Hudson on the Piketty Phenomenon

[vt]

Re: Hudson on the Piketty Phenomenon

True no reviews, but editorial reviews from other professors in the field:

"Rank and his colleagues achieve two important tasks in this book. They describe, in the words of average Americans whom they interviewed, what the 'American Dream' means. And then they show, through creative analyses of the hard data, how much that dream is being thwarted by the political economy of 21st century America. It makes for a poignant contrast." --Claude S. Fischer, PhD, Professor of Sociology, University of California, Berkeley

"Over the last generation, the ideal of the American Dream and the reality of the American economy have increasingly clashed. In this informed, and engagingly written book, Mark Rank takes us deep into the minds and lives of Americans of all walks of life as they build-and sometimes watch crumble-their own dreams. A powerful portrait of the ups and downs of a riskier and more unequal economy." --Jacob Hacker, PhD, Stanley B. Resor Professor Political Science; Director, Institution for Social and Policy Studies; Yale University

"In his exceptionally important new book, Chasing the American Dream, Mark Rank shows how rising economic inequality has distorted the meaning of the American dream and circumscribed the opportunities of ordinary Americans. Rank combines interview and focus groups with the life history method he pioneered in earlier work to show the astonishing rate at which individuals move in and out of poverty and affluence and how initial advantages and disadvantages translate into patterns of cumulative inequality which define their lives. Written with exceptional clarity, illustrated with vivid individual stories, this book will engage scholars, students, and non-specialist readers who want to know what is happening to the elusive American dream." --Michael B. Katz, PhD, University of Pennsylvania, author of The Undeserving Poor: America's Enduring Confrontation with Poverty

Just maybe Pikettys book is being pushed as a political and media agenda? Could "Chasing the American Dream" be closer to the answer?"

The professors cited above don't appear sponsored by another agenda like say the Koch bothers, whereas the Piketty book looks closer to fitting a political agenda.

[don]

Re: Hudson on the Piketty Phenomenon

The Accidental Controversialist:
Deeper Reflections on Thomas Piketty's "Capital"

by Thomas I. Palley

Thomas Piketty's Capital in the Twenty-First Century is a six hundred and eighty-five page tome that definitively characterizes the empirical pattern of income and wealth inequality in capitalist economies over the past two hundred and fifty years, and especially over the last one hundred. It also documents the grotesque rise of inequality over the past forty years and ends with a call for restoration of high marginal income tax rates and a global wealth tax.

His book has tapped a nerve and become a phenomenon. In laying a solid blow against inequality, Piketty has also become an accidental controversialist. That is because his book has potential to unintentionally trigger debate over so-called "free market" capitalism. The big question is will that happen?

To get some perspective on its phenomenon status, consider the following. The book (at time of writing this article) is number one onAmazon.com's best seller list, beating out the likes of Lynn Vincent'sHeaven Is for Real: A Little Boy's Astounding Story of His Trip to Heaven and Back; George Martin's A Game of Thrones 5-book Boxed Set; Erlend Blake's Never Work Again: Work Less, Earn More and Live Your Freedom; and Dale Carnegie's How to Win Friends & Influence People.

The usually sober Sunday New York Times had a long article accompanied by a side-bar placing Piketty's book alongside Adam Smith's (1776) The Wealth of Nations; Thomas Malthus' (1798) An Essay on the Principle of Population; John Stuart Mill's (1848) Principles of Political Economy; Karl Marx's (1867) Das Kapital: and John Maynard Keynes' (1936) The General Theory of Employment, Interest and Money. I think it fair to say phenomenon is no exaggeration.

Piketty's book consists of four sections. The first provides a theoretical framework, the second two provide empirical documentation, and the fourth provides a policy framework for reversing the surge in inequality of the past forty years. By all accounts from those who know, the empirical work is superb in scope and detail and it is praised as part of a new economic scholarship that explores "big" data sets. In Piketty's case the big data is individual tax returns.

