Economists say income gap hurts U.S. economy

[Ken-1122]

A poor person may pay rent to a landlord who in turn buys stuff. It doesn't just end with a bill.

I am not denying that government money doesn't get into the system, I'm just saying the Government isn't directly providing money to buy products.

Ken

 

[A2SG]

Exactly! He created wealth!

Out of the money other people gave him.

The Bureau of Engraving and Printing didn't print money and just hand it to him when he decided to raise his prices.

I never said they did!

Uh, yeah, that basically is what you've been saying:

I've explained it over and over to you and you still aren't getting it are you; Wealth is infinite! It is created out of ideas aka thin air. When wealth is created from thin air as you call it, money is printed in San Francisco to account for the wealth that has been created out of thin air.

The Bureau of Engraving and Printing will NOT print money for wealth created "out of thin air."

I've explained this before, but I will explain it again.:
If I go out and buy a plot of land with trees on it for say.....$50,000.00 then I cut down all the trees and use the trees to build a house, and an apraiser appraises the land to be worth $150,000.00 I have generated $100,000.00 worth of wealth out of thin air (as you call it) even if I don't sell it. In San Francisco where money is minted, they will print up an additional $100,000.00 to make up for the wealth I've generated (and a bunch of money for all the wealth others have generated)

The Bureau of Engraving and Printing will NOT print $100,000 because you developed land valued at that amount.

You misunderstand how the Bureau of Engraving and Printing works. (Also where they print the money, but that's really beside the point.)

I said it was worth the same, I never said it IS the same.

It may be worth the same amount for a brief period of time, but that doesn't mean it has the same value.

Not just them, they say most start-ups goes out of business within the first 2 years.

Exactly. Improvements don't equal increased market value; whether or nor people are willing to pay more does. And the reason why they're willing to pay more may not be in the seller's control.

True! My point is; the market GROWS! The rich become richer, not by taking from the poor, but by making the market grow then they get the lion's share of that growth.

They don't only take from the poor, but they do take from others. The poor just see less gain from that growth than anyone else.

But economic growth does not mean the Bureau of Engraving and Printing simply prints more money. It means money has changed hands more. Growth means more movement of cash, not just more cash.

-- A2SG, we've already addressed what would happen if the Bureau of Engraving and Printing just printed more cash....

 

[Viren]

I am not denying that government money doesn't get into the system, I'm just saying the Government isn't directly providing money to buy products.

Ken

True, but the effect is the same.

 

[Ken-1122]

Out of the money other people gave him.

Yes! If you can figure out a way of getting people to give you their hard earned money, you are creating wealth.

Uh, yeah, that basically is what you've been saying:
The Bureau of Engraving and Printing will NOT print money for wealth created "out of thin air."

The Bureau of Engraving and Printing will NOT print $100,000 because you developed land valued at that amount.

Of course they don't print money for each individual who creates wealth; I said they print to account for the wealth created.
Lemme put it this way; Do you agree they are constantly putting more and more money in circulation? That they print more money than what is destroyed? Why do they do this? If the economy were not growing, but more money were put into the system, wouldn't that devalue the dollar? So why are they printing more money than they destroy?

It may be worth the same amount for a brief period of time, but that doesn't mean it has the same value.

How are you defining the difference between value and worth? We seem to be talking past each other so I want to understand where you are coming from.

Exactly. Improvements don't equal increased market value; whether or nor people are willing to pay more does. And the reason why they're willing to pay more may not be in the seller's control.

Can you give an example where an improvement does not equal increased market value?

They don't only take from the poor, but they do take from others. The poor just see less gain from that growth than anyone else.

Do all rich people take from others? Or just some; do you have any names? How do they do this without getting caught or arrested?

Growth means more movement of cash, not just more cash.

Growth does not equal movement of cash. Growth is when a profit is made; granted wealth has to move in order to make a profit but If you don't make a profit, you are just shifting the same dollar from one person to the next.

Ken

 

[A2SG]

Yes! If you can figure out a way of getting people to give you their hard earned money, you are creating wealth.

