The real reason for street protests in the US

[ruby sparks]

Although I am not familiar with the exact details.. And had never heard of negative interest.

Negative rates are rates below zero. The Fed rate now is a quarter of one percent, not negative. However, that's more of an advantage to the borrower than the lender, because of the very low ROI.

Corporate debt costs more, bonds are averaging 3.89%. CC debt is unsecured, so it's much more expensive. Even so, RVonse has a point.

Ok, thanks. But how does negative interest work? I borrow £1000 from you and next year only have to pay you bank £999? If that’s the case, why would you lend me the money?

 

[SimpleDon]

Tax rates were never 70%. The left loves to toss around those high numbers while ignoring the fact that back then the tax code contained loopholes you could drive a 18 wheeler through, coupled with a lack of computer power to cross check things and expose cheating.

Policies like you espouse would severely damage our economy.

Not only were there sufficient loopholes to ensure that the top bracket was seldom paid, those who suddenly and unexpectedly came into wealth had neither the time nor the training to use those those loopholes were just about the only ones who paid the top bracket. As a result, these rates actually prevented movement between economic classes instead of facilitated it.

When I tried to discuss economics with you in the past you have demurred, saying that you are not interested in or have enough understanding of economics to discuss it. I am glad that you are starting to participate in economic discussions now. The economy is why government was first created and controlling and policing the economy is still one of government's main jobs, both of which are contrary to libertarian economics.

I answered Loran in post #34 above. Please read it, it applies to your post too, plus, if the higher rates inhibits class mobility why do I have the idea that upward class mobility has been reduced in recent times when rates have been reduced.

 

[Elixir]

Tax rates were never 70%. The left loves to toss around those high numbers while ignoring the fact that back then the tax code contained loopholes you could drive a 18 wheeler through, coupled with a lack of computer power to cross check things and expose cheating.

Policies like you espouse would severely damage our economy.

Not only were there sufficient loopholes to ensure that the top bracket was seldom paid, those who suddenly and unexpectedly came into wealth had neither the time nor the training to use those those loopholes were just about the only ones who paid the top bracket. As a result, these rates actually prevented movement between economic classes instead of facilitated it.

When I tried to discuss economics with you in the past you have demurred, saying that you are not interested in or have enough understanding of economics to discuss it. I am glad that you are starting to participate in economic discussions now. The economy is why government was first created and controlling and policing the economy is still one of government's main jobs, both of which are contrary to libertarian economics.

I answered Loran in post #34 above. Please read it, it applies to your post too, plus, if the higher rates inhibits class mobility why do I have the idea that upward class mobility has been reduced in recent times when rates have been reduced.

All these assertions that there were YUUUGE loopholes that Companies and individuals took advantage of in the 50s, remain unevidenced here. Not particularly surprising, but definitely disappointing to see that those making such assertions seem to feel that repeating such falsehoods lends credence to them. Facts like the 94% marginal rate for top earners during WWII, a 90% top rate in the 50s and the largest companies in the country paying record amounts of taxes during that period remain unchallenged, despite that they give lie to "loopholes you could drive a truck through", "rates were never 70%" etc.

Those arguing by implication that the rich are paying plenty of tax seem quite unable to support that premise.

 

[RVonse]

What options are warranted for the real looters in our economy? Those at the top directly tied to the fed who are paid to borrow money (negative and or zero interest) from the fed while those at the bottom are charged 20% credit card to 1000% pay day loans. Those are the criminals who are doing the most damage right now.

Better to live within your means. Most borrowing isn't for necessities. You don't pay 20% on the loans for things you normally need to borrow for.

But the point is this. The policy of the fed has made it routine for the rich people to borrow money at zero interest and then loan those same dollars to the poor at 1000%. This is the certain road to extreme wealth disparity. Yes you can argue the poor are dumb and the rich are smart, which goes without saying. But the government and the fed should not be structuring monetary policy encouraging even more wealth disparity when we already have too much wealth disparity! It is criminal to charge some of us zero interest and others 1000% no matter what the risk profile is. It is the people at the top of this scheme who are the real looters and pirates IMO. They make black live matters rioters look like a Sunday school picnic!

 

[laughing dog]

Although I am not familiar with the exact details.. And had never heard of negative interest.

Negative rates are rates below zero. The Fed rate now is a quarter of one percent, not negative. However, that's more of an advantage to the borrower than the lender, because of the very low ROI.

Corporate debt costs more, bonds are averaging 3.89%. CC debt is unsecured, so it's much more expensive. Even so, RVonse has a point.

Ok, thanks. But how does negative interest work? I borrow £1000 from you and next year only have to pay you bank £999? If that’s the case, why would you lend me the money?