The book's timing is near-perfect because of awakened political interest in inequality, but its empirical findings are not revolutionary and rising income and wealth inequality have been documented for years, albeit less comprehensively. Beginning in 1988 with the first edition of The State of Working America, Larry Mishel and his co-authors at the Economic Policy Institute in Washington DC have biennially documented the problem of wage stagnation and rising income inequality in the US -- and they too use big data from the Current Population Survey. Jamie Galbraith substantially confirmed that picture in his 1998 book Created Unequal: The Crisis in America Pay. Moreover, he too used biggish data on the distribution of manufacturing wages, and he subsequently extended his research to cover the international economy.

Another economist who documented rising US income and wealth inequality is Edward Wolff in his 2002 co-authored book Top Heavy: The Increasing Inequality of Wealth in America and What Can Be Done About It, and his 2008 book Poverty and Income Distribution. With regard to global patterns, Branko Milanovic has been the preeminent contributor with his 2002 article "True World Income Distribution, 1988 and 1993: First Calculations Based on Household Surveys Alone"and his 2005 book Worlds Apart: Measuring International and Global Inequality. Other renowned contributors include Anthony Atkinson andFrançois Bourguignon. And of course, Piketty has also contributed with his masterly 2003 article, co-authored with Emmanuel Saez, on US income inequality from 1913 to 1998. Indeed, his book is in part an extension of the methodology developed therein.

Given this, it is interesting to ask why Piketty has broken through where others have failed. In my view, one reason is political. Mishel, Galbraith, and Wolff are progressive left economists. Though their books are not theoretical or comprehensive policy treatments of the problem, their implicit theoretical logic emphasizes economic and political power. That logic is explicitly developed in my 1998 book Plenty of Nothing: The Downsizing of the American Dream and the Case for Structural Keynesianism.

The important point is mainstream economics has difficulty acknowledging work from such sources because to acknowledge is to legitimize. That creates the strange situation in economics whereby something is not thought or known until the right person says it. This pattern applies to income inequality, the macroeconomics of debt deflation, the economics of international capital controls, and Phillips curve inflation theory, to name a few instances.

These observations lead to a second concern, which is, after the initial fuss dies down, Piketty's book may end up being gattopardo economics that offers change without change. The public discourse on income and wealth inequality has been increasingly owned by progressive economists, both because of their early identification of the issue and the logical coherence and empirical consistency of their explanation. That has placed mainstream economics on the political defensive. Piketty provides a mainstream neoclassical explanation of worsening inequality in the first section of his book. That creates a gattopardo opportunity whereby inequality is folded back into mainstream economic theory which remains unchanged.

Using a conventional marginal productivity framework, Piketty provides an explanation of rising inequality based on increases in the gap between the marginal product of capital, which determines the rate of profit (r), and the rate of growth (g). Because capital ownership is so concentrated, a higher profit rate or slower growth rate increases inequality as the incomes of the wealthy grow faster than the overall economy.

The conventional character of Piketty's theoretical thinking rears its head in his policy prescriptions. His neoclassical growth framework leads him to focus on taxation as the remedy. There is little attention to issues of economic institutions and structures of economic power because these are not part of the neoclassical framework. That substantially explains progressive economists' diffident embrace of the book. Furthermore, even if technically feasible, Piketty's tax prescriptions are politically naïve given capital increasingly controls the political process.

These features have led some critics to raise old "Cambridge" arguments about the intellectual incoherence of marginal productivity income distribution theory. Critics also assert Piketty conflates physical and financial capital, overlooking the role of finance in determining rates of return and patterns of income and wealth distribution. There are two problems with these responses. First, mainstream economists determined long ago to turn a blind eye and deaf ear to such arguments. Second, these arguments miss the bull's-eye which is the nature of capitalism.

A better response is for critics to stick with the rate of profit versus growth argument while dumping the neoclassical marginal productivity aspect of Piketty's theoretical argument. Mainstream economists will assert the conventional story about the profit rate being technologically determined. However, as Piketty occasionally hints, in reality the profit rate is politically and socially determined by factors influencing the distribution of economic and political power. Growth is also influenced by policy and institutional choices. That is the place to push the argument, which is what critics of mainstream economics have been doing (unsuccessfully) for decades. The deep contribution of Piketty's book is it creates a fresh opportunity in this direction.

