The more I think about the OWS movement the more I see some shortcomings that will need to be addressed for anything to come out of this.
The first is the lack of a specific agenda.
At the moment the core message of the movement is to simply inform our political representation that We, The People, are ANGRY about the economic developments of recent years and that we really want SOMETHING done before it is too late. This is a fantastic STARTING POINT.
The longer this situation continues the greater the need for a cohesive request to be made of our law-makers. A cohesive request to benefit the people and to stop the pendulum swing in the direction of bankrupting the masses in favor of sequestering wealth with the already super-rich.
Sadly, I have no ideas on how such a cohesive action could be made. The current movement, by its very nature, is a chaotic yelling match. It is many voices yelling a variety of specific messages that, at times, conflict with each other.
I would like to see a new political party come to the forefront on this. Perhaps not one that gain office but one which would be able to speak for the masses and voice the concerns of the many rather than providing sound bites that protect the wealthy or pretend (this is important as many things that APPEAR to help the many are actually ineffective) to benefit the masses. I would like to see some sort of group emerge who the government fears and whom the average person hears from daily if they pay attention to any media. I would like to see a group appear that does not advocate for an increase in spending while advocating for a decrease in taxation. I would like to see a group emerge whose sole point in existence is to provide a reasonable voice to the government on actions that will benefit the WORKING people of this country. Not benefit the people who choose to under-work (or not work at all) and certainly not the people who earn a living by exploiting those less fortunate than them. I want to see a group emerge that creates sound bites and proposes plans that are based on the mathematics of revenue collection and general expenditures and examines rules for the social hand-out systems to propose better ways of streamlining those systems.
Sadly, I believe that there are several groups whose purpose is to do exactly what I have outlined, but they are all ineffective are reaching the mass audiences.
Perhaps, if we are lucky, the groups whose purpose is to make things better for the average working person will, in fact, start having their voices heard by the core media.
Showing posts with label Next Great Depression. Show all posts
Showing posts with label Next Great Depression. Show all posts
Tuesday, October 18, 2011
Friday, October 14, 2011
More on Occupy Wall Street
There has been a lot of discussion on the facebook pages of friends of mine regarding the core reasoning behind the Occupy Wall Street movement.
I appreciate it when people challenge my views because they force me to reinforce my ideas with critical analysis and research.
I have one friend who is obviously very much against the entire movement and believes that the root causes that people are upset about are manufactured. This friend has challenged many of my positions on the movement and, as a result, I have done more research including crunching some solid numbers.
This post is all about those numbers.
One of the major tenants of the 99%'s complaints is that the value of their income is decreasing with each passing year.
One of the major counter arguments against this opinion is that in the past 20 years the minimum wage has gone from $4.15 to $7.25 an hour. This amounts to a raw 75% INCREASE in the raw number value. The people who disagree with the OWS movement demand an explanation about how a 75% increase in the raw figure can possibly be considered a decrease in effective wages.
Here is how:
The first thing that one must acknowledge is that $4.15 in 1994 is equivalent to $6.25 in 2011 money (You can check for inflation-corrected values here). $7.25 is higher than $6.25 so it still APPEARS that the minimum wage is a better deal to those confined to it for their incomes.
But they are not better off because the costs of living NOT rolled into the CPI exceed the increase in pay.
Here are the core comparison points that need to be considered when examining the minimum wage differences between 1994 and today:
1. The number of people on minimum wage in 1994 for whom the minimum wage was their primary household income is different from the people today for whom that is a reality. There are more people today trying to earn a full living for their families on minimum wage and fewer trying to merely supplement the household income on that pay scale. Lower pay works great for supplementary jobs (and jobs of people whom are not supporting themselves) but it is hardly a means to generate wealth for the primary "breadwinner" of a family. I will readily admit that I have not done the research to back up this perception, but I do believe that research will support the assertion that more primary incomes are on minimum wage now than ever before.
2. In 1994 there were still many companies that provided pensions for people who had worked for them for the duration of their careers. This was a no-cost benefit that the companies provided as a reward for loyalty. This was in the age of people working for a single employer for their entire career. Those days are gone. Pensions are almost entirely extinct and people must contribute to the retirement plan in order to get anything out of their employer toward retirement. This means that a benefit has been removed from the base pay of 1994 and it has been turned into a cost. This affects the effective pay on both ends: decreasing compensation AND increasing cost of living.
3. Health care costs have risen far faster than many other things in this country. The CPI accounts for some of this change, but it does not account for other aspects of it. The raise in the cost of health care is an added adjustment for many. Furthering this is the growing trend for employers to provide smaller and smaller percentages of the healthcare package as a benefit. If one includes ALL increases in cost of healthcare as part of the CPI-adjusted purchasing value of the dollar one still must consider whether or not a particular subject had full coverage provided for them in 1994 but must pay a portion of it now.
4. New costs that are considered essential have appeared in society. In 1994 the idea of going without electricity or a home phone was ludicrous. People assumed that everyone had both of these items and to NOT have them meant you were excessively poor or truly eccentric. Today the home phone has migrated to a cell phone, electricity is just as important as it was in 1994 (more so) but there is a new core utility: internet service. Many people can still get by without this new utility but children in school are finding that their schools are relying more and more on internet-based tools and content to save money on supplies and textbooks. To have a school-aged child in 2011 without home internet access is just as irresponsible as having no telephone was in 1994. This is a NEW expense and, therefore, the CPI does not incorporate it into the adjusted buying power of the dollar.
5. A budgetary affect that occurs only for people who have children is that of school supplies. When I was in school there were a great many supplies supplied by the school. In 2011 economic conditions have forced many schools to scale back on the supplies that they have available to students at no charge. Each and every piece of paper, pencil, pen, etc that a family has to purchase for their school-aged-children that they did not before is a new cost that is not included in the CPI. This new cost varies widely by school district and age group so it cannot be a standardized item that is applicable to all.
