5 ms·

Income inequality has been increasing since the 1970s, so I submit the underlying cause cannot have been a policy change in 1986.

mathiasben 9y ago
true, the effectiveness of this scheme was slowly eroded beginning shortly after it was enacted. '86 was the knife blow that killed it for good with it's "revenue neutral" rebalancing of the "loopholes" and deductions available for reinvestment tax treatment.
- WalterBright 9y ago
  The reinvestment tax treatments you mentioned were more conventionally known as "tax shelters". People structured their income around tax shelters. Tax shelters tended to be crummy investments that only made sense when considering the tax savings. By eliminating the tax shelters and correspondingly lowering the tax rates, Reagan brought about much more efficient allocation of investment capital.
X86BSD 9y ago
Interesting that you noted it started in 1970. Can you think of anything that happened in 1970 that would have started this death spiral of our purchasing power? Perhaps say the severing of our money from gold maybe? Look it's rather simple. You can wax and wane about tax policy until you are blue in the face. The answer lies in the currency, not taxation. I give this example every single time these stories surface. Take a pre-1965 quarter when our money still was constitutional and made with silver. 6.25 grams of silver in that quarter. That silver content has a melt value today, right now, of $3.37. Items that silver quarter can buy today: A gallon and a half of gas = .25 cents 1 gallon of milk = .25 cents 1 loaf of bread = .25 cents The point illustrated is, the problem is your currency is worthless, it has been devalued by the banking cartel of the federal reserve to the point of almost complete worthlessness. And every year prices go up it's your currency losing more value, more purchasing power. It's not rocket science. You have been robbed by bankers. They own you. Washington and company learned their lesson after the continental dollar. Fiat currencies are fraud, and worthless. They always have been and always will be. Our dollar is no different. That's why the constitution has as the supreme law of the land that our currency must be backed by gold or silver. Which can't ever be valued at zero. Because it has intrinsic value. Fiat currency always throughout history, always, hits zero.
- collyw 9y ago
  I see you have been down voted, yet no one has given an explanation as to why you are wrong. I was thinking the same thing. I would appreciate it if someone could explain to me why this line of thinking is wrong.
  - X86BSD 9y ago
    It happens every time. They can't dispute the facts I illustrated above. They just down vote without any refuting. It's hard to argue the grams of silver in pre 1965 quarters is not 6.25, it's hard to argue the current price of those 6.25 grams of silver, and it is, I suppose, theoretical you can show me bread or milk that costs more then 3.xx dollars. But those are the national averages. So I just assume it's Wall Street vampires down voting or those who hear the word constitution and down vote because clearly that makes me wrong or insane.
  - asmithmd1 9y ago
    I will take a shot at explaining the problem with a gold standard. 1. We want slight 1%-2% inflation to prevent hoarding from slowing the economy to a crawl. Why invest or buy something today when the cash stuffed in my mattress will buy something better in 6 months. 2. If you agree with the first statement, why tie the rate of growth of money to how fast you can dig a metal out of the ground? Let "experts" survey the economy and decide how much more money there should be this year as opposed to last year. I am not saying I agree completely with either statement, but that is one argument against a gold tied currency.
    - X86BSD 9y ago
      Again, that is not disputing the facts I laid out. We can argue about the gold standard but that isn't what my argument was. I was pointing out that the currency is worthless because it's fiat. Also inflation is a hidden tax.
  - dredmorbius 9y ago
    Foreign (to the US) oil, and limited gold. Dollarising petroluem sales in particular served the interests of much of the world: the US, because it kept oil affordable (dollar didn't deflate more), OPEC, because it kept oil affordable (their currencies didn't inflate more), gold, because there's only so much, other nations, because they could exchange for dollars via reserve currency markets. The gold-backing was dead by 1970. Petro-dolarisation occurred in 1974. The UK all but went broke in 1979. The USSR did go broke in 1987-89, courtesy the US and Saudi Arabia (something Putin may well have in mind now). Money is weird. And the gold standard and "end the Fed" nonsense is ... complete bullshit.
collyw 9y ago
Around the same time that the gold standard was dropped and banks started creating money out of thin air.
- X86BSD 9y ago
  Correct you are. And yet it's depressing how many people do not get that. Or understand money.
- aoeuasdf1 9y ago
  Ah yes, the bad old days: https://pbs.twimg.com/media/C8H9i9IUwAEBo5s.jpg https://pbs.twimg.com/media/C8H9i9IUwAEBo5s.jpg
  - jdale27 9y ago
    Can you explain what conclusion we are supposed to draw from that chart?
    - aoeuasdf1 9y ago
      Having a currency standard based on metals is inherently unstable. Central banking has succeeded.
      - collyw 9y ago
        Succeeded in keeping asset holders rich, and effectively suppressing the wages of workers.
      - ric2b 9y ago
        You can't just compare those periods and assume that currency properties are all that matters, you're comparing periods that included: - slavery - the civil war - the industrial revolution - two world wars - huge growth in population and in the economy, which makes it inherently less volatile - a bunch of other important events that would obviously affect currency prices
  - deleted 9y ago
magoghm 9y ago
Look at this chart, you can see that inflation started to increase really fast since the 70's: http://www.wolframalpha.com/input/?i=1000+1776+dollars+in+2017 http://www.wolframalpha.com/input/?i=1000+1776+dollars+in+20... (sometime WolframAlpha doesn't display the chart you might need to reload the page until it does, then click on the button that say "Linear scale" to display in a linear scale instead of a log scale)
- aninhumer 9y ago
  Looking linear graph of an exponential process and seeing an apparent rapid increase at a certain point doesn't really prove anything. That's just what an exponential graph looks like. If I instead look at the log graph, it looks more like the value of currency was approximately stable before 1900, and then started to trend upwards some time after that. I'm not sure how to interpret that, but if you were intending to point to the end of the gold standard, this data doesn't really support that. There is a slight surge around 1970, but only relative to a general trend.
  - magoghm 9y ago
    When I look at the average rate of inflation from 1900 10 1970, it is 2.26% per year: http://www.wolframalpha.com/input/?i=1000+1900+dollars+in+1970 http://www.wolframalpha.com/input/?i=1000+1900+dollars+in+19... And when I look at the average rate of inflation from 1970 to 2017, it is 4.01% per year: http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+2017 http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+20... Both of them are exponential growths, but with quite different rates.
    - aninhumer 9y ago
      And for 1970 to 1980 it's 7.82% per year: http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+1980 http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+19... As I said, there was a surge around 1970, so yes, if you take a period that includes that surge, it will probably have a higher rate than one that does not.
dredmorbius 9y ago
OPEC oil crisis, US peak oil, associated political shifts in conjunction ith that. Gradual outsourcing of industrial productivity (high-paying factory jobs) from the US. Loss of bargaining leverage by labour.

