be repaid:
          - with money
          - through delivering the goods - do or give something as recompense
          - even with a 'return' of the debt notice that declares all debts repaid.
          - with the collateral

          Note that when the person with the money spends it so that the person with the debt can get the money it still doesn't repay the debt... to repay it a person needs to spend it towards paying the debt ... by what you said when the person who got the loan spends it their debt is paid... which evidently isn't the case.
      • Jan 27 2014: "The debt can be repaid:
        - with money"

        Requiring new debt, or someone with money spending the money so the person with debt can get the money. When the debt is repaid, the debt and the money are destroyed..


        " - through delivering the goods - do or give something as recompense"

        If the debt is held by a non-bank, then the debt and near-money are destroyed. If the debt is held by a bank, then either the bank must sell the asset, or add to that tiny amount of non-debt assets held by banks.

        " - even with a 'return' of the debt notice that declares all debts repaid."

        If owed to a non-bank, the near-money and dent are destroyed. If owed to a bank, the bank must transfer Tier One capital (money) into reserves (non-money), destroying the money when the debt is destroyed. If the bank has insufficient Tier 1 capital, then it is insolvent and subject to takeover by FDIC.


        " - with the collateral "

        Same as non-money delivery of assets. Either the near-money and debt are destroyed, the bank adds the asset to its balance sheer, or sells the asset to replenish reserved, destroying the debt and money.

        "Note that when the person with the money spends it so that the person with the debt can get the money it still doesn't repay the debt... to repay it a person needs to spend it towards paying the debt ... by what you said when the person who got the loan spends it their debt is paid... which evidently isn't the case."

        If the person that has money spends that money to repay debt, then the debt and the money are destroyed (or the debt and near-money if the debt was owed to a non-bank). If they spend it on something other than paying down their debt, then it is income to someone else. That someone else will again have to spend it for the person with debt to be able to pay down the debt.
        • Jan 27 2014: Note that the statement " If they spend it on something other than paying down their debt, then it is income to someone else" is rather misleading for the income to someone else includes a part of taxes ...
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    Jan 27 2014: Darrel,
    I don't know how to say this any differently, I see no way of justification or rationalization that could make the "taking" of another's wealth or property appropriate. If you are speaking of some equality in supporting government cost to it's citizens, of course, but to say that those that have more should pay more goes back to political conundrums that have already been proven false. Do I need to list the states that this has been attempted and the consequences of those actions? To redress the Devil in Prada doesn't mean it still isn't the Devil. I heard that line in a movie...so appropriate..
    • Jan 27 2014: You seem to be basing your economic opinion on morality. Economics is an examination of what is and how it works, not how things should be, and how they should work in a utopian dream land.

      I need to see if you actually understand economics before spending more tame talking to you about economics.


      How Is money created?

      Is it possible for everyone to be spending less than they earn?

      Explain the Paradox of Thrift.

      In a utopian dream land, each entity in an economy would be an island unto themselves, with their actions having no negative effects on the other entities. In realty economics, that is not the case.
      • Jan 27 2014: Darrell,

        Dehumanizing the enemy is a tactic used to not see the opposition as they are... Besides focusing on what is now will keep you from seeing what it is you don't understand.
        • Jan 27 2014: Not intended to dehumanize. Intended to establish a common language to serve as a basis for further conversation.

          What is it that you think I do not understand?

          Math works the way it works, not the way we want it to work. Same for economics. We discover economics, not create it.
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        Jan 27 2014: Morality? OK,
        Money is not created. Unless you are speaking of printing on paper. Money is an instrument of exchange and only represents value given by parties to the exchange.

        I spend less then I earn every month, that is how I am able to visit my grandchildren at Christmas.

        Paradox of Thrift? AKA Keynesian BS.

        Is that a good enough knowledge of Economics for you?

        However, I do live in Texas and that is as close as you can get to utopia.
        • Jan 27 2014: "Is that a good enough knowledge of Economics for you?"

          Yes, it tells me that you are willfully ignorant of economics, and therefore, further discussion is pointless.

          I assure you that money is indeed created.

          I assure you that Paradox of Thrift is well establish objective reality.