6. Additional government fees and regulations applied to the individual. An example of this is the state in which I live. In this state there is a car inspection. There has ALWAYS been a car inspection for the entire duration of my life. I currently possess a vehicle that will not pass inspection this year. The estimated repair cost is $2,000 for one of the problems and an unknown amount for the other. in the mid 90s I drove cars that were in worse condition that the one I am referring to now. I drove them and they passed inspection each and every year. The inspection criteria have both gotten stricter AND been more highly enforced. The reasoning for this is that each inspection attempt generates a fee (which has more than tripled in size since 1994) regardless of the pass or fail status. Each failure generates a list of work that MUST be completed to pass inspection. That work generates a sales tax. The net story is that the state has increased the fee AND made passing more difficult in a way to force more business to automobile service providers AND generate more tax revenue. The end result is that many people are driving cars without valid inspections because the "bogus" safety violations are NOT a danger to anyone and are too costly to fix. This is a cost that is NOT rolled into the CPI because it is an increase in the volume of car repairs required and not simply an increase in the cost of the car repairs themselves.
7. There is also the factor of the average debt load of the average college graduate. Those entering the work force from college now are bringing an average debt load of approximately $23,000 with them. Compare that to the rates of approximately 10 years ago and you see a nearly 77% increase in the volume of debt that people START their professional lives with. That increase in debt means an increase in debt payments which, in turn, is a decrease in the available money for other living expenses. At 5% interest for 15 years this increase in debt load translates to an increase of $79 in monthly payments. This alone is approximately equal to $.49 / hour in pre-tax income. That, alone, is nearly half the surplus generated by the new minimum wage as compared to the equivalent buying power of the minimum wage in 1994.
When you add up all of the factors listed above it rapidly becomes apparent that the $.90 hourly discrepancy between the effective $6.25 per hour and the actual $7.25 per hour is completely consumed by new expenses and items not covered by the CPI adjustment.
I am a solid example of this situation. I checked the factors listed above (salary, retirement planning, healthcare provision, etc) along with the expected time at work for the job I held in 2003 and the job I hold now. I did the inflationary adjustment on the 2003 figures. The end result is that my post-healthcare, post retirement planning, post taxes current income is a 49% reduction in buying power as compared to that of the position I held in 2003. Is my current gross pay higher? Yes but the effective purchasing power of my money is significantly less after all of my critical expenses are adjusted for.
One of my friends who is critical of the movement directed me to a "fact checking" article that did its best to normalize all of the tax revenue data for all income earners in this country. The end result of that article was the claim that the top 1% (who own 40+% of all the wealth) pay their fair share of the income taxes at 32.1% of the taxes and that that means that they are only earning 32.1% of the income. That article, at best, is reporting the figures on the IRS-labeled taxable income; at worst it is blatantly warping the data to misrepresent the wealth distribution. Either way, the math is just-plain-WRONG. In a situation where there is a volume of wealth and a means to both increase and decrease that wealth (income and expenditures) each and every year the net volume of wealth of any population group will asymptotically approach the income value for the group. If the income is below the wealth holdings then the holdings will decrease over time until they equal the income level and vice-versa. I believed this to be true and then I build a spreadsheet to prove it (the non-pretty version is here). If you adjust the starting amounts (currency, not percentage) for each of the population group's starting cash, income and outflow you will quickly see that if the income % is above the owned percent then the owned percent rises and if it is below the owned percent the owned percentage falls. You will also see that for any one group's net ownership to go up another group's wealth must fall by an equal amount. This is a VERY simple model but it is effective at demonstrating the core principles at work.
These are the reasons that the bottom 99% are unhappy. These are the seeds that led to the OWS protesting. These seeds have been properly cared for and watered to germinate into the full protest movement against the upper class because the actions of the upper class over the last decade have generated a greater squeeze on the already tightening budgets of the middle class. When pensions are being cut and life-savings are being drained from corporate holdings while the CEOs are taking multi-million dollar bonuses there is a HUGE problem. When bankers are developing schemes to trick (yes, stupid) investors into borrowing more money than they can afford to pay back and then foreclosing on their homes and making them homeless there is a problem. When corporations are making bad business decisions and losing all of their customers only to receive a handout from the government because they are "too big to fail" while smaller companies have to make it on their own there is a problem. When mega-corporations are receiving bail-outs from the government and the executives in charge of the companies are still collecting salaries that are many times that of the average worker there is a problem. When one of the richest men in this country (Warren Buffet) is stating in no uncertain terms that the loopholes in this country's tax codes allow him to pay a much smaller percentage of his income in income taxes than ANY employee he has while he has the greatest level of disposable income in the company there is a problem.
I am not advocating that all of the wealth be evenly spread out for that would result in a larger problem than we have. I don't care if the top 1% own 40% of the wealth. I care that the remaining 99% be able to live and survive on what they have. I want the taxation to be applied equally for all, regardless of what income bracket they are in. I want everyone to have their chance to work hard and save and make their own lives better. I want an end to people getting further behind the harder they work because that leads to a self-perpetuating system of poverty that the masses CANNOT escape without a violent revolution (see the French Revolution and half the current conflicts on the African continent for details). I want to avoid a situation where the ultra-wealthy have sequestered money above their threshold of being able to reasonably spend it because that capital gets locked away and ceases to power the economy. The economy requires money MOVE. Once people reach a threshold where they cannot spend all of their income their savings rocket upward and the volume of money that is poured back into the economy decreases.
When greed runs unchecked the problems of society get magnified and destabilization occurs. Greed has been running unchecked in this country since about 1986. It has finally caught up with us.
