The 99 percent(economist.com) |
The 99 percent(economist.com) |
1. Transparency. We need to see where every dollar of the US federal gov't is spent. It needs to be on the internet, and it needs to be easily accessable. An exception can be made for classified spending in specific, but not so categorically (IE we spend X on classified stuff). Additionally, just like there is a Surgeon's General Warning on cigarette packages, there needs to be a link on every candidates webpage that lists their top 100 donors, and what industry they are in. This website URL needs to be easily visible and placed in every television and radio advert as well.
2. Investment banks cannot also be commercial (depository banks). Investment banks become partnerships where c-level owners are financially responsible for the actions of their banks. The banking system survived before things changed from this, and it will survive afterward.
3. There should be a small federal tax on the sale of any type of derivative, bond, stock, or other financial instrument every time it is sold. Say $.10 per share, every time. The financial markets are for raising capitol for companies, not for financial hackers to make money. HFT is a waste of time and energy, adds unnecessary volatility, and has yet to be shown to be anything more than tangentially related to the goals of a financial security market, established for the purpose of raising capitol.
4. The tax code needs to be simplified. There are a number of ways to do this, but the end goal should be to end loopholes that allow companies like exxon to pay no federal taxes. Or any company for that matter to realize losses in the US and gains in a foreign country.
5. Finally, there should be a 4 term limit on US Senators, and an 8 Term limit on US Representatives. Self-explanatory.
Activision-Blizzard Share Price (ATVI): 13.50
Tax on a $100,000 trade: ~$7407.40
Google share price (GOOG): $586.31
Tax on a $100,000 trade: ~$170.55
Berkshire Hathaway Class A share price (BRK.A): 117,100.000
Tax on a $100,000 trade: ~$.10
This idea is clearly half-baked. I think a number of your other ideas are as well. You need to think through what actual benefits you expect from your proposed changes, as well as what the unintended consequences would be. Your post does not explain this very well at all.
To cite another example: forcing a split between retail and investment banking is a common talking point from people who want "more regulation". But most folks advocating for this do not have a coherent explanation for why this would actually be helpful. It's often claimed that deregulation contributed to the crisis, therefore we need to bring back this regulation. But the institutions that precipitated the crisis were all pure investment banks, so this regulation would have done absolutely nothing to prevent the financial crisis. This post does a great job of explaining why this particular policy proposal is poorly thought out, as well as covering the general issue of advocating policies without actually understanding what they would do or why they might be worthwhile: <http://www.theatlantic.com/business/archive/2011/10/if-you-f....
Glass-Steagall meant that investment banks had to entice investors to put their money into the system. The repeal allowed investment banks to raid and leverage depositors accounts. This introduces systemic risk because depositors unlike investors view their savings as a demand account and receive little interest because of that. Their money is basically cheap for the banks to get and the depositors always expect that money to be there. Investors expect a return that justifies the risk that they are entering into together with the investment bank/brokerage. Their money is relatively expensive to banks to get because the investor knows that money could disappear. Once banks could treat all those deposits as levergable funds for risky investments they didn't have to entice the expensive investment money or use caution in their investments (FDIC will pick up the losses). So with the repeal of G-S, brokerages suddenly had access to huge piles of FDIC insured money and all that money needed some place to go... and we've coincidentally had 2 major bubbles since. First the dotcoms, then mbs's and other related cdo's and now Treasuries. Break up the banks, make the investment houses have to make sensible bets (not 50:1 levers) that return better returns for investors and force banks to make terribly boring investments to return terribly boring rates to depositors and we have the beginnings of the return of sanity in banking. Without that, we will continue to inflate bubbles, pay bonuses and then bailout losses after the unavoidable asset deflation.
Here is another, more informed than me, argument for reinstatement http://moneywatch.bnet.com/economic-news/blog/maximum-utilit... "However, whether the elimination of the Glass-Steagall act caused the present crisis is the wrong question to ask. To determine the value of reinstating a similar rule, the question is whether the elimination of the Glass-Steagall act made the system more vulnerable to crashes. When the question is phrased in this way, it’s clear that it has made the system more vulnerable for the reasons outlined above.
Regarding splitting retail/investment banking, the following is a completely ignorant question, phrased in the form of a rambling incoherent hypothesis. I don't understand why it was a good idea for the U.S. to bail out the banks, but I can see how retail banking is essential to the month-to-month life of Main St, and so I can see why the government might be willing to spend taxpayer money to save it (to save taxpayers). It seems like maybe if retail banks weren't all playing the investment-bank game, maybe the suicidal investment banks could have been allowed to fail?
Corporate taxes are idiotic. They should tax them at zero and replace the lost revenue with a new upper-margin tax. Reasons:
1. Corporate taxes are effectively a sales tax.
2. Corporations, unlike individuals, can hire armies of lawyers, accountants, and lobbyists to get around the taxes.
3. Those same professionals are more often deployed by large, rather than small, companies.
4. Those same professionals are intelligent people wasting their intelligence on tax avoidance. They could just as easily be useful to society. Engineers, doctors, teachers, etc.
What you really want is an integrated tax system like Canada and many other countries have: Corporations pay income taxes, but when they pay out their profits as dividends, the individuals receiving those dividends pay tax on their share of the corporation's pre-tax income, but get a tax credit equal to the amount of taxes the corporation paid. (Sounds complicated? It is -- but it works.)
As a side benefit, this fixes the "Buffett pays less tax" problem, since the taxes paid on corporate taxes (in the end, once they've been paid out as dividends) are based on the same progressive system of increasing marginal rates as any other income.
However, I think it's important to acknowledge that corporate taxes are useful for providing an incentive for corporations to do something a certain way. That is, they can avoid the tax if they change their behaviour. (see: equal-opportunities employment, regional commercialisation incentives, emissions control, recycling, etc)
Like Romney said “Corporations are people, my friend."
