Off Topic Poker Forums

[Disclaimer: this is a derail/branch from the Gaming Obamacare thread and also in part a response to a PM convo with medic2038. i know, it won't make much sense.]

so i watched The Flaw last night. enjoyed the presentation, but did not enjoy so much the Louis Hyman segments when he starts playing "economic historian." i think he really ruined what was for the most part a very accurate, moving documentary with his unsubstantiated claims. that's my major point of contention, so i'll just stick to that for now.

his major thesis is that the recent rise of income inequality in the US was the cause of our current failure of capitalism and the impending doom of the middle class.

but who cares about % of income? absolute income and the health of the overall economy is more important. but i'll get to this later.

Hyman says income has stagnated since the early 1970's to today. and his implication is that income inequality is to blame. but the data doesn't support his conclusion.

in the movie, the chart @ 48:52 "Share of income bottom 90%" shows that from 1970-1980, the bottom's share of income was 65% or greater--near all-time highs. the same decade when income was stagnating. so unless there is a 10 year lag between income inequality and income stagnation, there is no causation.

i think the concept of ever-increasing wages is a myth. if this was true, a thousand years from now, the median income (in inflation adjusted dollars) of the nation would be so high that everybody is super rich. when examined thusly, the concept that wages must rise over time is obviously as absurd as the idea that housing prices must rise over time (a myth which Yale economist Robert Shiller debunked and which was also presented in the movie).

so let's reconsider. the evidence shows a different picture. we're getting richer as a nation , every one of us, rich and poor alike.

Harder for Americans to Rise From Lower Rungs ? [question is mine]

But many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe.

[...]

Skeptics caution that the studies measure “relative mobility” — how likely children are to move from their parents’ place in the income distribution. That is different from asking whether they have more money. Most Americans have higher incomes than their parents because the country has grown richer.

Some conservatives say this measure, called absolute mobility, is a better gauge of opportunity. A Pew study found that 81 percent of Americans have higher incomes than their parents (after accounting for family size). There is no comparable data on other countries.

The income compression in rival countries may also make them seem more mobile. Reihan Salam, a writer for The Daily and National Review Online, has calculated that a Danish family can move from the 10th percentile to the 90th percentile with $45,000 of additional earnings, while an American family would need an additional $93,000.


and we have to get a sense of bearing in all this doom and gloom. even with the US's "bad" income inequality and stagnant wages, we're forgetting that we are the 1% in the global economic picture.
http://en.wikipedia.org/wiki/Median_household_income

and all this even when our manufacturing industry has supposedly died and gone overseas. but contrary to popular opinion, again, this is not true.

and if the loss of manufacturing jobs due to the evil, heartless machines is now bothering you, do not fret, i'll again refer you back to Hazlitt - CHAPTER 7 The Curse of Machinery (skip to page 33).

but i did enjoy the movie, for the most part.

but who cares about % of income? absolute income and the health of the overall economy is more important. but i'll get to this later.

Waiting for this. I hope it's not trickle down theory.

so let's reconsider. the evidence shows a different picture. we're getting richer as a nation , every one of us, rich and poor alike.

Are you saying that each poor person has more money than they did before or that Americans as a group are richer? What about how much of each person's income must be spent on things we consider necessities?

"Some conservatives say this measure, called absolute mobility, is a better gauge of opportunity. A Pew study found that 81 percent of Americans have higher incomes than their parents (after accounting for family size). There is no comparable data on other countries."

In what way was family size accounted for? Family size has been shrinking as well. Also, again what percentage of income now is spent on necessities compared to their parents?

"The income compression in rival countries may also make them seem more mobile. Reihan Salam, a writer for The Daily and National Review Online, has calculated that a Danish family can move from the 10th percentile to the 90th percentile with $45,000 of additional earnings, while an American family would need an additional $93,000.[/i]"

This is a point for the Danes. Income compression there has been by lifting up the bottom. More people live comfortably, and there is less disparity. Sure it's a lot easier to climb steps one at a time than to leap 4 or 5 at a time, but that's not an argument that leaping is better in any metric on which you choose to evaluate.

and we have to get a sense of bearing in all this doom and gloom. even with the US's "bad" income inequality and stagnant wages, we're forgetting that we are the 1% in the global economic picture.
http://en.wikipedia.org/wiki/Median_household_income

No one said it is better to live in Eritrea than America. That doesn't mean it's not getting harder to keep your head above water in America. Our position as a nation in the global economic picture doesn't help everyone and doesn't help people equally.

and all this even when our manufacturing industry has supposedly died and gone overseas. but contrary to popular opinion, again, this is not true.