There are MANY historical examples that closely mirror the current situation that all lend support to the feelings behind the OWS movement. The times leading up to the Great Depression, Germany after WWI, the economic crunch in the mid 1800s in the US (broken only by the HUGE inrush of capital from the gold rush in the Rockies), the economic conditions that led to the revolution in Russia (allowing communism to take root), the economic conditions that led to the French Revolution, the banking crisis in the 1300s that destroyed the European economy so completely that we suffered the 400 years of the Dark Ages.... the list continues onward. All of these historical events have economic forces that drove them, all of them have similar scenarios to where we are today in this country.
I appreciate it when people challenge my views because they force me to reinforce my ideas with critical analysis and research.
I have one friend who is obviously very much against the entire movement and believes that the root causes that people are upset about are manufactured. This friend has challenged many of my positions on the movement and, as a result, I have done more research including crunching some solid numbers.
This post is all about those numbers.
One of the major tenants of the 99%'s complaints is that the value of their income is decreasing with each passing year.
One of the major counter arguments against this opinion is that in the past 20 years the minimum wage has gone from $4.15 to $7.25 an hour. This amounts to a raw 75% INCREASE in the raw number value. The people who disagree with the OWS movement demand an explanation about how a 75% increase in the raw figure can possibly be considered a decrease in effective wages.
Here is how:
The first thing that one must acknowledge is that $4.15 in 1994 is equivalent to $6.25 in 2011 money (You can check for inflation-corrected values here). $7.25 is higher than $6.25 so it still APPEARS that the minimum wage is a better deal to those confined to it for their incomes.
But they are not better off because the costs of living NOT rolled into the CPI exceed the increase in pay.
Here are the core comparison points that need to be considered when examining the minimum wage differences between 1994 and today:
1. The number of people on minimum wage in 1994 for whom the minimum wage was their primary household income is different from the people today for whom that is a reality. There are more people today trying to earn a full living for their families on minimum wage and fewer trying to merely supplement the household income on that pay scale. Lower pay works great for supplementary jobs (and jobs of people whom are not supporting themselves) but it is hardly a means to generate wealth for the primary "breadwinner" of a family. I will readily admit that I have not done the research to back up this perception, but I do believe that research will support the assertion that more primary incomes are on minimum wage now than ever before.
2. In 1994 there were still many companies that provided pensions for people who had worked for them for the duration of their careers. This was a no-cost benefit that the companies provided as a reward for loyalty. This was in the age of people working for a single employer for their entire career. Those days are gone. Pensions are almost entirely extinct and people must contribute to the retirement plan in order to get anything out of their employer toward retirement. This means that a benefit has been removed from the base pay of 1994 and it has been turned into a cost. This affects the effective pay on both ends: decreasing compensation AND increasing cost of living.
3. Health care costs have risen far faster than many other things in this country. The CPI accounts for some of this change, but it does not account for other aspects of it. The raise in the cost of health care is an added adjustment for many. Furthering this is the growing trend for employers to provide smaller and smaller percentages of the healthcare package as a benefit. If one includes ALL increases in cost of healthcare as part of the CPI-adjusted purchasing value of the dollar one still must consider whether or not a particular subject had full coverage provided for them in 1994 but must pay a portion of it now.
4. New costs that are considered essential have appeared in society. In 1994 the idea of going without electricity or a home phone was ludicrous. People assumed that everyone had both of these items and to NOT have them meant you were excessively poor or truly eccentric. Today the home phone has migrated to a cell phone, electricity is just as important as it was in 1994 (more so) but there is a new core utility: internet service. Many people can still get by without this new utility but children in school are finding that their schools are relying more and more on internet-based tools and content to save money on supplies and textbooks. To have a school-aged child in 2011 without home internet access is just as irresponsible as having no telephone was in 1994. This is a NEW expense and, therefore, the CPI does not incorporate it into the adjusted buying power of the dollar.
5. A budgetary affect that occurs only for people who have children is that of school supplies. When I was in school there were a great many supplies supplied by the school. In 2011 economic conditions have forced many schools to scale back on the supplies that they have available to students at no charge. Each and every piece of paper, pencil, pen, etc that a family has to purchase for their school-aged-children that they did not before is a new cost that is not included in the CPI. This new cost varies widely by school district and age group so it cannot be a standardized item that is applicable to all.
6. Additional government fees and regulations applied to the individual. An example of this is the state in which I live. In this state there is a car inspection. There has ALWAYS been a car inspection for the entire duration of my life. I currently possess a vehicle that will not pass inspection this year. The estimated repair cost is $2,000 for one of the problems and an unknown amount for the other. in the mid 90s I drove cars that were in worse condition that the one I am referring to now. I drove them and they passed inspection each and every year. The inspection criteria have both gotten stricter AND been more highly enforced. The reasoning for this is that each inspection attempt generates a fee (which has more than tripled in size since 1994) regardless of the pass or fail status. Each failure generates a list of work that MUST be completed to pass inspection. That work generates a sales tax. The net story is that the state has increased the fee AND made passing more difficult in a way to force more business to automobile service providers AND generate more tax revenue. The end result is that many people are driving cars without valid inspections because the "bogus" safety violations are NOT a danger to anyone and are too costly to fix. This is a cost that is NOT rolled into the CPI because it is an increase in the volume of car repairs required and not simply an increase in the cost of the car repairs themselves.
7. There is also the factor of the average debt load of the average college graduate. Those entering the work force from college now are bringing an average debt load of approximately $23,000 with them. Compare that to the rates of approximately 10 years ago and you see a nearly 77% increase in the volume of debt that people START their professional lives with. That increase in debt means an increase in debt payments which, in turn, is a decrease in the available money for other living expenses. At 5% interest for 15 years this increase in debt load translates to an increase of $79 in monthly payments. This alone is approximately equal to $.49 / hour in pre-tax income. That, alone, is nearly half the surplus generated by the new minimum wage as compared to the equivalent buying power of the minimum wage in 1994.
When you add up all of the factors listed above it rapidly becomes apparent that the $.90 hourly discrepancy between the effective $6.25 per hour and the actual $7.25 per hour is completely consumed by new expenses and items not covered by the CPI adjustment.