Second, all of guilmarin's points: 1) Transparency - Only politicians would disagree with this. Good idea. 2) As other readers pointed out, this is a red herring, and would not solve anything. 3) This has the effect of killing the messenger, and there is a lot of evidence that derivatives are extremely helpful to markets as an information tool and reducing volatility. I certainly can't come up with a compelling moral reason to limit free people from doing what they want with their property. 4) The tax code should be simplified, but because simplicity is inherently better. Removing the corporate tax, as indicated, would both decrease complexity and promote investment. 5) Do you have any evidence that junior senators and representatives are better or worse? I could see a problem with lame ducks increasing their cronyism rather than decreasing it. I don't have an intrinsic opinion on this, but certainly sounds like a reasonable goal if you can come up with a clear mechanism on how this would help and particularly data to support. Looking at incumbent stuff might be a good way to do this.
We know that markets aren't perfect or else Buffet and other value investors couldn't survive. Does HFT make markets more or less perfect at pricing? Does this matter for making markets more efficient in reality, not some hypothetical perfect market?
I don't know enough to form a proper opinion whether or not this is the case.
Of course part of the problem is defining HFT or algorithmic trading. If you build a robot to press an appropriate button at a trading terminal really fast, is that algorithmic, HFT, and should that be banned? Do you fix the tax at 10 cents, and if so how do you react if companies just create massive securities worth millions of dollars and trade those?
There's also a subset of algorithmic trading that inserts large stop-loss orders (not much of an algorithm there, it's just done by computer program instead of an individual), which have been known to cause flash crashes.
Hence the confusion and belief that by eliminating HFT we'll eliminate automatic stop-loss orders.
The possibility of HFT raises the barriers of entry. Therefore it causes at least some bad.
Personally, I think the markets should just operate at, say, 15 minute heartbeats. Anybody is open to place orders at any point in time in secret. Then, at a predetermined heartbeat time, all orders are revealed and some standard auctioning mechanism is used to match them up against each other.
Sure, spreads would be larger than they are now, but at the same time there would also be less volatility by definition. More importantly, barriers of entry would be much lower, which will cause the market to function closer to a "perfect market" over time.
This is a topic where the critics, who argue in favor of the status quo are at an advantage, because the realities of HFT are not easily discernable to the layman, and require a much deeper understanding of the entire modern financial ecosystem. Suffice to say, there were/are pros and cons to having a specialist.
I think what you want is for derivatives to not have the chance to bring down entire sectors of the economy. That's fine, and your point in (2) would acheive this. There is also a case to be made for larger capital and margin requirements for trading firms above a certain size - ie, anyone who trades over X,000 contracts per year.
Derivatives traders can fail as much as they want as long as the failure doesn't threaten stability. It's when they bet too large, and use depositors money, that the problems start. Introducing capital and margin requirements keeps the size of the bets down and isolating trading from banking keeps them from using depositors money.
Regarding 4, specifically "to realize losses in the US and gains in a foreign country", how do you propose companies avoid this situation? Should they deliberately lose money overseas as well? What would this accomplish?
to answer 4. The point of this is to stop companies from making subsidiaries in another country to realize gains, and then wait for a tax holiday for repatriation.
Every item bought, even if it costs $1.50 should be recorded? That will cause a massive increase in paperwork (how much will that cost? Will it be in paper? Or an online service that employees fill in when they buy something? What happens when their internet/computer in their office goes down? Should they not buy the thing or buy the thing and fill it in later? Do you want to turn up to your office, find no paper there and hear 'Sorry we can't go across the street to get paper cause we have to wait for the person from $FAR_AWAY to come here and fix our computer's browser?')
I was pleased about this but I would say it is not a perfect solution, payments could be split up to go under the limit for example.
Ideally we would have a system where this is all automated, every invoice goes through a system and the results are collected. I admit this is a very tricky one though.
At the time of the crash there was something like $60 trillion in Credit Default Swaps floating around. A 5% reserve requirement sure would have slowed that down. A reserve requirement would reduce the volatility of the commodities market, which would allow those who needed it a hedge, but reduce the incentive for speculators to churn.
Regulating crazy financial instruments will occur when what we call 'investment banks' but you could easily extend to all cooperatives that make money on financial instruments, are required to be partnerships. It's amazing how much self-regulation occurs when an actual person is personally responsible.
Edit: typo
The reason it is so high is that it was set a long time ago on a sliding scale, and bracket creep of house prices means that every house traded is on the old 'high' value.
As a result, housing liquidity is low and people sit on unsuitable houses for long periods of time because they can't afford to sell and buy another. This leads to excessive commuting as people drive long distances rather than move closer to jobs, and leads to old people staying in oversized houses, tying up housing stock.
With a median priced home, if you sell it, and buy another of identical value, you will have spent nearly $50,000 on agents fees, stamp duties and other costs.
I would dearly love someone to explain to me how that is a good idea, fair or any other justification.
30-1 and up leverage never has been and never will be safe, necessary, or a good idea. Not for Fannie and Freddie, not for investment banks, not for Citi and Wamu, not for LTCM, not for the Euro banks, not for individual mortgage borrowers.
Never, for anyone, ever, a good idea. Far, far, far more destabilizing than something like HFT.
1 rule and you can pretty much put a cap on how badly things can get blown up. Limit everyone everywhere to 10-1 leverage.
We can live with a slightly lower, more consistent growth rate.
The strictly investment banks (as opposed to the consolidated ones) were the ones that had the most trouble / caused the most problems in the recent recession.
But... my rights side says all that is doing is taking away my right to vote for whom I want.
Income is adjusted for inflation using the Bureau of Labor Statistics’ research series of the consumer price index for all urban consumers (CPI-U-RS). -http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome....
That report is much more detailed than the Economist's summary.
So, in 2007 the top 1% made ~375% of what they did in 1979 (~275% gain). In 2007 the bottom 20% made ~120% of what they did in 1979 (~20% gain).
The graph is labelled "US real average after-tax income" (emphasis mine). Real income is, by definition, income that has been adjusted for inflation.
