The gray bar represents the official recession, which is all over now, and supposedly everything is now lovely, because the economy is supposedly growing like gangbusters. (Actually government handouts to their pals is growing like gangbusters, which handouts are recorded as GDP growth, since everything the government spends money on is supposedly for value.)
The income is “real” income, which is to say income adjusted by the official inflation numbers, which, like the official GDP data and the official end of the recession, are becoming increasingly hard to believe. If the official inflation numbers are to be believed, the average real income in all income quintiles has fallen by ten or eleven percent, and if we doubt official inflation numbers, then by a fair bit more.
The state sponsored interpretation of this data by the official Harvard Economists, who know more economics that I do because Harvard tells us they do, is that it is proof the stimulus was not big enough. The problem with this account is that the official inflation for the last year was around four percent, which high and rising, though as yet well short of hyperinflation. The official account is Keynesian. If the Keynesian account is true you cannot have rising inflation, falling employment, and falling incomes, because it completely trivial for private enterprise to produce wealth no matter how besieged they are with blood sucking parasites. Stagflation is impossible, therefore inflation must be low, even if to the eyes of mere mortals who lack credentials from Harvard it looks alarmingly high.
The radical left interpretation of this data (and today’s radical left is a trial balloon for tomorrows official left, with whom it is dangerous to disagree) is that this problem is because the richest one percent are getting all the the boundless wealth that Keynesianism tells us is completely trivial to produce.
(“One percent” you may recall were the president’s words, which the supposedly grassroots crowd occupying the front lawn of Wall Street immediately echoed in massive chorus, like children at school repeating a drill by rote.)
However the top twenty percent, and the top five percent, are taking much the same beating as the median household, so though I do not have figures for the top one percent, this explanation is unlikely. If the top one percent were scarfing it all up, their income would have doubled.
Here is my explanation. During the Bush/Obama regime, we rapidly moved to European levels of regulation and state intervention, and so our income levels are now rapidly falling to those of a European country. When what made America unique went away, what made America rich went away.
I think it unlikely that this problem can be fixed by democratic means. The public service controls the government, not the politicians, and the Ivy League Universities are the holy church of the public service. Rolling back regulation would involve something more like regime change, for it would require a political purge of the public service. Everyone who applies to university issues a list of the extra curricular activities demonstrating that they are sufficiently left wing. A necessary step to remedy the problem is to go through those lists, and purge the public service of everyone who has submitted proof of his left wing character, which all of them, since you don’t get a higher position in the public service without credentials, and you don’t get the required credentials without demonstrating your political position.
It is a mistake to take sides in the debate between the official left and the official right on incomes policy. It is true that the top 1% have been getting very much richer over the last 35 years relative to everyone else. Over the same period, the financial sector grew enormously as a % of GDP, and it grew without noticeably producing anything valuable. It seems very likely that these two phenomena are linked—that is that many of the richer 1% got that way in the financial sector and that the other 99% would have been much richer absent the growth in the financial sector.
A big question is how and why this happened. The most plausible interpretation is that the financial sector gradually figured out that it could run a wide variety of ponzi-like schemes and buy both regulatory indifference and bailouts via payoffs to politicians. Then, gradually, as the honest people in finance retired and were replaced with dirtbags, the schemes multiplied.
So reflexively defending the top 1% is a mistake, since a great many of them are fraudsters. On the other hand, attacking the top 1% is also a mistake, since the problem isn’t their 1%-ness or their wealth but the fact that so many of them are fraudsters. It would be far better to attack Wall St specifically—and by attack I mean imprison using legal means if that is feasible. Just how many good guys are likely to get shot if everybody who works for Goldman-Sachs in a supervisory capacity is shot?
The disappeared money was not, for the most part, stolen by Goldman and Sach. Rather it was pissed away on loans to unemployed no-hablo-english wetbacks buying million dollar homes no money down. Every sale in Sunnyvale during the period 2005-2006 where I knew the financial condition of the purchaser, the sale was made to an unemployed Hispanic with little or no English.
Wall Street criminality was a minor detail in left wing political activist criminality.
The main problem is not that unproductive people are getting the money, but that left wing activists are running the economy, and they are criminally irresponsible and incompetent. Theft is a minor detail. The problem is the destruction of wealth. The biggest criminals were Freddie, Fanny, Washington Mutual, and Countrywide, all of whom lost money. Even Goldman and Sach lost money. Their crimes consisted of unloading their dud paper and toxic assets onto bigger idiots, some of them their customers, so that someone else took the fall for all the money that they had lost on making politically correct loans.
There has been a substantial redistribution of wealth not just to finance (which is only part of wall street), but to industries closely linked to government – lawyers, healthcare, and academia, among others, though finance is the largest part of it. Redistribution however is a minor detail. Most of the money does not go to the well connected. It goes down the drain.
Observe that the non governmental parts of wall street are severely persecuted, for example Rajaratnam got eleven years for a crime where no one can explain what he did wrong in terms that a wall street trader who wants to avoid getting eleven years in jail is likely to be able to understand, while bankers guilty of crimes that cost us stupendous amounts of money have no problems. He bought and sold on the basis of rumors and gossip, which if a crime, is a crime every investor commits.
Long time ago, I talked to a valuer, who reported that quite suddenly there was pushback against bogus house valuations. He complained he was squeezed between customers who wanted grotequely inflated valuations, and bankers who would no longer glibly pretend to believe them. I immediately knew what was going to happen: the whole ponzi based on no money down mortgages to deadbeat Hispanics was finally starting its long awaited and much predicted collapse, and I immediately took action. Insider trading? That information was not exactly secret, but neither was it publicly available.
You’re another Californian, Jim? Cheers. Here’s to re-arranging the deck chairs.
I am a citizen of more than one country, and move around a fair bit. I am a Californian, among other things, but spend considerably less time there since the ship started to sink.
I reckon whites are out of places to run to. They consolidated in south Africa after fleeing Rhodesia and the other countries. Now they’re moving from there to Australia, which is filling up with all kinds of nonWesterners. The same is true of the US and Britain. The way things are heading, one spot is as good as the next.
Eventually CA may de-populate like Nevada is.
Australia is not too bad. Australia has a somewhat Chilean style retirement system, which means it has long term solvency, unlike the rest of the west. Its non white immigrant population is largely oriental, which is not as bad as the non white immigrant population afflicting the US and Europe. Because many of these were refugees from communism, they failed to vote as progressively as they were supposed, so the ruling elite in Australia changed its mind. The government had decided to dissolve the existing people, and to appoint another one, but lately we have seen its resolution on that project wobble markedly.
Indeed, the two may be connected. If you are following a project to dissolve the people, and appoint a new people, you probably do not care much about long term solvency, since you are going to go bust either way. If you decide not to appoint a new people after all, then long term solvency matters, so the Chilean retirement system starts to look attractive.
I think you have the Harvard line pretty well nailed. They are not stupid, crude leftists like Barney Frank, rather they are, if anything, too optimistic about the vitality of capitalism. They really believe that capitalism will keep merrily chugging along even without a meaningful rule of law and no matter how burdensome kowtowing to the regulatory state becomes. And they are just crazy on the liquidity trap front. For them, Japan did not spend enough during its lost decade. Japan did not run up its public debt enough during its lost decade.
Taking advice from those guys led post-Communist Russia to disaster, lost decade Japan to disaster, and now the US to disaster. The absence of learning from these repeated demonstrations is spooky.
[…] stalled since 1973, are now falling, across the board, afflicting all income quintiles, with no end in sight. Japan has been in decline […]