I am a solid example of this situation. I checked the factors listed above (salary, retirement planning, healthcare provision, etc) along with the expected time at work for the job I held in 2003 and the job I hold now. I did the inflationary adjustment on the 2003 figures. The end result is that my post-healthcare, post retirement planning, post taxes current income is a 49% reduction in buying power as compared to that of the position I held in 2003. Is my current gross pay higher? Yes but the effective purchasing power of my money is significantly less after all of my critical expenses are adjusted for.
One of my friends who is critical of the movement directed me to a "fact checking" article that did its best to normalize all of the tax revenue data for all income earners in this country. The end result of that article was the claim that the top 1% (who own 40+% of all the wealth) pay their fair share of the income taxes at 32.1% of the taxes and that that means that they are only earning 32.1% of the income. That article, at best, is reporting the figures on the IRS-labeled taxable income; at worst it is blatantly warping the data to misrepresent the wealth distribution. Either way, the math is just-plain-WRONG. In a situation where there is a volume of wealth and a means to both increase and decrease that wealth (income and expenditures) each and every year the net volume of wealth of any population group will asymptotically approach the income value for the group. If the income is below the wealth holdings then the holdings will decrease over time until they equal the income level and vice-versa. I believed this to be true and then I build a spreadsheet to prove it (the non-pretty version is here). If you adjust the starting amounts (currency, not percentage) for each of the population group's starting cash, income and outflow you will quickly see that if the income % is above the owned percent then the owned percent rises and if it is below the owned percent the owned percentage falls. You will also see that for any one group's net ownership to go up another group's wealth must fall by an equal amount. This is a VERY simple model but it is effective at demonstrating the core principles at work.
These are the reasons that the bottom 99% are unhappy. These are the seeds that led to the OWS protesting. These seeds have been properly cared for and watered to germinate into the full protest movement against the upper class because the actions of the upper class over the last decade have generated a greater squeeze on the already tightening budgets of the middle class. When pensions are being cut and life-savings are being drained from corporate holdings while the CEOs are taking multi-million dollar bonuses there is a HUGE problem. When bankers are developing schemes to trick (yes, stupid) investors into borrowing more money than they can afford to pay back and then foreclosing on their homes and making them homeless there is a problem. When corporations are making bad business decisions and losing all of their customers only to receive a handout from the government because they are "too big to fail" while smaller companies have to make it on their own there is a problem. When mega-corporations are receiving bail-outs from the government and the executives in charge of the companies are still collecting salaries that are many times that of the average worker there is a problem. When one of the richest men in this country (Warren Buffet) is stating in no uncertain terms that the loopholes in this country's tax codes allow him to pay a much smaller percentage of his income in income taxes than ANY employee he has while he has the greatest level of disposable income in the company there is a problem.
I am not advocating that all of the wealth be evenly spread out for that would result in a larger problem than we have. I don't care if the top 1% own 40% of the wealth. I care that the remaining 99% be able to live and survive on what they have. I want the taxation to be applied equally for all, regardless of what income bracket they are in. I want everyone to have their chance to work hard and save and make their own lives better. I want an end to people getting further behind the harder they work because that leads to a self-perpetuating system of poverty that the masses CANNOT escape without a violent revolution (see the French Revolution and half the current conflicts on the African continent for details). I want to avoid a situation where the ultra-wealthy have sequestered money above their threshold of being able to reasonably spend it because that capital gets locked away and ceases to power the economy. The economy requires money MOVE. Once people reach a threshold where they cannot spend all of their income their savings rocket upward and the volume of money that is poured back into the economy decreases.
When greed runs unchecked the problems of society get magnified and destabilization occurs. Greed has been running unchecked in this country since about 1986. It has finally caught up with us.
There are MANY historical examples that closely mirror the current situation that all lend support to the feelings behind the OWS movement. The times leading up to the Great Depression, Germany after WWI, the economic crunch in the mid 1800s in the US (broken only by the HUGE inrush of capital from the gold rush in the Rockies), the economic conditions that led to the revolution in Russia (allowing communism to take root), the economic conditions that led to the French Revolution, the banking crisis in the 1300s that destroyed the European economy so completely that we suffered the 400 years of the Dark Ages.... the list continues onward. All of these historical events have economic forces that drove them, all of them have similar scenarios to where we are today in this country.
Monday, October 10, 2011
Regulation versus fear of regulation
I am a Libertarian.
I dislike the idea of big governments.
I dislike the idea of the waste generated by bureaucracy.
I dislike the idea of rigid rule structures that CANNOT meet all the unique circumstances among the population.
I hate the idea of loopholes in rule structures that allow people to go free.
I believe that the larger the government, the worse things are for the people governed.
All of that said I can truly say that there is one thing I fear more than large government and that is the complete lack of government at all.
This is because the complete lack of government allows for the total and complete exploitation of the people by any powerful entity. That entity could be an individual, it could be a violent gang of thugs or it could be a large, multi-national corporation.
The one thing that government is truly excellent at is generating fear among the corporations under its control. This is because the giant, unwieldy nature of governmental regulation is terrifying to any organization that wants to earn money. The larger the government the more terrifying the thought of it regulating your business. The more technically-based the company the more terrifying the slowness of government regulation is.
The LAST thing companies want is for governmental regulators casting their eyes in the direction of the industry that a particular company works within. The way most industries avoid government regulation is to self-regulate. They operate under the philosophy that they may misbehave to a specific line but if they step over that line their freedom to operate will be impinged greatly through forced rules by the government. This is the reason that companies are so completely against "Net Neutrality" regulations by the government. This is the reason that the MPAA has a ratings board to rate movies. This is the reason that the video game industry has a self-ratings system.
This system works well to minimize the exploitation of customers by companies through fear of the government. What happens when this fear is not present? Economic crisis.
