Ignoring the Correlation

Paul Krugman waxes about income inequality:

Apologists for rising inequality often argue that since most Americans’ income has risen despite rising inequality, there’s no reason to complain about inequality other than envy.

You see the contrast: a doubling of family incomes in the post war generation compared with maybe 20 percent since, and family incomes growing in line with GDP before, lagging far behind since, with the difference basically being the rising share of the 1 percent.

This is real stuff, not some trivial envy-driven concern. But we must be very, very quiet about it, right?

Krugman is very quiet about one thing: the fundamental change in the monetary system that took place in 1971, the year that Richard Nixon made the dollar a completely fiat currency by removing its peg to gold. After that event, income inequality has really raced ahead.

Now I know full well correlation does not imply causation. But I also know that giving central bankers free rein to print as much money to hand out like candy to their friends in big finance does imply that they will do it. How do I know that? Because they do:

From the Levy Institute:

The bottom line of crisis of 2007-9: a Federal Reserve bailout commitment in excess of $29 trillion.

My hypothesis is that leaving the gold standard was a free lunch: headline GDP growth could be achieved without any real gains in productivity, or efficiency, or in infrastructure, but instead by pumping money into the system and assuming that this would have a positive effect on the economy as a whole. After all — say the Keynesians — “aggregate demand (i.e. money circulation) is the state of the economy”.

But in reality “higher GDP” and “higher aggregate demand” just mean more money circulating. It’s perfectly possible for more money to circulate while the real economy (productivity, labour, technology, infrastructure, etc) deteriorates. In fact, in many respects this is exactly what happened during the Bush administration, where trillions of dollars of productive capital was burnt up on military adventurism.

Now maybe I have a thick skull. If so, could someone explain to me what I’m missing? The Federal Reserve was set free to print as much money as it wanted and give it to its friends with little oversight, and in the following years income inequality soared.

Seems like simple cause and effect.

64 thoughts on “Ignoring the Correlation

  1. Your hypothesis would seem very plausible. Especially since are primary export is “money” and not goods and services. Has there been much scrutiny of the FED over the years, since its modern inception, or is the current demand for more transparency the only real challenge it has faced?

  2. I don’t accept greed and envy explanations. I’m certain there are those in the 1% who are driven by greed as much as anything else, but I also convinced the majority are motivated by achievement and advancement of the human condition. And much of the envy seems to come from the ‘conscience of the liberal’.

    Not knowing how the demographic defining family is defined and tracked, it strikes me that the changing composition of the family relative to the distribution of ‘capita’ might have some effect. But I think that your issue related to the gold standard and fiat currency might be most of the explanation.

    I was there when the Nixon Administration carried out that change. America was in the middle of a serious recession, I had three young children and a job with a small technology company at high risk of going under, so I made changes to compensate that turned out well for me and my family. But, in the long run of history (my lifetime), I question, as you do, the macroeconomic propriety and efficacy of the dropping of the gold standard altogether. This was not the only strange economic policy action taken by Nixon, so I’m certain he is not the source (having understanding of what he is doing and why) of these moves.

    I’m interested in how these moves originated and who in the U.S. were the drivers and I will be doing some research for that explanation. Anyone here who already knows the details, chime in.

  3. As the Keynesians (and Paul Krugman) have been so prone and eager to mistake correlation for causation, it seems weird that they are so dismissive of even considering this obvious correlation (and whether it may imply anything). And it’s not just income inequality: you could take other statistics like unemployment, work force participation, income adjusted for inflation etc. etc. and you’ll see an obvious trend emerging at the beginning of the 1970s.

    As for Bob Thompson’s comment: when a system is complex enough you shouldn’t even bother to look for causes, because the system will just choose that path of least resistance.

    • Your last is intriguing, to say the least, but if we are seeking solutions, don’t we need to understand what problems we are trying to solve and use what we know to solve them? That is, if we have such knowledge, and, if not, don’t we have to learn how regardless of the complexities involved? Are you saying that we have reached the limit of our ability to exercise control over the society we have built and now the society controls us?