Our manufacturing has gone overseas. The United States is a net exporter of one product. One. And that product is paper. Which is exported to be manufactured into paper goods.
Machinery is neither here nor there. We have switched from an economy that produces wealth through the creation of goods to an economy that produces wealth by the loaning of money. You can see what happens when the loaning of money dries up.

and all this even when our manufacturing industry has supposedly died and gone overseas. but contrary to popular opinion, again, this is not true.

and if the loss of manufacturing jobs due to the evil, heartless machines is now bothering you, do not fret, i'll again refer you back to Hazlitt - CHAPTER 7 The Curse of Machinery (skip to page 33).

i retract this last part. in my defense, i was in a state of sleep deprivation.

Asian Power!

http://en.wikipedia.org/wiki/File:US_real_median_household_income_1967_-_2010.jpg

and, i think this belongs in here too. reply forthcoming (after some caffeine).



medic2038 said:

a lot of these points are just complaints about modern American society and nothing to with failure of capitalism. Capitalism isn't causing inflation, government is causing inflation. Capitalism isn't telling people not to save, it's our consumer culture that's doing it. Capitalism didn't tell people to get into credit card debt, we did that on our own.

I never argued capitalism was causing inflation.
I'm not even arguing that capitalism is failing. What I am saying is that the current model we're using now is unsustainable, and will cause capitalism to fail. When a few people have money, and everyone else is dirt poor capitalism can't function, that's called feudalism.

also, we live in the height of technological luxury. 20 years ago, we spent a lot more money for what we get now (cell phones, TV's, safer cars). we get far more for our money today and i'm just not buying that we're somehow "poorer" than 20 years ago. Capitalism is responsible for this. the technological innovations from competition caused this.

consumer spending doesn't increase an economy. production increases an economy. doing things, creating new business (doesn't have to be manufacturing, we're a service society now), that's what improves an economy. a bunch of people just wanting things and spending money on things they can't afford with money they don't have produces nothing. if people can't afford to buy things now, they shouldn't be buying things. we have to get back to reality. it's really that simple i think. we can't have a boom economy forever.

Most of the items you listed were perhaps luxury goods in a previous era, however today they're basically necessities. I also agree that NEW technology is always expensive.

Consumer spending absolutely does drive the economy. Production only increases when there's a demand for that product (or service). Which I why I argued the tax break falacy. Production is regulated (by a company) to ensure that their products are profitable.


Creating a new business is almost impossible right now in many areas, you need to have money first. As the old saying goes "you need to have money to make money". One of the primary reasons for small business failures is insufficient capital.

To use a service example:
The last ambulance service I worked at was a for profit, private ambulance service. Granted it was terribly mismanaged (friends and family as managers rather then qualified people). There's a VERY high demand in this area for a transport service (SWPA has the 2nd highest elderly population per capita in the US), the company also has VERY lucrative contracts.

However I couldn't start an ambulance service if I wanted to, it's simply financially undoable. To get a small service up and running (3 trucks or so) would take over 500k.

agree with the first point, but these figures are already adjusted for inflation. is the assumption that we should be getting richer as a people ad infinitum? so a million years from now, a person making 15k a year should theoretically be a millionaire? it doesn't follow. but considering technological innovations, it can be argued that even a poor person today in America lives better than a king a thousand years ago.

I never said I wanted everyone to be rich, quite the opposite. However we do have an eroding middle class, and that's due largely to wage stagnation.

Overall quality of life IS going down however. People don't have savings, and are living paycheck to paycheck. To use myself as an example I was part of the working poor for several years. Believe me it's not a very good or healthy life. I also didn't spend myself into that situation, I just couldn't make enough money to get out of it.

Let's suppose for a minute that you don't have any savings (not a stretch for most people), and something breaks on your car. We can even say that the problem is on the cheaper end and the repairs will only cost $1000. Well you need reliable transportation to get to work, so you have a few alternatives.