Each and every time there have been insufficient governmental controls on the banking and finance industry the end result has been economic chaos. The result is that the bottom 99% of the population end up losing more and more of the money that represents their hard work and the rich become even richer. Each and every time the government has failed to act on this particular industry's failure to self-govern the people who are crushed under the weight of the industry leaders' incomes are impoverished.
This is the cause of the financial crisis that launched the Dark Ages (Italy, 1300s), this is the cause of the French Revolution. This is the cause of the recent Icelandic revolution. This is the cause of Occupy Wall Street.
Is the fix governmental regulation? I hope not because that will take nearly as much capital away from the middle class but, instead of depositing it into the pockets of the top 1% it will grind it away in the inefficient bureaucracy of the regulations.
A far more effective tool to manage the financial industry would be the true and complete fear of governmental regulation. We need to generate a situation where the fear of governmental regulation is so terrifying that the people in charge of the financial industry actually behave themselves and treat their customers with some modicum of respect and fairness. I believe it would be great if the regulations presented ideas to the effect of wronged parties are compensated for and the bankers who did the wronging were bankrupted in the process. I am certain that this would strike fear into the hearts of the financial industry's leaders; fear great enough to avoid such regulations from being enacted.
What's the benefit of generating more government? Safety from greedy corporations? What is the drawback? Greedy politicians and terrible waste.
The fix for the greedy politicians is to craft a government where, by design, the politicians are afraid of the people they serve rather than the other way around and for the same reasons that the corporations should fear the government.
What keeps the population in line if the government fears them? The fear that the government won't always fear them.
The fear chain in society should look like this:
Corporations fear the government which fears the people. The people fear losing their livelihoods, financial independence and freedom.
The government can destroy any of the things the people should fear and corporations can destroy two of those things. There needs to be no action on the part of either a corporation nor the government to enhance and increase those fears. The very idea of a governing body should generate the fears automatically.
So, people sacrifice the complete freedom and independence for the protections against bullying entities and, in exchange they have a government. The government needs to heed its people in exchange for its survival and it's job is to protect the people whom it should fear.
It is a simple system. Perhaps too simple, perhaps not.
A system based on checks and balances of fear might work far better than anything we have in service today.
What we have today is a system where many key people in the government are tied to the wealth generated by the financial system. The financial system does not fear the government because the people in the government benefit too greatly from the existing financial system.
The change that Occupy Wall Street is clamoring for revolves around the imbalance created by these ties.
The change is coming; the question is in what form will it arrive? Hopefully the government and financial industries will awaken to realize that they are both in danger if they don't change to serve the majority of the people rather than the minority.
I dislike the idea of big governments.
I dislike the idea of the waste generated by bureaucracy.
I dislike the idea of rigid rule structures that CANNOT meet all the unique circumstances among the population.
I hate the idea of loopholes in rule structures that allow people to go free.
I believe that the larger the government, the worse things are for the people governed.
All of that said I can truly say that there is one thing I fear more than large government and that is the complete lack of government at all.
This is because the complete lack of government allows for the total and complete exploitation of the people by any powerful entity. That entity could be an individual, it could be a violent gang of thugs or it could be a large, multi-national corporation.
The one thing that government is truly excellent at is generating fear among the corporations under its control. This is because the giant, unwieldy nature of governmental regulation is terrifying to any organization that wants to earn money. The larger the government the more terrifying the thought of it regulating your business. The more technically-based the company the more terrifying the slowness of government regulation is.
The LAST thing companies want is for governmental regulators casting their eyes in the direction of the industry that a particular company works within. The way most industries avoid government regulation is to self-regulate. They operate under the philosophy that they may misbehave to a specific line but if they step over that line their freedom to operate will be impinged greatly through forced rules by the government. This is the reason that companies are so completely against "Net Neutrality" regulations by the government. This is the reason that the MPAA has a ratings board to rate movies. This is the reason that the video game industry has a self-ratings system.
This system works well to minimize the exploitation of customers by companies through fear of the government. What happens when this fear is not present? Economic crisis.
Each and every time there have been insufficient governmental controls on the banking and finance industry the end result has been economic chaos. The result is that the bottom 99% of the population end up losing more and more of the money that represents their hard work and the rich become even richer. Each and every time the government has failed to act on this particular industry's failure to self-govern the people who are crushed under the weight of the industry leaders' incomes are impoverished.
This is the cause of the financial crisis that launched the Dark Ages (Italy, 1300s), this is the cause of the French Revolution. This is the cause of the recent Icelandic revolution. This is the cause of Occupy Wall Street.
Is the fix governmental regulation? I hope not because that will take nearly as much capital away from the middle class but, instead of depositing it into the pockets of the top 1% it will grind it away in the inefficient bureaucracy of the regulations.
A far more effective tool to manage the financial industry would be the true and complete fear of governmental regulation. We need to generate a situation where the fear of governmental regulation is so terrifying that the people in charge of the financial industry actually behave themselves and treat their customers with some modicum of respect and fairness. I believe it would be great if the regulations presented ideas to the effect of wronged parties are compensated for and the bankers who did the wronging were bankrupted in the process. I am certain that this would strike fear into the hearts of the financial industry's leaders; fear great enough to avoid such regulations from being enacted.
What's the benefit of generating more government? Safety from greedy corporations? What is the drawback? Greedy politicians and terrible waste.
The fix for the greedy politicians is to craft a government where, by design, the politicians are afraid of the people they serve rather than the other way around and for the same reasons that the corporations should fear the government.
What keeps the population in line if the government fears them? The fear that the government won't always fear them.
The fear chain in society should look like this:
Corporations fear the government which fears the people. The people fear losing their livelihoods, financial independence and freedom.
The government can destroy any of the things the people should fear and corporations can destroy two of those things. There needs to be no action on the part of either a corporation nor the government to enhance and increase those fears. The very idea of a governing body should generate the fears automatically.