Yup, that's how it works. On the other hand, the Bureau of Engraving and Printing does not print money based on assessments of value. When wealth is created, it comes from somewhere else. And when wealth is concentrated in one particular segment of the population in such a way as it has become concentrated, it causes problems for the economy. Just like it did in the Gilded Age and in the late 20s.

Of course they don't print money for each individual who creates wealth; I said they print to account for the wealth created.

And you're still wrong. When you create wealth, you get that money from other people, not from the Bureau of Engraving and Printing.

Lemme put it this way; Do you agree they are constantly putting more and more money in circulation?

Not the way you envision it. The Bureau of Engraving and Printing is constantly replacing destroyed money, and yes, they do add to the supply, but there's a process to regulating the monetary supply:

The Fed expands the money supply through a couple of methods. For simplicity, let's consider "security purchasing." When the Fed wants to expand the money supply, it buys a security -- let's call it Asset A -- from a bank. Then it electronically transfers money to that bank. There is now additional money in the financial system that the bank can use to provide loans.

The nice part about being the Fed is that it doesn't actually need to mail a box of dollar bills to pay for these securities. Instead, it creates a "reserve balance" liability on its balance sheet. The transaction is completely electronic. No hard currency changes hands.

Then, when the Fed is ready to reduce monetary supply, it sells Asset A. This puts the security back into the financial market and reduces money in the system, again electronically. ​

That they print more money than what is destroyed? Why do they do this? If the economy were not growing, but more money were put into the system, wouldn't that devalue the dollar? So why are they printing more money than they destroy?

When the economy grows, the Bureau of Engraving and Printing (and the Mint) print (or coin) more than they destroy according to the rate of growth. Not according to assessments of property values.

How are you defining the difference between value and worth? We seem to be talking past each other so I want to understand where you are coming from.

In the example of cash versus stock certificates, "worth" is the specific dollar amount each represents; "value" is how that worth can be transacted. A dollar bill is legal tender and can be freely traded for goods or services; a stock certificate is not. It can be sold for whatever its worth at any given time into legal tender, but it doesn't have value AS legal tender until then.

Can you give an example where an improvement does not equal increased market value?

I did already: New Coke.

Another example would be a friend of mine who did some work on his house, enlarging his living room. In the process, he wound up losing a downstairs bathroom; he didn't care, but when he tried to sell the house, he got less for it than he would have before the "improvement" because it now only had one bathroom.

Do all rich people take from others?

Everyone who makes money takes it from someone. Most of the time, entirely willingly.

Or just some; do you have any names? How do they do this without getting caught or arrested?

Everyone who earns a dollar takes it from someone else...in the case of wages, from your boss, in the case of a business, from your customers.

Growth does not equal movement of cash.

Mostly, it kinda does. More movement means more economic activity, which generally translates to economic growth. Granted, there is always movement to some degree, and that doesn't always translate to economic growth, but you can't have economic growth if money doesn't move around.

Growth is when a profit is made; granted wealth has to move in order to make a profit but If you don't make a profit, you are just shifting the same dollar from one person to the next.

That's what you do when you DO make a profit. If you get more money from other people than you give to other people yourself, you're making a profit.

Problem is, when only the very rich benefit from that, it's bad for the economy; when more people participate in the movement of money in the system, then it's better all around.

Yes, when an economy grows, that does mean more cash is out there in the system, but it's not a one to one transaction, with cash printed based on assessed value of property as you suggest. It's a bit more complicated than that, with the Federal Reserve controlling and regulating the monetary supply in various ways.

How The Federal Reserve System Really Works [Infographic] | Daily Infographic

-- A2SG, hopefully that will help explain things a bit better....

 

[Viren]

If the economy were not growing, but more money were put into the system, wouldn't that devalue the dollar?

Yes.
value of the dollar over time graph - Bing Images

 

[catholichomeschooler]

True, but the effect is the same.

No it isn't, because government only gets money by forcibly taking it from the person who earned it.

 

[Viren]

No it isn't, because government only gets money by forcibly taking it from the person who earned it.

We were talking about what happens to the money the government spends after it gets into the economy.

 

[Ken-1122]

Yup, that's how it works. On the other hand, the Bureau of Engraving and Printing does not print money based on assessments of value.