Consumerism worked for a while to keep things even, but we've reached a plateau. People can only buy so much crap. But we're more productive now than ever [1].
So where does all that extra money go? The people at the top take it. CEOs don't give their employees raises, and pocket the rest. Bankers play games with your excess money you've dumped into the market and "lose" it. etc.
No-one's missed that extra money until now, because there's always been enough work to go around. Now there's not. Maybe people aren't buying because their "confidence" is shaken. Maybe the Chinese are "taking our jobs". Maybe people don't need more crap.
Guess what, it doesn't matter. Everyone's stuck on debating why there's not enough work to go around. But really, the solution's simple.
Everyone should do less work.
The only way to simultaneously (a) reduce the income gap, (b) lower unemployment, and (c) not return to wasteful excessive consumerism is to shorten the work week and raise the minimum wage.
Those at the top will be forced to pay more per hour worked due to decrease in supply. This will fix the income gap.
The unemployed will suddenly find work, now that more workers are required to perform the same amount of work.
And no-one needs to find any arcane means of "increasing consumer confidence".
I propose a mandatory maximum of 35-hour non-overtime weeks, coupled with a 20% (or greater) increase in minimum wage. Necessarily will likely be a short-term (5-year or less) exemption from these policies for small business owners (defined as those whose executives take home in salary + bonuses less than some threshold, say $200k).
There once came a day when humans were productive enough that a two-day weekend was warranted. As we continue our march down the road of automation, it is only natural that we give ourselves more time to enjoy the fruits of our labors, and not devote our time to serve those more fortunate than us.
I have no idea what The Economist could possibly mean by "pick up the bill" in this context. They know as well as anyone that wealth isn't conserved. If my company makes twice as much money next year as this one, I've added to the world's wealth, not subtracted from it.
I think both The Economist and the Occupy Wall Street protestors are conflating two distinct groups: those who get rich by creating wealth, and those who get rich by diverting the revenues of the state into their own pockets. The latter group consists of special interest groups—and certainly includes virtually the entire banking and finance industry. What most of the protesters seem to misunderstand is that their target shouldn't be capitalism, but rather special interest groups—and the system of government that allows such groups to thrive. Unfortunately, the latter is a problem so big it's hard to grasp, and solutions aimed at the actual source are, to put it charitably, off the political map.
A lot of people also think that the economy/creation of wealth can only go up, by only focusing on the last 200 years or so of economic history. I call it "blind faith in economic progress", which was fine to believe in around the 1880s or so, but anymore.
the top 1% of earners pay 38% of all income tax while earning 27% of all income. The top 50% pay 97% of all income tax.
Broken windows fallacy, broken window fallacy and zero-sum thinking everywhere in this whole debate.
How much of the income does the top 50% get? Without that, your figures are useless.
Just concentrating on income tax hides the fact lower earners tend to spend a higher proportion of their income on other taxes (such as sales tax).
ycombinator is not the place to repeat poorly researched, often quoted and misleading statistics, without a proper discussion of how they effect the current discussion. Sorry.
1. Choosing 1979. If you started from 1999 all the graphs would look nearly the same. So, does that mean in the last 12 years the 1% is no better off?
2. Notice that the 1%'s advantage drops down significantly in a recession. They seem to have ignored the last one though, and stopped right at the height of the bubble.
That's what I can read.
There is not an inherent problem in income inequality if everyone has an acceptable standard of living. The problem is when the poor go without health care, food, shelter, education, Internet, and heating. Unemployment can be a large part of this.
I don't use an iPhone myself by the way. The smartphone plans are ridiculously expensive here in Canada. Any middle class family bearing iPhones are making other non-trivial sacrifices to do so... like education or retirement savings.
You are so, so wrong.
I was hoping you were being ironic, but apparently you're serious.
Raising minimum wage and cutting working hours will drop productivity like a stone. You're effectively saying that all workers are equal, and interchangeable. You want to forcibly stop the more productive ones from working, so that their tasks and livelihoods can be given to others.
In the case of a software company you're introducing the twin evils of bad hires and oversized teams. For what? An inferior product produced at a higher price.
Dropping productivity means a drop in living standards for everyone, not just the rich people.
The reason people are out of work is because too many people are paying back too much debt, and that equates to negative savings.
Minimum wages increase unemployment because they set a price floor above the clearing price for the going price of a worker. Now, that's not an argument for getting rid of minimum wages, but you can't argue against the reality of what they do.
The solution is to continue paying back debt, and learn the lesson not to borrow so much next time around. Yes, that sucks, but hard lessons seldom have pleasant consequences.
If you want to stop a lot of wealth accumulating at the top end of the pyramid, by all means break up banking cartels and break the ties between legislators and big business, you won't get many arguments from most people. But fairyland schemes to force people to pay more than wages are worth, and force people to work less hours than they want? Hello, central planning. Hello, centralised control. The only way for this to work is to put the needs of the state above the needs of the individual. Which must, by definition, mean less individual freedom and more state control. What are you going to do with someone who works more than 35 hours? Lock them up at the point of a gun?
"Wasteful excessive consumerism" is an entirely relative proposition. One persons waste is another satisfactory standard of living. To impose an arbitary living standard on someone is to completely control their lives.
You're asking everyone to do less work. Less work by definition means less production, and less production means a lower living standard. And guess where the bulk of that lower living standard will fall - that's right, you can bet your peasant clothes it won't be on the 1%.
To conclude : you're effectively asking for centralised control of peoples wages, centralised control of how much a person can work, and centralised and arbitary division of what is small, medium and large business for the purposes of handing out favors, subsidies and handouts. Eventually businesses will start to fail and so will seek more handouts, bailouts, concessions or are nationalised because they are vital to society (eg mining, energy, farming).
You've effectively described a blend of National Socialism and Stalinism. And we know that both eventually lead to mass murder and misery of millions. This experiment has been tried before, it ends badly for all involved.
I hope you're young and still learning, because if you're of any reasonable age, you should know better by now.
> You are so, so wrong.
...
> You've effectively described a blend of National Socialism and Stalinism.