Mainstream academic economists will try to block that and push thegattopardo tactic. My prediction is "r minus g" algebra will make its way into the curriculum, with the profit rate explained as the marginal product of capital; Chicago School economists will counter the economy has mechanisms limiting prolonged wide divergence of r and g; and Harvard and MIT graduate students will have opportunities to do market failure research arguing the opposite. The net result is economics will be left essentially unchanged and even more difficult to change.

[Thailandnotes]

Re: Hudson on the Piketty Phenomenon

I found it interesting that Pikkety's book has already gotten more than 60 negative one-star reviews* on Amazon, whereas (Stiglitz) The Price of Inequality which is along the same lines has only garnered 1.

*Skimming these will seem like you just walked into the wrong bar.

(vt's Chasing the American Dream has not been reviewed)

[vt]

Re: Hudson on the Piketty Phenomenon

A clearer view than Piketty's on America's experience with inequality:

http://www.amazon.com/Chasing-Americ...american+dream

[Thailandnotes]

Re: Hudson on the Piketty Phenomenon

Here's an interesting article about NYC real estate taxes that appeared this month.

THE EXISTING TAX SYSTEM IS "SIMPLY INDESCRIBABLE," SAID New York University law professor Roderick Hills, who also called it “a morass of indecipherable and indefensible legal lunacy.”

“Everything they say about the way the system works is absolutely correct,” said Carol Kellermann, president of the Citizens Budget Commission. “Whether this suit is valid and is upheld, I think to me what is useful and important about it is that it gets to the issue of the need to revise the tax system.”

The quirks in the city’s property-tax algorithm are hard to keep straight.

To start with, take the disparities between houses in wealthy neighborhoods and houses in less-wealthy ones.

As a not-so-random example of how this works: last year the Daily News reported that Bill de Blasio paid $2,900 in real estate taxes on each of his 11th Street rowhouses in Park Slope, though they are worth (at the very least) $1.1 million each.

At the same time, a homeowner in the much-less-posh Woodhaven section of Queens pays $3,700 in taxes on a townhouse that’s now on the market for $299,000.

Now look at how both the mayor and the Woodhaven homeowner make out compared to Ernest Robinson, a Bronx renter and one of the plaintiffs in the suit.

the whole article...

http://www.capitalnewyork.com/articl...tag-page-image

[vt]

Re: Hudson on the Piketty Phenomenon

Not just the fireman, but the policeman (or woman) and especially the soldier.

It still makes my blood boil to have seen our returning Vietnam vets cursed and spit on by some low life dirt who failed to understand the soldiers were forced into service and war by leaders who thought them expendable.

It's difficult to explain artistic , athletic, or any type of talent; even the talent to manage a small, medium, or large business.

Shouldn't a world class violinist be paid more than a rapper? But who are we to judge how citizens spend their money for what they perceive as value? The world is not fair.

Any large fortune gained illegally should be forbidden. Any gained unethically should be controlled and corrected. Any gained by a measure that it is excessive by a reasonable standard needs to be changed. But someone who creates something that improves life for people should not be denied the fruits of their labor.

8% of the population is employed by the non profit industry. Those organizations are supported by wealthy benefactors, corporations, and in some cases by government grants.

What's inequality and not inequality is a complex subject. This thread is raising important issues.

It's not just distributing the wealth pie; more importantly is how do we grow the pie to have far more share in the innovation, invention, and creativity that this country has always cultivated, plus how do we duplicate this in other nations?

[Woodsman]

Re: Hudson on the Piketty Phenomenon

These gentlemen make quite a bit more than the average worker. Is it undeserved? Their net worth runs from $140 million to $700 million.

They move product. They make what some might consider a lumpen form art. For this they are paid a king's ransom.