1) You can use credit to pay for the repairs. However since you don't have anything in savings it's unlikely that you have the disposable income to really pay this off.
2) You can get a different car. If you own your car (and it's worth anything) you might be able to trade it in for something you can get some use out of. However chances are a car of equal value would be old and unreliable as well.
3) You can use public transportation to go to work. While this is cheaper (then a car payment) it's not THAT cheap. I just looked at the cost of a bus pass for my locality, and it's $150/month.

Most people don't go into debt from overspending, they go into debt because they don't have enough money to cover life being life.

Lets use an average single person (30k annual wages, or give or take $15/hr):
30k-(30%)taxes is 21k annual take home.

1BR apartment-450/mo, 5400 annually.
Lets say the only utility you have to pay is electric, and you're on a budget plan of $100/mo. 1200 annually.

Lets say a cheap car payment of $300/mo, 3600 annually.
Cheap insurance 100/mo, 1200 annually.

So just after housing and car payment we're at 11.4k, so already half of the yearly income is spent.

Now lets say you spend 200/mo on food, and 100/mo on gas. That's 3600 annually and we're at 15k.

Lets give us dirt cheap health insurance for 150/mo.
Lets say we bundle our cable/phone/internet for 150/mo. We're not at 18.6k.
We put 100/mo into our 401k. 1200.

If you use a cell phone for work at all, you can't really get away with prepaid. A cheap package is 100/mo, so we're at 21k.

I didn't even factor in that we usually need to buy some new clothes/shoes. Mom and Dad still have birthdays, mothers/fathers day, and Christmas (or whatever holiday). We still have a need to be social, and have friends.

Each of the prices I gave were a total lowball as well, in reality many of those payments are much higher.

So basically you can forget about any kind of savings, or any preparation for an oh shit life moment. Most people aren't going into debt because they spending excessively, they're going into debt because they're not getting an adequate wage!

Simply having 350/mo extra would substantially increase your quality of life. We're only talking about a little over 4k per year. Under my scenario this "average" American has no disposable income at all. This is not a far fetched example at all.


This is a short and simple article.
http://conceptualmath.org/philo/status1.htm

but who cares about % of income? absolute income and the health of the overall economy is more important. but i'll get to this later.

I think most economic historians would disagree. My understanding is that there is a fairly strong correlation between overall economic well-being and the presence of a large middle class. The reason is that the strength of an economy is measured on how productive it is, and the impoverished class tends to be very limited in terms of productivity (only capable of doing very low skill tasks), while the middle class tends to have more education and training to be capable of higher productivity tasks. You could almost call it a 'trickle up' theory -- if a society finds a way for members of the impoverished class to reach the middle class, the economic vibrancy of the entire society will generally improve.

However, income redistribution by itself does not accomplish this. In my view, it is misleading to think about lower and middle class solely according to income levels. If you simply give money or things of monetary value to someone without much money, they will not have developed any new skills and so the transfer adds nothing to society overall. (You can, of course, argue for such transfers in certain cases on a moral basis, but I leave that out of the current discussion.) However, if you are able to teach someone in the impoverished class new skills, then that investment will provide a return to society in the future.

To me, the big problem in the US is not income inequality so much as skill and opportunity inequality. If you go to the very poor parts of the US, be they poor or rural, what you'll observe is that almost everybody receives such a poor upbringing (poor parenting, bad schooling, etc.) that they are locked into poverty from birth. In the past, such poverty could be overcome through hard work at unskilled jobs, especially as organized labor grew in power in the early 1900s and brought about higher wages for such work. Today, employment has a higher educational barrier. I find it hard to believe that are schools are worse today than they were 100 years ago (when a rural elementary school would often be a single room for 25 children ranging from K - 6), but the cost to society of not educating the lower class is much, much greater today. So even though the lower class probably receives more direct subsidies from the government, they are arguably in the worst shape in modern American history simply because they have the smallest available opportunity to escape their dependency on governmental assistance.

well i think actually even thou american is on a decline, china will soon be on a decline which which will bring more manufacturing jobs back to the USA or India. The overall problem with the middle class right now imo is that there is so much efficiency in the market bc of the internet, quantitative trading, and simply lots of cheap information out there about investing, starting a business, ect. Margins at stores get squeezed, leveraging needs to be high to expand rapidly, and there is little room left in the market for someone to have their little family store to make money, their simply investment portfolio that can keep up with inflation at all, their employeers simply making enough money to pay higher wages ect. Bc ineffecit capital gets killed so quickly in the market, its harder for the people who don;t have huge firms doing massive amounts of research to make a nice return. at least my 2 cents.

his major thesis is that the recent rise of income inequality in the US was the cause of our current failure of capitalism and the impending doom of the middle class.

