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Unread postPosted: Tue Oct 14, 2008 1:56 pm 
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On the Inequality of Wealth and Income, by Marriner S. Eccles, who served as Franklin D. Roosevelt's Chairman of the Federal Reserve from November 1934 to February 1948, where he detailed what he believed caused the Depression in his memoirs, "Beckoning Frontiers":

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery.

Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers' loans, and foreign debt. The stimulation to spend by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product -- in other words, had there been less savings by business and the higher-income groups and more income in the lower groups -- we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.

The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.

Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.

This then, was my reading of what brought on the depression.

Marriner S. Eccles

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Unread postPosted: Wed Oct 15, 2008 9:36 am 
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Good read, I hadn’t heard of him until now.

So the lesson here is on the redistribution of wealth or even income and how it can stabilize an economy, yet every elected government has neglected to do so. For instance, for the economy to be stable the bottom has to be stable, viewing the middle as the foundation. And the only way to fix the problem in the long run would be to consistently start taking money from the wealthy, who coincidentally have been given huge tax breaks in America over the past 8 years.

Actually, elements of these ideas were used to recover from the great depression as Roosevelt devalued the dollar, which caused the American money stock to grow. Interest rates fell so people had less repayments and more disposable income to consume goods. Sort of like interest-sensitive spending. Added to this, they deliberately acted to increase inflation and cause a mini economic boom. Roosevelt also did a fair bit to redistribute wealth beyond all that by promoting inheritance and state taxation.

Things like the devaluation, interests, deliberate government policies and inflation mentioned above represent some of the ways distribution of wealth can be forced into markets.

Now today you’ve got obama pushing to take from the rich and give to the poor by taxing capital gains, cuts for working families and increases for the rich guys. And also, like Roosevelt, he wants to raise the death taxes too. The thing is though, it remains to be seen if he can live up to these promises, they’ll probably have hidden clauses in end because the books wont balance, they never do in politics from what i’ve seen.

Do you have any ideas on how to achieve such an ideology? That is, a place where taxes are not tilted to benefit the wealthy, polarisation of wealth is reduced, maybe even specifically highlighting race/wealth inequality and get the rich guys wearing economic justice hats.


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Unread postPosted: Wed Oct 15, 2008 3:00 pm 
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So basically the greedy idiots transferred wealth from public to private hands, just like they are continuing to do so and ushering another great depression. Yet now we give these same idiots money to fix the problem, when they are only going to make it worse so that we'll give them even more shit?

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