Jesse — Audacious Oligarchy: The Rules Are For the Little People

I cannot stress enough that this elitist attitude towards society is a learned mindset, that comes with a sense of extreme entitlement, and not some inherited tendency. As it succeeds it can become contagious among those who are morally weak and easily influenced.

Some good quotes.

Jesse's Café Américan
Audacious Oligarchy: The Rules Are For the Little People

Jesse

SchiffGold — Global Debt Growing Three Times Faster than Global Wealth

Moronic. Whoever wrote this doesn't have any understanding of accounting and the credit-debit relationship that underlies accounting. 

All borrowing results in a debt that is a payable and corresponding saving that results in a loan that is a receivable. A debt is account payable and loan is a account receivable.  

A debt obligation is a financial liability and ownership of a loan is a financial asset.

Some credit is used to to fund capital investment, and some credit is used to fund consumption.

As long as revenue is sufficient to service repayment obligations on time, there is no liquidity (cashflow) problem, and insolvency is not an issue.

The relevant question is whether ability to pay is commensurate with obligations undertaken.

The post ignores this.

SchiffGold
Global Debt Growing Three Times Faster than Global Wealth

Steve Roth — How Do Americans Get Rich? (And Stay Rich?)

Wealth is generally conceived as a stock that is increased by the flow of income. But some wealth grows by itself, for example, equity prices based on market cap and real estate based on land rent. While interest is considered a type of income and is booked periodically (and is taxable in the period), asset appreciation that increases wealth is not considered income but capital gains and it is not booked (or taxed) until it is realized  even though it results in actual wealth accrual. Steve Roth poses some questions about this.

A huge aid to answering that question arrived last month. Gabriel Zucman, Emmanuel Saez, and Thomas Piketty (PSZ) released one of the most important pieces of economic research in the last century. Their Distributional National Accounts (DINAs) reveal the distribution of national income to different income classes, wealth classes, age groups, and genders (and potentially different races, etc. etc.). This has been unavailable in the national accounts, and as a result it’s absent in most macroeconomic empirical work.…

But impressive as they are, the DINAs don’t fully answer the question of how Americans accumulate wealth. Because the DINAs only tally income, and income doesn’t include households’ holding (or “capital”) gains on stock portfolios, real estate, etc. Income does include much “property income” — dividends, interest, etc. That’s income from owning things. But it’s not everything that households receive from ownership. Holding gains figure large in that picture.

Any investor will tell you: cap gains are a big part of their wealth accumulation. Total return — dividends plus capital gains — is the measure that most savvy stock-market investors care about, long-term (and that fund managers like to tout, loudly). And much of Americans’ retirement saving — especially middle-class Americans — is accrued through capital gains on their homes.

The DINAs’ central goal is to match income as presented in the national accounts, and to reveal a multidimensional pyramid of distributional data underneath that income measure. A deeply worthy goal. But as a result, the DINAs can’t and don’t reveal the whole picture of household wealth accumulation (change in assets and net worth), or its distribution.…

Wealth accumulation greatly exceeds saving from income, pretty much always and everywhere, over very long periods. And holding gains are not a small part of wealth accumulation, especially for already-wealthy households....

Evonomics
How Do Americans Get Rich? (And Stay Rich?)

Steve Roth | Publisher of EvonomicsSae

Sandwichman — Post Post Work Post

What Karl Marx really meant. And therefore why most of what goes by the name "economics" is a crock. It's actually a story gussied up in math that is used to dupe the rubes.

EconoSpeak

Post Post Work Post
Sandwichman

Cory Doctorow — Nuanced view of corruption: money doesn't buy elections, it buys influence

Jonathan Soros, son of George Soros and heavy donor to campaigns to get money out of politics, writes a nuanced account of what huge, open campaign contributions do to electoral politics. 

