Think About This

In Econ 101 there is this thing called the Lorenz curve. It looks like this:

(Diagram Credit: Wikipedia)

The Lorenz curve shows the distribution of income of a population percentage-wise.

The 45 degree line is called the Line of Equality. The Line of Equality describes a condition where income is equal for everybody. The “bottom” 10% of people on the x axis have 10% of the income and the “top” 10% also have 10% of the income. It happens to describe the official communist ideal.

As readers of this blog well know, the official communist ideal is not income equality but despotic inequality. Real communism sells the income equality to the victims of cabalistically-ruled despotic capitalism to people by force and then proceeds to distribute the income more unequally than even despotic “Laissez-Faire” capitalism. Communism is: therefore a capitalist maneuver, a maneuver to achieve absolute monopoly. The history of Communism is a history not of equality but of tyranny at every time and at every place.

Point proved.

The curve. (The curved curve.) The point halfway between zero and 100% on the x axis shows share of income of the individual who is in the middle of the population as sorted by income. There are an equal number of people either side of him. The share of income for this person who is at 50% of the population is where a vertical line from the x axis intersects with a horizontal line from the y axis where they intersect on the the curve. The share of the individual’s income is on the y axis. The curve shown above seems to show the person at 50% of the population has a share somewhere between 10 and 15% of income. The more this curve dips in toward the xy axis the more unequal the income.

The Lorenz curve in reality does not have a symmetrical shape. It may have a somewhat continuous shape but not a symmetrical one. A real Lorenz curve of the US for instance accounting for net income after expenses as well as for income from offshore wealth might hover very close to the x axis for about 90% of the population, increase somewhat for the next 5%, jump up for the next 4 9/10% and then shoot straight up at the last 1/10%, meaning that the 1/10 of 1% of the population have gargantuan incomes. The last 1/10,000% represents the income earned by the top 315 income earners in the country; the last 1/100,000% the last 31.5 income earners (based on a US population of 315.5 million people). We obviously know that the rich have been getting very rich indeed, with year over year gains of 10% or more for the last few decades for the bulk of the wealthiest people in the country.

It is these same people who represent the greatest threat to individual liberty, general freedom and economic security. That is because, just as they have been willing to use underhanded, treacherous means to gain their wealth, they will also us underhanded and treacherous means to keep it.

The Lorenz Curve describes the distribution of income across a population, arrayed by income but a curve could just as well plot the share of wealth or assets by population.

Plotting measures of wealth held by individuals would yield an even more concave curve because income not spent translates into wealth and greater incomes allow for greater saving. For instance most individuals making $100,000 -at this point in time- per year or less spend nearly all of it. Those that make less of course save less, and at some point incomes drop to a level where saving is impossible because the threshold where the fixed costs of maintaining an existence requisite to making an income in the commercial marketplace become equal to that income.

Of course, the above only considers assets and not assets and liabilities, otherwise known as net assets. For each individual, tally what they own and what they owe and then you have their net assets (or net worth, financially speaking of course). So, say, one of the people with the US median individual income of $27,915 per year probably has very little in the way of assets or money savings but may have substantial liabilities such as a car loan, a mortgage on a very modest piece of property, medical bills and credit card debt (never mind this individuals share of local, state and national debt).

Say the note on the used car is at $6,500 and the car is worth $4,600. Realistic. Say the note on the condo or trailer is at $83,000 but is now worth $75,000. Say, the individual has $2,100 in emergency room bills outstanding and $2,900 on a credit card. He has inherited a few things of minor value from his grandparents that are worth $2,500. Let’s say the individual has $400 dollars in his bank account. What is his net worth? It is $340+$2,500+$4,600-$6,500+$75,000-$83,000-$2,100-$2,900=-$12,000.

You and I know this is probably a pretty good financial situation for someone on his own. -$12,000 is the individuals current net worth provided he can unload his assets quickly and with little cost.

Interlude to look at income. I estimate the following income/expense (net income) scenario:

monthly income 2,326
monthly expenses
mortgage 728
car pmt 138
medical bill 100
credit card 100
elec 75
oil 225
water 50
trash 50
cable 100
phone 50
gas 200
US tax 400
state tax 115
local tax 50
total expenses 2,381

Obviously our example isn’t making it, even without buying food, accounting for maintenance of body or property, or any extras such as vacations or dining.