Central banks charge negative interest rates on reserves in order to induce banks to lend or spend their funds instead of keeping them idle.

A bank charging a negative interest rate is sending the signal to depositors that there is a net cost to the bank of servicing their account (i.e. the return on any loans - cost of serving the loan and the deposit account < 0).

 

[Axulus]

Although I am not familiar with the exact details.. And had never heard of negative interest.

Negative rates are rates below zero. The Fed rate now is a quarter of one percent, not negative. However, that's more of an advantage to the borrower than the lender, because of the very low ROI.

Corporate debt costs more, bonds are averaging 3.89%. CC debt is unsecured, so it's much more expensive. Even so, RVonse has a point.

Yea, lenders are are real trouble. Don't buy bank stocks today. They can't make money when their spread is so thin.

What is their spread currently? Aren't they able to obtain money at very low rates (low interest paid on deposits, other cheap sources of money), so the spread shouldn't really be affected all that much, no?

 

[Axulus]

What options are warranted for the real looters in our economy? Those at the top directly tied to the fed who are paid to borrow money (negative and or zero interest) from the fed while those at the bottom are charged 20% credit card to 1000% pay day loans. Those are the criminals who are doing the most damage right now.

Better to live within your means. Most borrowing isn't for necessities. You don't pay 20% on the loans for things you normally need to borrow for.

But the point is this. The policy of the fed has made it routine for the rich people to borrow money at zero interest and then loan those same dollars to the poor at 1000%. This is the certain road to extreme wealth disparity. Yes you can argue the poor are dumb and the rich are smart, which goes without saying. But the government and the fed should not be structuring monetary policy encouraging even more wealth disparity when we already have too much wealth disparity! It is criminal to charge some of us zero interest and others 1000% no matter what the risk profile is. It is the people at the top of this scheme who are the real looters and pirates IMO. They make black live matters rioters look like a Sunday school picnic!

I don't think people who own a house are necessarily rich (they benefit from lower interest rates). Additionally, if business loans are cheaper, it will spur more business investment. As an example, rental property owners will be able to take out cheaper loans, which increases the demand to construct additional housing. As a result, even renters will benefit from the increased supply of housing through lower rents.

Rich people don't borrow massive amounts of money for consumption (they typically already have plenty saved up). The most significant impact of low interest rates is on businesses and consumers buying things like cars and houses. The businesses don't benefit all that much in way of profits from low interest rates due to competition, as the positive effect on their profit margins erodes due to the increased supply.

 

[RVonse]

But the point is this. The policy of the fed has made it routine for the rich people to borrow money at zero interest and then loan those same dollars to the poor at 1000%. This is the certain road to extreme wealth disparity. Yes you can argue the poor are dumb and the rich are smart, which goes without saying. But the government and the fed should not be structuring monetary policy encouraging even more wealth disparity when we already have too much wealth disparity! It is criminal to charge some of us zero interest and others 1000% no matter what the risk profile is. It is the people at the top of this scheme who are the real looters and pirates IMO. They make black live matters rioters look like a Sunday school picnic!

I don't think people who own a house are necessarily rich (they benefit from lower interest rates).

Since the beginning of time, the landowners are by definition the rich. And the people who pay rent are the slave class. Yes, there are different levels of rich. But you will NEVER find a rich person who only pays rent while owning nothing at all (indentured servitude).

Rich people don't borrow massive amounts of money for consumption (they typically already have plenty saved up).

But they do leverage heavily to become rich. Especially when the money is on good terms from the fed

 

[J842P]

Although I am not familiar with the exact details.. And had never heard of negative interest.

Negative rates are rates below zero. The Fed rate now is a quarter of one percent, not negative. However, that's more of an advantage to the borrower than the lender, because of the very low ROI.

Corporate debt costs more, bonds are averaging 3.89%. CC debt is unsecured, so it's much more expensive. Even so, RVonse has a point.

Ok, thanks. But how does negative interest work? I borrow £1000 from you and next year only have to pay you bank £999? If that’s the case, why would you lend me the money?

If you are the Fed, to encourage you to spend, obviously. For the same reasons it lowers the rate from some positive number to a smaller, positive number.

 

[J842P]

It's true that the upper 1% never paid 90% in taxes. Most paid about 42%, after deductions. I wish that people would stop saying that the upper tax rate was 90%. It was 90% on paper, but very, very few actually paid that much. Still 42% is far more than most in the upper 1% pay these days.

https://slate.com/business/2017/08/the-history-of-tax-rates-for-the-rich.html

American progressives like to remember the mid–20th century as a time when the only thing higher than a Cadillac’s tail fin was the top marginal tax rate (which, during the Eisenhower years peaked above 90 percent for the very rich). Uncle Sam took 90 cents on the dollar off the highest incomes, and—as any good Bernie Sanders devotee will remind you—the economy thrived.