After a certain point, spending doesn't make a huge difference in electoral outcomes (one study says that doubling funding shifts the needle by one percent), but because politicians are entirely beholden to their funders to reach that certain point, the electoral agenda becomes about their donors' priorities. And once in office, every argument is couched in terms that are set by those donors (as Barney Frank quipped, "[Congress are not] the only people in the history of the world who, on a regular basis, took money from perfect strangers and made sure it had no effect on them." 

Soros points out that money was corrupting politics -- albeit less openly -- long beforeCitizens United, and calls for a radical campaign-spending reform to minimize the reach of large campaign donors' priorities on political discourse.… 

Boing Boing

Nuanced view of corruption: money doesn't buy elections, it buys influence
Cory Doctorow

Branko Milakovic — Some prefer land: Stiglitz on income and wealth inequality

A couple of days ago I was invited to give comments on Joe Stiglitz’s presentation of a new paper on theoretical models of evolution of wealth and income inequality. The other two commentators were Duncan Foley and Paul Krugman. Stiglitz’s paper is not, as far as I know, on the Internet yet, so I cannot give the link. (I also had my own slides, but I do not know how to upload them here, so I cannot include the link to them either.) 

Stiglitz’s is a long paper (some 60 pages) and is in reality composed of two independent papers. The first one, on which I mostly commented, is a continuation of the discussion started by Piketty’s “Le Capital…”. Stiglitz points out to several very important puzzles that cannot be easily accommodated in the current neoclassical framework: broadly constant rate of return despite massive capital deepening, rising share of capital incomes even if the production function studies tend to find elasticity of substitution between capital and labor of less than 1, and stagnant wages despite the increase in K/Y ratio. The second paper is the extension od Stiglitz’s 1969 paper on the theory of wealth and income inequality whose objective is to model the long-run distributions among households that differ in terms of labor and capital incomes they receive and savings behavior.…

Milanovic on Stiglitz on Piketty.

global inequality
Some prefer land: Stiglitz on income and wealth inequality
Branko Milakovic

Andrew Gavin Marshall — Globalization’s ‘Game of Thrones’

Think of any period in human history when empires and imperialism were common features of society, whether from ancient Egypt, Rome, China, to the Ottomans and the rise of the European and Japanese empires. There is an institution that – with few exceptions – was prevalent across most imperial societies: the family dynasty. In a world dominated by institutions – organized hierarchically and embedded with their own functions and ideologies – the ‘family unit’ is very often the first and most important institution in the development of individuals. For the rich and powerful, the family unit has been the principal institution through which power is accumulated, preserved and propagated, precisely because the interest is multi-generational, requiring long-term planning and strategy.

Meet the new aristocracy of wealth and power. It's already here and it's going global. Piketty doesn't have to wait to see. Just peek under the covers.

Boiling Frogs Post
Globalization’s ‘Game of Thrones’, Part 1: Dynastic Power in the Modern World
****
Globalization’s Game of Thrones- Part II: Managing the Wealth of the World’s Dynasties
Andrew Gavin Marshall | Project Manager of The People’s Book Project

Steve Roth — We Have No Idea What Our Capital is Worth

That headline makes quite a statement. But it’s true. The stock of so-called “financial capital,” or wealth — all the financial assets out there, which are ultimately claims on real capital — represents only the most tenuous long-term approximation of what our real capital is worth.

Certainly true: the stock (total dollar value) of “financial capital” goes up (in fits, starts, and reverses) over the decades as real capital is accumulated. But beyond that rough, big-picture relationship, the total value of financial assets tells us very little about the total value of real assets....

Which is why — I’ll say it again — Piketty should have called it Wealth in the 21st Century.

Asymptosis
We Have No Idea What Our Capital is Worth
Steve Roth 

Michael Pettis — Why Increasing Savings Does Not Bring Wealth

Debate about the global savings glut hypothesis is mired in confusion, a fundamental one of which is the seemingly obvious but false claim that a global savings glut must lead to higher global savings. Here, for example, is a recent piece by one of my favorite economists, Barry Eichengreen: 

There is only one problem: the data show little evidence of a savings glut. Since 1980, global savings have fluctuated between 22% and 24% of world GDP, with little tendency to trend up or down.

