NationStates Jolt Archive

Do you agree with this statement (attributed to JFK, by the way)? Do you think that JFK made the correct decision when issuing his tax cuts (poll coming)?

Yes. The policies of Kennedy, continued by Johnson, were very effective.

The economic expansion of the 1960's produced strong economic growth, extremely low unemployment (3.4% by 1968) and huge gains in real personal income, real disposable income, real wages, and income equality. Home ownership soared, and people had access to more goods and a higher standard of living by 1969 than than they did in 1959.

The only real weak point is poverty, which did not fall despite the efforts of the War on Poverty.

Yes. The policies of Kennedy, continued by Johnson, were very effective.

Some of it was. Johnson's effectively turning welfare into reparations wasn't.

Yes. The policies of Kennedy, continued by Johnson, were very effective.

The economic expansion of the 1960's produced strong economic growth, extremely low unemployment (3.4% by 1968) and huge gains in real personal income, real disposable income, real wages, and income equality. Home ownership soared, and people had access to more goods and a higher standard of living by 1969 than than they did in 1959.

The only real weak point is poverty, which did not fall despite the efforts of the War on Poverty.

All true. But the only way that the "War of Poverty" could have acutally worked was to either outlaw money and pull everyone down to exactly the same. Needless to say, that'd never happen.

Tax cuts helped my family out. We run 2 different types of business. We opened a third based really on our net profit after taxes going up so high. This third business would not have started without our spendable income going up dramatically. Our NPAT went up considerably. One due to us not paying as much taxes. Secondly due to the fact that I believe people have more cash. Our employees make more money at our restuarants now vs prior tax breaks. We have hired new employees with this new business that have an income from 75k and up per year. So I say make tax cuts that GWBush has made permanent. The rising tide does lift the boats that do not already have holes in them.

All true. But the only way that the "War of Poverty" could have acutally worked was to either outlaw money and pull everyone down to exactly the same. Needless to say, that'd never happen.

Ironically, poverty rose after the start of the "War on Poverty" and didn't fall to its 1960's levels until the welfare system was changed in 1996. Thankfully, poverty in 1996 was far less severe than poverty in 1966 so that's at least some improvement.

Ironically, poverty rose after the start of the "War on Poverty" and didn't fall to its 1960's levels until the welfare system was changed in 1996. Thankfully, poverty in 1996 was far less severe than poverty in 1966 so that's at least some improvement.

Spot on!

The phrase is correct, but only helpful if you own a boat.

Yes, JFK was quite correct about a rising tide lifts all boats. We should all be spared from the burdens of having the government nationalize the fruits of our labor through the income and payroll tax- with that, we could turn a rising tide into a veritable tsunami of prosperity.

It matters if you put the water in at the bottom or at the top. If it goes in at the bottom all boats rise. If you put it in at the top, the small boats sink first, then the big boats eventually sink.

As it relates to tax cuts, when money is put in at the bottom it is spent and those who receive it spend it, and they spend it, etc. until the rich get it then it is warehoused. If it is put in at the top, it goes directly to the warehouse.

The 60s cuts were at the bottom. The top had something like a 90% tax rate on the money over a certain amount. (Not on total income, just that over a certain large amount)

The money helped the economy fund other things also that helped the economy like the finishing of the interstate hiway system, the space program, and of course the war.

Anytime money is dumped into an economy there is at least superficial prosperity. The difference is today the government is dumping money they don't have (yes I know there was also a nat. debt in the 60s, but there was proportionatly more tax coming in). The cutting of tax at the bottom is greatly responsible for this because every time money changes hands it is taxed. So when it goes in at the bottom it not only builds the economy, but it is taxed everytime it changes hands. When money goes in at the top it is only taxed as capital gains.

It matters if you put the water in at the bottom or at the top. If it goes in at the bottom all boats rise. If you put it in at the top, the small boats sink first, then the big boats eventually sink.

As it relates to tax cuts, when money is put in at the bottom it is spent and those who receive it spend it, and they spend it, etc. until the rich get it then it is warehoused. If it is put in at the top, it goes directly to the warehouse.