Conservatives, however, often try to push back on this version of history, pointing out that those staggeringly high tax rates existed mostly on paper; relatively few Americans actually paid them. Recently, the Tax Foundation’s Scott Greenberg went so far as to argue that “taxes on the rich were not that much higher” in the 1950s than today. Between 1950 and 1959, he notes, the highest earning 1 percent of Americans paid an effective tax rate of 42 percent. By 2014, it was only down to 36.4 percent—a substantial but by no means astronomical decline.

Tax rates do indeed need to be raised on the wealthiest Americans but 90% is unrealistic.

What was this thread supposed to be about again?

Why is it unrealistic? It doesn't seem unrealistic to me. Indeed, it was the case. So it has been real.

Why should we stop saying the marginal tax rates were 90% for the top rate? That's the truth. Should we stop saying the top marginal tax rate is currently 37% because no one pays that either?

 

[Testy Calibrate]

Until we get a grip on this issue, we will continue to see a slide towards autocracy and possible economic collapse. The protests will just lead to more repression and backlash and create a vicious circle. Inequality is what caused the Great Depression. We need to rid ourselves of this notion that low marginal tax rates are an economic cure all. In fact, Democratic proposals like Warren’s wealth tax or even AOC’s tax proposal don’t go nearly far enough. We need to see marginal tax rates back to 70% on income over $1,000,000, not $10,000,000. We need a much more robust Antitrust policy. Changes in antitrust law have gutted it and few people realize what has happened. We actually need less securities regulations, or at least major overhaul of them. Shareholders actually have too much power, and since the early 70’s, College business courses have emphasized that shareholders are the only concern of management, and other stakeholders such as workers, customers or the communities in which they operate are irrelevant. All that needs to change.

Tax rates were never 70%. The left loves to toss around those high numbers while ignoring the fact that back then the tax code contained loopholes you could drive a 18 wheeler through, coupled with a lack of computer power to cross check things and expose cheating.

Policies like you espouse would severely damage our economy.

That seems to dramatically miss the point.

 

[ruby sparks]

Ok, thanks. But how does negative interest work? I borrow £1000 from you and next year only have to pay you bank £999? If that’s the case, why would you lend me the money?

If you are the Fed, to encourage you to spend, obviously. For the same reasons it lowers the rate from some positive number to a smaller, positive number.

Ok. Thanks.

But it’s the equivalent of a Bank of England base rate, I think? In which case, it’s available widely, and affects individual borrowers (and depositors).

I agree that private business lenders charging 1000% etc to the desperate and not well off can be deemed predatory (albeit the lender is taking more risks) but is there actually any direct connection between such businesses borrowing at very low, zero, or negative rates and then using that money to lend at 1000%?

I guess it could very easily be happening. I just wondered if it in fact was.

ETA: are there caps on what maximum interest rates are permitted to be charged for loans in the USA, as there are in the UK, or is it a free-for-all?

 

[SLD]

It's true that the upper 1% never paid 90% in taxes. Most paid about 42%, after deductions. I wish that people would stop saying that the upper tax rate was 90%. It was 90% on paper, but very, very few actually paid that much. Still 42% is far more than most in the upper 1% pay these days.

https://slate.com/business/2017/08/the-history-of-tax-rates-for-the-rich.html

American progressives like to remember the mid–20th century as a time when the only thing higher than a Cadillac’s tail fin was the top marginal tax rate (which, during the Eisenhower years peaked above 90 percent for the very rich). Uncle Sam took 90 cents on the dollar off the highest incomes, and—as any good Bernie Sanders devotee will remind you—the economy thrived.

Conservatives, however, often try to push back on this version of history, pointing out that those staggeringly high tax rates existed mostly on paper; relatively few Americans actually paid them. Recently, the Tax Foundation’s Scott Greenberg went so far as to argue that “taxes on the rich were not that much higher” in the 1950s than today. Between 1950 and 1959, he notes, the highest earning 1 percent of Americans paid an effective tax rate of 42 percent. By 2014, it was only down to 36.4 percent—a substantial but by no means astronomical decline.

Tax rates do indeed need to be raised on the wealthiest Americans but 90% is unrealistic.

What was this thread supposed to be about again?

That the increasing income disparities is creating alienation between the wealthy who are milking the system through such things as low marginal tax rates, and other ways, and the rest of us who don’t have access to the corridors of power. This alienation is driving people to oppose the system in destructive ways. e.g. voting for Trump, or actually rioting in the streets. People need to identify with the system and that it provides them with the same opportunities as the elites, or they will oppose it.