As surprising as it might sound, global savings gluts do not result in higher global savings except under specific, often unlikely, conditions.

What is a savings glut?

There is no formal definition, but whenever market conditions or policy distortions cause the savings rate in one part of the economy to rise excessively (itself an ambiguous word), we can speak of a savings glut. There are at least two main causes of a savings glut. 

1. A rise in income inequality. We see this in Europe, the US, China, and indeed in much of the world. As wealthy households increase their share of total income, and because they tend to save a larger share of their income than do ordinary households, rising income inequality forces up the savings rate. 

2. A decline in the household share of GDP. We’ve seen this mainly in China and Germany over the past fifteen years. When countries implement policies that intentionally or unintentionally force down the household share of GDP (usually to increase their international competitiveness) they also automatically force down the consumption share of GDP. Because savings is defined as GDP minus consumption, forcing down the consumption share forces up the savings share. There are many policies and conditions that do this, and I discuss these extensively in my book, The Great Rebalancing, but the main ones are low wage growth relative to productivity, financial repression, and an undervalued currency. 

Notice that in both these cases, and completely contrary to the popular narrative that praises high savings as a consequence of household thrift, and so as morally virtuous, the rise in the savings rate does not occur because ordinary households have become thriftier. In the former case household savings rise simply because the rich increase their share of total income. In the latter case national savings rise without households in the aggregate increasing their savings....

Quotes Marriner Eccles, too.

EconMatters
Why Increasing Savings Does Not Bring Wealth
Michael Pettis | Senior Associate at the Carnegie Endowment for International Peace and a finance professor at Peking University

JW Mason — Wealth Distribution and the Puzzle of Germany

There’s been some discussion recently of the new estimates from Emmanuel Saez and Gabriel Zucman of the distribution of household wealth in the US. Using the capital income reported in the tax data, and applying appropriate rates of return to different kinds of assets, they are able to estimate the distribution of household wealth holdings going back to the beginning of the income tax in 1913. They find that wealth inequality is back to the levels of the 1920s, with 40% of net worth accounted for the richest one percent of households. The bottom 50% of households have a net worth of zero.

There’s a natural reaction to see this as posing the same kind of problem as the distribution of income — only more extreme — and respond with proposals to redistribute wealth. This case is argued by the very smart Steve Roth in comments here and on his own blog. But I’m not convinced. It’s worth recalling that proposals for broadening the ranks of property-owners are more likely to come from the right. What else was Bush’s “ownership society”? Social Security privatization, if he’d been able it pull it off, would have dramatically broadened the distribution of wealth. In general, I think the distribution of wealth has a more ambiguous relationship than the distribution of income to broader social inequality.

Last summer, the ECB released a survey of European household wealth. And unexpectedly, the Germans turned out to be among the poorest people in Europe. The median German household reported net worth of just €50,000, compared with €100,000 in Greece, €110,000 in France, and €180,000 in Spain. The pattern is essentially the same if you look at assets rather than net worth — median household assets are lower in Germany than almost anywhere else in Europe, including the crisis countries of the Mediterranean.

At the time, this finding was mostly received in terms the familiar North-South morality tale, as one more argument for forcing austerity on the shiftless South. Not only are the thrifty Germans being asked to bail out the wastrel Mediterraneans, now it turns out the Southerners are actually richer? Why can't they take responsibility for their own debts? No more bailouts!

No surprise there. But how do we make sense of the results themselves, given what we know about the economies of Germany and the rest of Europe? I think that understood correctly, they speak directly to the political implications of wealth distribution....

Resolving paradoxes of income and wealth. A lot of analysis depends on the construction on which it is based.