I haven't watched the film, but will instead go off of this succinct apercu.

I've rarely - as in hardly ever, seen an accurate reasoning as to why the middle class has and will continue to abate... or to use a poker term, merge into the bottom of the socio-economic strata. Even as middle class living standards have gone way up over the last 30 years, the polarization of classes is becoming more pronounced.

Perhaps the biggest culprit of them all is due to fractional reserve lending. There are other forces at play in addition to this one, but IMO you will never solve the issue without abolishing FRL. I do realize this is a more unpopular opinion and stance...
This problem isn't that far removed from the medical care problem either. Leverage in the form of cost shifting has enabled the medical industry to become bloated in several ways just as student loans that cannot be discharged have enabled the cost of higher education to skyrocket.
Similar forces bleed out the middle class and prevent it, on the whole, from acquiring capital on the cost side. Most of the comments about the middle class focus on the income side.

Well, I don't care how awesome you are at value betting if you hemorrhage the chips due to calling off light and general spew and do this continually. In other words, income doesn't matter if an adequate structure isn't in place. Ironically, one of the reasons - actually, THE biggest reason why middle class standard of living has gone up so much is somewhat related to the stagnation of middle class income - international trade; both outsourcing and in-sourcing are factors (but not the only ones). The importation of cheap goods, the shell games in the monetary system, etc have enabled much of it... and this will work well until it doesn't.

There are other social factors at play, and of course other economic factors at play... but IMO, I almost never read about perhaps the biggest factor at play: debt and debt instruments - and mark my words, these two things WILL (as in 100%) bring about collapse in the USA at some point.

America's economy is being drained by the over bloated military wasteful spending and the whole economy is rigged with fiat currency that has no intrinsic value so will inevitably collapse, the money is backed by debt, not by value. How can a country be solvent financially when it is essentially running off of play money?

America's economy is being drained by the over bloated military wasteful spending and the whole economy is rigged with fiat currency that has no intrinsic value so will inevitably collapse, the money is backed by debt, not by value. How can a country be solvent financially when it is essentially running off of play money?

The country hasn't been solvent for years. And basically any idiot knows you can't give a tax break while in 2 wars at the same time....

Stu, without FRB(fractional reserve banking) though most of the middle class would never be able to obtain anything. It's because of FRB that we can get home loans and car loans. Now I'm not a huge fan of it, but I do think it does somewhat stimulate the economy.

Here's a pretty interesting (albeit long) video series:
http://www.peakprosperity.com/crashcourse

I think TJ said it best:
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

wow, what did i just do? this feels like work now.

i'll try to go through all the responses in time, but i'm realizing that i'm in way over my head. i was just hoping to talk about the movie lol.

one point tho. i feel median income really doesn't tell the whole story. we should know the % of the population clustered around the median. maybe there's a statistics term for this, i forget. wouldn't that tell us how many people are actually in the middle class?

and also, even tho people are bringing up costs, that alone doesn't tell us much unless we compare it to the past or to other industrialized nations. just asserting that "it's bad" without a base reference doesn't help much imo. maybe healthcare alone is doing it, but oddly even after 12 pages of the Obamacare thread, nobody's mentioned useful $ amounts per person since the system's so fragmented.

and i'm in the defense here. am i supposed to make the case for you guys and pull up all the relevant stats?

anyway, debate on!

The country hasn't been solvent for years. And basically any idiot knows you can't give a tax break while in 2 wars at the same time....

Stu, without FRB(fractional reserve banking) though most of the middle class would never be able to obtain anything. It's because of FRB that we can get home loans and car loans. Now I'm not a huge fan of it, but I do think it does somewhat stimulate the economy.

Here's a pretty interesting (albeit long) video series:
http://www.peakprosperity.com/crashcourse

I think TJ said it best:
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

While the first part of your post is true IMO, the TJ quote is probably something Stueyskid would agree with.
We definitely use FRL to create wealth in this country. If we got rid of that, but also never added production of goods and services, then no wealth would be created here.

