Quote: Original post by Shannon Barber
We need to stop spending so much of our money on the military.
While it is nice to have an extremely large and powerful military it is just not sustainable. Our country has been tanking since the 1950's and now we are just barely treading water.

I'm all for closing our bases in Korea, and Germany etc.. and reducing our military adventurism, however, we're almost at the point now that the only thing propping up or position as a financial power is our military might.

Don't get me wrong, I'm not arguing for military Keynesianism. I'm stating that our credible threat of naked aggression is the only thing keeping us afloat in some geo-economic circles.( The Asias and the Middle East primarily )

Think Rome a couple of hundred years after Christ.

Quote: Original post by LessBread

Quote: Original post by Klapaucius
When people save money, it goes into e.g. bank accounts/IRAs/whatever where it funds investments, not in a money hole in their back yard. What we are experiencing currently probably isn't all that much savings anyway, at least not intentionally - spending is likely reduced because the economy is shrinking (correcting) from the credit bubble.

What business person worth their salt would invest in expansion when the demand for their products is shrinking? What bank would lend them money under those conditions?

So, where is the money that you're putting in your bank account going? Are you saying that it is just sitting in a money hole in the bank's back yard?

Quote: Original post by superpig

Quote: Original post by LessBread

Quote: Original post by Klapaucius
When people save money, it goes into e.g. bank accounts/IRAs/whatever where it funds investments, not in a money hole in their back yard. What we are experiencing currently probably isn't all that much savings anyway, at least not intentionally - spending is likely reduced because the economy is shrinking (correcting) from the credit bubble.

What business person worth their salt would invest in expansion when the demand for their products is shrinking? What bank would lend them money under those conditions?

So, where is the money that you're putting in your bank account going? Are you saying that it is just sitting in a money hole in the bank's back yard?

Their point is that the bank sets on it because they have more outstanding risks than their reserves could support, even with a very liberal leveraging policy.

The reality is that fed money is dearer than real money. It's an odd analogue to Gresham's Law where the money from the fed is "virgin" where the money from the populace gains access to pre-inflated money at a large multiplier.

It's a capital vacuum that has to be filled for the industry to be in equilibrium, but rather than fill it, they believe it is expedient to instead circumvent it and ignore the vacuum.

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by superpig

Quote: Original post by LessBread

Quote: Original post by Klapaucius
When people save money, it goes into e.g. bank accounts/IRAs/whatever where it funds investments, not in a money hole in their back yard. What we are experiencing currently probably isn't all that much savings anyway, at least not intentionally - spending is likely reduced because the economy is shrinking (correcting) from the credit bubble.

What business person worth their salt would invest in expansion when the demand for their products is shrinking? What bank would lend them money under those conditions?

So, where is the money that you're putting in your bank account going? Are you saying that it is just sitting in a money hole in the bank's back yard?

Their point is that the bank sets on it because they have more outstanding risks than their reserves could support, even with a very liberal leveraging policy.

Mm, right. That makes sense. I'm just trying to clarify what "sits on it" actually entails: the bank is actually increasing the amount of physical currency that it keeps in its vaults, by giving less of it out, calling in the stuff it's owed, etc?

Quote: Original post by superpig

Quote: Original post by LessBread

Quote: Original post by Klapaucius
When people save money, it goes into e.g. bank accounts/IRAs/whatever where it funds investments, not in a money hole in their back yard. What we are experiencing currently probably isn't all that much savings anyway, at least not intentionally - spending is likely reduced because the economy is shrinking (correcting) from the credit bubble.

What business person worth their salt would invest in expansion when the demand for their products is shrinking? What bank would lend them money under those conditions?

So, where is the money that you're putting in your bank account going? Are you saying that it is just sitting in a money hole in the bank's back yard?

It's a matter of more or less not all or nothing. Ultimately, the money you put in your bank account is sent off to be burned. What's left are numbers in an account. It seems to me that during a recession private investment shifts towards projects with less risk but there are too few such projects to absorb surplus savings which piles up in banks. Riskier projects are put on hold as investors wait for market conditions to improve.

Turning back to the OP, here is something to read: Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data (David Cay Johnston)

Quote:
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In 2007 the top 400 taxpayers had an average income of $344.8 million, up 31 percent from their average $263.3 million income in 2006, according to figures in a report that the IRS posted to its Web site without announcement that were discovered February 16. (For the report, see Tax Analysts Doc 2010-3372 .)
...
The long-term data show that under current tax and economic rules, the incomes of the top earners rise when the economy expands and contract during recessions, only to rise again. Their effective income tax rate fell to 16.62 percent, down more than half a percentage point from 17.17 percent in 2006, the new data show. That rate is lower than the typical effective income tax rate paid by Americans with incomes in the low six figures, which is what each taxpayer in the top group earned in the first three hours of 2007.