I didn't mean that. You misunderstood me. I was trying to make the point that the economy is constantly growing and extra currency is put into circulation because of the growth in the economy. I was trying to give an example of how a person can cause the economy to grow, and how that person is an example of why more money is printed and put into the economc system.

When wealth is created, it comes from somewhere else.

Depends on how the wealth is created.

And when wealth is concentrated in one particular segment of the population in such a way as it has become concentrated, it causes problems for the economy. Just like it did in the Gilded Age and in the late 20s.

The reason the wealth is conentrated in one particular segment of the population that way is because that one particular segment of the population is creating the wealth. Do you think things would be better if they didn't create any wealth at all?

And you're still wrong. When you create wealth, you get that money from other people, not from the Bureau of Engraving and Printing.

First of all, not all wealth is money. The richest have very little money; but they have a lot of wealth.
Second of all, where do those "other people" get that money from? It all comes from the B of E&P.

When the economy grows, the Bureau of Engraving and Printing (and the Mint) print (or coin) more than they destroy according to the rate of growth. Not according to assessments of property values.

Property Values is just one example of how the economy can grow; which is the example I used. Of course there are other ways the economy grows!

I did already: New Coke.

Another example would be a friend of mine who did some work on his house, enlarging his living room. In the process, he wound up losing a downstairs bathroom; he didn't care, but when he tried to sell the house, he got less for it than he would have before the "improvement" because it now only had one bathroom.

Those are not examples of improvements, they are examples of attempted improvements which turned out to be mistakes.

Everyone who makes money takes it from someone. Most of the time, entirely willingly.

Everyone who earns a dollar takes it from someone else...in the case of wages, from your boss, in the case of a business, from your customers.

That is not taking money, that's earning money and purchasing products with money; big difference.

Mostly, it kinda does. More movement means more economic activity, which generally translates to economic growth. Granted, there is always movement to some degree, and that doesn't always translate to economic growth, but you can't have economic growth if money doesn't move around.

Then explain how moving money around without any profit can cause the economy to grow.

Ken

 

[Ken-1122]

Yes.
value of the dollar over time graph - Bing Images

Are you suggesting the economy has not grown in over 100 years?

Ken

 

[A2SG]

I didn't mean that. You misunderstood me. I was trying to make the point that the economy is constantly growing and extra currency is put into circulation because of the growth in the economy. I was trying to give an example of how a person can cause the economy to grow, and how that person is an example of why more money is printed and put into the economc system.

Unfortunately, your example was completely wrong and didn't explain how currency is added to the economy. The Federal Reserve adds currency equal to the general rate of growth for the overall economy, not based on any specific or individual assessment of value.

Depends on how the wealth is created.

Not really. Wealth is created in two ways: more money or increased value of an asset or property. The former comes from other people; the latter is wealth that exists nowhere but on paper until someone agrees to pay that amount, or some other amount for that asset or property.

The only other way to increase your wealth without taking money from someone else is to counterfeit it.

The reason the wealth is conentrated in one particular segment of the population that way is because that one particular segment of the population is creating the wealth.

No, it's because of what they choose to do with that wealth. Instead of creating more jobs or paying better wages, the rich are keeping a greater proportion of their wealth, or distributing it only amongst themselves (ie paying high bonuses to already highly paid CEOs instead of company-wide raises for everyone). While this is, certainly, well within their rights to do so...it doesn't aid the economy or create economic growth. It only adds to the problem of income inequality.

Do you think things would be better if they didn't create any wealth at all?

Of course not. Why would you think I would?

First of all, not all wealth is money. The richest have very little money; but they have a lot of wealth.

Yup. But they used money to purchase assets or properties that may have increased in value.

Second of all, where do those "other people" get that money from? It all comes from the B of E&P.

People don't go the the Bureau of Engraving and Printing to pick up some cash for the day, you know. People get their money from wherever they derive their income: an employer, a company they own, etc. It's all a cycle, money comes in and it goes out. Kinda like the tide, if you listen to Bill O'Reilly.

