

The Fall and Rise of U.S. Inequality, in 2 Graphs - jamessun
http://www.npr.org/blogs/money/2015/02/11/384988128/the-fall-and-rise-of-u-s-inequality-in-2-graphs

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jamessun
Related story from Washington Post,
[http://www.washingtonpost.com/blogs/wonkblog/wp/2015/04/20/t...](http://www.washingtonpost.com/blogs/wonkblog/wp/2015/04/20/this-
chart-explains-everything-you-need-to-know-about-inequality/)

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ctdonath
No mention that currencies went from gold standard to fiat from 1971-1976.

My take: Makes a huge difference between a stable money supply spread across a
growing population, vs unrestricted money growth which can be "firehosed" to a
small group.

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rco8786
There is so much wrong with this article I don't even know where to begin.

Talking about the rise of the 1% without a single mention of moving away from
the gold standard and the finance industry is misguided at best.

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rskar
Per
[http://www.federalreservehistory.org/Events/DetailView/33](http://www.federalreservehistory.org/Events/DetailView/33):
In the 1960s, European and Japanese exports became more competitive with US
exports. The US share of world output decreased and so did the need for
dollars, making converting those dollars to gold more desirable. The
deteriorating US balance of payments, combined with military spending and
foreign aid, resulted in a large supply of dollars around the world.
Meanwhile, the gold supply had increased only marginally. Eventually, there
were more foreign-held dollars than the United States had gold. The country
was vulnerable to a run on gold and there was a loss of confidence in the US
government’s ability to meet its obligations, thereby threatening both the
dollar’s position as reserve currency and the overall Bretton Woods system.

In other words, the "gold standard" that some have alluded to made absolutely
no meaningful restrictions on the growth of the money supply; there were more
foreign-held dollars than the United States had gold, anyway.

According to
[http://en.wikipedia.org/wiki/Nixon_Shock](http://en.wikipedia.org/wiki/Nixon_Shock):
At the time, the U.S. also had unemployment and inflation rates of 6.1% (Aug
1971) and 5.84% (1971), respectively. ... On the afternoon of Friday, August
13, 1971, [Federal Reserve chairman Arthur Burns, incoming Treasury Secretary
John Connally, and then Undersecretary for International Monetary Affairs and
future Fed Chairman Paul Volcker] along with twelve other high-ranking White
House and Treasury advisors met secretly with Nixon at Camp David.

Which meant Nixon was already facing the very real prospect of the American
dollar being fully undermined. For no other reason than the fact that nations
and banks were generally accustomed to settling accounts with gold, he had no
choice but to hold on to whatever gold was left.

The real issue was that foreign investments were paying off, America was no
longer doing the lion's share of the production, and Bretton Woods made it
possible for foreign nations to acquire gold from US currency. You'll note
that the graph shows data-points from 1966 thru 1985 more-or-less clumped in
the area of ($300K-$400K, $30K-$35K). The break-away, if you will, starts
after 1986. That is quite coincident with the Tax Reform Act of 1986 under
Ronald Reagan (see
[http://en.wikipedia.org/wiki/Reaganomics](http://en.wikipedia.org/wiki/Reaganomics)).

Per Wikipedia: The primary effect of the tax changes over the course of
Reagan's term in office was a change in the composition of federal receipts,
towards more payroll taxes and new investment taxes, and away from higher
earners and capital gains on existing investments. Federal revenue share of
GDP fell from 19.6% in fiscal 1981 to 17.3% in 1984, before rising back to
18.4% by fiscal year 1989. Personal income tax revenues fell during this
period relative to GDP, while payroll tax revenues rose relative to GDP.
President Ronald Reagan's 1981 cut in the top regular tax rate on unearned
income reduced the maximum capital gains rate to only 20%—its lowest level
since the Hoover administration. In 1986 President Reagan set tax rates on
capital gains at the same level as the rates on ordinary income like salaries
and wages, with both topping out at 28 percent.

My own take on all this is that the gold standard factor is minor compared to
the "tax efficiency" advantages that Reaganomics gave to unearned income over
earned income. Getting into the unearned income game requires capital to play.
Raising that initial capital is the first hurdle. Once achieved, it is then
possible to maintain and grow this unearned income. Since the 1986 tax reform
tremendously lightened the load on higher earners and on capital gains on
existing investments, that made it easier for higher earners to get into the
game, and easier for the holders of existing investments to grow their
unearned income.

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xname
"Income growth of top 1%" is a very misleading concept. It sounds like "top
1%" is a fixed group of people, and we are talking about their income growth.
Actually it is not that case at all. It is the "growth" of income from "top
1%" at different time points. Because it is about different group of people
from different time points, it is misleading to call the difference as
"growth". It's like last year best student A got score 100, and this year best
student B got score 110, and you call it the "achievement growth of best
student".

On the other hand, "income growth of bottom 99%" has the same issue, but it is
less the problem, because 99% is a much more stable group of people. It's like
"achievement growth of all students (except the best one)".

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vander_elst
but that's exaclty what they want to show, how the best students performed in
different years, whoever they are.. what about if the score of the best
student gradually goes from 100 to 80 in within 20 years.. that would still
reveal something about the university and the students, further analysis have
to be performed, no doubt on that, but that would show some particular trend
in how the students are learning / are thaught