The question is, what is the relationship between the level of market production in an economy, and the claims on future production represented by wealth? It’s a truism — tho often forgotten — that the market production counted in GDP is only a part of all the productive activity that takes place in society. In the same way, not all market production is capitalized into assets. Wealth in an economic sense represents only those claims on future income that are exercised by virtue of a legal title that is freely transferable, and hence has a market value.

For example, imagine two otherwise similar countries, one of which makes provision for retirement income through a pay-as-you-go public pension system, and the other of which uses some form of funded pension. The two countries may have identical levels of output and income, and retirees may receive exactly the same payments in both. But because the assets held by the pension funds show up on balance sheets while the right to future public pension payments does not, the first country will have less wealth than the second one. Again, this does not imply any difference in production, or income, or who ultimately bears the cost of supporting retirees; it is simply a question of how much of those future payments are capitalized into assets.

The Slack Wire
Wealth Distribution and the Puzzle of GermanyJW Mason

Daniel Isenberg — Entrepreneurship Always Leads to Inequality

Isenberg asks, "So is inequality, when it is directly created by entrepreneurs, good or bad?"

The obvious answer is that some inequality is necessary as a incentive under capitalism but excessive inequality poisons the well. The knotty question is, how much? Once that is answered, how is the balance to be maintained?

What's required is a squeeze on wealth deemed to be excessive. Tax assets in addition to income to reduce wealth disparity and to provide a very generous tax credit for charitable contributions that are either endowments funding future spending, or are spent on immediately?

Harvard Business Review — HBR Blog Network
Entrepreneurship Always Leads to Inequality
Daniel Isenberg | Professor of Entrepreneurship Practice, Babson Executive Education

Peter Radford — Distribution and all that

Analysis of distribution through rationing by price

Real-World Economics Review Blog
Distribution and all that
Peter Radford

Maxwell Strachan — This 1 Quote Explains America's Biggest Problem Perfectly

Say what you will about Goldman Sachs -- and you could say a lot -- but its CEO, Lloyd Blankfein, recently boiled down one of America’s most complex problems into a perfectly simple and quotable line. Repeat after Lloyd, folks:

"This country does a great job of creating wealth, but not a great [job] of distributing it.”

Bingo!

The Huffington Post
This 1 Quote Explains America's Biggest Problem Perfectly
Maxwell Strachan

Like Pope Francis said in Evangelii Gaudium.

Izabella Kaminska — Property bubbles and ghost cities

I have a working theory about the premium property bubble in capital cities like London. There’ll be a post about it on AV soon. (Have been a little under the weather so it’s taken a while.)
In a nutshell, the idea is that the economy is plagued by a glut of misvalued capital — which is seeking preservation for as long as possible and at all costs. The preservation is not really about the dollar sum of that capital, but about preserving the position on the social hierarchy ladder that it provides for....


But, as per my German sun lounger analogy, owners of abstracted financial capital have lost perspective on what their capital rights represents. They wish to preserve not the wealth provided for by the means of production, but the superior social position that this used to entitle them to.
The truth, however, is that they are no longer entitled to that. Also, what they misunderstand is that they are no less well off as a result of losing that claim. It’s everyone else who is elevating to their wealth.
Nevertheless the search for the preservation of their past superiority continues — the days when they were adding social value — continues.
Consequently this capital flitters from one idle asset class to the next, avoiding at any cost an opportunity to invest in something productive — out of fear this might expose them to the sort of risk that might lose them their superiority claims forever. It’s worth noting that the constant speculative flittering is damaging in its own right.

Dizzynomics
Property bubbles and ghost cities
Izabella Kaminska

In a healthy capitalism, the purpose of real capital is production for consumption and financial capital is for further capital formation from gains from production, that is, for productive investment. When financial capital is accumulated as financial wealth for it own sake, neither for consumption not productive investment, rentierism and power, then capitalism becomes dysfunctional.