The 60s cuts were at the bottom. The top had something like a 90% tax rate on the money over a certain amount. (Not on total income, just that over a certain large amount)

The money helped the economy fund other things also that helped the economy like the finishing of the interstate hiway system, the space program, and of course the war.

Anytime money is dumped into an economy there is at least superficial prosperity. The difference is today the government is dumping money they don't have (yes I know there was also a nat. debt in the 60s, but there was proportionatly more tax coming in). The cutting of tax at the bottom is greatly responsible for this because every time money changes hands it is taxed. So when it goes in at the bottom it not only builds the economy, but it is taxed everytime it changes hands. When money goes in at the top it is only taxed as capital gains.

I really hate when people think that those who save money are using it like Scrooge McDuck to swim in a pool of bullion. The money doesn't just sit there- it gets invested and taken out as loans by other people for both capital and durable consumer goods. When people spend it on these goods, industries have to bid away workers etc. from lower paying jobs into hiring paying jobs in order to enhance the capital structure. These workers get higher wages and then spend the money or save it, thus creating the cycle again. It doesn't matter where the money comes from, just that it comes from somewhere.

Also, tax cuts do not "dump" money into the economy- they're not subsidies. They are letting people keep the product of their work. And Kennedy did cut the top marginal tax rate, actually.

Begoner21;11674094']Do you agree with this statement (attributed to JFK, by the way)? Do you think that JFK made the correct decision when issuing his tax cuts (poll coming)?

Hasn't worked for the last round of tax cuts, so I say no.

http://www.jobwatch.org/

Of course a rising tide lifts all boats. Haven't you ever studied physics?

I really hate when people think that those who save money are using it like Scrooge McDuck to swim in a pool of bullion. The money doesn't just sit there- it gets invested and taken out as loans by other people for both capital and durable consumer goods. When people spend it on these goods, industries have to bid away workers etc. from lower paying jobs into hiring paying jobs in order to enhance the capital structure. These workers get higher wages and then spend the money or save it, thus creating the cycle again. It doesn't matter where the money comes from, just that it comes from somewhere.

Also, tax cuts do not "dump" money into the economy- they're not subsidies. They are letting people keep the product of their work. And Kennedy did cut the top marginal tax rate, actually.

Your words "capital and durible", One turn of the money. At the bottom, consumable, several turns of the money.

Tax cuts are subsidies especially when they are from debt and not excess. Whoever gets the money is subsidised. If that's a cut for big oil, or a cut for Joe Sixpack. The power to tax is the power to destroy. And the power to not tax is the power to encourage one part of the economy, while destroying another part of the economy. Somebody is going to pay. Who pays is the debate. In the case of tinkle down, I'm afraid it's our grandchildren and greatgrandchildren. The last time the wealth was concentrated at the top was 1929. Less than 5% of the population held 85% of the wealth.

I have to repeat, it matters if the water goes in the bottom or the top. One raises all boats, the other swamps all boats.

All true. But the only way that the "War of Poverty" could have acutally worked was to either outlaw money and pull everyone down to exactly the same. Needless to say, that'd never happen.

And to this day, we spend more and more and more on programs that have never worked.

Hasn't worked for the last round of tax cuts, so I say no.

http://www.jobwatch.org/

Are we just watching the wages adjust to normal levels after the 'irrational exuberance' of the dot-com years? Sure, I'd like to see full employment and increasing wages, but isn't full employment and pretty good wages okay?

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I notice the EPI, who produces jobwatch, is in favor of a living wage law. That doesn't convince me that they are going to be real supportive of any tax cuts.

Are we just watching the wages adjust to normal levels after the 'irrational exuberance' of the dot-com years? Sure, I'd like to see full employment and increasing wages, but isn't full employment and pretty good wages okay?

I've got a feeling we're not. I don't have the numbers in front of me and don't really feel like looking them up, but I think I've read about a long-term drop in real wages that started before the dot-com bubble.