          If you actually want to understand how the economy works, it is up to you to break out of your shell of willful ignorance.
        • Jan 27 2014: I live close by and its nice over here :-)
        • Jan 27 2014: Conservative haven of Phoenix AZ for me.
      • Jan 27 2014: Darrell,

        The language I observed that lead me to mention 'dehumanization' which you labeled as intended to establish a common language that serves as a basis for further conversations seems to me to be a bit biassed ( that's just a factual observation). I do sense an openness and willingness to converse and jointly explore the issues. I agree with you that establishing a common language to serve as a basis for further effective conversations is rather desirable. Let's just keep in mind that 'distortions' can get in there. I also agree that math works the way it work... and sometimes we need two flat views and a process to perceive depth. From where I stand there exists different economic systems and depending on which one we use we get different pictures...
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        Jan 27 2014: Gee Darrell,

        Should I get my money back for the economy minor I got from my university?
        Or should you sign off as another Keynesian puppet. I am good either way.
        • Jan 27 2014: If you do not know that money is created, then yes indeed, you should demand the university return any money spent on economics classes.

          The Paradox of Thrift is objective truth. It is the basis of the economic cycle. Total money spent must equal total money received. If money spent goes down, than money received goes down.

          It is best understood in a thought experiment in an economy of 2 people.

          Imagine you and I are the only people on earth and we each have $10. There is $20 total. Now, let's buy and sell stuff from each other in such a way that we both end up with more than $10.

          Now, let's say A is how much I buy from you and B is how much you buy from me.

          Then it is clear to see. If A > B, then B < A. It is impossible for A > B and B > A.

          You buy $10 worth of stuff from me, then I buy $9 worth of stuff from you. I have $11 but you have $9. Total is still $20.

          Unless we grow the $20, there is no way that we can both spend more than we receive.

          So, let's create more $. That is done by one of us taking out a loan from a bank. But that means the one taking out the loan has gotten more money by borrowing it, not earning it.

          Okay, one of us goes to a bank and borrows some new money into existence... The one that took out the loan is them spending more than he earned.

          For one of us to spend less than we earn, the other MUST spend more than he earns.

          It is just as objectively true for an economy of 7 billion as it is for an economy of 2.

          Paradox of Thrift is objective reality, NOT Keynesian bullshit. It is simple math that if A > B, then B not > A.

          If you do not get The Paradox if Thrift, then you should definitely ask for your money back for any econ classes you took.
      • Jan 28 2014: Darrell,

        I saw a flaw in what you said- the Total money spent is going to be larger than the total money in circulation... even after just a couple of rounds at it the total money spent is going to be larger than the money in circulation which will remain fixed at $20. You also shifted the experiment in an economy of 2 people to include a third one... the bank. Of course we could had created the debt by writing a IOU note amongst ourselves and use that note a valid means of exchange... Of course when considering humans reasoning it follows from observation that A>B B>C C>A does happen... yea it breaks the logical rules of logic.. still based on observations that what humans chose to do... its sometimes irrational to think humans will be rational ... humans will be humans...
        • Jan 28 2014: Yes, the money in circulation will be greater than the money that exists. This is called the velocity of money. This is not a flaw, it is an aspect of economics.

          That has nothing to do with the Paradox of Thrift that says you spending less lowers my income.

          Yes, we could write IOU on a piece of paper, and spend it into the economy. That further highlights that money is borrowed into existence. Again, this does not alter the fact that for one person to earn more than they spend, the other must spend more than they earn.

          Humans indeed will be irrational. That does not mean that all attempts at education are fruitless.
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        Jan 28 2014: Currency IS based on morality. Currency is based on faith and trust. Now we need to destroy that morality to allow your model of economic manipulation be practiced.
      • Jan 28 2014: Darrell,

        From what I recall the velocity of money is how fast a turn around money has... the more turns in a given period the faster it is. I think your first paragraph requires a bit of revision, though I hold do understand what you intended to state. The point I made was that Total money spent is going to be larger than the total money in circulation... indirectly the point was that individuals can become quite wealthy independent of the fact that the total amount of money remains fixed at $20. say through interchange valuables without resorting to money through barter ...

        I looked a bit further into the paradox of Thrift and found a reference where it relates it to a prisoner's dilemma ... that is : saving is beneficial to each individual but deleterious to the general population. I also followed a reference to the fable of the bees where I found the following statement 'in which a cynical system of morality was made attractive by ingenious paradoxes'. The form of the prisoner's dilemma to me is rather useful because I employ it as a metaphor that seeks to point how a good system of morality always leads to the best outcome, granted while still being tempted by an attractive and ingenious setup that if followed leads to the worst possible outcome. The 'paradox' is interesting because it runs contrary to intuition and because someone unaware of the stakes would easily be logically drawn to make the wrong choice based on what seems to be good for an individual while ending up being the opposite, bad for the individual and leading to the worst possible state. WIIFM (what's in it for me) leads to the worst state where as acting morally leads to the best possible state. In the particular instance of the prisoners dilemma I employ there be a cost of doing good (4) and a cost of doing bad (6)... the thing is that those who do bad pass the bill to the other while those who do good pay the bill themselves.

