. . . is credit expansion. It isn't simply the boom-bust business cycle that is caused by the artificial expansion of the money supply, but also the increase in income inequality and the stagnation of real wages.

http://www.mises.org/story/2847

I could not have said it better myself.

I would say the stagnation of real wages is due to the rising costs of health care, considering they've outpaced inflation by a huge amount. I notice that mises ignores this... telling, really.

Don't sell yourself short. Isn't the article postulating that the reason for increasing inequality is that inflation-created paper gains mostly accrue to the rich? And isn't that belied by increasing inequality of incomes that largely don't include these gains? For example, I believe that tax incomes are showing increasing inequality, even though unrealized cap gains aren't reported on your tax return.

anyone know of counter articles to the boom bust cycle of business being caused by something other than credit expansion?

Author of article also fails to distunguish between a cash flow statement and an income statement. Depreciating costs is actually costlier than expensing them at once for the simple reason that taxes on profits are higher for depreciated expenses. In fact in the Bush led fiscal stimulus initiatives, accelerated depreciation for one a year period was a hallmark of his plan as it encouraged businesses to invest more (which they most certainly did) not less.

This is not the point that I understand the author to be making. What he is saying is that by artificially lowering interest rates (really by expanding the money supply) the government is creating profit on the balance sheets of corporations that would not have existed otherwise. This profit must eventually be "repaid" in the future when the government takes a tightening stance on the money supply.

Profit isn't a part of Balance Sheets. He most certainly is saying that depreciation makes profits on the income statement to be more than what they actually are. He totally ignores cash flow which is ridiculous.

There's also a whole lot of other errors in the article.

Add in the pressure from low wage illegal aliens. It trickles up.

OF COURSE !! Ignoring an ancillary if not wholly unrelated topic is telling indeed. Obvious evidence of another racist, homophobic, anti healthcare screed from the liberations


This cannot go unclallenged !! ZOMG WAKE UP DVAULT !!!



QUICK TO THE HACKMOBILE

FYP

But rising health care costs are a validation of mises arguement. The military, banks, and health care system are among the first to recieve new money printed by the government. One would expect this.

I'm all for lower-priced goods and increased productivity that immigrants bring, but you can't deny their effect on healthcare and education costs.

I don't understand why income inequality is a bad thing.

People who work a job take no risk. They are given a salary in exchange for their efforts.

People who risk their capital and attempt to put it into more productive use (often by hiring the salary men) are rewarded for their efforts based on the risks they have taken. The smarter and most productive folks with money make the most.

In a free market isn't this what you want? Don't you want the smart people taking risks to produce more efficiently? Thats what creates greater and greater society wealth.

you already know the answer to this problem.

Yes, but money begets money. A good portion of the inordinately rich did not actually earn their money. It was handed to them. When the rich are getting richer for not doing anything except hiring the best investment professionals money can buy and living in a country that helps insure they will stay on top, this kind of screws your theory a bit.

BTW, I'm not entirely disagreeing with you....just playing devil's advocate.

Except the benefits of productivity gains are only accruing to the capitalists, otherwise real incomes would be increasing. I think that's the whole point. Poor Man X would rather get 20% of 100 than 10% of 150...

This is rhetoric.

First of all, the fact that someone didn't "earn" their money doesn't give anyone else license to grab it.

Secondly, the rich don't get richer in a vacuum. Those investments help other people increase THEIR wealth as well. And on top of that, investing is not "doing nothing".

Thirdly, being rich is by no means a guarantee that one will stay rich.

Also I think the poor in this inequality example needs to be defined. Are real incomes for the poor worldwide decreasing?

The reason I ask is because if you are defining the poor as only the poor in the US, then it makes sense that their real incomes are decreasing. Changing economic policies won't affect that either. Globalization combined with better technology ensures that the high earning unskilled labor can't expect higher real incomes in the future. They'll either be replaced by a foreigner who will work for nickels or by a machine.

Just so. Illegal aliens represent a huge transfer mechanism. It's certain some of the benefits trickle down to the lowest income legal Americans but I have no doubt that all those benes and more are sucked off by the tremendous downward pressure on wages. There will soon be additional pressure in higher payroll taxes, sapping wages at the lowest level further.

Well, if you have no doubt, then we can ignore the ambiguous results from the various studies that have been done. Good to know.

Simple answer: Neo-liberalism.

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

I believe Bush Jr. re-raised him aswell.

You're right, and I never once implied that anyone should.

Unless someone is actively managing their own money, how is investing doing "something?" I guess talking to a broker once a month COULD be considered doing something. So could applying for welfare or unemployment.

Fortunately, you are correct.


My post was referring particularly to the argument that "the rich are rich because they work harder, are smarter, and/or manage money better than the average person."

I do not believe this is the case. Of course, in many cases people get rich for the above reasons. BUT, in many cases, people get rich because

- They were born into it.

- They are willing to do "whatever they have to do" to get rich, whether it be kill, steal, or cheat. Say what you will, but the most ruthless often do very well financially.

- They hit the lottery, either literally, by sitting on some asset that drastically increases in price, by suing someone, etc.

Again, I'm NOT implying that rich people should have their money taken. I'm not implying there's anything wrong with being rich. What I'm saying is rich people aren't necessarily the smartest or hardest working. That's all.

Show me the study where real wages for the lowest earners are increasing and I'll retract what I wrote.

The cost of milk has gone up much quicker over the last 3 years.

From what I remember, only 10% or so of people who inherit >1 mil end up not losing it. How anyone can claim the rich are getting richer when this is happening is beyond me.