Property Values is just one example of how the economy can grow; which is the example I used. Of course there are other ways the economy grows!

Sure. But when you used property value as an example of how the economy grows, your example was completely erroneous.

Those are not examples of improvements, they are examples of attempted improvements which turned out to be mistakes.

All improvements are attempted improvements...you only find out if it worked after the fact. Granted, some attempts are better or more informed than others.

That is not taking money, that's earning money and purchasing products with money; big difference.

Not really. If you earn money, you take it from someone. Granted, you take what is willingly given, but the point is you get it from someone else. It doesn't just appear out of thin air. The Bureau of Engraving and Printing doesn't swing by and hand it to you.

Then explain how moving money around without any profit can cause the economy to grow.

It doesn't. But you can't make a profit without moving money around.

Movement is the key. You can't have growth, or make a profit, without economic activity, and that means movement of money around.

-- A2SG, hearing Raymond Scott's "Powerhouse" in my head right now....

Raymond Scott - Powerhouse [mp3] - YouTube

 

[Viren]

Are you suggesting the economy has not grown in over 100 years?

Ken

No, I'm suggesting that more money is printed than wealth created.

 

[Ken-1122]

Not really. Wealth is created in two ways: more money or increased value of an asset or property. The former comes from other people; the latter is wealth that exists nowhere but on paper until someone agrees to pay that amount, or some other amount for that asset or property.

The only other way to increase your wealth without taking money from someone else is to counterfeit it.

As I said before, the super rich have very little money; what they have is wealth; on paper as you call it. That wealth is not being taken from the poor or middle class because they have very little wealth, what little bit they have is in currency

No, it's because of what they choose to do with that wealth. Instead of creating more jobs or paying better wages, the rich are keeping a greater proportion of their wealth, or distributing it only amongst themselves

Not quite. They reinvest the money in the company and give it to the shareholders. Now because the very rich have the majority of the shares, it is equal to keeping more of it for themselves; which is good for the company, not necessarily for the worker. But anyone can become a shareholder

Of course not. Why would you think I would?

Because I suspect that is what would happen if they were forced to pay the workers more than they want to. If they were not allowed to control their wealth as they choose, they would lose motivation to create wealth.

Yup. But they used money to purchase assets or properties that may have increased in value.

Do you really believe when one company buys out another, someone comes into an office with a billion dollars worth of $100 bills?

People don't go the the Bureau of Engraving and Printing to pick up some cash for the day, you know. People get their money from wherever they derive their income: an employer, a company they own, etc. It's all a cycle, money comes in and it goes out. Kinda like the tide, if you listen to Bill O'Reilly.

And where does the employer get it from? Where does the bank get if from? It all comes from the Bureau of Engraving and printing

Sure. But when you used property value as an example of how the economy grows, your example was completely erroneous.

Why was it erroneous? It IS an example of how the economy grows. When property grows in value; weather it is a business, farm, whatever; it grows the economy

All improvements are attempted improvements...you only find out if it worked after the fact. Granted, some attempts are better or more informed than others.

I asked for an example of an improvement that did not result in increased value; not an attempt at improvement.

Not really. If you earn money, you take it from someone. Granted, you take what is willingly given, but the point is you get it from someone else. It doesn't just appear out of thin air. The Bureau of Engraving and Printing doesn't swing by and hand it to you.

There is a difference between earning money and taking money. There is a difference between buying property and taking property

Ken

 

[Ken-1122]

No, I'm suggesting that more money is printed than wealth created.

Nobody is disputing that; and it doesnt disprove my claim.

Ken

 

[A2SG]

As I said before, the super rich have very little money; what they have is wealth; on paper as you call it. That wealth is not being taken from the poor or middle class because they have very little wealth, what little bit they have is in currency

But that's where they got that wealth from in the first place! Other people, to be precise (probably from many different economic classes, depending on the product or service offered). The rich get rich by creating companies that sold a product or service that other people paid for. From there, investments and assets added to their wealth, but it originally came from somewhere: customers.

In a robust, strong economy, much of that wealth is put back into the system, building companies that create jobs and pay wages. When that happens less, their wealth stays where it is, and it doesn't aid the economy.