Hyperbole much? It saddens me to see this kind of nonsense on HN.
Also, let me point out that your disagreement is not on the highest level of the disagreement scale. In particular, your parent brings up the very reasonable point that mankind introduced the two-day-weekend at some point during the industrial revolution. It's likely difficult to find anybody who says that that's a bad thing. So what's wrong with drawing an analogy here between the introduction of the two-day-weekend and reducing the maximum length of the regular work week?
I'm not saying that all your points are without merit, but you have not addressed the parent's point, and your comment is so full of rhetorical bullshit, it's disgusting.
By the way: too many people are paying back too much debt, and that equates to negative savings.
This is factually incorrect (or perhaps you misstated). The savings rate is the ratio of disposable income that people do not spend. Since paying back debt means that you use some of your disposable income to pay back the debt instead of spending it, it actually equates positive savings.
You can see that the savings rate had a huge spike upwards in the US after the mortgage bubble burst, for precisely that reason: http://research.stlouisfed.org/fred2/series/PSAVERT
And - as you say - that's largely responsible for the economic mess we're in right now, because larger savings have translated to lower aggregate demand, which has lead to net layoffs. It's the paradox of thrift at work.
Fantastic, except where are all of these consumed goods going to come from? You'll see huge inflationary pressure which means tighter monetary policy; higher interest rates and reduced borrowing and lending. Yes, there will be economic growth and increased GDP on paper, but there won't be any benefit to society. Furthermore, inflation actually helps the '1%' through arbitrary redistribution of wealth.
First year macroeconomics - I seriously think it should be a prerequisite to adulthood.
Now, it's reasonable to point out that skilled laborers are basically fully employed right now, so the proposal would marginally reduce the supply of skilled labor hours -- and could thereby reduce skilled output.
But FWIW I don't think that's a very good point. Skilled labor is not really hour-limited in the same way that unskilled labor is -- that is, the output of a salaried full-time knowledge-worker employee is unlikely to change much (certainly not by 12.5%) if the standard workweek drops from 40 hours to 35. That's not how knowledge jobs work and that's not how salaried positions work. Whereas productivity in unskilled positions really would drop by somewhere close to 12.5% under the proposal. (Which is good; it opens up more of these "job" things that are so crucial to wealth distribution in the modern world.)
At any rate, if shorter work weeks for skilled workers bothers you that much, there's an easy solution: just say that you can only pay the minimum wage for the first 35 hours of the week, after which you have to pay at least 1.5 * minimum wage. Leave everything else the same. (Well, I like the parent's minimum wage hike too.) Now we're only cutting the output of near-minimum-wage workers.
I'm not at all sure that this idea wouldn't be disastrous, but I can't think of any good reasons that it might be. I feel like it's the most obvious way out of the current economic situation.
> In the case of a software company you're introducing the twin evils of bad hires and oversized teams. For what? An inferior product produced at a higher price.
Software engineers are not hourly workers last time I checked.
> What are you going to do with someone who works more than 35 hours?
The same thing we do with people who work more than 40 hours now. Pay them overtime.
> I hope you're young and still learning, because if you're of any reasonable age, you should know better by now.
You sir are an asshole.
As a founder, this seems intuitively obvious. I have problems finding the correct people. There simply aren't enough skilled people who can do work (that is where the overhead of managing them + their cost < my time loss). Consequently, it makes economic sense for everyone to just work longer hours. If we had to limit hours, we'd simply produce less. And because our product provides time-savings for our customers, all of society suffers.
I also completely disagree that people can buy so much stuff. Sure, physical items, yes. But 77% of the US economy is services.
From a personal perspective, I don't need more trinkets. But if I had the money, I'd never do my own laundry, shopping, driving, etc. -- that is I would spend a lot of money to gain time. Whether that time goes toward pleasure or working harder, it doesn't matter -- society still wins.
There is much to be said about the legal work week in France. It has been badly misrepresented again and again.
In most industries, the reduction of work hours was more than compensated by "annualization". That means that you must do 35 hours a week, not every week but as a mean value along the whole year. What's the result? Where people used to work 39 hours all year long, even when the activity was in a low cycle, an work paid overtime when activity was high, they now work 30 hours a week at times and up to 48 hours a week at other times, always paid the standard wage all year long.
Furthermore, even the definition of "work hour" changed. For instance, in some industries people are now allowed to take a piss only 2 times a day instead of 4. In "sales" (actually, supermarket cashiers mostly), people are now "working" only while they're actually on duty (they used to be "working" while present on the premises); so they may be given "free time" for up to two or three hours during the day (there aren't many customers in shops for hours during the week), though they often have no other choice but wait at the workplace or the immediate vicinity because they haven't got time or resource to do anything else.
So actually for a large part of the economy, going from 39 to 35 hours was quite a big improvement of productivity. What is usually represented abroad as a scandalous, quasi communist change was actually a boon for the "great capital". Further "adjustments" made to the system in the past 12 years by right wing governments have achieved the picture; though they still love to bad mouth "the 35 hours" (lazy leftists! profiteering socialists!), getting rid of the many "progresses" induced by this system is absolutely out of the question.
This is, by the way, perfectly in line with the habit to ditch French (now dead) retirement law: "Lazy French retire at 60! Courageous Germans retire at 67!", while the truth is that French retire at 62.5 years, and German 62.7...
> But 77% of the US economy is services.
Many of these services don't always make sense economically. Is it for the best that so many Americans eat out almost every day? Sure, that creates demand for a lot of low wage jobs, then what?
This sort of short-sighted insistence on GDP growth (more business! more jobs!) is toxic in the long term. Some of the basics tenets seriously need to be revised.
Outsourcing wealth production to low-wage countries increased profit margins and enabled the meteoric rise in CEO and executive compensation relative to labor, whose wages were stagnant at best, or who were being outsourced and laid off at worst (eg, labor wasn't benefitting from the increased profit margins, only executives and shareholders/owners).