UU!I.I.4AAUU35 wrote:
the whole economy is rigged with fiat currency that has no intrinsic value

There is no such thing as a currency with intrinsic value. Everything that has a value has that value placed upon it by people (in terms of it being used by people as a basis for exchange).

and also, even tho people are bringing up costs, that alone doesn't tell us much unless we compare it to the past or to other industrialized nations. just asserting that "it's bad" without a base reference doesn't help much imo. maybe healthcare alone is doing it, but oddly even after 12 pages of the Obamacare thread, nobody's mentioned useful $ amounts per person since the system's so fragmented.

I disagree. Things can be empirically bad. If you do an analysis of what a typical middle class family spends on, you can assign values to the things they buy and thereby determine if they are able to dispose income on items considered luxury or frivolous. The more of those they buy, the better off they are economically.

bad thread title. [that's what i get for creating threads at 4 in the morning...] something like "Income decline in America" would have been better i think.

so i'm gonna pull a Scumbag Steve and only reply to the easy stuff.

Are you saying that each poor person has more money than they did before or that Americans as a group are richer? What about how much of each person's income must be spent on things we consider necessities?

yes, the data supports the fact that Americans as a group, the Median household income, has risen over time (tho i'm still at odds to understand how long this can go on, in my mind, there has to be some level of stable median income).

i haven't gotten to costs yet.

In what way was family size accounted for? Family size has been shrinking as well. Also, again what percentage of income now is spent on necessities compared to their parents?

i would assume 2 parent homes from a generation ago were compared to 2 parent homes today and 1 parent homes from a generation ago were compared to 1 parent homes today.

This is a point for the Danes. Income compression there has been by lifting up the bottom. More people live comfortably, and there is less disparity. Sure it's a lot easier to climb steps one at a time than to leap 4 or 5 at a time, but that's not an argument that leaping is better in any metric on which you choose to evaluate.

lifting up the bottom and cutting off the top i'd say, lowering the incentives for everybody where little effort is rewarded while great effort is not.

don't see what you're getting at with the leaping vs climbing analogy. the fact is, the incomes are compressed in Denmark so that low skilled workers are overpaid and high skilled workers are underpaid. this is the road to equality of outcomes as warned of in Vonnegut's Harrison Bergeron.

Asian Power!

http://en.wikipedia.org/wiki/File:US_real_median_household_income_1967_-_2010.jpg

+1

well i think actually even thou american is on a decline, china will soon be on a decline which which will bring more manufacturing jobs back to the USA or India.

but those jobs are overseas since they pay the workers worse than American minimum wage (i'm assuming). people in America wouldn't want those jobs back, and we'd only be hurting ourselves trying to do things more costly here because it would have to be subsidized by the govt in order to be globally competitive.

I disagree. Things can be empirically bad. If you do an analysis of what a typical middle class family spends on, you can assign values to the things they buy and thereby determine if they are able to dispose income on items considered luxury or frivolous. The more of those they buy, the better off they are economically.

that's called an opinion. i can say it's bad that i only have $20 a week of discretionary income. but if we find that in 1975, a theoretical duplicate of my 2012 self still had $20 a week in discretionary income, nothing's changed and we have to conclude life just sucks, and it's not about America getting worse.

Ok, I'll admit I didn't read every response in here and I've no formal education in economics, so if I'm asking a foolish question or something that's already been addressed, I apologize.

From what I'm reading above with people talking about ever-increasing wages and the size/value of a middle class, aren't we really talking about a consumer's buying power? If wages increase at the same rate as inflation, the average person isn't really 'making more' when it comes to buying power - that is, the ability to purchase more with the same amount of money.

When people talk about the 'middle class' it seems like people are talking about the group of people that are able to buy 'X'. Usually, X is defined as a nice house, a car, plenty of food, enough to raise kids/send them to college, and some left over for frivolities. If you can't afford to buy all of X, you're in a lower class. If you can afford lots more than X, you're upper class. This is why, at least when I look at it, people who make $100k in NYC can be just scraping by and wouldn't consider themselves middle class, but if you made that much money where I live in WV you'd easily be upper-middle class or more (there aren't a lot of genuine upper class - super rich - people in my area).

So when we're talking about wage stagnation, does the raw dollar value really matter? It seems like it's just a veil and a way to obscure the discussion over buying power.