Darrell Shimel Jr.

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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
I don't listen to propaganda. I look at the raw data, understand the economic processes. Income inequality comes from a great many things. Some people are smarter, some luckier, many work much harder. I think income inequality, based on effort and capital investments, IS EXCELLENT. Reward the things that we want people to do!!!! Wealth inequality comes from people spending far less than they earn, draining liquidity from the economy, requiring new money be borrowed into existence to replace it. You are completely wrong about inflation. We had to go off Brenton Woods in 1971 because we had embraced global free trade and needed a floating exchange rate. Yes, that is bad, but it did not cause inequality. Inequality was at its worst in the 1800s, when we were on the gold standard and had balanced foreign trade. You are so blinded by your obsession with inflation that you blame it for everything, and cannot see that problems were much worse when there was no inflation.
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
"The gilded age greatly increased people's standard of living because of technological advances. Railroads, automobiles, electricity, factories, industrial revolution, oil, infant morality greatly improved. Most of all despite your theories taxes were almost non existent. But you would rather morn income inequality, go figure. I would rather celebrate perhaps one of the greatest advances in the standard living for Everyone in the US. " A good option does not preclude the existence of an option that is even better. Yes, technology improved peoples' lives in the late 1800s. BUT, it improved it even MORE, for most people, in the 1950s, when the benefit was spread more evenly between workers and investors, instead of the lion's share of improved production going to the investors. AND, I do not moan income inequality. Income inequality is good, as income is a measure of how much you put into the economy that people are willing to pay for. I moan widening cash and near-cash wealth inequality. HUGE difference. If you make 100x the average person, than this is a measure that you create 100x the value of the average person. EXCELLENT! Now spend the majority of that income either on consumption or capital investment.... take massive deductions for that spending and income tax will take little to nothing of your huge income. What I bemoan is the people with high incomes stashing a huge chunk of that income in banks, bonds, money markets and other debt based (mal)investments. That drains liquidity from the economy that can only be put back by unsustainable debt growth. Seriously, spend some time looking at top marginal income tax rates and the Fed Reserve Z.1 table D3 that shows debt outstanding. You will clearly see that unsustainable debt began to spike at the exact same time (1981) that we abandoned the tax code that created the American Middle Class. It is not random coincidence. Understand my argument before attempting to counter it.
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
The flaw with your argument is that we had unsustainable debt growth for 25+ years before the Fed started paying banks for excess cash reserves. I agree we need less government. The biggest mistake of the Democratic party was traditional welfare, paying people to sit at home and not work. That, of course, is mostly gone. But, we still spend far too much on housing subsidies (simply artificially props up rent above natural supply/demand), healthcare (inefficient private for-profit insurance companies, too expensive prescription drugs, and fee for service rather than fee for outcome), food stamps (too many minimum wage, part-time jobs and minimum wage too low), farm subsidies, ethanol subsidies, too many people in jail, and a while host of other government programs that need to be slashed. Don't get me started on disability and workman's comp, the new welfare programs! SLASH and MASSIVE ENFORCEMENT, along with independent 3rd party doctors paid by govt to verify claims of disability and injury. The late 1930s-1960s tax code was designed to strengthen the private economy, and reduce need for government assistance. It would work again to eliminate most of the need of government. IF, the steep income tax, with deductions for most consumption and capital investment produces too much income, then we should have increased deduction, and increased Social Security payouts or spent more on roads, or other make-work programs. Pay people to work, not sit at home. But, the current tax code is actually making us more and more dependent on government. Without those govt handouts, people spend less and corporate profits collapse. Austerity does not work. You can't slash spending and rich-get-richer while everyone else goes into debt, ourselves to long-term prosperity. We need wage driven consumption and investment, and that means we need to return to the tax code that was designed to keep money moving.
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
Equality DOES translate to a standard of living to those not at the top. http://www.nytimes.com/2014/04/23/upshot/the-american-middle-class-is-no-longer-the-worlds-richest.html?_r=0&abt=0002&abg=0 "After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans. The numbers, based on surveys conducted over the past 35 years, offer some of the most detailed publicly available comparisons for different income groups in different countries over time. They suggest that most American families are paying a steep price for high and rising income inequality." Should the economy exist to separate winners from losers, making a few the masters of the universe and the majority their indentured servants? Or should the economy exist to reward efficient production of goods and services through equatable distribution of those goods and services based on relative value of input? If the former, then we're on the right road. If the latter, then we need to return to the tax code of the late 1930s - 1960s, that created the American Middle class, because our current tax code is killing the middle class.
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
I'm going to guess this is hyperbole, since none of the major gini indexes list North Korea. However, there are a few countries with very low inequality, based on gini score... like best in the 141 country CIA list, Sweden with close equality countries like Denmark, Norway, Luxemburg, Austria and Germany which rank in the top 12. In the CIA income inequality index, USA ranks 41st most unequal, right between Uruguay, Bulgaria, Philippines and Cameroon. Proof equality does not make you a poor country, and inequality does not make you rich.