        Question is does one pay the bill oneself or pass it?
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    Jan 27 2014: Estaban,

    Your last paragraph in response to Ben. I don't see that, no one (individual) consumes more then another or contaminates more then the other. There are simply physical limits on man as to his consumption and excretions. So, are you speaking of groups of men in some configuration that as that group consume and contaminates? How about we talk about BP oil company... Hundreds of thousand of people as a group extract natural resources, causing some uncontrolled damages or contamination in the process, These people convert these resources into gasoline that the rest of us buy ( give BP money) so they can go back and extract more and continue the process. Added are those who say, government should take some of that money and redistribute it to other people so they can buy gas and return it to BP and the cycle continues and the contamination from the use of gas as a fuel continues.
    To quote a well known Jewish Rabbi of many years ago... "Let him who is without sin cast the first stone"
    • Jan 28 2014: Mike,

      'The footprint' individuals leave is a bit individual... evidently someone living in a city and somebody living in the jungle utilize resources in different ways... looking at their ways of being we could analyze their individual contributions to see what each uses... when individuals compare themselves to those arround they may think one thing when they compare themselves to others in the world they may reach a different conclusion...
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    Jan 27 2014: Ben Jarvis,
    So. a wealthy employer needs to pay higher taxes because his employees have to travel these bad roads. I'll have to check to see if my employment contract says that my employer is responsible for me to get to work,
    All those times I could have said... "suck it up, the roads are bad and slowed me down. You should pay higher taxes."

    Added:

    Am I the only one to take some offense in the unethical and immoral stance too many have taken in the "legal redistribution of wealth"? Would these same people support the armed robbery of banks? Or how about insurance fraud? Should Bernie Madoff be celebrated for conning millions from people who had millions? To say it is OK for the government to take money and give it to others is because it is legal therefore acceptable unlike the bank robber or the con man? To me there is no difference... to "take" is to take" you use a gun or shroud it in law, or you let others do it in your name as a citizen. It is said that a rose by any other name would smell just as sweet, To steal property by any other name is still robbery.
    • Jan 27 2014: No. A high income individual, that does not spend a significant portion of their income, is draining money from active circulation within the economy, reducing overall economic activity, demand and employment.

      Since the creation of money, man has struggled with too much money ending up in too few hands.

      The income tax code should not be viewed only as a tool to fund government or as punishment of success.

      It should be viewed as a tool to create and sustain economic activity by preventing too much money from pooling into too few hands.

      Take a long look at the top marginal income tax rate and its effect on the economy over the last 100 years.

      We jacked up the rates to above 60%, and we got the launch of the Roarin' 20s. We dropped the top rate to 25%, and we got the boom that went bust and created the Great Depression.

      At the pit of the Great Depression, we jacked the top rate back above 70%, and the crash bottomed and recovery began. Top rate eventually broke 90%, and the result was the creation of the vast American Middle Class. In the mid-1960s we started dropping the top rate, and the results have been bad... very bad.

      Under Reagan we dropped the top rate to an insanely low rate, and offset it with massive debt expansion. The result is the house of cards built on the mountain of debt that is the modern USA economy.

      To fix the economy and save the middle class, we need to return to the economic policies that created the Middle Class. That is, low payroll taxes and a steeply progressive income tax code with massive deductions for virtually all spending.

      We need to rediscover The Paradox of Thrift and understand that the rich getting richer is only possible because everyone else has been going into debt at an unsustainable pace.
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        Jan 27 2014: Nothing you have said has changed the premise that no one has any right to take other peoples money or property. You can note noble causes and economic paradigms till the cows come as they say. It doesn't change the situation. Sorry, armed robbery is still armed robbery .
        • Jan 27 2014: Actually, in my ideal tax code, it is quite easy for you to pay no tax. Just spend all your income on tax deductible expenses. Poof, no tax.

          What we cannot allow is for a few people to hoard money, in money/near-money form, as that destroys the economy.

          Your right to swing your fist ends at my face.

          Your right to hoard money ends at the point that it damages the economy.

          If you look at the tax code of the 1940s-1965, you see VERY high top rates, but lots and lots of deductions that ensured no one actually paid those top rates, because they would spend it rather than hand it over to the government.