So, people sacrifice the complete freedom and independence for the protections against bullying entities and, in exchange they have a government. The government needs to heed its people in exchange for its survival and it's job is to protect the people whom it should fear.
It is a simple system. Perhaps too simple, perhaps not.
A system based on checks and balances of fear might work far better than anything we have in service today.
What we have today is a system where many key people in the government are tied to the wealth generated by the financial system. The financial system does not fear the government because the people in the government benefit too greatly from the existing financial system.
The change that Occupy Wall Street is clamoring for revolves around the imbalance created by these ties.
The change is coming; the question is in what form will it arrive? Hopefully the government and financial industries will awaken to realize that they are both in danger if they don't change to serve the majority of the people rather than the minority.
Sunday, October 9, 2011
The Root Cause of "Occupy Wall Street"
The idea of a finances-based revolution is not new. It actually happening is also not new.
The Occupy Wall Street movement is the beginning of such a revolution in this country.
If we, the people, are lucky it will end with policy change within our existing legal structure; if we are not lucky it will either end with no change or with a complete governmental collapse. Either of these outcomes has potential to be far more beneficial to the majority of people but carries greater likelihood and potential for far worse outcomes.
To understand this movement one must first understand that there are three main components to wealth: wealth itself, rate of increasing wealth and the rate of change of the rate of wealth increase (for mathematicians: these are obviously connected through calculus as the rate of increasing wealth is an integral of wealth itself and the rate of change of the increase in wealth is an integral of that).
If you take any ONE of these factors for an individual at any given point in time you have a very small picture of their financial health. If you take any ONE of them over a span of time you have a much clearer picture of the trend of their financial health. When you add all three factors, over a period of time, you get a solid picture of the financial health of the subject. But what will that picture MEAN? Nothing. Wealth is an abstract concept and, because it is abstract, it means nothing unless you have a frame of reference. Therefore one needs to match the same data sets within the same time period to other subjects for any of the data to have actual MEANING. The larger the data set the greater the potential meaning.
Now that there is an understanding on what this data means there can be a presentation on the data that has driven the people to occupy the symbolic center of banking within the US and protest the way that the bottom 99% of people have had their financial lives drained.
Without doing an exhaustive review of many difference sources it is difficult to get a full picture of any of these data sets and, even then, many of the sources appear to be in conflict with each other. This is because wealth is an abstract concept that is open to some interpretation AND people are reluctant to fully divulge their financial information. The end result is that only a general picture can be built across the full population.
In all four categories below I was interesting in links with data charts and graphs far more than links with large blocks of text. I admit that I did almost no reading unless I found data on the charts that conflicted with my current understanding of the greater picture.
1. Wealth in the US
Estimates range on this but generally all show approximately half of the financial wealth of the USA being owned and controlled by the top 1% of the population.
Here is the google search I used: http://www.google.com/search?q=wealth+in+the+usa
Here are a few links I looked at:
http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
http://en.wikipedia.org/wiki/Wealth_in_the_United_States
http://www.businesspundit.com/wealth-distribution-in-the-united-states/
http://www.alternet.org/economy/145705/the_richest_1%25_have_captured_america%27s_wealth_--_what%27s_it_going_to_take_to_get_it_back
http://www.mybudget360.com/top-1-percent-control-42-percent-of-financial-wealth-in-the-us-how-average-americans-are-lured-into-debt-servitude-by-promises-of-mega-wealth/
2. Growth in Wealth in the US
The pattern here becomes clearer. Growth of wealth is increasing in all sectors of the USA, but the rate of that growth is not equal. The top 1% have their wealth growth growing faster than any other. To put the growth of wealth into perspective one could cross-reference the cost increase for living in each of the salary ranges listed to see how limited the growth actually is for several ranges.
Here is the google search I used: http://www.google.com/search?q=wealth+in+the+usa
And here are some articles that I looked at that were useful:
http://www.jchs.harvard.edu/publications/markets/w07-1.pdf
http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4?op=1
http://prospect.org/cs/articles?article=how_the_pie_is_sliced
http://www.slate.com/articles/news_and_politics/the_great_divergence/features/2010/the_united_states_of_inequality/introducing_the_great_divergence.html
http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph
3. Change in the Rate of Growth in Wealth in the US
This is the most disturbing of the figures for it shows how quickly the growth rate is changing in favor of exterminating the wealth of the poorest 9% of the population. The faster this is the faster the existing middle class will be destroyed and the harder it will be to build a healthy financial future for anyone who is not born into one.
Here is the google search I used: http://www.google.com/search?q=wealth+in+the+usa
All of the relevant links for this data point have already been shared above.
4. Current Snapshot of Wealth Distribution in the US Versus Other Countries
There are lots of ways to examine distribution of wealth. When one examines the per-capita wealth of a nation one will get a figure that usually does not represent the average person in that country. Distribution of wealth within that country as compared to the distribution of wealth in other countries coupled with the per-capita figure show a better picture. For example, a country where the top 1% own 75% of the wealth of the country will misrepresent the per-capita more than a nation where the top 1% control only 25% of the wealth. The more out of balance the internal distribution, the more the per-capita figure is out of alignment with the average person in the country.
There are not very many ways to compare this quickly and concisely.
