I haven’t written to here for a long time.
Didn’t seem much point… for a variety of reasons.
But I just read this Blog-post by Karl Denninger and wanted to second the thought.
Those who fall into the top strata thus regard themselves as doing well in the current US economy. And indeed they are. Only those who spend more time talking to competent macroeconomists than is healthy know that they could be doing even better if the economy were rebalanced at full employment. So the absence of distress among America’s top 10% and its top 1% – and hence political pressure for measures to return the economy to its pre-2008 growth path – is understandable.
But, for everyone else – roughly 90% of the US population – there has been no jump in income share relative to ten or 20 years ago to offset what now looks to be a permanent lost decade. On the contrary, the bottom 90% has continued to lose ground.
Let’s ask: Why?
The problem is defined in this chart:
That’s across the entire economy. And it tells you that across the entire economy for 30 years there has been no net economic benefit in real terms for the people in this economy.
Now you might look at that chart and note that the slope is downward from 1980 to the present in the light blue. But if your prescription is to raise that blue area, you have a problem because in order to do so at a rate sufficient to recover what was lost over that 30 year time period you’d have to roughly double itand then hold it there for 30 years. That is, you’d have to double wages and yet not produce any more monetary inflation in doing so.
Do you think that’s possible? I don’t.
So what’s the other alternative? Reversal of the previous inflation. Of course “economists” call this “deflation” and claim it’s bad, but it’s not. You only want things to be expensive if you’re a seller, and sellers are in the minority. They do, however, happen to be that same 10% and 1% quoted above.
There is no “answer” to be found in redistribution of wealth or any such nonsense so long as you allow those very same someone’s (that top 1% and 10%) to issue all the monetary inflation they want in the form of unbacked credit. They can — and have — simply used that to steal back any attempt to tax away or “redistribute” their income.
J. Bradford Delong knows this, for he is:
Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade…..
Uh huh. In other words he’s very familiar with the data presented in that chart.
But he doesn’t discuss it — not once. There is no reference to the quantity of credit (and thus the “supply of money-like things”) in the economy, because as soon as you bring that into the discussion what has gone wrong becomes immediately apparent, the people responsible are also immediately apparent, and the solution is likewise immediately apparent.
And if the people were to understand this widely they might come to the (very-justified) conclusion that all of the above was and is an intentional act of fraud, not an accident or some “random” event.
They might call for indictments and prosecutions, they might be willing to back that demand up, and they might include those who have been dishonest with them in those Administrations, including Mr. DeLong, in the list of people to be tossed in the dock.