Meanwhile, a fireman runs headlong into a burning building to rescue some dirtbag who wouldn't piss on you if you were on fire. Goes to bed, rescues a little girl the next day. Get's pissed on Saturday, makes it to Mass on Sunday, starts all over the next day, and I think to myself what does he deserve? 30 and a pension is all he's hoping for, but I guess half a billion is a nice take for a fellow who grew up selling crack $20 a rock and stabbing people in the stomach in business disputes.

The fireman is a dime a dozen, right? One in every city worth the name. But there's only one Roca-fella. Supply and demand. The way God intended.

I kid, of course. Nobody said it had to make sense. Me, I love watching stupid human tricks.

[santafe2]

Re: Hudson on the Piketty Phenomenon

This has come up before on this forum. I think Hudson completely understands real estate and is not talking about an upper middle-class couple who inherits a house and rents it out or buys two houses looking for income.

“In New York City, where I live, the older the building, the more valuable it is because it doesn’t wear out, it’s maintained – most landlords spend about 10% of their income on maintenance and repairs. So the pretence is landlords pretend that their building is like a machine, wearing out, they charge depreciation and because of that they say “I didn’t make any profit, this is a return of capital”. And as soon as they’ve depreciated a building in full they then sell it among themselves or they buy it all over again and start the whole process all over, so you can depreciate the same building, say it’s 100 years old, you can keep depreciating it again and again and again and again as if it’s worn out all these times, and it’s the same building. But the owners and the next owners and the next owner and the next owner doesn’t have to pay any tax on this.”

Basically, the whole argument is about where the super rich store wealth and how they prevent the interest it gains from being taxed. Part two is about suppressing wages to the point where everything in life requires borrowing = tax paid to the lenders.

GRATs, the 65-day rule, and the like are absurd perversions of the tax code. You can listen to Krugman on Moyers and sigh, but he gets some important parts right. 10 billion dollars grabbing 5 % on its investment returns over a million dollars a day. Go to Forbes and check out their historical billionaires list. It’s clear Piketty hit some homeruns with his data. Those lists, as you move through them, are the children of the children of innovators/monopolists

I still completely disagree with Hudson's points but let's see if we can discuss this and find some common ground.

• You begin with the issue of class. My takeaway from your point is that upper middle class, or lower end of the investing class, is OK. One or two houses is OK but 100 buildings in NYC is not OK. If so, this is an issue of scale, not a real estate issue. It of course begs the question, how much is too much?
• Hudson rails against depreciation. This is the ability to, over 27.5 or 40 years, depreciate a property asset. As he points out, property is maintained so it doesn't really depreciate. Depreciation does not provide tax avoidance. That portion of your rental property that is depreciated becomes capital gain. Again, this is not a real estate issue, it's a tax issue. Depreciation turns ordinary income into capital gains.
• You mention inheritors. The poster children are the Walton family. This is an issue of both scale and estate tax loopholes, I'm sure you don't care if I split my estate between my children. For the Waltons, it may at this point also be an anti-trust issue but it has nothing to do with real estate.

Rents are taxed as income not capital gains. If expenses are about 10% a year and depreciation is between 2.5% and 3.7%, the remainder is non maintenance expenses, improvement or profit. There are of course ways to securitize real estate investments but that again would be a tax issue. I think Hudson is conflating issues and not thinking clearly on this issue.

[vt]

Re: Hudson on the Piketty Phenomenon

These gentlemen make quite a bit more than the average worker. Is it undeserved? Their net worth runs from $140 million to $700 million.

http://www.forbes.com/sites/zackomal...-artists-2014/

4/16/2014 @ 10:01AM 195,793 views

The Forbes Five: Hip-Hop's Wealthiest Artists 2014

This story appears in the May 5, 2014 issue of Forbes.

The Forbes Five: Hip-Hop's Wealthiest Artists 2014

1 of 12

The Forbes Five: Hip-Hop's Wealthiest Artists

Sean “Diddy” Combs’ reign as hip-hop's wealthiest mogul continues (full coverage here). Who else made this year’s rap rich list? Click through the gallery to find out.