This is what's been happening. Again, corporate profits are at record levels, but jobs and wages are not.

Not quite. They reinvest the money in the company and give it to the shareholders.

Not their workers. Which means the wealth continues to concentrate at the top, not with more people who could use it to buy more things and use more services.

That would make for a stronger, more robust economy.

Now because the very rich have the majority of the shares, it is equal to keeping more of it for themselves; which is good for the company, not necessarily for the worker. But anyone can become a shareholder.

Theoretically, sure. In actual reality, not so much.

Because I suspect that is what would happen if they were forced to pay the workers more than they want to. If they were not allowed to control their wealth as they choose, they would lose motivation to create wealth.

And do what? Sit on their money and not invest it?

That's where we're at NOW!

See, we've had thirty years or so of an economic policy that basically said "throw more money at rich folks, they'll trickle it down for everyone!" Guess what, that didn't work.

So, time for a new idea. Like ones that worked in the past, and did help create a stronger, more robust economy.

Do you really believe when one company buys out another, someone comes into an office with a billion dollars worth of $100 bills?

Nah, they probably write a check.

Same thing, just less paper.

And where does the employer get it from? Where does the bank get if from? It all comes from the Bureau of Engraving and printing.

The employer gets it from his customers, the bank gets it from those it lends money to when they repay their loans (and from other investments).

The Bureau of Engraving and Printing does not just hand out cash.

Why was it erroneous? It IS an example of how the economy grows. When property grows in value; weather it is a business, farm, whatever; it grows the economy.

But the Bureau of Engraving and Printing does not print money equal to that amount. Someone pays for that property when its sold (maybe at the assessed value if a buyer is willing to pay that amount), someone buys that business' product or service, or that farm's crops.

Economic growth occurs when there is enough economic activity to increase the market value of those properties, goods and services, and people are able to pay more for them.

I asked for an example of an improvement that did not result in increased value; not an attempt at improvement.

And I offered a couple of examples of exactly that.

All improvements are attempts; some pay off, but some don't. If you're smart and well informed about the improvements you attempt, you're probably going to be more likely to see increased value, but you never know for sure until someone agrees to pay more because of that improvement.

There is a difference between earning money and taking money.

Only if the person you're taking it from doesn't give it to you willingly. Otherwise, it's the same thing. You take money that is given to you willingly by an employer or customer.

There is a difference between buying property and taking property

The only difference is the willingness to sell it.

-- A2SG, "take" and "steal" are not synonyms....

 

[Ken-1122]

But that's where they got that wealth from in the first place! Other people, to be precise (probably from many different economic classes, depending on the product or service offered). The rich get rich by creating companies that sold a product or service that other people paid for. From there, investments and assets added to their wealth, but it originally came from somewhere: customers.

So they get if from the customers and the customers get if from those they work for; the rich? So how did it the money into this circle in the first place?

In a robust, strong economy, much of that wealth is put back into the system, building companies that create jobs and pay wages. When that happens less, their wealth stays where it is, and it doesn't aid the economy.

But the money is put back into the system, building companies, creating jobs. That is what happens when they invest their money.

Not their workers. Which means the wealth continues to concentrate at the top, not with more people who could use it to buy more things and use more services.

That would make for a stronger, more robust economy

That’s up for debate. The shareholders use the money to invest in the company to make it bigger and more profitable[/font]

And do what? Sit on their money and not invest it?

That's where we're at NOW!

Name 1 billionaire who does this.

Nah, they probably write a check.

Same thing, just less paper.

But a check is just paper until it is cashed! Right???

The Bureau of Engraving and Printing does not just hand out cash.

Nobody said they did.

Economic growth occurs when there is enough economic activity to increase the market value of those properties, goods and services, and people are able to pay more for them.

There are always people who are able to pay more for them; the trick is to convince them to pay more; and in order to do that they must increase the value of the property.

-- A2SG, "take" and "steal" are not synonyms....

The way you phrased it, they appeared the same.

K

 

[A2SG]

So they get if from the customers and the customers get if from those they work for; the rich? So how did it the money into this circle in the first place?