      • I’m just saying that the idea of dropping the gold-link likely appeared as the best course to follow from many, many angles. Of course, there were back then people that were against this move for the right reasons and these people have now been likely proven correct. I’m just saying that trying to pinpoint the decision to drop the gold standard on a single individual or group of individuals that *were certain* of what they were doing and of the *ultimate implications* of what they were doing, would be incorrect.

        • I’m really not very interested in who but the arguments for why the gold standard was dropped so any new knowledge acquired over four decades can be used to debunk those arguments (if, in fact, they do). I appreciate your points.

        • The French were to turn in some $280 mil USD in exchange for gold and Nixon wanted to stiff them. He then turned around and propped the now fiat USD by agreeing with the Saudis to overturn US law which limited US imports of crude to 25% in exchange for Saudis agreeing to make all oil transactions in USD. Now this petrodollar wall is crumbling and one day we will no longer be able to export our inflation.

  4. PS: “And it’s not just income inequality” -> Actually you should check these (not sure I mentioned the correct statistics, but I did see many others that match this pattern – also, you should check what ShadowStats are saying as well).

  5. It may be a circular argument in the sense that GDP growth is a good measure of the success of Modern Monetary Theory but it only applies if the economy obeys all the assumptions set out. The reality is that growth in GDP is not the same as growth in prosperity and certainly not equality.

    Central bankers of the last 25 years have indeed had a free lunch too, they have been able to pump liquidity into the economy with little recourse as a result of 3 massive tectonic global influences which started in the late 1980’s and exerted huge disinflationary forces: Perestroika and end of cold war, rise of Emerging Asia Mercantilism, birth of the Internet.

    • I realised a while back that those disinflationary influences you are talking about, coupled with mandates of “price stability” may have made for a more bubble-friendly world.

      The more externalities cause disinflation, the more inflation central bankers need to create for CPI to remain at close to zero. This also means that inflation will be concentrated predominantly in certain sectors that do not benefit so much from externalities — specifically housing, but also IPOs, energy, etc.

      The biggest problem, though, has surely been the securitisation of these bubbles. This has meant that when the bubbles burst it dragged down the entire economy as many institutions, banks and funds owned these securities.

  6. You correlate it to a worng things. Income dsparity has nothing to do with gold standard. Rather it’s mostly affected by taxes. Remember that marginal tax was 90-93% during 1994-1963. You take more from the rich and distribute it to the poor. This how it works. This distribution system started to fail with globalization: cheap labor abroad moved taxable production out of the country, making it impossible to control taxable income.

    • Assuming that income inequality is a function of government not redistributing enough seems quite one-dimensional. Net income results from a variety of factors, of which tax rate is secondary.

      The key factor is that you’re not explaining why there is a correlation between income inequality and fiat credit creation.

      Here’s the US money supply from 1960:

      The money supply starts exploding as soon as income inequality does. The more money is created, the more unequal the distribution seems to be. That makes sense; all that credit creation is not going to wage labour, it’s being pumped out by the Fed and then lent by the PDs and going into Wall Street. And very little seems to trickle down.

    • John was not inferring anything, he was merely presenting a correlation. To address your comment: how would globalization have played out under a gold-linked currency? Perhaps we should ponder whether the day of reckoning would have come much sooner than under the fiat-dollar standard.

  7. Pingback: Who’s the Communist Now? « azizonomics

  8. Pingback: The Shape of Regulatory Capture « azizonomics

  9. Pingback: Corporatism and Income Inequality « azizonomics

  10. Pingback: America's Economy Is Now More Communist Than China

  11. Pingback: Why the Left Misunderstands Income Inequality « azizonomics

  12. Heya are using WordPress for your blog platform? I’m new to the blog world but I’m trying to get started and create my own. Do you need any html coding expertise to make your own blog? Any help would be really appreciated!|

  13. Pingback: How The Republicans Can Win The Upcoming Battle Over Income Inequality | Rotterdam Week

  14. Hello would you mind letting me know which hosting company you’re working with?

    I’ve loaded your blog in 3 different web browsers and I must say
    this blog loads a lot quicker then most. Can you suggest
    a good internet hosting provider at a fair price? Cheers, I appreciate it!