mathiasben 9y ago

true, the effectiveness of this scheme was slowly eroded beginning shortly after it was enacted. '86 was the knife blow that killed it for good with it's "revenue neutral" rebalancing of the "loopholes" and deductions available for reinvestment tax treatment.

WalterBright 9y ago
The reinvestment tax treatments you mentioned were more conventionally known as "tax shelters". People structured their income around tax shelters. Tax shelters tended to be crummy investments that only made sense when considering the tax savings. By eliminating the tax shelters and correspondingly lowering the tax rates, Reagan brought about much more efficient allocation of investment capital.

X86BSD 9y ago

Interesting that you noted it started in 1970. Can you think of anything that happened in 1970 that would have started this death spiral of our purchasing power? Perhaps say the severing of our money from gold maybe? Look it's rather simple. You can wax and wane about tax policy until you are blue in the face. The answer lies in the currency, not taxation. I give this example every single time these stories surface. Take a pre-1965 quarter when our money still was constitutional and made with silver. 6.25 grams of silver in that quarter. That silver content has a melt value today, right now, of $3.37. Items that silver quarter can buy today: A gallon and a half of gas = .25 cents 1 gallon of milk = .25 cents 1 loaf of bread = .25 cents The point illustrated is, the problem is your currency is worthless, it has been devalued by the banking cartel of the federal reserve to the point of almost complete worthlessness. And every year prices go up it's your currency losing more value, more purchasing power. It's not rocket science. You have been robbed by bankers. They own you. Washington and company learned their lesson after the continental dollar. Fiat currencies are fraud, and worthless. They always have been and always will be. Our dollar is no different. That's why the constitution has as the supreme law of the land that our currency must be backed by gold or silver. Which can't ever be valued at zero. Because it has intrinsic value. Fiat currency always throughout history, always, hits zero.