Um, when humans stopped just bartering stuff and started to use something that represented a specific value. A long time ago, as even ancient Egypt and ancient China used coins.

But the money is put back into the system, building companies, creating jobs. That is what happens when they invest their money.

Yup. But, since they haven't been investing all that much of their wealth, but rather keeping most of it or distributing it mostly among themselves (ie paying rich CEOs very large bonuses instead of giving other employees raises), the job rate is still low and wages are still going down.

This is why income inequality becomes a problem when the gap is as high as it has become.

That’s up for debate. The shareholders use the money to invest in the company to make it bigger and more profitable

But if that profit is taken out of the company and kept by the rich, instead of being used to pay workers better wages, the economy stagnates as a result.

Which is exactly what's been happening.

Name 1 billionaire who does this.

I don't know that many billionaires personally to know that much about their financial holdings.

But, since the gap between rich and poor has increased exponentially over he past couple of decades, enough that the top 1% now control 42% of the wealth in the US (39% worldwide), it's clear that the richest Americans aren't investing nearly as much of their wealth as the economy needs them to.

But a check is just paper until it is cashed! Right???

Right.

But, see, unlike a stock certificate, a check represents a specific, set amount and can be exchanged for legal tender.

Nobody said they did.

Based on some things you've said, I wondered if you thought that was the case.

Glad to know you do not.

There are always people who are able to pay more for them; the trick is to convince them to pay more; and in order to do that they must increase the value of the property.

That's only half of the picture; if people had more money, they could spend more...but if they don't, then they can't, no matter whether or not the improvement makes the product a better value.

The way you phrased it, they appeared the same.

I don't see how it could appear that way, since I specified that that the money taken was given willingly.

Everyone who makes money takes it from someone. Most of the time, entirely willingly.

Everyone who earns a dollar takes it from someone else...in the case of wages, from your boss, in the case of a business, from your customers.

I apologize if that wasn't clear before. Hopefully, the bolded emphasis will help clarify things.

-- A2SG, we aim to please....

 

[Ken-1122]

But if that profit is taken out of the company and kept by the rich, instead of being used to pay workers better wages, the economy stagnates as a result.

Which is exactly what's been happening.

Are you suggesting those who run the companies are extracting money out of the company to keep for themselves?

I don't know that many billionaires personally to know that much about their financial holdings.

If you did, you would know they do not sit on top of all their money and allow it to be eaten up by inflation.

Right.

But, see, unlike a stock certificate, a check represents a specific, set amount and can be exchanged for legal tender.

The same for a stock certificate; the only difference the stock certificate fluxuates in price and rarely gets eaten up by inflation.

That's only half of the picture; if people had more money, they could spend more...but if they don't, then they can't, no matter whether or not the improvement makes the product a better value.

That would only be true if everybody were poor. There is always a market for your products, even if your market caters to the super rich.


Ken

 

[Viren]

That would only be true if everybody were poor. There is always a market for your products, even if your market caters to the super rich.
Ken

So now the "job creators" must also be the consumers.

 

[A2SG]

Are you suggesting those who run the companies are extracting money out of the company to keep for themselves?

Of course they are! It's called a salary!

But, beyond that, it's been well established that corporate profits are up, up, UP! Where are these profits going? Sure, some go to CEOs in the form of large bonuses, but where are the rest of them going? Not to taxes, and not toward paying all their employees a better wage.

Where is it going?

If you did, you would know they do not sit on top of all their money and allow it to be eaten up by inflation.

So tell me where it's going, then. We already know it's not going toward taxes, nor is it going toward better wages for working stiffs. And precious little of it is going toward creating jobs, as the job rate is still stagnating.

The same for a stock certificate; the only difference the stock certificate fluxuates in price and rarely gets eaten up by inflation.

Nope. A stock certificate can be sold if someone is interested in buying it; but a check represents a fixed amount of legal tender, payable upon demand. There is no sale involved.

That would only be true if everybody were poor. There is always a market for your products, even if your market caters to the super rich.

How many companies went out of business during the Great Depression because people couldn't afford to buy their products?

-- A2SG, 20,000 businesses went bankrupt, and over 1600 banks...