passing the buck

The equal sharing of misery? Hang the rich? The first idea is that inequality is an issue that all of us need to be concerned with.Or, it has always been there but slightly below the radar in our “to do” list. Also, there is the extent that inequality is made more severe by a financial class, among others, that have  discovered a way to “game” the American banking system, then Wall Street is an appropriate target for mass protest. But, going back to the Pecora Commission or the beginning of banking in America, this has always been true. But, is this the price of society, under the assumption that inequality is a good thing, with its social capital as impetus for economic activity?

---Pecora was successful in figuring out that their executives paid no taxes in the years immediately following the crash, and that before the crash, Morgan offered stocks at discounted rates to many influential people, including the former president Calvin Coolidge, Supreme Court justice Owen J. Roberts. Defending himself, Jack Morgan said Pecora had “the manners of a prosecuting attorney who is trying to convict a horse thief.” The Morgan testimony was so outrageous that Senator Carter Glass quipped, “We are having a circus, and the only things lacking now are peanuts and colored lemonade.” A press agent for the Ringling Brothers Circus took advantage of this quote to put a midget (one Lya Graf) on Morgan’s lap. To compound the error, the committee chairman, Senator Duncan Fletcher of Florida, asked with newspapers not to print the pictures, which only made them rush to do so. Senator Glass later barred cameramen from the committee room.---Read More:

Maybe. But it is somewhat ingenious to belabor that point. After all, economically, excessive disparity is inefficient.  Instead of the government bailing out the people who caused the crisis,the malaise, the people who caused the crisis should be bailing out the people they have hurt, and perhaps spending some time in one of Charles Dicken’s debtors prisons.

Neil Reynolds: ( see link at end): …Sadly, not everyone can be above average – a fact that Dutch economist Jan Pen illustrated in his celebrated 1971 treatise that portrayed low-income people as dwarfs and high-income people as giants. The analogy was deeply disturbing. People’s worth, after all, cannot be determined by incomes alone. Mr. Pen’s “parade of the dwarfs” has insidiously infiltrated economic analysis for 40 years.

---Pen then described what the observers would see. Not a series of people of steadily increasing height—that’s far too bland a picture. The observers would see something much stranger. They would see, mostly, a parade of dwarves, and then some unbelievable giants at the very end. ---Read More: image:

Wicked though it was, Mr. Pen’s imaginary march proved irresistible – perhaps empowered, in part, by the literary force of Gulliver’s travels in Lilliput. Mr. Pen simply measured people’s height by their incomes, then lined everyone up for a one-hour parade, the lowest-income people at the head of the line.

By his calculations, using British income distribution, the low-income people were midgets, standing only inches in height. It wasn’t until the 40-minute mark in the parade that the marchers grew to average human height, and were visible to the parade watchers (also assumed to be of average height). At the 54-minute mark, the marchers stood twice as high as the average. At 59 minutes, marchers stood five times as high. With four seconds left, the top 0.1 per cent of earners passed the reviewing stand, standing 19 times higher than average earners. In the final split second, the top 0.01 per cent of earners finish the parade – as giants standing 165 times higher than the average earners: a mutant of macabre proportions….

---Heights begin to surge upward at a madly accelerating rate. Doctors, lawyers, and senior civil servants twenty feet tall speed by. Moments later, successful corporate executives, bankers, stock­brokers—peering down from fifty feet, 100 feet, 500 feet. In the last few seconds you glimpse pop stars, movie stars, the most successful entrepreneurs. You can see only up to their knees (this is Britain: it’s cloudy). And if you blink, you’ll miss them altogether. At the very end of the parade (it’s 1971, recall) is John Paul Getty, heir to the Getty Oil fortune. The sole of his shoe is hundreds of feet thick. --- Read More: image:

…Mr. Pen’s parade anticipated the soak-the-rich ethic that now dominates political discourse in so many of the affluent Western democracies in general and in the United States in particular. From the Occupy movement to the rhetoric of President Barack Obama, one strident message has become audible above all others. The rich must be cut down – until they, too, are average size.

It is easy to imagine a different parade than that of Mr. Pen (who died in 2010). Let low-income earners stand erect, carrying a tax burden equal to 10 per cent of their incomes – think of it, perhaps, as rocks on their backs. Let the average earners carry boulders equal to 30 per cent of their incomes. Let the high earners carry Sisyphean boulders equal to 60 per cent of their incomes – a reasonable estimate of total taxes paid by high-income earners in Ontario….

---That is worth repeating:

r thirty-five years, the rise in wages and salaries in the wide middle of the income distribution was 11 percent. The rise in wages and salaries at the top of the income distribution was 617 percent. ---Read More: image:

Implicit in this parade is an appreciation of the labour of absolutely everyone – and of the tax contributions of everyone, too. Read More:

Pass the buck? Wealth per se, is not a “shameful” thing in itself, it presents certain opportunities, the issue is always what to do with it. If its hoarded, better to let the government tax it, if a part is given to charity, it can be defined as a social justice whereby the inequalities we see are there exactly so they can be fixed and much can be repaired, mended and brought to form if people, especially the most fortunate gave 10-20% of their earnings to charity which is not the case. The transformation of societal morale would be almost instant that people were actually concerned with their fellow travelers well-being.


James Rickards:It should come as no surprise that an unprecedented policy should have unprecedented and unexpected results. There is ample evidence that the Fed’s policy has failed to achieve its goals and is leaving the U.S. economy worse off when compared to a more normalized interest rate regime.

The principal victims of the Fed’s policies are those at or near retirement who face a Hobson’s Choice of gambling in the stock market or getting nothing at all. A summary of these deleterious effects on retirement income security, explained in more detail below, includes the following:

Increasing income inequality. Zero rate policy represents a wealth transfer from prudent retirees and savers to banks and leveraged investors. It penalizes everyday Americans and rewards bankers, hedge funds and high-net worth investors.

Lost purchasing power. Zero rate policy deprives retirees and those nearing retirement of income and depletes their net worth through inflation. This lost purchasing power exceeds $400 billion per year and cumulatively exceeds $1 trillion since 2007.

Sending the wrong signal. Zero rate policy is designed to inject inflation into the U.S. economy. However, it signals the opposite – Fed fear of deflation. Americans understand this signal and hoard savings even at painfully low rates.Read More:

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