Here are some links to graphs that demonstrate CEO pay versus that of the average worker:
http://www.phibetaiota.net/wp-content/uploads/2011/09/CEO-pay-versus-wages1.gif
http://motherjones.com/files/legacy/news/exhibit/2006/05/exhibit_chart1_265x181.gif
http://tmotr.files.wordpress.com/2011/07/table_sm.jpg?w=250&h=221
Here are some additional links for reference:
http://en.wikipedia.org/wiki/Distribution_of_wealth
http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States
http://www.lcurve.org/
http://www.guardian.co.uk/money/2006/dec/06/business.internationalnews
http://www.zerohedge.com/article/detailed-look-global-wealth-distribution
http://ecolocalizer.com/2010/04/12/plutocracy-reborn-wealth-inequality-gap-largest-since-1928/
It is important to note that some of the figures on wealth divergence are very similar to those seen just before the Great Depression. In a time where all of the wealth is locked up in the hands of a small number they purchase what they need, supplying jobs to only the suppliers of those goods. If no one else has any money to purchase goods or services then no one can hire anyone to provide those services (e.g. and earn money to purchase those services). The economy is a lot like streets in a city in this regard; as long as everyone keeps moving everything works well but when things stop moving gridlock occurs and no one can move anything.
These four data components demonstrate that the wealthiest people in the US have altered the wealth-accumulation patterns in their own favor at an ever-increasing rate. There is a finite amount of wealth (the economy runs not on the volume of wealth but rather on the movement of that volume) which will grow, but it grows at a rate that is much smaller than the rate of monetary movement. The end result is that as the wealthiest people leverage the markets to grow their wealth more rapidly they are, in essence, stealing the potential to do so away from the people who need the monetary growth the most. This process is flattening the middle class from both ends and will, eventually, wear it down until it no longer exists. If you are reading this you are probably a part of the middle class. Most everyone you know is probably a part of the middle class. Think about how difficult it is for you to get ahead financially. Think about what $100 / month invested into low-yield savings account would do for you if you could leave it there for 30 years. Now think about a slightly higher-yield account of some sort and how that would benefit you in 30 years. If you were able to bring home an additional $100 / month (after taxes) and then you took the initiative to save it think about how much money that would be when you retire. Now think about the factors that are preventing you from either saving that money now or preventing your employer from paying it to you. Now look at the pay-divergence chart above. Where do you think that extra $100 per month that you could be saving has gone? And that $100 / month that I could be saving? and that $100 / month that all of your friends and acquaintances and family members could be saving?
I do think it is important to note that the current US wealth distribution closely mirrors that of the overall world wealth distribution. But, as pointed out above, that is not the complete picture. How fast each group is gaining wealth in comparison to the other groups is more important than that current snapshop. What is more important than the current rate of change is the change in that rate. The US market is changing in favor of the wealthiest 1% gaining an ever-increasing share at an ever-increasing pace. At the current rate, if nothing changes, the US wealth distribution will not mirror that of the world for very long; it will continue to aggregate its wealth into the top 1% until it is able to affect the worldwide average instead of being a point on the spectrum.
I am not a communist. I am not a socialist. I think Capitalism is the system that has proven, time and again, to be the best at managing market forces. The problem with it is that it also breeds greed. And greed is what allows us ALL to become stupid with money and to allow situations to occur where 99% of a population are put into a financial depression because the other 1% want more and more for themselves and are willing to take it from anyone. Capitalism, unrestrained is as bad as any other means of managing an economy. Bloated government interfering with the economy is no better than a complete lack of controls.
The real conundrum is how can we fix what we have now in such a way as to provide the proper governmental controls to prevent the 99% from being "robbed blind" by the 1% while still allowing the market to work smoothly to meet demands where possible? I think that the only answer there is to have smart people in government. Smart people who want to make things better for everyone rather than people who want the power and respect of being a Senator or Congressperson. Smart people who will work toward fixes rather than fighting along party lines just to prevent the other party from getting a good idea credited to them first......
The Occupy Wall Street movement is the beginning of such a revolution in this country.
If we, the people, are lucky it will end with policy change within our existing legal structure; if we are not lucky it will either end with no change or with a complete governmental collapse. Either of these outcomes has potential to be far more beneficial to the majority of people but carries greater likelihood and potential for far worse outcomes.
To understand this movement one must first understand that there are three main components to wealth: wealth itself, rate of increasing wealth and the rate of change of the rate of wealth increase (for mathematicians: these are obviously connected through calculus as the rate of increasing wealth is an integral of wealth itself and the rate of change of the increase in wealth is an integral of that).
If you take any ONE of these factors for an individual at any given point in time you have a very small picture of their financial health. If you take any ONE of them over a span of time you have a much clearer picture of the trend of their financial health. When you add all three factors, over a period of time, you get a solid picture of the financial health of the subject. But what will that picture MEAN? Nothing. Wealth is an abstract concept and, because it is abstract, it means nothing unless you have a frame of reference. Therefore one needs to match the same data sets within the same time period to other subjects for any of the data to have actual MEANING. The larger the data set the greater the potential meaning.
Now that there is an understanding on what this data means there can be a presentation on the data that has driven the people to occupy the symbolic center of banking within the US and protest the way that the bottom 99% of people have had their financial lives drained.
Without doing an exhaustive review of many difference sources it is difficult to get a full picture of any of these data sets and, even then, many of the sources appear to be in conflict with each other. This is because wealth is an abstract concept that is open to some interpretation AND people are reluctant to fully divulge their financial information. The end result is that only a general picture can be built across the full population.
In all four categories below I was interesting in links with data charts and graphs far more than links with large blocks of text. I admit that I did almost no reading unless I found data on the charts that conflicted with my current understanding of the greater picture.
1. Wealth in the US
Estimates range on this but generally all show approximately half of the financial wealth of the USA being owned and controlled by the top 1% of the population.
Here is the google search I used: http://www.google.com/search?q=wealth+in+the+usa
Here are a few links I looked at:
http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
http://en.wikipedia.org/wiki/Wealth_in_the_United_States
http://www.businesspundit.com/wealth-distribution-in-the-united-states/
http://www.alternet.org/economy/145705/the_richest_1%25_have_captured_america%27s_wealth_--_what%27s_it_going_to_take_to_get_it_back
http://www.mybudget360.com/top-1-percent-control-42-percent-of-financial-wealth-in-the-us-how-average-americans-are-lured-into-debt-servitude-by-promises-of-mega-wealth/
2. Growth in Wealth in the US
The pattern here becomes clearer. Growth of wealth is increasing in all sectors of the USA, but the rate of that growth is not equal. The top 1% have their wealth growth growing faster than any other. To put the growth of wealth into perspective one could cross-reference the cost increase for living in each of the salary ranges listed to see how limited the growth actually is for several ranges.