Yeah, that would be ok, it's just that considering the ammount of debt many people are carrying and the pitifully low level of savings in this country, OK wages might not cut it. People need to take responsibility for their finances, but in the mean time they need good wages to dig themselves out of the hole they're in.

Well, there are some huge differences between 1960-1963 and 2001-2003; most importantly, the tax rates on personal income in the 1960's were a lot higher than they were in 2001 with the top bracket as high as 91% on certain incomes. As a result, the cut in taxes produced a lot bigger effect than the 2001 cuts; it caused disposable income to grow by 54% from 1961-1969, compared to 15% from 2001-2006. This higher rate of disposable income growth had a larger effect on consumer spending

Also, the government was not spending as much money or running deficits on the scale that it is now; there wasn't the same crowding-out effect from the deficits so the tax cuts increased overall private investment without having it crowded out by large deficits like in 2002-2006. A third issue is the difference between the two periods economically; there was no dot-com bubble during the 1960's, so the wealth destruction caused by the collapse of the stock market in 2000-2002 was nonexistent in the 1960's economy. This further distorts the effects of the two tax cuts, since the 2001/2003 cuts were working more along the lines of filling in the gap caused by the stock market collapse in personal incomes while the 1960's cuts did not have the same wealth destruction

Lastly, there are some technological differences between the two periods. In the 1960's, commonplace items like TVs, microwaves, cars, and other appliances were fairly new and many families were buying them for the first time. These consumer markets were in their "adoption phase" rather than a "replacement phase" (where the customer base is much more stable are people mostly replacing their products rather than buying them for the first time), so these industries grew faster and the disposable income growth had a more serious effect.

This is similar to the PC/Internet markets in the 1990's compared to today; currently, both markets in the developed world are in a replacement/upgrade phase rather than a adoption phase, so growth in demand is slower and overall economic growth is not as fast as it would be if these technologies were new. In the next few decades, similar effects will come from hybrid vehicles, Web 2.0, commodities, financial services, alternative energy, biotech and other fields; currently, however, we're in a gap between these phases (like the 1970's) so our growth will be more moderate and growth in disposable income will have a smaller effect.

I've got a feeling we're not. I don't have the numbers in front of me and don't really feel like looking them up, but I think I've read about a long-term drop in real wages that started before the dot-com bubble.

Since 1972, as a matter of fact. Even at the height of the dot-com bubble and the 90's boom, real wages were still lower than they were in 1986. In fact, wages fell from 1986-1992 and didn't recover from their 1992 levels until 1996. That means wages fell for 6 straight years and were stagnant for another 4. However, that didn't affect economic growth because:

Thankfully, most people are no longer wage earners; salaried employees have seen solid growth over the same period, with growth in the late 1990's reaching double-digits for some fields. Currently, salary growth is weaker but it has been rebounding as the labor market grows tighter; a particularly good sign is the recovery in IT salaries despite outsourcing and foreign competition. Bonuses have also grown, so undoubtedly these numbers will accelerate over the next few years as productivity gives way to increased hiring (there's only so much you can get out of a worker, and cost cutting has reached its limits for most companies).

The only way to really escape falling wages is to either go in to high-tech manufacturing/construction or get an education for a salaried job; it's pretty tough to keep wages and benefits up in other fields. In fact, the "decline" in manufacturing jobs isn't really a decline; more and more workers are being shifted from full-time to part-time status so they no longer are included in the payroll survey. And, of course, part-time positions generally pay less than full time ones.

Since 1972, as a matter of fact. Even at the height of the dot-com bubble and the 90's boom, real wages were still lower than they were in 1986. In fact, wages fell from 1986-1992 and didn't recover from their 1992 levels until 1996. That means wages fell for 6 straight years and were stagnant for another 4. However, that didn't affect economic growth because:

Thankfully, most people are no longer wage earners; salaried employees have seen solid growth over the same period, with growth in the late 1990's reaching double-digits for some fields. Currently, salary growth is weaker but it has been rebounding as the labor market grows tighter; a particularly good sign is the recovery in IT salaries despite outsourcing and foreign competition. Bonuses have also grown, so undoubtedly these numbers will accelerate over the next few years as productivity gives way to increased hiring (there's only so much you can get out of a worker, and cost cutting has reached its limits for most companies).