Taxpayers on the 95th to 99th steps on the income ladder paid an effective income tax rate of 17.52 percent, according to calculations by the Tax Foundation, a nonprofit research group that favors less taxation and lower rates. Taxpayers in this category earned between $255,000 and $451,000 in 2007, compared with an average daily income of almost $945,000 for the top 400, who paid lower effective tax rates on average.
...
The top 400's share of all income grew from 1.31 cents out of every dollar earned by all Americans to 1.59 cents.

Adjusted for inflation to 2009 dollars, the top 400 enjoyed a 27 percent increase in their income, or nine times the rate of increase for the bottom 90 percent, based on an earlier analysis of tax data published by Profs. Emmanuel Saez and Thomas Piketty, economists at the University of California at Berkeley who have been studying global income trends.

Since 1992, the bottom 90 percent of Americans have seen their incomes rise by 13 percent in 2009 dollars, compared with an increase of 399 percent for the top 400.
...
Most of the income going to the top 400 tax returns is from capital. Salaries and wages accounted for only 6.5 percent of the top 400's income in 2007, down from 7.4 percent in 2006 and 26.2 percent in 1992. The average salary rose from 2006 to 2007, however, just at a slower rate than overall income growth.

The biggest source of income was capital gains, which are taxed at a maximum rate of 15 percent. Gains accounted for 66.3 percent of 2007 income for the top 400, up from 62.8 percent in 2006 and 36.1 percent in 1992.
...
The report shows that the number of the top 400 who paid an effective tax rate of 0 percent to 10 percent declined slightly, to 25 in 2007 from 31 in 2006. In 1992 only 6 of the top 400 paid an effective income tax rate of less than 10 percent.

Another 127 paid 10 percent to 15 percent in 2007, up from 113 in 2006.

Only 33 of the top 400 paid an effective tax rate of 30 percent to 35 percent, which is the maximum federal tax rate.

That last paragraph is especially telling.

Quote: Original post by superpig
Mm, right. That makes sense. I'm just trying to clarify what "sits on it" actually entails: the bank is actually increasing the amount of physical currency that it keeps in its vaults, by giving less of it out, calling in the stuff it's owed, etc?

lol, I typed this wordy response which was technically accurate but an end around to the spirit of your question. In short, they're putting the money into non-growth sectors; hard metals, municipals, T-bills. The ratio of consumptive loans to capitals loans is lopsided.

It's the old saw about eating the seeds for next years crop.

Quote: Original post by LessBread
Turning back to the OP, here is something to read: Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data (David Cay Johnston)

Quote:
...
In 2007 the top 400 taxpayers had an average income of $344.8 million, up 31 percent from their average $263.3 million income in 2006, according to figures in a report that the IRS posted to its Web site without announcement that were discovered February 16. (For the report, see Tax Analysts Doc 2010-3372 .)
...
The long-term data show that under current tax and economic rules, the incomes of the top earners rise when the economy expands and contract during recessions, only to rise again. Their effective income tax rate fell to 16.62 percent, down more than half a percentage point from 17.17 percent in 2006, the new data show. That rate is lower than the typical effective income tax rate paid by Americans with incomes in the low six figures, which is what each taxpayer in the top group earned in the first three hours of 2007.

Taxpayers on the 95th to 99th steps on the income ladder paid an effective income tax rate of 17.52 percent, according to calculations by the Tax Foundation, a nonprofit research group that favors less taxation and lower rates. Taxpayers in this category earned between $255,000 and $451,000 in 2007, compared with an average daily income of almost $945,000 for the top 400, who paid lower effective tax rates on average.
...
The top 400's share of all income grew from 1.31 cents out of every dollar earned by all Americans to 1.59 cents.

Adjusted for inflation to 2009 dollars, the top 400 enjoyed a 27 percent increase in their income, or nine times the rate of increase for the bottom 90 percent, based on an earlier analysis of tax data published by Profs. Emmanuel Saez and Thomas Piketty, economists at the University of California at Berkeley who have been studying global income trends.

Since 1992, the bottom 90 percent of Americans have seen their incomes rise by 13 percent in 2009 dollars, compared with an increase of 399 percent for the top 400.
...
Most of the income going to the top 400 tax returns is from capital. Salaries and wages accounted for only 6.5 percent of the top 400's income in 2007, down from 7.4 percent in 2006 and 26.2 percent in 1992. The average salary rose from 2006 to 2007, however, just at a slower rate than overall income growth.