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Back in 2007, Sean “Diddy” Combs teamed with Jay Z and 50 Cent to create a song titled “I Get Money: Forbes 1-2-3 Billion Dollar Remix.” Less than a decade later, rappers are closing in on ten-figure fortunes, and he’s the nearest of the bunch.
Diddy leads the pack with an estimated fortune of $700 million, an increase of $120 million over his net worth last year. The change comes largely from the addition of Revolt TV—the new, music-focused, multi-platform channel of which he’s the majority owner—to his already-hefty portfolio.
“Right now my focus is Revolt and making it the number one, most-trusted, most credible worldwide brand for music,” he told FORBES in a recent interview. “And to get Revolt to be the quintessential definition of real time. I think that’s the future.”
Diddy has plenty of competition in the race to $1 billion. His top challengers are Dr. Dre, who ranks second with $550 million, and Jay Z, in third place with an estimated $520 million. The former leapfrogged the latter on this year’sForbes Five thanks to a large stake in Beats By Dr. Dre, which he cofounded with Interscope chief Jimmy Iovine in 2008.
The company controls an astounding two-thirds of the premium headphone market, with annual sales reportedly in excess of $1 billion and growing. Private equity firm Carlyle invested $500 million for a minority stake last year, pushing Beats’ value past $1 billion and likely closer to $2 billion.
“Beats has a unique brand—it speaks to a nice young demographic, which is really interesting to marketers,” says Peter Csathy, former president of Musicmatch, an early digital music purveyor acquired by Yahoo YHOO -2.19% in 2004 for $160 million. “When I think about Beats, I think about it as a lifestyle, I think of it as a media company, not just a hardware and music-focused company.”
Full coverage: Hip-Hop’s Wealthiest Artists 2014
Jay Z’s fortune continues to grow at a healthy clip, too. He’s made multiple nine-figure deals in the past, including his $204 million Rocawear sale in 2007 and his $150 million pact with Live Nation in 2008. But much of his recent growth comes from Roc Nation, his record label and management firm that recently added a sports agency. The outfit gets a single-digit cut of pacts like Robinson Cano’s $240 million monster agreement.
(For more on Mr. Carter’s rise as a businessman, check out Empire State of Mind: How Jay-Z Went From Street Corner To Corner Office).
Next up: Bryan “Birdman” Williams, whose net worth would be over $300 million if he didn’t share his fortune with brother Ronald “Slim” Williams. The duo cofounded Cash Money Records two decades ago; Cash Money continues to grow with a roster that includes Drake, Nicki Minaj and Lil Wayne. Birdman has also diversified with Cash Money Content, GT Vodka and the YMCMB clothing line.
Rounding out the list is 50 Cent, who owes most of his fortune to his $100 million haul from the sale of Vitaminwater in 2007. Now he’s trying to repeat the feat with companies like SMS Audio and SK Energy beverages. In the meantime, he’ll reboot his music career by taking his G-Unit Records independent and releasing new album Animal Ambition in June.
“It was getting pretty difficult to launch music that everyone was paying attention to at the same time,” says 50 Cent of his final days at Interscope, the label that launched him to superstardom. “The company itself was going through so many changes that I didn’t really know the people involved in the projects anymore.”
In order to complete our Forbes Five list, we follow the same procedures we follow while calculating our list of the world’s billionaires: looking at past earnings, valuing current holdings, leafing through financial documents and talking to analysts, attorneys, managers, other industry players and even some of the moguls themselves—like Diddy, who already has his eye on the next generation.
“My advice to future entrepreneurs is to always know reality, to know what you’re getting yourself into, to know how hard it’s going to be, how competitive it’s going to be,” he says. “We’re in a time where the people that really work hard—and really believe in themselves, and really don’t give up on their dreams, no matter how many times they fall down—are the ones that are going to be successful.”
Note: This story is an expanded version of a piece that ran in the May 5, 2014 issue of FORBES magazine.
For more about the business of music, check out my Jay Z biography, Empire State of Mind. My next, Michael Jackson, Inc, will be published in June. You can also follow me on Twitter and Facebook.