Eric Dolan — Research finds wealth warps your perspective and makes you less ethical

Research finds wealth warps your perspective and makes you less ethical (via Raw Story )

Across multiple studies, researchers at the University of California at Berkeley have found that being in the upper-class predisposes individuals to acting unethically. Studies conducted by psychology professor Paul Piff found those who drive luxury cars were less likely to stop for pedestrians, those…

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Andrew Gavin Marshall — Meet the Elite Business and Think-Tank Community That's Doing Its Best to Control the World

The large foundations of America's industrial giants have played a truly profound – and largely overlooked – role in the shaping of modern society.
AlterNet
Meet the Elite Business and Think-Tank Community That's Doing Its Best to Control the World
Andrew Gavin Marshall
(h/t Andy Blatchford via email)

A good time to remember this from Carroll Quigley's Tragedy and Hope, (1966), Ch. 20, "The Money Power Seeks to Create a World System of Financial Control in Private Hands Able to Dominate Every Nation on Earth":

"The powers of financial capitalism had (a) far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank... sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."  

Tragedy and Hope: A History of the World in Our Time
by Carroll Quigley
Volumes 1-8
New York: The Macmillan Company, 1966
Online copy at archive.org

Carroll Quigley (1910-1977) was Professor of History at Georgetown University, member of the Council on Foreign Relations (CFR), and a mentor to Bill Clinton.

Andrew Gavin Marshall — Global Power Project, Part 1: Exposing the Transnational Capitalist Class

The Global Power Project, an investigative series produced by Occupy.com, aims to identify and connect the worldwide institutions and individuals who comprise today's global power oligarchy. By studying the relationships and varying levels of leadership that govern our planet's most influential institutions — from banks, corporations and financial institutions to think tanks, foundations and universities — this project seeks to expose the complex, highly integrated network of influence wielded by relatively few individuals on a national and transnational basis. This is not a study of wealth, but a study of power.

Truthout
Global Power Project, Part 1: Exposing the Transnational Capitalist Class
Andrew Gavin Marshall, Occupy.com | News Analysis

I think that the term "capitalist class" is misused here. C. Wright Mills's term "the power elite" is more apt. It's not simply the owners of the means of production or the directors of finance capital that are involved in the power elite. It's an intricate web of power relationships that also involves considerable jockeying for power within the web itself.

Carey L. Biron — Developing World to Dominate Global Investment by 2030

According to the World Bank and numerous other analysts, wealth in developing countries is today largely locked up among the elite....

Of potentially considerable concern in the bank’s projections is where this new wealth will end up being concentrated.

“It’s one thing for the pie to be increasing, but how equitably is it being distributed?” Kar asks.

“Equity is a huge problem, as the rich seem to be getting richer and the poor getting poorer. Further, it seems the nouveau riche in the developing countries are a bit more callous than the established rich in developed countries.” 

Inter Press Service
Developing World to Dominate Global Investment by 2030
Carey L. Biron

Neoliberalism at work.

G. William Domhoff — Wealth, Income, and Power

Detailed investigation of distributive inequality.

Who Rules America?
Wealth, Income, and Power
G. William Domhoff | Professor of Sociology, UC Santa Cruz
(h/t Clonal in the comments)

See also the work of Emmanuel Saez, Professor of Economics 
Director, Center for Equitable Growth, UC Berkeley

Bill Moyers interviews Robert Wolff

Economist Richard Wolff joins Bill to shine light on the disaster left behind in capitalism’s wake, and to discuss the fight for economic justice, including a fair minimum wage. A Professor of Economics Emeritus at the University of Massachusetts, and currently Visiting Professor in the Graduate Program in International Affairs of the New School, Wolff has written many books on the effects of rampant capitalism, including Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.

AlterNet
Moyers: Rampant Capitalism Has Created a Social Disaster -- How Do We Right the Ship?
Bill Moyers interviews Robert Wolff