The biggest source of income was capital gains, which are taxed at a maximum rate of 15 percent. Gains accounted for 66.3 percent of 2007 income for the top 400, up from 62.8 percent in 2006 and 36.1 percent in 1992.
...
The report shows that the number of the top 400 who paid an effective tax rate of 0 percent to 10 percent declined slightly, to 25 in 2007 from 31 in 2006. In 1992 only 6 of the top 400 paid an effective income tax rate of less than 10 percent.

Another 127 paid 10 percent to 15 percent in 2007, up from 113 in 2006.

Only 33 of the top 400 paid an effective tax rate of 30 percent to 35 percent, which is the maximum federal tax rate.

That last paragraph is especially telling.

All of this indicates that the problem that needs to be addressed is the capital gains tax rate, not the income tax. Raising the income tax will largely only effect the middle and upper middle class. The super wealthy are making the majority of their money as capital gains. As the income tax increase, they will make sure a larger percentage of their earnings are capital gains to offset it.

The OP wasn't specific about the kinds of taxes under discussion. Increasing capital gains taxes would be a good start but not a good finish. If you piece together the numbers, 152 of the top 400 earners were taxed at rates below 15% even as their income grew 9 times faster than the bottom 90%. On average they saw their income increase $72 million from 2006 to 2007 while the bottom 90% saw an increase of only $927.

Here's more on the absence of inflation: Prices fall in spite of stimulus measures

Quote:
The prices of US goods and services, excluding food and fuel, fell last month for the first time since 1982 as aggressive measures to stimulate economic growth failed to inflate the cost of living.
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"That underlying core inflation pressures remain benign is consistent with our view that core price measures will keep to a disinflationary path this year owing to a very wide output gap," said Joshua Shapiro, chief US economist at MFR, in a research note.
...

See also: U.S. Inflation :: Current Median CPI

And more bad news on the jobs front: Millions of Unemployed Face Years Without Jobs

Quote:
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Labor experts say the economy needs 100,000 new jobs a month just to absorb entrants to the labor force. With more than 15 million people officially jobless, even a vigorous recovery is likely to leave an enormous number out of work for years.
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Large companies are increasingly owned by institutional investors who crave swift profits, a feat often achieved by cutting payroll. The declining influence of unions has made it easier for employers to shift work to part-time and temporary employees. Factory work and even white-collar jobs have moved in recent years to low-cost countries in Asia and Latin America. Automation has helped manufacturing cut 5.6 million jobs since 2000 — the sort of jobs that once provided lower-skilled workers with middle-class paychecks.

“American business is about maximizing shareholder value,” said Allen Sinai, chief global economist at the research firm Decision Economics. “You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.”

During periods of American economic expansion in the 1950s, ’60s and ’70s, the number of private-sector jobs increased about 3.5 percent a year, according to an analysis of Labor Department data by Lakshman Achuthan, managing director of the Economic Cycle Research Institute, a research firm. During expansions in the 1980s and ’90s, jobs grew just 2.4 percent annually. And during the last decade, job growth fell to 0.9 percent annually.

“The pace of job growth has been getting weaker in each expansion,” Mr. Achuthan said. “There is no indication that this pattern is about to change.”

Before 1990, it took an average of 21 months for the economy to regain the jobs shed during a recession, according to an analysis of Labor Department data by the National Employment Law Project and the Economic Policy Institute, a labor-oriented research group in Washington.

After the recessions in 1990 and in 2001, 31 and 46 months passed before employment returned to its previous peaks. The economy was growing, but companies remained conservative in their hiring.

Some 34 million people were hired into new and existing private-sector jobs in 2000, at the tail end of an expansion, according to Labor Department data. A year later, in the midst of recession, hiring had fallen off to 31.6 million. And as late as 2003, with the economy again growing, hiring in the private sector continued to slip, to 29.8 million.

It was a jobless recovery: Business was picking up, but it simply did not translate into more work. This time, hiring may be especially subdued, labor economists say.

Traditionally, three sectors have led the way out of recession: automobiles, home building and banking. But auto companies have been shrinking because strapped households have less buying power. Home building is limited by fears about a glut of foreclosed properties. Banking is expanding, but this seems largely a function of government support that is being withdrawn.

At the same time, the continued bite of the financial crisis has crimped the flow of money to small businesses and new ventures, which tend to be major sources of new jobs.
...