Monday, May 5, 2014

Piketty and Deficits

Over at Ludwig's place, Hunter Lewis takes apart some of Piketty's charts.  It would be good to read the entire piece as time permits.

Just looking at this chart

the thing I would say is that income inequality increases in eras of extreme deficit spending by the federal government. 

Lewis says it this way:

What we actually see is two peaks for high earners, right before the crash of 1929 and again before the crash of 2008. These are the two great bubble eras in which government printed too much new money, which led to a false and unsustainable prosperity. These were also crony capitalist eras, as rich people with government connections used the new money to become even richer or benefited from other government favors.
We have not operated in a free market system for a long time.  As we say here every so often, the proper term for our current economic system of government-corporate collusion is "fascism".  If you have ever wondered why people like Buffet and Soros are so enthusiastic and supportive of their particular form of "socialism", this might help explain it.  

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