  15. Hello this is kinda of off topic but I was wondering if blogs use WYSIWYG editors or
    if you have to manually code with HTML. I’m starting a blog soon but have no coding knowledge so I wanted to get
    guidance from someone with experience. Any help would be enormously appreciated!

  16. This indicates your gadget is now disconnected from the Computer.
    When Ashley came to speak final evening, I expected
    Mike to be with her. It also enables you to change the icons, lock
    display, background, font and much much more.

  17. You can even produce the picture in black and white and have your child color using crayons
    or pencils. A new window or tab will open using the coloring page.
    All of the blankets are absolve to print-out.

  18. Hope the readers have discovered the info they were looking for.
    And in contrast to most other IM applications, the voice messages are limited
    only to 1 minute. Just as Facebook stores your pictures and
    Gmail stores your e-mail.

  19. Hey there! I know this is somewhat off-topic however
    I had to ask. Does operating a well-established website such as yours require a
    lot of work? I’m brand new to writing a blog bbut I do writ in my
    journsl on a daily basis. I’d likke to start a blog so I can share my personal experience and feelings online.
    Please let me know if you have any recommendations or tips
    for brand new aspiring bloggers. Appreciate it!

  20. I think everything typed made a great deal of sense.
    But, think on this, suppose you wrote a catchier title?
    I am not saying your content isn’t solid, however what if you added
    a title to possibly grab folk’s attention? I mean Ignoring
    the Correlation | azizonomics is a little plain. You should peek at Yahoo’s front page and watch
    how they create article titles to get viewers to open the links.
    You might try adding a video or a pic or two to grab people excited about everything’ve got to say.

    In my opinion, it might bring your posts a little bit more interesting.

  21. You don’t have to check your brains at the doorway. The yeast organisms thrive on sugar and
    your scenario could worsen. Gained u r dn Exercising, hung u moist garments nd gt
    a good shower. Women are valuable human being produced by god.

  22. Sooner or later, Google will find all new spam methods.
    These pre-computed numbers, hold on in a very giant
    information bank for millions or URLs on the net.
    You need to make your potential customers aware of your products
    and services to ensure that they recognize them as valid solutions to their everyday problems.

  23. I really like your blog.. very nice colors & theme.
    Did you design this website yourself or did you hire someone to do it for you?
    Plz respond as I’m looking too construct my own blog
    and would like to find out where u got this from.
    thawnk you

  24. It is this watch series’ starting price and it is a reduced price.
    Flirt using the use of words and body language. Anything you encounter that
    is filled with light is great.

  25. However, messaging is simple, handy, and fast. Nevertheless, carriers
    can build packages around third-celebration apps. Sensitive components are
    stored guarded, as the cooling method draws warmth absent
    from the processors.

  26. Amazing blog! Do you have any helpful hints for aspiring writers?
    I’m hoping to start my own site soon but I’m a little lost on everything.
    Would you suggest starting with a free platform like WordPress or go for
    a paid option? There are so many choices out there that I’m totally overwhelmed ..
    Any ideas? Many thanks!

  27. În primii săi ani , extracția a fost făcut într-o împrejurare în întreaga
    lume . Amintiți-vă acele vremuri de vous
    rendez bancheta din spate sau de a crea în cinema ?
    Nu de vizitatori , și cu siguranță nu Google ( a se
    vedea : Penguin ) .

  28. First of all I would like to say superb blog! I had a quick question which
    I’d like to ask if you don’t mind. I was curious to find out how you center
    yourself and clear your thoughts before writing.

    I have had a difficult time clearing my thoughts in getting my thoughts out there.
    I do take pleasure in writing but it just seems like the
    first 10 to 15 minutes are usually wasted simply just trying to figure out how to begin. Any suggestions or hints?

  29. Great weblog right here! Additionally your website rather a lot up fast!
    What host are you the usage of? Can I get your affiliate link for your host?
    I desire my website loaded up as quickly as yours lol

  30. It ranks up there with the likes of getting to meet Johnny Depp,
    the best dessert you ever ate, and your husband doing all laundry
    and cooking for an entire month. If you like something from other people’s board you
    can “re-pin” it to your own. There are different ways on getting invited to Pinterest.