This is debt slavery; for the banks that loaned our example the money for his assets that enable him to get a job that does not even pay for itself got that money for nothing. Our example is paying the banks every month for doing nothing but distributing debt notes and collecting payments on them.

End interlude on income.

Back to the analysis of wealth. Our example who is at the 50% percentile of individual income earnings has a net worth of negative $12,000. Many people below his income level may have more unfavorable net worths but many may have better ones, for as incomes go lower debt becomes less likely due to the absence of institutions who will lend them money; they may not have any assets but they have no debt either. Many don’t care to get ahead by work, like our example. Furthermore, those with low or no incomes have a plethora of free government benefits they can receive from housing, fuel, food, child, healthcare, phone and miscellaneous expense subsidies that make it less likely they will incur debts; for debts will certainly need to be acquired if one is to survive without any sort of income.

The point is that the distribution of wealth does not follow the distribution of income because of government income redistribution programs. It is those that are actually working, but working for inadequate compensation, that likely have the greatest negative net worths. The position (or rank) of individuals in the population on the x axis of our Lorenz curve is scrambled around when net worth is plotted instead of income. Furthermore, whereas income as the economists count it is always positive (they don’t use net income), the distribution of net worth among the population will be negative for a hefty portion of the population.

I can only speculate as to the percentage of the population with net assets that are below zero, but if I were to I would say that it was above 50%.

For the inverse reason that the wage slave has a negative net worth for his efforts the very high income earners have extremely huge net worths for theirs because they are the ones exploiting the wage slaves. The money actually is where the work is actually being done.

It’s a trade of labor for credits that have to be returned where they came from.

A couple of fundamental principles of physics are that matter and energy can neither be created nor destroyed. Likewise, the earth is a closed system as far as economics is concerned. All the earth’s assets cannot be increased. Nor can the earths energy. The assets can move around or change ownership and the money can flow in different ways as it courses around the world like jumping electrons from one transaction to another.

Assets are analogous to potential energy. Money being transacted is analogous to kinetic energy.

When central banks print money to pay for bonds contracted for by central governments for said money, they get this money through thin air. Shareholders in the central banks receive dividends on the payments by the central governments (which get the money by extracting it from their people). The supply of money is increased reducing the value of the original supply. Increased borrowing, however, means increased interest inflows to the banks, so while the value of individual notes are diluted the increase in volume of debt payments more than makes up for the dilution (indeed greater borrowing simply means a greater allocation of the pool of money to the bankers); furthermore more bonds means a greater share of the claim on assets. In any liquidation bondholders have the first claim on assets.

We agree, it’s a scam? A raw deal of the most outrageous variety?

There are no words to put to how absurd the whole deal is. How unjust. How appalling. How weak and how wicked.

Surreal as it seems, it is real.

What to do? This can’t go on because, for one, it does not conform to reality. It is a derivative activity dealing with numbers that is applied to real labor and real things. It is essentially a construct of the imagination put on top of the daily work of survival, trade and accumulating real things. Mechanically, one cannot pay for non-real things (the banking overhead) with real things and have it all turn out if those non-real things do not convert back into real things for the people that actually produce or else there will at some point be a inadequate supply of real things sufficient to sustain or satisfy the actual producers.

If at one point an entire economy existed without debt and debt was then introduced, further economic activity would be reduced by the amount of interest payments for the reason that although there is more money introduced, the value of individual notes is diluted due to the increase in the amount of them. Essentially there is no real change in the money supply as the share value has simply been diluted (we “see” it as inflation).

The real economy -goods, materials, services used and produced by people is still what it is. Now, a portion of the money -used to trade for goods, materials, services- is diverted to bankers. So, although the money supply hasn’t really changed, the economy suffers because money that formerly represented real work is being siphoned off by bankers, which means the money supply has actually shrunken. Wow! Say that again!?

Okay, I will. Say there are no banks. The government has provided 1 million dollars for the economy. The people work and play, earn and spend uneventfully. Then, suddenly, the government adds another 1 million to the economy. What does that do? Is everyone suddenly twice as wealthy? No. Nothing has changed except that it now takes 2 dollars to buy what one dollar previously did. No worries though, nobody is worse off because it didn’t affect how much people were working and playing; it only affected the nominal amount of the monetary transactions. If, however a banker introduces the extra million, interest will be extracted from the economy into the coffers of the unproductive banker. If two million with no interest made no difference to the real economy, then the same thing with interest will. Negatively. The more and more money borrowed, the greater proportion of economic activity siphoned off as interest credits. Imagine the banker lent not one million but ten million. Worse yet.

