Mar 31 2007
Income Disparity: The Trough and Spigot Ignored
Income Disparity: The Trough and Spigot Ignored
In a tradition that is as regular as Tax Day (only more frequent), the New York Times is again updating us on the vast discrepancy in income between the top wage earners and most U.S. taxpayers. The slant of most such articles is one to suggest remedy is required, with the implication that the redistributionistas ought to help level the playing field in order to make things more “fair” — whatever that’s supposed to mean.
Many regular readers might expect our publication to defend the free market and the rights of individuals to keep what they’ve duly earn. After all, most wage earners do not find themselves among the top 1% earning more than $348,000 by collecting welfare checks or blaming society for their problems. Most are providing something of value in exchange for what they earn. The demand for what it is they offer — a unique talent, service or product, is what gets them their wage, after all. Right?
Well, that’s the idea — at least with free market capitalism.
However, assertions that the U.S. is a system of free market capitalism is a MYTH. Today it more closely resembles what should be called a neo-fascist state.
Gasp! Did you just read the word “Fascist” being used to describe the U.S.? Indeed you did, but not in the context often used by radicals mislabeled as “anarchists” (who are really Marxists) who protest world trade meetings.
Fascism is an often mis-used term in the United States. Its true meaning is closely tied to Corporatism or Mercantilism, where the Government is in cahoots with businesses and trade groups capable of buying access to legislation that provides them benefits of both regulation and big money.
With that in mind, I’m tired of the crass envy-card being pulled out repeatedly in discussing the income gap. Rather, I’d like to see a study done that breaks down, by group, who is making this money. That’s because many, without question, are doing so not via the consensual free market even if many actually believe they are.
Two areas worth looking into are those closest to the massive increase in money supply over the last several decades. M3 has increased by over five times since 1980 — an astronomical increase even when not considering that we suspect the Fed retired it given it both understated real credit growth in the U.S. banking system and was making it obvious that the Fed lacked the ability to truly control it. Note, while the Fed talked tough on inflation and raised short term rates 17 consecutive times since 2004 before stopping in June 2006, M3 grew at a pace of 8% or greater. When the Fed discontinued publishing M3 in March of 2006, private services continued to track its growth, which recently continues at 11%.
Now, with all that freshly minted-from-thin-air money funneling out from the spigots in the banking system, is it any coincidence that those ponied up to the spigots — those at Wall Street big investment banking firms or running billion dollar hedge funds using leverage — had record bonuses and profits in 2006??
The dirty secret of money from thin air is that it is not backed by any production or contribution to the economy. Rather, it comes from nothing, and yet it still serves as a claim to the hard work, sacrifice, and production of others. New dollars get full purchasing power. Meanwhile, the common folk not in the purified air on Wall Street, far on down the chain of those dollars getting spent, are the ones who end up losing their purchasing power. That’s because prices adjust to the expanding money supply that is not matched by a commensurate expansion of available goods and services. Those are the same folks that the NYT and others always are worrying about in the referenced article. Meanwhile, the money shufflers on Wall Street take their percentage of each billion that flows forth. An there is a pipeline from New York to D.C. consisting of contributions and influence protecting the gig. One need only look at the resumes of many an appointed Treasury Secretary to see the fingerprints.
And so it is that investment bankers and their fleets of attorneys and accountants are among the top of the 1% of earners.
It also serves to mention that over 85% of Congress consists of attorneys. Indeed, practicing law — the art of compliance with legislation — are doing quite well in the U.S. as well. It is commonplace for those in Congress or government positions to end up in private practice serving the government. Pass the legislation. Create the code. Develop the relationships. Get the work. These people are in the business of planting minefields in the front yards of the nation, and charging hefty fees to serve as daily guide to avoid being blown up. Of course, every few days, the mines are moved to ensure steady business.
Those low on the chain don’t get the benefits. Rather, they pay all the unseen costs. Wealth is dislocated from the rational economy and diverted into the pockets of what is becoming a financial ruling class. These are not the byproducts of a free market. Readers ought to reject any such suggestion. Rather, they are the trappings of fascism, corporatism, mercantilism, parastic capitalism.
You pick the term, but don’t blame it on the free market.
And hint: The solution to the problem is not socialist redistribution as is often the prescription from the lefties at the NYT, etc.
Instead, the solution is for voters to break the grip that the financial ruling elite has on government.