  31. I heard this business over an additional market rating
    cite as well as viewed some their works, they take their task rather seriously, yet
    make it enjoyable for the remainder. Having Turquoise Video clip Manufacturing capture our
    health and fitness occasions on video clip was the best business choice made.

  32. Thankfully, Native Expansion was one of the first mods to try
    and remedy that issue. Pious Anger ‘ Reduce the cool down time of Crusader’s Blow
    by 10%. In any case, just draw your weapon or set your spells
    and aim with the cursor. Consider: Wrath of the Lich King would make a perfect stocking stuffer, although that might be
    just too much game for any one gamer to handle all at
    once. As far as what bonuses you get for
    choosing a specific class, those are likely to be as insignificant as
    the class bonuses on Skyrim or Oblivion. Domination Victor I-III ‘ Win 5, 15,
    and 30 Domination Matches. Once you have recruited four total subscribers to fight with you, you will be rewarded with a specific in game item: a gift from the leader of your faction himself.

    The game’s graphics have aged fairly well, and touches such as the water effects
    and natural setting hold up. Also like the MG4 the M240 is great
    for hardcore games with its high fire rate. Watch the video with all the actors talking about their characters.

  33. You need to be able to concentrate on effectively landing blows even though your attacker is punching, kicking, and hitting you.
    At the writing of this article, there are a grand variety of books on self defense that are priced at a penny that can teach you all the things that any modern dojo can teach you, without having to pay for the high price of lessons.
    Well, you will discover that one of the precepts for teaching
    traditional martial arts is that of practicing choreographed forms
    or what is called katas that is supposed to teach you how to really fight in the streets.

  34. Which usually Cruel Purposes character are you? And how intense is your
    loyalty to nachos? Do you know exactly what your favorite breakfast food states about a person?

    These are just some of the seemingly endless variety of questions which can be answered by thousands of on-line personality quizzes, most recently made viral simply by Buzzfeed.

    A long time before Buzzfeed, world number one
    quiz website although, these quizzes were the staple of teen plus women’s periodicals, catering the insatiable
    thirst to discover and categorize yourself. And as Slate
    recently pointed out, the most popular Nyc Times actual 2013 was in fact a quiz authored
    by an intern.

    But age range ago, Socrates described the basic human impetus to know thyself — a fundamental drive that we all have to explore and understand ourselves.
    Now, using a quiz to tell us every thing we could probably want to know regarding ourselves
    (and things we never wanted to know), in the Internet age, our
    actual desire may be to rank thyself.

    “We like to believe the world will be categorize-able, ” Emma Roller wrote in Slate.
    world number one quiz website “On the darkish side of human nature, this wish to simplify the world is one reason for prejudice of all types; on the lighting side, it makes lists extremely fun. Life is so much simpler when you can group people in to different boxes! ”

    Individuals have recommended that the quizzes may
    focus on a have to reaffirm the stories all of us tell ourself about ourselves, our internal narrative.

    “It reinforces a feeling of ourself, whether or not it has any legitimacy or not, ” press psychologist Robert Simmermon told the Huffington Post in February.
    “We know difficult literal, yet we hold on maybe a small secret a part of ourselves that will hopes it really is true. inch

    But if knowing which Pretty Little Liar or classic Jimmy Consume World track you are isn’t doing enough to build up your sense of self, test an online personality quiz gowns based in real psychological analysis. You may really learn a worthwhile thing or two about yourself (taking the results with a grain associated with salt, of course).

    Have a look at these 7 research-based on the internet quizzes beneath for a small dose associated with self-knowledge (and perhaps, validation). world number one quiz website

    Are you within love?


    So you aren’t in a new relationship and you also can’t stop thinking about your own significant other — but could it be really love? Problem of enjoy is one that’s baffled plus preoccupied countless poets, musicians and romantics of all types, and even psychologists who research human romantic relationships and sexuality haven’t arrived at a good operating definition. Yet there is 1 test, developed by University associated with Maryland psychologist Sandra Langeslag and the girl team, that will does quite a good job associated with assessing the particular behavioral, emotional, cognitive, plus physical “symptoms” of being inside a state associated with romantic adore (which entails both passion and attachment).

