The Stats of the Union

The Stats of the Union

What follows is a set of charts and diagrams to explain what is wrong with the US economy:

Chart of Inflation 1800-2005

Chart of Consumer Price Index, 1800-2005

(Source: http://www.economics-charts.com/cpi/cpi-1800-2005.html)

What is inflation?

Inflation is a tax on holders of cash (all of us).  Imagine that dollars weren’t dollars anymore but shares in your country – and your country was a corporation.  Suppose that your country/corporation was worth $100 dollars.  Your country’s worth is called the Gross Domestic Product.  Suppose have 1 share of 100 shares available… you have $1 worth of the value of your country. 

Now suppose your country wants to fund a war as they are often apt to do.  The governement doesn’t want to raise taxes to fund the war because that would cause a revolt.  So instead the government ‘inflates’ the money supply and prints 200 dollars/shares.  They buy all the tanks and weapons they need to liberate oil from sand.

But what happened to the $1 in your pocket?  Recall that it was worth $1 dollar, but since the government doubled the money supply, it says $1 but it’s now only worth 50 cents. 

What happened in 1913?

Note the spike near 1913… this corresponds with the creation of the Federal Reserve.  The Federal Reserve is a non-federal private banking cartel which allows the US government to inflate the money at will to the benefit of the government and bankers and to the detriment of all money holders (the rest of us).

Income Inequality

   

(source: http://lanekenworthy.net/2008/03/09/the-best-inequality-graph/)

What do these pictures mean? 

They mean that the top 1% or the top 5% are holding more and more of the total amount of money in the economy?  In short it says that the rich are getting rich are getting richer.  It doesn’t directly say that the poor are getting poorer… it says that the poor’s income are remaining largely flat.  If you factor in inflation… making around the same amount money in a climate where inflation is rampant… then yes… the poor are getting poorer.

The American Drown

(source: http://www.good.is/post/americans-are-horribly-misinformed-about-who-has-money/)

This is a graph of the actual wealth distribution vs. the perceived distribution.  The first line shows the actual distribution.  The next group of lines shows the perceived distribution for various demographics.  The final group of lines shows what those same demographics think the wealth distribution ought to be.

The American dream holds that anyone can make it anytime.  That’s why we all work long hours working our way to our place in the white picket fenced sunny backyard.  Regrettably these pictures show the opposite.  Unless your income is in the top 5% or so, you’re likely not to see increases in your income… you’re likely NOT to ‘make it’. 

Avarice – In 3D

(source: http://www.forbes.com/forbes/2009/1019/forbes-400-rich-list-09-richest-people-by-industry.html)

Forbes’ list of the top 400 wealthiest Americans broken down by industry.  Note the finance industry represents a near quarter of the entries.  The banking sector benefits from inflation in that it has a special relationship with the government which allows it to collect interest on inflated funds.  Remember when the government bought $100 dollars worth of tanks with printed money?  Well the tank manufacturer placed those funds in their bank.  The bank is allowed under federal law to loan out $9 on every dollar in reserve.  So the bank can loan out $900 dollars to saps like you and I who pay them interest on this fake money.  Nice work if you can get it.

Death and Taxes

Death and taxes are inevitable, if you’re poor.

(source: http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#cite_note-22)

Here is a graph of the top bracket tax rate.  Note, at no time did anyone ever pay 90% tax.  90% was the tax rate of the highest bracket.  Meaning people who made exorbitant amounts of money paid 90% tax on some of their earnings. 

This means that someone in 2010 who makes $400,000 will pay same tax rates as someone who makes $4 million, or $4 billion.  What’s wrong with that?  Well the problem is that someone making $4million is much better able to shoulder a heavier tax burden.  By eliminating heavier taxes on the top percentiles, the government is forced to increase taxes on the lower percentiles to compensate. 

What is a trickle down economy?

A trickle down economy holds that by pandering to the rich, the rich spend money, create, innovate and create more jobs.  Thus measures like reducing the income tax on the upper percentiles would seem to be effective.  Were that true we wouldn’t be seeing income disparity running as rampant as it is. 

In a final picture, it is a trickle down economy, only this is the trickle:

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