[gwynedd1]

Re: Hudson on the Piketty Phenomenon

Yes, there would certainly be inflation, and it would be more of an equitable arrangement. Handing out money/credit (and there is no difference practically in the short run as money is debt after all in the current system) to everyone equally is more just IMO than handing it out to a select few and hoping/trusting they will pass it on judiciously.



Again, not sure I follow - what are the myths and what is accurate in your view? I use of the term "fiat money/currency" broadly. Having a bank lend me 1000 US dollars is credit and creates $1000 of new fiat money as far as I understand. I can walk out of the bank with 10 C-notes after all. Is this what you think is a myth?

Well look at it this way. Credit isn't currency. And if most money is credit, then the currency is a fraction of a money problem. The Great Depression and its vast swings of credit happened squarely on a gold standard.

Then of course getting government entirely out of money does not get them even remotely out of credit, if credit is secured by anything the governments touches like real estate. Of course we are so far gone with loan guarantees and the like that this phenomena has not seen a ray of sunshine, nor will it likely ever . That is to say nothing of Fannie, Freddie and Ginniemae . That prints credit like nothing else. The 2000-2008 consumer economy was run on HELOC.

[vinoveri]

Re: Hudson on the Piketty Phenomenon

There is no inherent link to inflation hurting the poor or middle class. If a myth built by an association by design such that beating someone on sunny days is nothing but a purely manufactured association. If they dropped $100 bills in a poor neighborhood, there would be inflation as well, yet the association would be quite clear that inflation would be linked to windfalls of that nature.

Yes, there would certainly be inflation, and it would be more of an equitable arrangement. Handing out money/credit (and there is no difference practically in the short run as money is debt after all in the current system) to everyone equally is more just IMO than handing it out to a select few and hoping/trusting they will pass it on judiciously.

The myths these people believe are astounding?

He also got in a big argument with your Australian Steve Keen two years ago saying that banks don’t create credit. “All banks do,” Krugman said, “is lend out savings.” He said it’s inconceivable that a bank can actually create credit or inflate asset prices.

Again I cannot take anyone seriously who things fiat currency is the problem when credit dominates the money supply. Nor with the Internet "Austrians" speaking about reserves and potential which are mythological speculations.



This is why I find company with classical economics:

I apprehend that bank notes, bills, or cheques, as such, do not act on prices at all. What does act on prices is Credit, in whatever shape given, and whether it gives rise to any transferable instruments capable of passing into circulation or not.

JS Mill

Again, not sure I follow - what are the myths and what is accurate in your view? I use of the term "fiat money/currency" broadly. Having a bank lend me 1000 US dollars is credit and creates $1000 of new fiat money as far as I understand. I can walk out of the bank with 10 C-notes after all. Is this what you think is a myth?

[gwynedd1]

Re: Hudson on the Piketty Phenomenon

We'll have to agree to disagree on this point. Sorry, I don't understand the monkey-water analogy. You seem to acknowledge that the system is "by design", "paradoxical" and the public is "deceived" so there we can agree.

There is no inherent link to inflation hurting the poor or middle class. If a myth built by an association by design such as beating someone on sunny days, it is nothing but a purely manufactured association. If they dropped $100 bills in a poor neighborhood, there would be inflation as well, yet the association would be quite clear that inflation would be linked to windfalls of that nature.



The myths these people believe are astounding?

He also got in a big argument with your Australian Steve Keen two years ago saying that banks don’t create credit. “All banks do,” Krugman said, “is lend out savings.” He said it’s inconceivable that a bank can actually create credit or inflate asset prices.

Again I cannot take anyone seriously who things fiat currency is the problem when credit dominates the money supply. Nor with the Internet "Austrians" speaking about reserves and potential which are mythological speculations.