collyw 9y ago
I see you have been down voted, yet no one has given an explanation as to why you are wrong. I was thinking the same thing. I would appreciate it if someone could explain to me why this line of thinking is wrong.
- X86BSD 9y ago
  It happens every time. They can't dispute the facts I illustrated above. They just down vote without any refuting. It's hard to argue the grams of silver in pre 1965 quarters is not 6.25, it's hard to argue the current price of those 6.25 grams of silver, and it is, I suppose, theoretical you can show me bread or milk that costs more then 3.xx dollars. But those are the national averages. So I just assume it's Wall Street vampires down voting or those who hear the word constitution and down vote because clearly that makes me wrong or insane.
- asmithmd1 9y ago
  I will take a shot at explaining the problem with a gold standard. 1. We want slight 1%-2% inflation to prevent hoarding from slowing the economy to a crawl. Why invest or buy something today when the cash stuffed in my mattress will buy something better in 6 months. 2. If you agree with the first statement, why tie the rate of growth of money to how fast you can dig a metal out of the ground? Let "experts" survey the economy and decide how much more money there should be this year as opposed to last year. I am not saying I agree completely with either statement, but that is one argument against a gold tied currency.
  - X86BSD 9y ago
    Again, that is not disputing the facts I laid out. We can argue about the gold standard but that isn't what my argument was. I was pointing out that the currency is worthless because it's fiat. Also inflation is a hidden tax.
- dredmorbius 9y ago
  Foreign (to the US) oil, and limited gold. Dollarising petroluem sales in particular served the interests of much of the world: the US, because it kept oil affordable (dollar didn't deflate more), OPEC, because it kept oil affordable (their currencies didn't inflate more), gold, because there's only so much, other nations, because they could exchange for dollars via reserve currency markets. The gold-backing was dead by 1970. Petro-dolarisation occurred in 1974. The UK all but went broke in 1979. The USSR did go broke in 1987-89, courtesy the US and Saudi Arabia (something Putin may well have in mind now). Money is weird. And the gold standard and "end the Fed" nonsense is ... complete bullshit.

collyw 9y ago

Around the same time that the gold standard was dropped and banks started creating money out of thin air.

X86BSD 9y ago
Correct you are. And yet it's depressing how many people do not get that. Or understand money.
aoeuasdf1 9y ago
Ah yes, the bad old days: https://pbs.twimg.com/media/C8H9i9IUwAEBo5s.jpg https://pbs.twimg.com/media/C8H9i9IUwAEBo5s.jpg
- jdale27 9y ago
  Can you explain what conclusion we are supposed to draw from that chart?
  - aoeuasdf1 9y ago
    Having a currency standard based on metals is inherently unstable. Central banking has succeeded.
    - collyw 9y ago
      Succeeded in keeping asset holders rich, and effectively suppressing the wages of workers.
    - ric2b 9y ago
      You can't just compare those periods and assume that currency properties are all that matters, you're comparing periods that included: - slavery - the civil war - the industrial revolution - two world wars - huge growth in population and in the economy, which makes it inherently less volatile - a bunch of other important events that would obviously affect currency prices
- deleted 9y ago

magoghm 9y ago

Look at this chart, you can see that inflation started to increase really fast since the 70's: http://www.wolframalpha.com/input/?i=1000+1776+dollars+in+2017 http://www.wolframalpha.com/input/?i=1000+1776+dollars+in+20... (sometime WolframAlpha doesn't display the chart you might need to reload the page until it does, then click on the button that say "Linear scale" to display in a linear scale instead of a log scale)

aninhumer 9y ago
Looking linear graph of an exponential process and seeing an apparent rapid increase at a certain point doesn't really prove anything. That's just what an exponential graph looks like. If I instead look at the log graph, it looks more like the value of currency was approximately stable before 1900, and then started to trend upwards some time after that. I'm not sure how to interpret that, but if you were intending to point to the end of the gold standard, this data doesn't really support that. There is a slight surge around 1970, but only relative to a general trend.
- magoghm 9y ago
  When I look at the average rate of inflation from 1900 10 1970, it is 2.26% per year: http://www.wolframalpha.com/input/?i=1000+1900+dollars+in+1970 http://www.wolframalpha.com/input/?i=1000+1900+dollars+in+19... And when I look at the average rate of inflation from 1970 to 2017, it is 4.01% per year: http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+2017 http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+20... Both of them are exponential growths, but with quite different rates.
  - aninhumer 9y ago
    And for 1970 to 1980 it's 7.82% per year: http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+1980 http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+19... As I said, there was a surge around 1970, so yes, if you take a period that includes that surge, it will probably have a higher rate than one that does not.

dredmorbius 9y ago

OPEC oil crisis, US peak oil, associated political shifts in conjunction ith that. Gradual outsourcing of industrial productivity (high-paying factory jobs) from the US. Loss of bargaining leverage by labour.