The only way to really escape falling wages is to either go in to high-tech manufacturing/construction or get an education for a salaried job; it's pretty tough to keep wages and benefits up in other fields. In fact, the "decline" in manufacturing jobs isn't really a decline; more and more workers are being shifted from full-time to part-time status so they no longer are included in the payroll survey. And, of course, part-time positions generally pay less than full time ones.

Is 'wage-earner' the term that gets exploited in order to show the desired effect of real wage loss?

I heard an interesting commercial on the radio today. The IBEW was begging manufacturers to hire union electricians. They promoted the traditional things that are always pushed, mainly quality of work, time to complete, and experience. All of which is true. They did leave out the parts about nonsensical rules and excessive costs for union labor.

The tone of the commercial was quite solicitious; it sounded like the union jobs for electricians were drying up. Definitely not one of those cheery "Look for the Union Label" commericals. In a right to work state, that doesn't surprise me that they're having trouble competing. Maybe they will eventually get around to re-negotiating their rates.

Your words "capital and durible", One turn of the money. At the bottom, consumable, several turns of the money.

I'm afraid I don't understand what you're trying to say.

Tax cuts are subsidies especially when they are from debt and not excess. Whoever gets the money is subsidised. If that's a cut for big oil, or a cut for Joe Sixpack. The power to tax is the power to destroy. And the power to not tax is the power to encourage one part of the economy, while destroying another part of the economy. Somebody is going to pay. Who pays is the debate. In the case of tinkle down, I'm afraid it's our grandchildren and greatgrandchildren. The last time the wealth was concentrated at the top was 1929. Less than 5% of the population held 85% of the wealth.

Tax cuts are still not subsidies. Let's say you were a serf and I was your lord. You pick 100 berries a day, and I take 20 from you each day. One day, I decide I'll be a nice guy and only take 10 from you. Am I "dumping" those berries onto you? I agree with you that spending without getting the revenue is bad, but I would not agree with you that the best solution is to tax- instead, it is to stop spending so much and let people keep what they make. And the Great Depression has more to do with credit expansion than with distribution of income.

Is 'wage-earner' the term that gets exploited in order to show the desired effect of real wage loss?

Well, yeah. The only people affected by changes in real wages are the people who actually earn them; most people earn salaries.

Even so, it's hard to really calculate the real wage because not all wage positions pay the same amount. It's better to look at it by industry; real wages might have fallen by 5% in one industry but rose by 1% in another, for example.

Well, yeah. The only people affected by changes in real wages are the people who actually earn them; most people earn salaries.

Even so, it's hard to really calculate the real wage because not all wage positions pay the same amount. It's better to look at it by industry; real wages might have fallen by 5% in one industry but rose by 1% in another, for example.

I'm going to keep asking you about this because it bothers me. When you get bored, just tell me to buzz off.

Where can I see that the term "wage earner" is applied exclusively to non-salaried employees? I've always looked at the data with the general idea that wages were something that were paid for work, but not just hourly work.

Your words "capital and durible", One turn of the money. At the bottom, consumable, several turns of the money.

You really need to steer clear of the economics threads.

Firstly, as has already been pointed to you in this thread, money invested does not sit in a box somewhere - it goes to businesses, which spend it, and it keeps flowing around the economy just the same as if anyone else was spending it. Thia is true whatever you do with your money unless you actually go and stick it under your bed - and no one does that.

Secondly, the velocity of money does not affect overall wealth in the end. In simple terms, it works like this: if a population spent money twice as often each year, they are spending twice as much in total in that year - but paying for the same amount of goods. Prices will therefore double, and no one is any richer after all.

http://en.wikipedia.org/wiki/Velocity_of_money

I'm going to keep asking you about this because it bothers me. When you get bored, just tell me to buzz off.