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
Inequality of income is a driving engine of capitalism; that much is true. If I produce twice as much as you, then I receive twice the income of you. This is how production is increased. The fatal flaw of socialism is that by detaching effort from reward, people do not put in much effort, then there is little or nothing to buy with your income. Also, if I set aside some of my time to create capital, or set aside a portion of my income to purchase capital, my production will be improved, increasing my income. Also a good thing to create/improve capital equipment. The fatal flaw of capitalism is allowing people to keep too much of their income as cash and near-cash rather than requiring almost all income be spent on consumption or capital. Under the current tax code, I can save a significant portion of my income to be loaned out. This drains the money from active circulation in the economy until the government orchestrates lending conditions so loose that someone borrows money into existence. That new money borrowed into existence then flows through the economy back to me, and I set it aside to be loaned out again, and the government has to loosen lending conditions again until money is again borrowed into the economy. Repeat. It is this wealth inequality that is the fatal flaw of capitalism, and it is NOT a driving engine of capitalism. The economy was much, much better off when we had a 90+% income tax rate, that no one actually paid because we offered deductions for spending and capital investment. Carrot and stick to keep money moving (along with efforts to balance international trade) created a capitalist economy with falling inequality, large and growing middle class, and long-term sustainable growth trajectory. TLDR: Income inequality = good as income is a measure of effort and capital. Widening cash and near-cash wealth inequality = bad as it drains cash from active circulation and makes us dependent on unsustainable debt growth.
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
High income tax, with deductions for spending, is not about gaining revenue for government. It is about keeping money moving within the private sector, so that there is less need for government. As for utopian fantasy, it is historic data. Mid 1930s the USA adopted the exact income tax structure I propose we return to. What actually happened was massive decline in inequality, booming economy and the creation of the middle class. We maintained that long-term sustainable tax policy for just over 40 years, until we elected Reagan in 1980 and dismantled that income tax. Here is your "utopian fantasy" clearly demonstrated in actual historical data. http://graphics8.nytimes.com/images/2007/09/19/opinion/19krugman2.533.jpg
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
Little of what you say is accurate. Yes, prices are 96% higher, but so are wages. It doesn't matter if my income is $1 a day, and my expenses are $1 or if I make $400 and my expenses are $400. This "nominal" value of a dollar is irrelevant as long as I have a job, and my wage keeps up with inflation. In fact, since I have debt, inflation helps me since my rising paycheck makes it easier for me to repay my debts. Let's take a real look at history. The 1800s were a time without sustained inflation. Repeated booms and busts that consumed the entire century resulted in the widest wealth disparity in the history of the country. Look up "gilded age". And what I want? Steeply progressive income tax with deductions for most spending? That is what we had from the late 1930s until Reaganomics. Look at this chart: http://graphics8.nytimes.com/images/2007/09/19/opinion/19krugman2.533.jpg When we started the inflation that you are so worried about, inequality didn't magically increase. Inequality is not about inflation. Inequality is about a tax policy that allows high income individuals to hoard their incomes. Inequality plummeted and we created the middle class, when we imposed the tax policy I propose we return to. Inequality, and the bubble economy returned, when we destroyed the tax code that I propose.
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
Leveraging occurs whenever a bank loans money. Fractional reserve banking is a limiting factor for the leverage, not a cause of leverage. There are three options: 1) Unlimited bank lending = infinite potential leverage. 2) Limited bank lending = we use fractional reserve as a limiting factor. This multiplies the central bank's balance sheet (un-limited) by 1/fraction reserve. So, a 10% fractional reserve permits the commercial banking sector to multiply the Fed Balance sheet by 10. (10% is a classic text book example, but since Reagan era banking reform, most loans only require a 3% reserve, allowing banks to multiply the Fed Balance sheet by 33.) 3) No bank lending. Deflation is very bad for workers, because most are in debt and their incomes drop, making it harder to pay back debt. Even if you have non-money hard assets, such as land, inventory or commodities, the price of those assets fall at the same time the prices of the stuff you want to buy falls, meaning you really do not have more purchasing power. Really, the only people that deflation is good for, is the people holding cash. The problem is, the deflation is a strong disincentive to spend. Why buy something today when it will be cheaper tomorrow? With no one buying, demand goes away and workers are laid off. So, disinflation means: Falling paychecks. Skyrocketing unemployment. Defaulting loans, foreclosures and repossessions. This is why periods of disinflation are always accompanied by things we like to call depressions.
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Darrell Shimel Jr.
Posted 9 months ago
Thomas Piketty: New thoughts on capital in the twenty-first century
If you really, really want to get the land out of the hands of the people that use it to generate income (rent) and into the hands of individual owners, then income tax is still the way to go. It allows you to target the tax at the individual that you want to hit, while not hitting the people you do not intend to hit. 95% top income tax rate. Allow people to deduct living expense of their primary residence, upto X amount per year, but not deduct expenses for income generating properties above Y per year. Those huge land owners, generating incomes far above Y, would suddenly see that income taxed at 95%, ensuring there is better uses of their money. The person living in a flat they happen to own, would not be hit by income tax from owning the land, and they would get deduction from their regular income equal to their cost of ownership. Double incentive to diversify the ownership of land. Large owners would be encouraged to sell land (non cost deductible), to invest in assets they can deduct the price of (such as building factories and filling them with machinery and employees). Individuals would be encouraged to buy so that they can get deductions from income tax for their cost of ownership.