    Take Langeslag’s 20-question questions to tell a person if your relationship is passionate love. world number one quiz website System.Drawing.Bitmap as this kind of love, you’ve got to score high on both infatuation and connection.

    How mindful are you?


    “You are introduced to a group of people. Right after shaking fingers
    and swapping names, you understand you were not really hearing and have no clue what their names are
    usually. ”

    Sound familiar? If it will, you might have a tendency towards spaciness plus distraction — and you can probably benefit from bringing world number one quiz website a little more mindfulness into the daily life. Figure out how mindful (or mindless) you happen to be with this basic, eight-question True/False quiz through the Mindful Leadership Institute can assist you determine how mindful (or mindless) you are within your everyday life. Determining your rating is simple: The more True’s you end up with, the particular less mindful you are.

    Just how emotionally smart are you?

    two women combating

    Think you can tell the difference between anxiety and shock? You might actually be surprised in how difficult it is to read others’ face expressions, an art that’s important measure of empathy and sympathy. Try a facial recognition questions from the University or college of California, Berkeley’s Higher Good Science Center to try your aptitude on this marker of psychological intelligence.

    In case your score will be low, avoid read into it too much — while the test is a good indicator of your capability to read the facial expressions more world number one quiz website, it’s not the only real measure of emotional intelligence. Such things as self-awareness, emotional regulation, and social skills also get play, based on psychologist Daniel Goleman.

    What do you think are the most effective defining character traits?

    May your personality be summed up right after answering forty questions? You might not want to think that you’re that easy to figure out, yet one personality test professes to break the personality code with one simple measurement.

    The “You Just Get Me” test, created by professional individuals and suggested by the New York Times, provides you with a thorough assessment of your character traits after answering forty questions. Better yet, you’ll get the personality “bubble chart” exposing which traits you possess many and minimum strongly.

    Just how mentally properly are you?