And I didn’t argue for 90% tax rates, just 70%. I once read a study of marginal tax rates that said 70% created the optimum revenue for a state. Granted the wealthy rarely paid such, but look what they had to do to avoid Y had to get rid of it and put it into socially useful things like charities, and other social type investments. The money got out there. It was freed from a single person to be used for a variety of other people’s needs. This is what causes economic growth and ensures that more people got to share in the bounty of our economy. Thus less rioting, and a far more harmonious social system.

 

[J842P]

Ok, thanks. But how does negative interest work? I borrow £1000 from you and next year only have to pay you bank £999? If that’s the case, why would you lend me the money?

If you are the Fed, to encourage you to spend, obviously. For the same reasons it lowers the rate from some positive number to a smaller, positive number.

Ok. Thanks.

But it’s the equivalent of a Bank of England base rate, I think? In which case, it’s available widely, and affects individual borrowers (and depositors).

I agree that private business lenders charging 1000% etc to the desperate and not well off can be deemed predatory (albeit the lender is taking more risks) but is there actually any direct connection between such businesses borrowing at very low, zero, or negative rates and then using that money to lend at 1000%?

I guess it could very easily be happening. I just wondered if it in fact was.

ETA: are there caps on what maximum interest rates are permitted to be charged for loans in the USA, as there are in the UK, or is it a free-for-all?

Basically a free for all at a federal level. Many states cap it at like, 36% (pretty outrageous rates IMO).

Anyway, I don't think there is necessarily any relationship between practically 0% or even negative rates and high rates on consumer credit cards. It just looks bad when juxtaposed.

 

[Harry Bosch]

Yea, lenders are are real trouble. Don't buy bank stocks today. They can't make money when their spread is so thin.

What is their spread currently? Aren't they able to obtain money at very low rates (low interest paid on deposits, other cheap sources of money), so the spread shouldn't really be affected all that much, no?

I'm not really sure. I was a commercial banker about five years ago. I'd say that the average spread is somewhere around 3%. Deposits are at the bottom. So, as rates come down, it shrinks a banks spread one way. Banks need the spread to pay for their employees, their facilities, FDIC insurance, and etc.

 

[DBT]

Is anything really going to change? The rich cling to their advantage, their wealth and power while the rest scrabble to make a living. It's been that way for centuries, revolutions come and go, faces change, people talk, debate, propose solutions, yet inequity grows with each new cycle.

 

[SLD]

Is anything really going to change? The rich cling to their advantage, their wealth and power while the rest scrabble to make a living. It's been that way for centuries, revolutions come and go, faces change, people talk, debate, propose solutions, yet inequity grows with each new cycle.

It hasn’t always been that way, but it’s a difficult problem to overcome. But after WW2, the US and many other countries did precisely that. The GINI factor went down significantly because marginal tax rates were high, and estate taxes were also pretty strong. In the 50’s, the average CEO made about 25 times what his average employee made. Now it’s over 300 times. We can go back, but I fear having to go through what our ancestors went through the last century to get there.

SLD

 

[Loren Pechtel]

Is anything really going to change? The rich cling to their advantage, their wealth and power while the rest scrabble to make a living. It's been that way for centuries, revolutions come and go, faces change, people talk, debate, propose solutions, yet inequity grows with each new cycle.

It hasn’t always been that way, but it’s a difficult problem to overcome. But after WW2, the US and many other countries did precisely that. The GINI factor went down significantly because marginal tax rates were high, and estate taxes were also pretty strong. In the 50’s, the average CEO made about 25 times what his average employee made. Now it’s over 300 times. We can go back, but I fear having to go through what our ancestors went through the last century to get there.

SLD

How much of this is due to consolidation, though? There aren't nearly as many CEOs now.

 

[DBT]

Is anything really going to change? The rich cling to their advantage, their wealth and power while the rest scrabble to make a living. It's been that way for centuries, revolutions come and go, faces change, people talk, debate, propose solutions, yet inequity grows with each new cycle.

It hasn’t always been that way, but it’s a difficult problem to overcome. But after WW2, the US and many other countries did precisely that. The GINI factor went down significantly because marginal tax rates were high, and estate taxes were also pretty strong. In the 50’s, the average CEO made about 25 times what his average employee made. Now it’s over 300 times. We can go back, but I fear having to go through what our ancestors went through the last century to get there.

SLD

The ratio of wealth, income, power between rich and poor has varied throughout history, there have been better periods and worse periods, but nothing has fundamentaly changed....and there has been a growing disparity in the last few decades. That is what I meant.