Cheap money and debt bubbles enabled labor to continue consuming on credit beyond their means, sustaining the increased profit margins longer than should have been possible, while simultaneously paying interest on their consumption.
Hence, the 99% (or whatever the % is) has been transferring wealth to the 1% from both ends. The solution is, stay out of debt as much as possible, and find ways to incentivize repatriation of production operations to the US (ostensibly by reducing the cost-basis of manufacturing here). Certain legal proposals, like financial transaction taxes and the like, may help as well.
[1] http://www.orionmagazine.org/index.php/articles/article/2962...
I had more relevant comments here: http://news.ycombinator.com/item?id=3120123
You seem to subscribe to the aim of total income equality as a goal. To do this you would force the productive to hand over most of the product of their work to those who are less productive. Obviously, to do this, you need to force them using the apparatus of the state to do so.
In other words, they either spend the majority of their time working for others or they go to jail. They are not asked to share the product of their work, they are threatened to do so or be locked up.
Does that sound fair to you? That is a very perverse sense of justice, where you don't have a choice in how the output of your labour is divided.
Honestly I cannot understand after a century of misery from forced wealth redistribution and forced work and millions of deaths people still come up with these ideas.
E.g., small businesses like Apple and Google.
There is no cure for cancer, no clean energy, no cheap housing, no good education. There are so many things to do.
Everytime someones says there's "only one way", that person turned out to be:
* Dogmatic
and
* Wrong
There's certainly not a single reason behind the current situation, and certainly not one single answer to it.
However the fact that you must choose four of {decrease excess wealth, decrease employment, maintain moderate per-capita consumption, maintain high per-capita work output, maintain high per-hour work output} is a logical truth.
Proof:
Wealth can be created (work), destroyed (consumed), or accumulated and held (income/wealth inequality). Wealth must be created at the same rate it is accumulated or destroyed (i.e. Wc = Wa + Wd). Since OWS wants to decrease wealth accumulated and it is undesirable to increase wealth destroyed (unless in the example given above), we must therefore decrease wealth created. Right now this is happening due to unemployment. Since OWS also wants to minimize that, we must decrease wealth created in another manner. Obviously, decreasing wealth created per hour worked is out of the question (that would mean reverting to a pre-industrial age). The only remaining option is to decrease hours worked. QED.
I think the reason for the bailouts was not combination retail/investment banks. The biggest recipients of bailouts were pure play investment banks. The theory is that failing to bail them out would have led to contagion across wide swaths of the financial system, but the main vector would not have been retail banks; it would have been the counter-parties to the many transactions that the investment banks had, including such examples as pension funds holding CDOs.
I think the root cause of the bailout was the revolving door among the biggest investment bank players (especially Goldman Sachs) and financial regulators, including the Fed, the SEC and the Treasury Department. It's a classic case of regulatory capture <http://en.wikipedia.org/wiki/Regulatory_capture>. I don't think this is so much outright corruption, as the fact that the top finance people in government have gradually come to have the same worldview as the top finance people on Wall Street. So it was easy for them to think that a rash of bank failures was the worst possible thing imaginable, and must be avoided at any cost. At the same time, they could not imagine imposing severe consequences on the management and investors of those banks.
If there's any regulation that is truly critical, it's preventing this revolving door. But I am not sure how we can sanely do that.
However at the moment, investment banking subsidises retail banking quite significantly, if you change this then banks will start charging for retail accounts.
There are a couple of solutions to this, but they all basically come down to the same thing, someone has to pay for the retail banking. Either it comes directly from the customer as a periodic payment or it is funded by taxation, I suggest the later because arguably a retail bank account is a necessary part of modern life in the west and could be considered a utility.
I would personally like to see retail only banks that charge and are strongly regulated to avoid bailouts in the future.
Investment banks should be allowed to offer retail services, but they should be forced to make it clear to the customer that if their investment arm fails, there will be no bailout from the government and they could lose all their money.
Let the people who want to play roulette and let those that don't have an option too.
Sadly this kinda depends on their being enough consumers who don't want to play roulette.
I have no idea whether this would actually be a good thing or not, though.
No, the 1% are generally company executives. The company is indeed creating more wealth but right now executives are taking a very large portion of that created wealth and actual workers are getting a very small (relatively) portion.
>those who get rich by creating wealth
Here you probably have in mind people like Zuckerberg, the google guys, etc., but this is a small minority. Most of the guys getting capturing so much wealth are just executives. They're creating wealth cut are they really creating hundreds or thousands of times more wealth than the people actually doing the work?
>to put it charitably, off the political map.
Anything that would actually help is off the map. People want sound-byte fixes. Something you can describe in one sentence. What is actually needed is a multi-pronged approach to encourage the right kind of change. Personally, I would like to see a law that says companies must disclose full compensation for every employee. They don't need to say who gets what but they would need to list each position and what the total comp was for it (this could be made a bit more generic so it's harder to tie to exactly who gets what). The free market works for buying products because we see what the product costs and we see what everyone else charges. With wages it's hard to pin down exactly what market rates are. If this data were forced to be disclosed I think it would strengthen workers' position in negotiation, hopefully driving labor prices up (and hopefully this combined with market competition would force executive salaries down closer to realistic numbers).
And that's just one thing, we would need a great many changes to encourage markets to correct after years of various interest groups doing what ever they can to distort markets in their favor.
I don't believe I referred to anything regarding the recent recession or who was to blame. My problem with the repeal of Glass-Steagall has more to do with the overwhelming conflict of interest it could create within these institutions (i.e., using deposits to grant credit to the investment arms for making risky bets). On the flip side, you could argue that proper regulation could stymie that risk, but I'd rather just not leave it up to chance (read: politicians). That's my opinion - you may feel differently.
If you tax transactions, the transactions will just disappear off into another location. A derivatives market with modern communications could be run out of a third world country in Africa using Warlords to protect the office. And the traders could still sit in New York offices.
If people want to do HFT, then let them, except where they might injure the general economy from large failures. If you think HFT is just for the pros, work out a way to bring it to the man in the street via a startup and make a fortune .