If introduced money can lead to greater productivity or conquest it can be a successful investment, but if it invested in no-win, useless wars that aren’t even for the nation fighting them and are squandered on useless, unproductive and uninventive elements of society, it cannot be. Regardless, borrowing imaginary money from someone else is senseless to say the least.

To say the least.

It may be added that the interloping banking cadre have been inclined to take “their profits” and invest them in production or exploitation of cut rate economies (having no debt due to being poor), the produce of which will yield a greater return for them back in the economy which was doing fine prior to the banker ever interloping while priming the pump of the new economy for future exploitation of it.

In the foregoing ways does the banker extract income, and then wealth, from an economy of real work, goods and value. It is a absurd, blatant, surreal and baldfaced scam. Yes it is. And, being unreal, as well as unjust, it simply has no place in the judgement seat in the reckonings of justice; that is,  the rendering of reward and punishment; for it has already subsumed that role unjustly. That is the issue. That is the problem. In the final analysis, it it the reallocation of wealth and assets from those who work to those who steal. The basis of all wealth and all value is work, or labor. There is no other way to arrive at any other conclusion.

When people save, they are saving for goods and services. They may save for attorneys, financial planners and doctors but all of this is so that they can enjoy basic goods and services provided by labor. One does not strive (or steal) with visions of visiting the doctor or going to the lawyers office, spending time with a stockbroker or an insurance agent; they strive (or steal) so that may be not just secure but able to live with pleasure. To live with pleasure requires cars, electricity, furnishings, clothing, meals, music and massages: all things that come from actual work.

Recall our Lorenz curve where we plotted population against income. Recall the one that I imagined where we plotted population against wealth. Recall the wealth was negative for many working productive people. This wealth, and claim on future earnings via interest payments, are claimed by the bankers. Also claimed is wealth in the form of productive assets that used to belong to those in the economy who used to do some sort of work to get it before the bankers ever came along and used not just raw usury but complex swindles to sieze. Recall how that banking is a stupendous malicious scam. Everybody loses but the bankers and those they choose to prop up. If we showed the Lorenz wealth curve and the income curve on the same graph, we would see that the income curve is sharply convex, going from 0% on the x axis to 100% on the y axis. We would see that the wealth curve dips below the x axis until somewhere beyond 50% on the x axis and then goes up more sharply than the income curve (i.e., is more convex).

The segment of the population whose wealth is hugging the y axis is the accumulated stolen wealth of the financial “elite”.

If we invert the wealth curve so that it is upside down. The point on the curve that was at the bottom-most left is now at the top left and the point on the curve that was at the top most right is now at the bottom-most right. The two curves will now intersect near the y axis. It will look like an “X” where someone grabbed the center, pulling hard, so that the X stretched out and was pulled almost flat against the y axis.

Then: Take all the wealth above the intersection of the inverted wealth curve and the income curve and redistribute it to the remaining population equally.

It will be a soft sell, especially to those who were expecting a windfall in gas prices for the middle eastern wars. Hey people: here is the real cause of the rise in gas prices. Have yourself some Chevron stock. Texaco? Citigroup? Here you go.

It isn’t communism: it is necessary. It isn’t dreaming; what is happening is a nightmare. It isn’t stealing: it is justice. It isn’t turning the other cheek but it is the jubilee. It is at least an equal application of justice, even to the very, very rich.

Beyond this, we offer to “offshore” the “bankers” and their masonic co-conspirators to a remote island, restore the constitution, allow lending only by domestic companies that actually produce physical things as their main line of business, restrict unsavory commerce here and abroad and reduce immigration to a trickle.

If the reader is concerned that those that did not work will unfairly get a share of the recovered loot, I will remind him that those that did not work were already getting an unfair share (the bankers). Those that work will still have way more than they had, and they will not have any debt either. I can’t imagine how well those that are naturally talented and willing to work, invent and strive will do in an environment such as this.

Just an idea.

I’ll tell you this though, this world we live in is just an idea too.

Someone else’s idea.

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About americanalliance

I am interested in America. The land, the people. There is a MAJOR disconnect between the American nation and the so-called "elite."
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