          And what was the result of that tax code? Low effective tax rates, high employment with high wages, low debt, and the creation of the vast American Middle Class.

          This allowed a broad tax base where almost everyone had a high enough income that they could pay the low effective tax rates, little economic safety net for non-elderly, and small government,

          The point of a high top marginal rate (with massive deductions for spending, so that no one actually pays those top rates) is not to TAKE more from the rich. The point is to get the rich to spend, to create a strong middle class, to reduce the need for government and high debt.
  • Jan 27 2014: most definitely. one the real eye-openers is the video going around youtube that shows how even the richest 10-2% o the world are being underpaid, all so the richest 1% can be $100-billionaires instead of 'just' $10-billionaires.

    there's nothing wrong with getting rich or being rich, so long as you aren't using your position to ensure other people can't also get rich. one of the greatest americans was ben franklin, who at middle age realised he had more than enough income to live out the rest of his days in supreme luxury, and decided to stop working. we wouldn't have this problem now if all the rich decided to do the same, but unfortunately what usually (not always) happens is they decide to stay and keep on building their wealth by ensuring that others get as little as possible, no matter how hard they've worked.
    • Jan 27 2014: Ben,

      I agree and would like to highlight what you said by restating using a different from:

      there's something right with getting rich and/or being rich, so long as one is using one's position to ensure other people can also get rich (and do get rich). One of the greatest realizations is one has more than enough income to live out the rest of his days in supreme luxury, by doing what they ought to do and decided to start getting others into the same club. We would have a better place now if the rich and poor decided to do what's right and enriching each other as it ought to be done, what usually (not always) happens is some decide to stay with their ways and keep on building them by ensuring that others get as little as possible, rather than a fair share or even a bit more than they bargained for in a nice sort of way.

      As you sort of said : - the real eye-openers is the realization that shows how even the richest are being underpaid... and short changed ... by those who ensuring that others get as little as possible, no matter how hard they've worked.... some even resorting to legalized stealing schemata's that continue to favor robin hood economics and maintain restrictive scarcity principles rather than create wealth through abundance of products, services, experiences and a couple of other worthy ways to have, keep and share.

      Lets keep in mind 'ideas with spreading"... and how when one gives/gets and idea its replicated and duplicated.

      To spread or not to spread isn't the issues its how to spread... choose wisely what to spread...
      • Jan 28 2014: perhaps we can conclude that, along the lines of the original question, "capitalism within limits" - a legal minimum and maximum but free space in between for people to succeed in via their effort and hard work - is what's needed?
        • Jan 28 2014: Ben,

          Sure so long as the limits apply to everyone 'equally' - even the king is required to obey the rule of law and the rules themselves must follow certain rules!

          As you mentioned yesterday in a different post... something about the wisdom being associated to defining the meanings...

          perhaps we can conclude that, "capitalism within limits" - a legal minimum and maximum applies to all sorts of issues, entities and enterprises where a single voice of righteousness suffices to constrain the slanderous ways. BTW I am seeing capitalism within limits as a restriction of the capitalists ways including stuff like limiting the amount of debt/assets/intrusions a private and public enterprise can incur. In other words it isn't 'the kings' arbitrary proclamations that become the rule of law it is 'the rule of law just proclamations'* that become the rule of law.

          *a single voice of righteousness suffices to establish the just rule of law!
      • Jan 29 2014: as long as entities aren't used as a replacement for people. these days criminal businessmen can get away with white-collar crime because their company takes the punishment (in the form of a fine) while the actual people who did the crime and made the decisions go unpunished. quite recently in the UK, banks paid huge fines for rigging libor rates, but the people who did the rigging and made all that money illegally kept it all and didn't spend a day in court, let alone prison.
        • Jan 29 2014: I used the word 'entities' to generically refer to a bunch of 'actors' like organizations, governments, estates, corporations, people etc... even the rules themselves. You are right about the injustice of allowing an entity to pay a fine for doing something while allowing 'the actors' to 'get away with it'. Of course a just rule of law is more concerned with inducing the desirable behavior than on levying and punishments. It's more to do with the spirit of the law than the letter of the law or even the enactments. For example I know some organizations would rather settle the individual cases brought up rather than do a massive recall and use all sort of dubious schemes to get away with it. On the same case doing a massive recall and bringing down a business for a mistake that no one caught seems like the wrong way to go, especially when it involves shifting the user responsibility over to the producer. Of course distinguishing malpractice from a mistake that no one caught can be tricky...