The only thing that should be done with derivatives is ensure that large financial institutions are not brought down by bad trading decisions (ie Lehman), and that small firms cannot seize up market liquidity through overleveraging (ie LTCM)
This can be covered off quite ably with capital and margin requirements. That's fair enough, and quite accepted throughout many other fields.
If you're a company raising money, investors will want to be compensated for this extra cost, thus shifting the burden onto the company and raising the cost of raising capital.
If you're an investor who wants to liquidate, you'll be offered a price lower than fair market value, as buyer will want you to cover the tax portion.
Armed with this knowledge, the rational you will think twice before converting cash into financial equity instruments. Maybe you'll choose CDs, maybe bonds, maybe stocks of foreign companies that trade on exchanges that have no such requirements.
You could probably mitigate the HFT strategies by suggesting the market stay open for just a few hours a week - enough for buyers and sellers to match outstanding bids, not worth it for HFTraders to bother.
As I said - what are you going to do, lock them up if they work 40 hours?
How about we just leave things alone with regard to minimum wages and let people work as much as they want?
Yes, there are already minimum wages, and we know that this already causes unemployment. If you increase the minimum wage by 20%, there will be a resulting hike in prices of things by some value. Now you've just made everything more expensive, and you've increased unemployment.
Yes, it's probably a strong reaction, but I just hate the thought of any of this type of 'solution' ever getting traction. It just seems so naive after these ideas have been tried and failed time and time again.
Anyone who is here and is interested in startups needs to understand how jobs are created. Jobs are created by the process of value being created, whereby the work of a person adds more value than it costs, and other people are willing to exchange something of value for it.
If I were president, I could dictate 100% employment tomorrow by enlisting everyone as air raid wardens or terrorist spotters and paying them a salary. But would we be better off? No. It doesn't work at any level. Sure, you can borrow a billion dollars and employ people to dig holes in the ground and fill them back in again, but then you've just made society a billion dollars poorer, and all that potential labor to do something with has been wasted.
Bottom line : people should stop trying to impose price controls on things, including labor. It has never worked, will never work and it frustrates me to see it being discussed.
You're right, this whole weekend thing sucks. Let's go back to the industrial revolution era and work 6-day 80-hour workweeks because that's what the market decides is the most productive. People who don't want to lose their free time can opt to work less and... oh wait, they'd be fired and be out of work. /sarcasm
This is why people organize... the labor movement is a natural product of a laissez-faire economy. Government exists to serve the people; i.e. the laborers. Hence, it makes sense for government to enforce labor policies.
Let's not go there. Specialists were accused of favoritism: filling orders that certain traders submitted and ignoring requests from other traders.
More generally, the advancements, both in technology and in pricing, actually helped everyone. SOES (small order entry system) helped smaller traders to quickly trade. Decimalization really helped reduce transactions costs (spread between bid and offer is a sort of transaction cost, when we were dealing with 1/16th quoting, the spread cost was over 6 cents)
On another front, brokers used to screw people over by telling people they bought at one price while actually buying at a lower price. This is why Regulation NMS came about. And HFTs nowadays help keep all of the exchange prices in line, minimizing the potential damage of shady broker behavior.
"At least with a specialist, everyone was relatively even in that regard." <-- again, specialists were accused of playing favorites. That's manifestly unfair.
"I can literally create an unfair system by owning the closest supercomputer." <-- That's also not true. It's not good enough to have the lowest latency connection. I can have a slightly slower connection but still have an edge. To put numbers to this, lets say that I was 100 microseconds slower than the fastest person, but I could predict the next price movement 150 microseconds faster (this is due to many factors, including the particular model I use and other implementation details). Then, I would still have a 50 microsecond edge.
"my 'compromise' tax is pretty damn fair considering" <-- this would absolutely screw large funds. As was mentioned by many others, if you tax transactions, market makers will quote wider spreads (and yes, spreads are transactions costs to the large funds moving in and out of positions)
"I'm arguing that there was a cost to removing the specialists, it's obvious now, and we should fix it." <-- NYSE parity (which is a vestige of the specialists) is broken and unfair. Why should someone who sent an order after me get filled before me? Most exchanges have a price-time priority concept, so that if we are sending at the same price but I sent first, then I should get my fill first. The specialists wrecked the idea back then and the current implementation is still unfair.
"the system is just as corrupt now as it was then, just differently." <-- it's actually much less corrupt. I recommend you go and try to build your own HFT, and then you will see that the system now is much more fair than you think. (shameless plug: I started blogging about my experience: http://news.ycombinator.com/item?id=2835656 )
Fact: when you make a large trade, there is a price impact. I.e., if you sell lots of GOOG, the price goes down.
Once upon a time, large funds could use their own sophisticated algorithms to make sure their unsophisticated counterparties feel the price impact. I.e., the big fund disguises their intent, Joe IRA buys from the large fund, and then the price goes down after Joe already owns the stock.
Nowadays, HFT makes the price impact happen immediately, typically splitting the difference with Joe [1].
Why is this worse?
[1] The HFT's try to outbid the large fund in order get ahead of it, resulting in Joe getting a better price.
Dotcom bubble: 1995-2000.
Gramm-Leach-Bliley: Nov 1999.
Further, if you measure the housing bubble in the usual way (movement in the price/rent ratio), the housing bubble also started in 1998.
I am also not persuaded by your linked argument as an argument for Glass-Steagall. It argue for the Volcker rule, which is not the same thing as any former provision of Glass-Steagall. I am not sure why the author relates the two, other than perhaps the fact that Glass-Steagall is a popular talking point. To be more clear on the difference, the provision of Glass-Steagall that tends to capture the popular imagination, and which was repealed in 1999, was a rule against combining investment banking and commercial banking within the same entity. The Volcker Rule would instead forbid banks from trading for their own account, while still allowing them to combine commercial and investment activity. I don't have enough knowledge of the Volker rule to argue for or against it, but I the sketchy argument made in its favor and the attempt to conflate it with Glass-Steagall are not terribly persuasive.