Where can I see that the term "wage earner" is applied exclusively to non-salaried employees? I've always looked at the data with the general idea that wages were something that were paid for work, but not just hourly work.

Me too. I see no rationale for making the distinction, and I'm not entirely sure that one is made in the figures...

A rising tide lifts all boats...

except the sunken ones. Those just get deeper under water.

I honestly have no opinion about the tax thing... just wanted to point out the problem with the metaphor.

I'm going to keep asking you about this because it bothers me. When you get bored, just tell me to buzz off.

Where can I see that the term "wage earner" is applied exclusively to non-salaried employees? I've always looked at the data with the general idea that wages were something that were paid for work, but not just hourly work.

Actually, it's hard to tell because they are often grouped together. I'd need some time to look.

However, you can look at the growth rates by occupation to get an idea of the growth in wages of each sector.

Actually, it's hard to tell because they are often grouped together. I'd need some time to look.

However, you can look at the growth rates by occupation to get an idea of the growth in wages of each sector.

Looking at sector and occupation earnings/wages makes sense. I suspect it is true that more education (to an optimum level) means higher income.

I'm afraid I don't understand what you're trying to say.



Tax cuts are still not subsidies. Let's say you were a serf and I was your lord. You pick 100 berries a day, and I take 20 from you each day. One day, I decide I'll be a nice guy and only take 10 from you. Am I "dumping" those berries onto you? I agree with you that spending without getting the revenue is bad, but I would not agree with you that the best solution is to tax- instead, it is to stop spending so much and let people keep what they make. And the Great Depression has more to do with credit expansion than with distribution of income.

Every time money is spent it is a stimulation. If it is spent once over a given period of time it has a nominal effect, if it is spent and respent that effect is multiplied. When money is placed at the bottom it is spent and whoever gets it spends it, and whoever they spend it with spends it...........each time their is an addition to the economy. Also each time it is spent it is taxed which is a gain for the government which would allow for lower tax with less deficite spending.

The govenment chooses where to tax and by doing that it gives an advantage (if you don't like the word subsidy) to one area and a drag to another area. In your example, if the Lord taxed strawberries and not blueberries it would encourage the production of blueberries and discourage the production of strawberries. I would see that as a subsidy of blueberries to the detriment of strawberry producers.

By cutting taxes on the rich the government encourages the stock market. Since the rich are spending on consumables all they want to spend. If you give Bill Gates or Warren Buffett a thousand dollar tax cut they won't spend it. Instead it will go to the stock market and because of supply and demand the cost of stocks will go up without a cooresponding increase in production. On the other hand, if you give Joe Sixpack a thousand dollar tax cut he will spend it...someone will have to make what he buys...then whoever he spends it with will spend it....someone will have to make what that person buys...etc. The money ripples through the economy and production goes up. Then of course it will slowly make it to the rich who will buy stock and the stock will go up. But it will go up not only based on increased demand but because of increased worth due to increased demand for product.

So by giving directly to the rich the government is subsidizing the stock market by creating demand which makes the economy look good without a real increase in value. On the other hand if money is put in at the bottom it would subsidize production which wouldn't bring an immediate increase in the stock market, but a slow long term gain based on value.

Looking at sector and occupation earnings/wages makes sense. I suspect it is true that more education (to an optimum level) means higher income.

Both higher income and faster income growth...education pays, and bigtime.

Also, the BLS has started tracking things like bonuses on its monthly-earnings data so the overall income picture for different levels of the economy will be a lot clearer than it was prior to these revisions.

Every time money is spent it is a stimulation. If it is spent once over a given period of time it has a nominal effect, if it is spent and respent that effect is multiplied. When money is placed at the bottom it is spent and whoever gets it spends it, and whoever they spend it with spends it...........each time their is an addition to the economy. Also each time it is spent it is taxed which is a gain for the government which would allow for lower tax with less deficite spending.