This is why I find company with classical economics:

I apprehend that bank notes, bills, or cheques, as such, do not act on prices at all. What does act on prices is Credit, in whatever shape given, and whether it gives rise to any transferable instruments capable of passing into circulation or not.

JS Mill

[vinoveri]

Re: Hudson on the Piketty Phenomenon

As it should IHO.

We'll have to agree to disagree on this point. Sorry, I don't understand the monkey-water analogy. You seem to acknowledge that the system is "by design", "paradoxical" and the public is "deceived" so there we can agree.

[gwynedd1]

Re: Hudson on the Piketty Phenomenon

The currency is devalued in ALL circumstances as far as I can tell - and in fact is stated official policy, i.e., inflation targeting. Moreover centralized monetary policy, although not necessarily inherently so, seems to promote the formation of a pyramid where whoever receives the money first benefits more than those who receive it later.

If you place a banana on a ladder and spray cold water on all the monkeys anytime one monkey tries to get it, you will soon have reinforced the idea that the cold water and the banana is related. it will also cause the other monkeys to stop any monkey wise monkey who discovered this is not the case when the one with the hose leaves. In other words you are describing two very different principles that have only by habit and design been linked. Inflation tends to correlate with being bad for middle class debtors because the system inflates with credit inflation. Monetary inflation relieves middle class debtors, necessarily as a fundamental principle . However most of the public is now deceived because they fail to graps the credit money paradox.

An issue arises because central control of the monetary unit and its value if forced on people, even this itself need not be bad per se, but it is the corruption and the fact again that those who get the money first benefit that is unjust. Letting people deciding what to trade is consistent with freedom.


Here is where philosophy and worldviews come into play. The world is tough and competitive enough. A society that rewards ingenuity, hard work, risk taking directed toward increasing real wealth by providing goods and services that raise standards of living is righty directed imo. A world of centrally managed fiat creation and devaluation means one has to continually work to turnover their depreciating currency to prevent poverty; one cannot simply work hard, save money and become independent of wage slavery without speculating with savings hoping not to end up with a goose egg. In short, money currently has an effective expiration date.

As it should IHO.

Note this doesn't even touch upon the issue of leverage, and the fact that those with access to easy and unlimited credit causes asset inflation which since it is not uniform causes dramatic inequality. Look what is happening with PE buying up forecloses homes for instance. How close are they to the money spigot vs us?

Which is why I bristle at the idea that fiat currency is any real problem. A hard currency brings as much credit and paper notes as our system ever did. The only difference what the size of it. So long as bank notes were regional, there was the threat that too many notes would come back for the redemption of specie when the economy was saturated as was noted by Adam Smith.

If anything fiat currency might even be worse for deflation. The silver demonetization was cured in the long run because of an increase in the supply of gold. Never in the history of the world would I recall all the gold mines being closed. However with our money system this has occurred several times. A balanced budget or a surplus is the equivalent of shutting down every gold mine in gold standard and even to putting some back into the ground.

[vinoveri]

Re: Hudson on the Piketty Phenomenon

I thought Twain handled the issue well in A Connecticut Yankee in King Arthur's Court.

There has always been inflation. There will always be inflation.

The alternative is no churn and a young generation with no chance.

Those that benefit most are at the top of the pyramid, inflation or no.

Nothing wrong with inflation per se if it is reflective of economic growth, i.e., the money supply must grow to keep up with economic growth per Friedman approach.

Twain lived in a different world, e.g., one without pure fiat currency. Of course there have always been speculators, carpet baggers, sheisters, etc irrespective of inflation, but now we have systematic deliberate currency depreciation by the central authorities which clearly are directed to benefit the top of the pyramid, and which clearly disadvantage the lower classes (e.g., housing bubble/bust and aftermath) and which are inequitable. The system and those at the top are more important than the commonwealth and common good - but the right continues to rationalize via "trickle down" theory justification, and the left is caught up with its government can do so much good for "the people" by allocating credit via the banking system and 'arbitrarily' fixing the price of money. I don't think it works currently; corruption has taken over.