Finally I don't think there is any onus on me to offer an argument against Glass-Steagall, until someone presents an argument in its favor. Surely the burden of proof should be on those favoring a new regulation. That being said, the major reason the rule was repealed is that it made US banks uncompetitive compared to foreign banks, with no clear sign that the US banking system was more stable than foreign banking systems as a result. There is no particular reason to think this has changed. So reinstating the rule would make US banks less competitive and perhaps drive more financial activities overseas, for no clear gains.
Hyperbole? Maybe a little, but too many people sleepwalk into agreeing with this type of idea without thinking through the full consequences.
Sure, they wouldn't start out that way, they never do. But as businesses fail, they need support or nationalisation. Which brings in more planning. National Socialism took over 10 years to get to it's full zenith, this doesn't happen overnight, but there is no reason to even begin down the path that leads to that. You can dance around it all you like, but the only way to make this sort of rubbish work is by overarching state power over the individual. You can't try and whitewash the misery of millions caused by planned economies just because it is a cliche to do so.
It saddens me that people still think this way after a century of misery from trying to command and plan economies. And on HN of all places, which is supposed to be about startups and technology. You mightn't like my way of putting things, well, that's the way I talk and write.
Re savings rate : we are in agreement. People are using disposable income to pay down debt, which means it goes into neither consumption or new investment. Which causes the slump. This has to be worked through before things will improve.
He went to great pains over his career to point out that he never said that imposing increasing controls over people necessarily leads to dictatorship. His point was that, in order for a centrally planned economy to work, you necessarily had to capture increasing amounts of activity under the control of the government. And that increasing control by government was by no means
It's true that Hayeks original ideas have been characterised by many different people and groups to the point where it is impossible to know what they mean unless you go back and figure them out for yourself. It's also important to know that Hayek wrote his original works while socialism was still a bubbling, living idea in the western world, and not the failed anachronism it is (should) now regarded as.
My point here is that you always have a choice in the way you want to run things. Down one path is increasing amounts of control, and there should be no argument about what lies at the end of that path. Of course it's not inevitable that, once you start down that path, that it's impossible to reverse. Down the other path is not increasing amounts of government control over people.
35 hour weeks are not a radical idea, sure, lots of people have agitated for them for a long time. But the way the thread was written was that everyone was going to be forced to work a 35 hour week. Maybe the OP didn't presume to force people, but if it's not forced, it won't be obeyed and thus will be pointless. Besides that, the entire thread showed a complete lack of understanding of what creates real jobs and wealth, with statements like 'we produce too much'.
If the last half century of European history gives us anything, it's that the welfare state is doomed and that you can't magic up productivity and wages growth by government intervention.
Sure, conjuring up mass murder was probably overdone for this forum, probably a case of being a bit hot headed when I originally posted. But whenever I see outbreaks of this type of thinking among what appear to be young people, I get anxious that they get some history and context into the fact these ideas have all been tried and failed in the past.
So you're saying minimum wage and overtime are bad things? I'm not proposing new laws, just new numbers in existing laws.
Why not just not give out tax holidays, and allow foreign companies owned by US companies to leave profits overseas forever? Granted, this will reduce investment in the US, but we don't care about unintended consequences.
At what point does pollution or energy usage become criminal?
At the point it harms society as a whole.
I would be willing to consider giving up the ability of the government to micromanage corporate behavior in return for recapitalization of the US manufacturing base and repatriation of profits.
1999-2000:
Prime Minister: Putin
2000-2008:
President: Putin
2008-2012:
Prime Minister: Putin
2012-2016 (anticipated):
President: PutinIt happens in Russia because they have collusion. Presumably we would have less chance of that happening as other candidates would be free to join in on the political race. There is non-such in Putin's Russia.
In Russia, candidacies are controlled (and those two had an "understanding"), so you end up with that. Anyhow, Russia is an exception. Why do you bother bringing up an exception as in this case it would appear irrelevant?
What we do have is people who, due to name establishment (incumbency) recognition and or party backing, end up stringing together many terms --this alternative, would at least break that pattern up and give other candidates a chance due to stalled momentum (of the what would have been incumbent). It's seems an obvious difference to me.
Is that so bad? Is it bad if we encourage people to invest in businesses rather than term deposits (or CDs as I think they're called in the US)?
You can't herd invididuals, as anyone who has tried to round up a group of cats knows. You either accept that individuals have the right to be individuals or you have to force people submit to your plans and forego their individual choices. Too many people come out of education nowadays thinking they could organise society, if just given a chance. But the truth is that society is a loose collection of individuals, and by nature can only be convinced, not coerced. You either believe in the fundamental human right to choose your own destiny, or you don't - there are no half measures.
What kind of question is that?
No, I wouldn't want to harm anyone. You definitively can't make things better by killing people. You can make things better by letting people get to work and build their lives and families in peace.
Kill anyone? I'm aghast at the way Gaddafi was treated, even though I thought he was an evil despot.
You can start a worker-owned cooperative now. Why don't you? You could even make it a non-profit and save on some taxes.
What you want to do is make it impossible for corporations as we know them to exist, taking away freedoms. Corporations aren't slave-owners and employees aren't slaves. You have the freedom to work for one or start your own company.
I suppose a worker-owned cooperative would be fine, as long as the workers also took on losses (IE: if sales are down this month, you might only get a $500 paycheck as opposed to a $3000 one).
Then you would have to deal with the day-to-day stuff and you would end up having a president, treasurer, managers, etc, etc, etc, essentially creating what thousands of years of human history have already told you. Bitcoin, which was suppose to get around those pesky banks, essentially gave you the reason why banks are necessary: Most people don't want to or don't have the ability to secure their own money.
Most people aren't willing to take a risk. They won't start a company and take no paycheck for months or possible years while barely scraping by hoping their idea actually is successful.
Why should someone that takes absolutely no risk get anything close to the owners of a company?