But if the money is saved, it goes to higher end industries like capital goods and consumer durables. The money eventually finds its way as wages and dividends. These wages and dividends are then used for consumption or are saved again (Yes, I know investment is there too, but you always need to save first before investing). I am not doubting that getting people to consume is an essential part of the economy, but savings are the engine of the economy that allow for greater capital formation to provide us with more and better goods and improve our lives. Without it, we are stuck with what we have and cannot improve from there. Even the consumption companies that get the money from those at the bottom of the pyramid must save if they want to expand their capacity.

The govenment chooses where to tax and by doing that it gives an advantage (if you don't like the word subsidy) to one area and a drag to another area. In your example, if the Lord taxed strawberries and not blueberries it would encourage the production of blueberries and discourage the production of strawberries. I would see that as a subsidy of blueberries to the detriment of strawberry producers.

To say that taxation gives advantages to people is like saying that I am giving John an advantage by only shooting him in one foot while I shoot Jim in both feet. In a sense, they are an advantage, but in reality I'm just hampering one more than the other.

By cutting taxes on the rich the government encourages the stock market. Since the rich are spending on consumables all they want to spend. If you give Bill Gates or Warren Buffett a thousand dollar tax cut they won't spend it. Instead it will go to the stock market and because of supply and demand the cost of stocks will go up without a cooresponding increase in production. On the other hand, if you give Joe Sixpack a thousand dollar tax cut he will spend it...someone will have to make what he buys...then whoever he spends it with will spend it....someone will have to make what that person buys...etc. The money ripples through the economy and production goes up. Then of course it will slowly make it to the rich who will buy stock and the stock will go up. But it will go up not only based on increased demand but because of increased worth due to increased demand for product.

You appear to believe that the stock market is a black hole for money that only serves to make rich people richer. This is not true. That money that Bill Gates or Warren Buffett invest in the stock market goes into the hands of companies to expand their capacity and extend their capital structure. To lengthen the capital structure, they must pay other companies to get the goods as well as hire employees. Eventually, all of this money will come down as wages and dividends which will be spent or saved, and the process repeated. What I'm trying to say is that it isn't true that capital goods and consumer durables are a one shot deal and consumer nondurables are the greatest stimulant- the money will always course its way about and affect other parts of the economy.

But if the money is saved, it goes to higher end industries like capital goods and consumer durables. The money eventually finds its way as wages and dividends. These wages and dividends are then used for consumption or are saved again (Yes, I know investment is there too, but you always need to save first before investing). I am not doubting that getting people to consume is an essential part of the economy, but savings are the engine of the economy that allow for greater capital formation to provide us with more and better goods and improve our lives. Without it, we are stuck with what we have and cannot improve from there. Even the consumption companies that get the money from those at the bottom of the pyramid must save if they want to expand their capacity.

To say that taxation gives advantages to people is like saying that I am giving John an advantage by only shooting him in one foot while I shoot Jim in both feet. In a sense, they are an advantage, but in reality I'm just hampering one more than the other.

You appear to believe that the stock market is a black hole for money that only serves to make rich people richer. This is not true. That money that Bill Gates or Warren Buffett invest in the stock market goes into the hands of companies to expand their capacity and extend their capital structure. To lengthen the capital structure, they must pay other companies to get the goods as well as hire employees. Eventually, all of this money will come down as wages and dividends which will be spent or saved, and the process repeated. What I'm trying to say is that it isn't true that capital goods and consumer durables are a one shot deal and consumer nondurables are the greatest stimulant- the money will always course its way about and affect other parts of the economy.

You are assuming that in tinkledown the people at the top are benevolent enough to share the wealth. Even a quick look at the last 25 years says that's not true. Real wages have dropped like a rock. The reason more hasn't been done with immigration is that is depresses wages. A matter of supply and demand for labor.