  35. Single women want sex in your city: http://cort.as/-Kxr0?7GzVdUb7pDR4

    Popular tags: sweet dating headlines, an example of relative age dating, self summary for dating site, speed dating in jackson mississippi, joseline dating who, 10 signs you know you’re dating a man, dating a girl with hsv 2, stavros niarchos dating history, gratis dating seiten, 28 year old woman dating a 40 year old man, guyanese dating website, older dating sites uk, dating sites in windhoek, matchmaking failed you are not connected to matchmaking servers cs go, deal breaker when dating someone, online dating of the modern male, online dating site success rates, senior partner dating, military connections dating, russian dating websites funny, specialist dating agencies, dating mit niveau, rebound dating uk, pof dating profile examples, craigslist personal dating ads, dating site directory, how to meet up online dating, dating in woodstock nb, pippa middleton dating james matthews, mennonite dating customs, dating agentur berlin, laws on minors dating adults, dating website portland oregon, portable generators hook up your house, reddit best hookup stories, risks dating older man, dating addison hollywood u, free dating colorado springs, what is the legal age of dating in nc, what to do when the guy you’re dating moves away, dating state college pa, dating poolse vrouwen, is frank dating danielle from american pickers, hottest dating site, fanfiction victorious tori and beck are dating, best atheist dating sites, good thai girl dating, indian dating in sydney, dating service mangalore, dating north east scotland, matchmaking gratis, bodybuilder dating websites, leeds dating pof, contact dating site, examples describe yourself dating profile, knightsbridge dating, dating site forums, online dating websites wikipedia, speed dating tx, online dating all free, job dating marseille 23 octobre 2014, health dating sites, rich dating sites australia, speed dating handwerkskammer hamburg, lebanese dating services, filipino dating websites, cost of senior dating sites, top 5 online dating questions, should i join a dating site at 18, dating leeds free, scrubs actors dating, online dating foto tipps, high end matchmaking services los angeles, buy online dating profiles, short definition of carbon dating, lesbian dating online malaysia, dating chemistry signs, dating after suicide of spouse, how do i delete my interracial dating account, dating grimsby, online dating rushing, cat lover dating site, late bloomer dating site, community friends dating site, dating in charlotte bbb, best private dating place in dhaka, do exes come back after dating others, over fifty dating uk, earth science lab relative dating #1, he is dating an ugly girl, craigslist dating cleveland ohio, best uk gay dating app, dating an older woman tips, dating without emotions, windsor chair dating, number one christian dating website, laverne and shirley dating slump, dating sites college graduates, single army men dating site, bb dating app, police dating site uk, hook up san francisco, about me dating quotes, psycho pass dating guide, doc love dating profile, speed dating b2b, dating george clooney, gay dating scottish borders, dating sider for unge, mauritius stuttgart speed dating, good profile information for dating sites, dating at 30 years old, australian asian dating sites, proco rat dating, south american free dating, http://www.christian dating for free, dating in norway, dating instant messaging, speed dating duisburg 2015, speed dating belfast northern ireland, mental health dating website, hare krishna dating, new america dating site, dallas gay dating service, dating apartment manager, i gave up on dating, free no credit card adult dating sites, is nina and ian still dating 2013, female dating in pune, who is kurt dating on glee, how to stop dating someone after three dates, download marriage not dating ep 13 eng sub, what dating sites are completely free, top dating online sites, free social networking dating websites, tattoo lovers dating uk, high paying dating affiliates, dating online manila, charlie sheen online dating, one direction preferences he’s dating your mom, hookup in midland mi, christian girl dating muslim guy, marriage not dating download, dating a woman with multiple baby daddies, sugar mummy dating websites, 5 dating stages, speed dating albuquerque nm, dating king williams town, scandinavian dating websites, dating programme with steve jones, online dating bhaskar, free online dating cape town, what is the dating website with fish in it, online dating sites over 50, carbon dating oak island, this is not a dating site you must be willing, what does a dream about dating a celebrity mean, online dating for free without credit card, free russian dating sites ru, gay matchmaking washington dc, dating sites for seniors toronto, cougar life hook up, international dating site japan, reddit polyamory dating, paginas dating gratis, lesbian dating app singapore, talking after a hookup, mt eliza dating, free matchmaking sites india, adventure dating winnipeg, senior citizen dating app, expat dating singapore, single mother dating site in nigeria, hook up culture in canada, afro dating romance, best online dating sites in japan, dating condom, dawn disabled dating service, louisiana dating site, lemel humes dating, danville va hook up, absolutely free indian dating site, wealthy christian dating, dating is hurting my self esteem, speed dating auckland new zealand, south africa ladies dating, fwb started dating someone else, tampa dating ideas, queer dating sites, dating site with stds, dating website for truckers, free kundli match making software download, ultrasound dating rules, dating prospects definition, free dating sites like tinder, online dating username list, bad dating profiles, dating star sign compatibility, one direction young dating age limit, dating etiquette who pays, best dating apps in new york city, just surrey dating, premium matchmaking wot, best dating apps australia 2016, harry styles dating history, speed dating cronulla, australian dating websites, are kiki and shout from fresh beat band dating, speed dating torquay, dating emotional rollercoaster, dating with the dark shanty agatha, the hookup biloxi ms, online dating girlschase, radiometric dating discovery, daily mail online dating, fort st john dating service, dating 101 why am i still single, uk dating laws, lj moreno dating history, best hookup app india, sex lies dating new york city, speed dating gay los angeles, rv sewer hookup at home, free old dating site in usa, emotii online dating, free top dating sites 2013, online military dating, funny status for dating sites, online dating laws, free dating addis ababa, san angelo online dating, best online dating miami, being bipolar and dating, dating ladies in usa, peace fm dating site, white guy dating asian girl yahoo, pvp matchmaking dark souls 3, dating 4th week, examples of good first messages on dating sites, single seniors dating sites, zion t dating, dating sites in new york, speed dating blaenau gwent, best reality dating shows, carbon dating pictures, matchmaking service sydney, lisdoonvarna matchmaking festival september 2013, carbon dating questions and answers, dating body signals, dating in brampton ontario, dating websites for free malaysia, how to delete uniform dating account, ar-ar age dating

Leave a Reply to pencil portrait drawing step by step Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s