Worker owned cooperatives aren't some kind of pie-in-the sky idea tat has never been tried. they make up a large portion of the employment base in Emiglia-Romagna, the Basque territory, Switzerland, and Wisconsin, along with lots of other places. Cooperatives employ 100 million people around the world according to the ILO, so it's not some kind of pipe dream that you would like to make it out to be.
I never said that I wanted to make corporations illegal, just stop using tax dollars to subsidize them, while taxing them in order to balance out the extreme wealth redistribution that they engage in. It seems eminently sensible for a country that likes to call itself a democracy to promote (or at least set up a favorable regulatory scheme for) economic democracy rather than the techno-feudalism that corporate capitalism resembles when capital becomes too concentrated.
re:bitcoin: what?
>Why should someone that takes absolutely no risk get anything close to the owners of a company?
Good question. Why should a rich investor that spends a tiny fraction of his money own the product of the founders and workers who actually create the value? Why should capital own labor, rather than the other way around?
If these really worked and made sense, we would have more worker owned cooperatives as opposed to corporations. I haven't heard much about them because they are in the slim minority..and there's probably a reason for this.
"I never said that I wanted to make corporations illegal, just stop using tax dollars to subsidize them, while taxing them in order to balance out the extreme wealth redistribution that they engage in."
Which translates to: taxing the hell out of them so it's no longer profitable to start one. I'm cool with worker owned cooperatives as long as they are taxed exactly the same as corporations.
"It seems eminently sensible for a country that likes to call itself a democracy to promote (or at least set up a favorable regulatory scheme for) economic democracy rather than the techno-feudalism that corporate capitalism resembles when capital becomes too concentrated."
It is a democracy: you can start your own company at any time. You want to prevent someone from having too much money, even if they've earned it honestly. I don't want anyone to limit my success. When this happens, I will either leave the country or become a criminal.
"Good question. Why should a rich investor that spends a tiny fraction of his money own the product of the founders and workers who actually create the value? Why should capital own labor, rather than the other way around?"
Because the rich investor is risking their money. The founders can bootstrap. Many companies do. I personally wouldn't give up that much control to anyone. Most workers don't understand what it takes to run a company. It's more than just collecting a larger paycheck..
"re:bitcoin: what?"
Never heard of bitcoin?
You cannot make it easy for people and corporations to be interchangeable and then have differing tax rates for each. They MUST have the SAME rate.
eg. I 'own' all my rental properties through LLCs which are themselves 'owned' by a corporation of which I am the sole benefactor. Travel? expensed. Living in my house for free? No problem, house owned by LLC, rent waived by my own corporation. Any living expense whatsoever? No problem, benefits of running/owning the corporation. What then is the point of being an individual on your tax return? Oh yes, I pay my fair share on my income of $1 per year.
Honestly, sometimes I think people like you who bring up these arguments are completely uneducated.
The top marginal tax rate and corporate tax rate should be equalised.
That way there is no tax benefit to putting revenue through corporations or individually.
Yes, the tax offices can catch abuses like this, but it would be much simpler if there was no tax advantage to doing it one way or the other.
The amount of tax accountants and lawyers that do no productive work because they are moving stuff around in entities makes me want to cry. It's a giant churning game that does nobody any good. The govt doesn't get the money, because they can always be outsmarted. The armies of people doing the outsmarting don't contribute to society.
Just equalise the top tax rates for individual and corporations and loopholes disappear by the bucket load.
And, of course, throwing people in jail who deliberately fail to report such benefits.
1. The IRS already does this with certain classes of businesses in which they make it illegal to form them purely for tax avoidance purposes.
2.You set the corporate income tax to 0, but personal income tax to whatever. You then make all corporate profits flow through to individuals, and make corporate write offs and deductions rare/impossible/non-existant.
Under our current tax environment, you're right. But there is nothing inherent in reality that makes this impossible.
Either way, there is no justification for a tax on buying and selling things like houses and cars. Why you would want to disincentivise transactions between people I will never know.
There is a big gap between wanting "total income quality", and wanting to close the huge, and increasing, income equality gap in the US, and to increase the minimum wage (or undertake other means) to reach a point where people can reasonably buy a house and send their children to university without requiring crippling loans.
Once houses have finished correcting lots of people will be able to afford them. Housing affordability is headed towards the best it's ever been.
I agree that things are bad, but going down the road of trying to force a solution by means of restrictions, price controls and regulations will only make the problem worse.
As I've posted in the past, places like Detroit should be cordoned off and turned into special economic zones like Hong Kong is to China. There should be a very low tax rate, no trade restrictions with other countries, and many other regulations, taxes and boondoggles dropped. There should be no (or very low, say 3%, for Military use) federal taxes and in turn they should receive no handouts or participate in any programs from the Federal government.
Do that I can guarantee that in 10 years the place will be booming, employment will be high and things will be moving in the right direction. With somewhere like Detroit, it's time people started thinking outside the box and experimenting with some rollback of the last 100 years of policy.
Also, once Detroit is removed from all Federal programs, how does it pay to feed all the currently unemployed people there?
Even Gandhi recognized the right outcome here, but I agree with him that in most real cases the set of choices usually contains something else, such as maiming or more generally "disabling" to include relatively harmless things like tackling. (Hence I still criticize soldiers who shoot-to-kill brainwashed and/or insane kids coming at them with a machete for not shooting them in the knees or somewhere easier to hit but less likely to kill.)
My original question is dependent on you believing that there exists some real situation where killing one or more people makes the world better, the classic (sorry to Godwin the topic) being to kill Hitler to save who knows how many lives (regardless of if the war still happened). Since you've said you don't believe that, I guess I got what I really wanted to know. I should have just framed it that way to begin with. I agree with you that too many people falsely believe they could fix things, I don't agree with you that a single person couldn't fix things given the right opportunities such as being able to kill the most damaging 50k people.
Wow. Circular reasoning much? Try doing some research - you might find that there are thing in the world you didn't already know.
I don't see a parallel. I think you're reaching very very far.