I stated that the money at the top has some economic value because it does turn, but it turns very slowly, and money only adds to the economy when it turns. Dividends aren't spent they are reinvested. The problem is one of stock inflation. This same thing happened in the 20's. An artificial amount of money is dumped into the top which isn't going to be spent for goods. When there is more money chasing a fixed amount of assets the price of those assets goes up without an increase in value. ie. supply and demand There are a fixed number of stocks, when more money goes after that fixed asset the cost of the asset goes up artificially. This makes the news as "the economy must be good because the stock market is up". When in actuallity the stocks go up due to inflation of demand. So the government likes to see a high stock market reardless of value. So the government does everything possible to make sure demand for stock remains high. Things like IRA's based primarily on stock. I have one. My little controbution to inflating the market. When the impact of one government program runs out they try to think of another to further inflate the market. The newest is private SS accounts. Why don't they allow my IRA or private SS to be invested in farm land, or even gold? A solid asset that has less chance of total collapse. Because that wouldn't inflate the price of stock.

Your arguement that the money is used for durables is true only to a limit. There is no need to invest in a factory if there is no demand. The way to create demand is to put the money in the hands of those that will buy factory output. Then by the time the capacity of the current factory is reached the money will have made it's way to those that have the excess money to loan toward the building of that factory. Of course, as I said you only pay for a factory once. You pay for the production of that factory over and over.

You are assuming that in tinkledown the people at the top are benevolent enough to share the wealth. Even a quick look at the last 25 years says that's not true. Real wages have dropped like a rock. The reason more hasn't been done with immigration is that is depresses wages. A matter of supply and demand for labor.

Uh? I never said that I believed that rich people are "benevolent" enough to "share the wealth". They have to give money, or they don't get their capacity expanded- they have to give some incentive to bid employees away from other industries into the capital and consumer durable goods industries. Hourly wages have gone down a bit, yes (not sure what kind of rock dropping that would be like- maybe one of those porous rocks that kinda sinks a bit in water but floats for the most part, but whatever), but most people don't get hourly wages anymore- they get salaries, as we have a service-centered economy in this modern era.

I stated that the money at the top has some economic value because it does turn, but it turns very slowly, and money only adds to the economy when it turns. Dividends aren't spent they are reinvested. The problem is one of stock inflation. This same thing happened in the 20's. An artificial amount of money is dumped into the top which isn't going to be spent for goods.

But when those dividends are reinvested, they go to provide for more capacity, providing more wages for people. Actually, the process of money going from investment to wages is rather quick, so there isn't that much of a velocity problem. Also, the stock inflation wasn't a result of tax cut, it was a result of credit expansion by a fractional reserve and the Fed. I don't want to bother everyone with a long explanation why, and I believe someone else can do so much more eloquently. If you're interested, then you can read this (http://www.mises.org/rothbard/agd.pdf) document.

When there is more money chasing a fixed amount of assets the price of those assets goes up without an increase in value. ie. supply and demand There are a fixed number of stocks, when more money goes after that fixed asset the cost of the asset goes up artificially. This makes the news as "the economy must be good because the stock market is up". When in actuallity the stocks go up due to inflation of demand. So the government likes to see a high stock market reardless of value. So the government does everything possible to make sure demand for stock remains high. Things like IRA's based primarily on stock. I have one. My little controbution to inflating the market. When the impact of one government program runs out they try to think of another to further inflate the market. The newest is private SS accounts. Why don't they allow my IRA or private SS to be invested in farm land, or even gold? A solid asset that has less chance of total collapse. Because that wouldn't inflate the price of stock.

Well, I partly agree with you on this, but this is a result of credit expansion as opposed to tax cuts. More money going after more goods, except with taxes it is actual production, whereas with credit expansion it's just with extra paper. And I would agree with you that the government likes to manipulate the stock market to make itself look good.

Your arguement that the money is used for durables is true only to a limit. There is no need to invest in a factory if there is no demand. The way to create demand is to put the money in the hands of those that will buy factory output. Then by the time the capacity of the current factory is reached the money will have made it's way to those that have the excess money to loan toward the building of that factory. Of course, as I said you only pay for a factory once. You pay for the production of that factory over and over.