Here is the google search I used: http://www.google.com/search?q=wealth+in+the+usa
And here are some articles that I looked at that were useful:
http://www.jchs.harvard.edu/publications/markets/w07-1.pdf
http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4?op=1
http://prospect.org/cs/articles?article=how_the_pie_is_sliced
http://www.slate.com/articles/news_and_politics/the_great_divergence/features/2010/the_united_states_of_inequality/introducing_the_great_divergence.html
http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph
3. Change in the Rate of Growth in Wealth in the US
This is the most disturbing of the figures for it shows how quickly the growth rate is changing in favor of exterminating the wealth of the poorest 9% of the population. The faster this is the faster the existing middle class will be destroyed and the harder it will be to build a healthy financial future for anyone who is not born into one.
Here is the google search I used: http://www.google.com/search?q=wealth+in+the+usa
All of the relevant links for this data point have already been shared above.
4. Current Snapshot of Wealth Distribution in the US Versus Other Countries
There are lots of ways to examine distribution of wealth. When one examines the per-capita wealth of a nation one will get a figure that usually does not represent the average person in that country. Distribution of wealth within that country as compared to the distribution of wealth in other countries coupled with the per-capita figure show a better picture. For example, a country where the top 1% own 75% of the wealth of the country will misrepresent the per-capita more than a nation where the top 1% control only 25% of the wealth. The more out of balance the internal distribution, the more the per-capita figure is out of alignment with the average person in the country.
There are not very many ways to compare this quickly and concisely.
Here are some links to graphs that demonstrate CEO pay versus that of the average worker:
http://www.phibetaiota.net/wp-content/uploads/2011/09/CEO-pay-versus-wages1.gif
http://motherjones.com/files/legacy/news/exhibit/2006/05/exhibit_chart1_265x181.gif
http://tmotr.files.wordpress.com/2011/07/table_sm.jpg?w=250&h=221
Here are some additional links for reference:
http://en.wikipedia.org/wiki/Distribution_of_wealth
http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States
http://www.lcurve.org/
http://www.guardian.co.uk/money/2006/dec/06/business.internationalnews
http://www.zerohedge.com/article/detailed-look-global-wealth-distribution
http://ecolocalizer.com/2010/04/12/plutocracy-reborn-wealth-inequality-gap-largest-since-1928/
It is important to note that some of the figures on wealth divergence are very similar to those seen just before the Great Depression. In a time where all of the wealth is locked up in the hands of a small number they purchase what they need, supplying jobs to only the suppliers of those goods. If no one else has any money to purchase goods or services then no one can hire anyone to provide those services (e.g. and earn money to purchase those services). The economy is a lot like streets in a city in this regard; as long as everyone keeps moving everything works well but when things stop moving gridlock occurs and no one can move anything.
These four data components demonstrate that the wealthiest people in the US have altered the wealth-accumulation patterns in their own favor at an ever-increasing rate. There is a finite amount of wealth (the economy runs not on the volume of wealth but rather on the movement of that volume) which will grow, but it grows at a rate that is much smaller than the rate of monetary movement. The end result is that as the wealthiest people leverage the markets to grow their wealth more rapidly they are, in essence, stealing the potential to do so away from the people who need the monetary growth the most. This process is flattening the middle class from both ends and will, eventually, wear it down until it no longer exists. If you are reading this you are probably a part of the middle class. Most everyone you know is probably a part of the middle class. Think about how difficult it is for you to get ahead financially. Think about what $100 / month invested into low-yield savings account would do for you if you could leave it there for 30 years. Now think about a slightly higher-yield account of some sort and how that would benefit you in 30 years. If you were able to bring home an additional $100 / month (after taxes) and then you took the initiative to save it think about how much money that would be when you retire. Now think about the factors that are preventing you from either saving that money now or preventing your employer from paying it to you. Now look at the pay-divergence chart above. Where do you think that extra $100 per month that you could be saving has gone? And that $100 / month that I could be saving? and that $100 / month that all of your friends and acquaintances and family members could be saving?
I do think it is important to note that the current US wealth distribution closely mirrors that of the overall world wealth distribution. But, as pointed out above, that is not the complete picture. How fast each group is gaining wealth in comparison to the other groups is more important than that current snapshop. What is more important than the current rate of change is the change in that rate. The US market is changing in favor of the wealthiest 1% gaining an ever-increasing share at an ever-increasing pace. At the current rate, if nothing changes, the US wealth distribution will not mirror that of the world for very long; it will continue to aggregate its wealth into the top 1% until it is able to affect the worldwide average instead of being a point on the spectrum.
I am not a communist. I am not a socialist. I think Capitalism is the system that has proven, time and again, to be the best at managing market forces. The problem with it is that it also breeds greed. And greed is what allows us ALL to become stupid with money and to allow situations to occur where 99% of a population are put into a financial depression because the other 1% want more and more for themselves and are willing to take it from anyone. Capitalism, unrestrained is as bad as any other means of managing an economy. Bloated government interfering with the economy is no better than a complete lack of controls.
The real conundrum is how can we fix what we have now in such a way as to provide the proper governmental controls to prevent the 99% from being "robbed blind" by the 1% while still allowing the market to work smoothly to meet demands where possible? I think that the only answer there is to have smart people in government. Smart people who want to make things better for everyone rather than people who want the power and respect of being a Senator or Congressperson. Smart people who will work toward fixes rather than fighting along party lines just to prevent the other party from getting a good idea credited to them first......
Subscribe to:
Posts (Atom)