I assume in this scenario people are saving too much- we have a glut of supply (saved money) and a shortage of demand (investment opportunities that will cover the interest rate). Remember, interest rates are a demand on future money for present money, and vice versa. If we were to have, say, a steel mill, that was making more steel than it was selling, that steel mill would have to A.) Lower prices, B.) Lower its production, or C.) A mix of both. A lowering of the interest rate would constitute as both, as it would discourage people from depositing (supplying), and encourage businesses to buy at the lower interest rate "price" (demand). Since the entrepeneurs are predicting demand, they will take into account the fact that people are not saving as much money but are consuming now, and that their investment which would normally not profit will now be able to make money thanks to the higher expenditures by consumers.

they get salaries, as we have a service-centered economy in this modern era.

Salaries are not always improving at a steady rate(well unless you are an exec). Battle cry of the exec is the fact the American worker is too expensive. Heard many utter that phrase.

Salaries don't always match COL. Especially when many companies are dumping more and more medical costs on to the employees. Some are even dumping insurence plans.


But when those dividends are reinvested, they go to provide for more capacity, providing more wages for people.

How many companies pay dividends? I hold stock in about 27 companies and only 2 pay dividends. The best being Aerodefense (go figure).


Actually, the process of money going from investment to wages is rather quick, so there isn't that much of a velocity problem.


Investment doesn't always pan out to wage increases.


Well, I partly agree with you on this, but this is a result of credit expansion as opposed to tax cuts.


Why are more and more people living off credit cards more if wages are increasing as you suggest.

I don't want to bother arguing about it, since most of it is over my head. I just think that if the only thing that matters to the economy is how much stock is worth, how the hell did we survive before the stockmarket? I wonder what the world would be like without the stockmarket?

When it comes to economics, you can always quote Scott Adams.
The old saying about capitalism was, "A rising tide lifts all boats." If you own a boat, that's an inspirational thought. But if you work in a cubicle, rising water means one of your brilliant co-workers tried to flush the company newsletter down the toilet. Obviously one theory does not fit all people. The economic theory that is good for the stockholders is not necessarily the exact same one that is good for employees. -The Joy of Work

Begoner21;11674094']Do you agree with this statement (attributed to JFK, by the way)? Do you think that JFK made the correct decision when issuing his tax cuts (poll coming)?
as far as tax cuts go..go tax cuts...but as far as the rising ship....well i got a rising ship...lol...nevermind

I don't want to bother arguing about it, since most of it is over my head. I just think that if the only thing that matters to the economy is how much stock is worth, how the hell did we survive before the stockmarket? I wonder what the world would be like without the stockmarket?

When it comes to economics, you can always quote Scott Adams.
-The Joy of Work
Scott Adams is very short sighted and inexperienced when it comes to business theory. A company that doesn't do well with the shareholders isn't going to be around long to do anything for the employees.

Salaries are not always improving at a steady rate(well unless you are an exec). Battle cry of the exec is the fact the American worker is too expensive. Heard many utter that phrase.

I am not saying that they are always improving. I'm saying that the general trend has been upwards. And the American worker being too expensive has nothing to do with the American worker, actually- moreso the government enforced regulations placed upon them. We could decrease the amount of money government forces companies to expend on workers and simultaneously increase their wages if we eliminated useless regulations etc.

Salaries don't always match COL. Especially when many companies are dumping more and more medical costs on to the employees. Some are even dumping insurence plans.

Blame the income tax and its distortion of medical costs, where if the employee gets less medical care if he gets his wages and spends them on medicine, but gets more if the company provides a collectivized plan for him. Again, I am not saying that salaries ALWAYS are higher than COL, just that they have a general trend upward.

How many companies pay dividends? I hold stock in about 27 companies and only 2 pay dividends. The best being Aerodefense (go figure).

Dividends aren't quite as important as wages, I'm just obliged to list them because they're part of the income approach of calculating GDP. Wages are far, far more important.

Investment doesn't always pan out to wage increases.

Not always, but generally. I am not making blanket statements.

Why are more and more people living off credit cards more if wages are increasing as you suggest.

Because the Fed makes interest rates artificially low, and it is more advantageous to spend like a drunken sailor than it is to save money.