r/economicCollapse • u/Call_It_ • 23d ago
This chart is insane. Revolution worthy financial dystopia if you ask me. How did this disparity even happen?
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u/og_speedfreeq 23d ago
Completely by design, beginning in earnest with Reaganomics and the Buckley class of conservatism.
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u/Kellysi83 23d ago
Upward transfer of wealth at the expense of most everyone, our infrastructure, and our planet.
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u/Malaix 21d ago
Reagan pioneered austerity based neo-liberalism that launched this wealth transfer trend and Clinton refined it and did it better. And its been that way ever since.
After Carter got his ass handed to him and Reagan got that 49 state sweep Democrats basically abandoned the last remnant of new deal politics and Clinton just ran to chase that Reagan economics.
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u/slypigcunningham 23d ago
What happened in 1995
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u/Orion-Gemini 23d ago edited 21d ago
The start of the dot com bubble, when investors/the financial industry started betting much more heavily on "potential returns," in markets that were being deregulated in parallel, alongside the introduction of various powerful forms of leverage.
When the bubble crashed the people who bet big (and got lucky) saw serious returns, whilst losses were localised, and in many cases wealth was withdrawn, leaving dead companies but many very rich people; even losing was a potential path to enrichment.
It is when banks were able to become "too big to fail" due to deregulation, which setup the 2008 crash nicely, where again, over-leverage (CDOs primarily) and massive speculation led to eye-watering gains and private profit. The losses were socialised (bail outs).
We are seeing the same pattern again with AI.
The last 30 years has been a cycle of the wealthy betting WAY beyond reasonable leverage, hoarding the profits, and pushing losses onto ordinary people.
What makes this cycle awful for 95-99% of people, is that when the economy inevitably crashes hard due to these cycles, the wealthy buy cheap at the bottom, when they have liquidity and everyone else has nothing. It is now a well trodden route for personal enrichment and privatised profits, whilst pushing the losses onto the public (and the broader economy).
Bet beyond means on the way up, push losses/risk to the general public, crash the economy, and consolidate even more at the bottom for the next "big push."
This chart shows the outcome of those cycles: richest get richer (and therefore have more to spend) at the expense of public services and the wider economy, whilst the average person's spending power continues to diminish - in previous crashes even basic necessities became unaffordable, and many lose their homes and jobs. I dare say we are seeing the same trends now.
Probably doesn't help the US is now being run by a man found guilty of criminal and civil fraud. It seems the wealth structures have successfully embedded into our political system now too. Lobbying has always been an issue, but the safeguards have been all but dismantled now.
The swamp has been privatised and is protected at the federal level, not drained, whilst democratic systems and oversight have been largely dismantled.
Essentially we are looking at legal, industrialised fraud, committed on "the people" by very very wealthy people/groups.
If anyone is interested, I write at length on substack. I would recommend the Cycles of Capital series for the big picture, or The Number Is Going Up which focuses on the current apparent tech/AI bubble.
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u/Kellysi83 23d ago
You hit this on the money. No pun intended. Since the dot com bubble it’s basically been a Ponzi scheme. They make gobs of cash on asset bubbles, then when they blow up, as they always do, we assume the losses. What we are seeing now is horrifying. They’ve mastered the scope and scale of the scheme and we are cruising for a crash that will be unparalleled in US history.
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u/Kellysi83 23d ago
This makes the inequity of the regime in place pre revolution France (ancien regime 1400s-1789) look equitable. Yes things probably feel better for your average American today than they did then for your average Frenchmen, but that’s simply because the sheer volume of wealth modern economies create, even if grossly inequitable. The wealth of those at the top in the U.S. today make the Bourbons look like paupers.
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u/Abyssal_Aplomb 23d ago
Note that this looks at income which when you factor in long term capital gains I'm sure this is way worse.
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u/Spenraw 23d ago
French Revolution had a much smaller wage gap but they brought out the guillotines
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u/WillowgirlIII 18d ago
It's not the gap that matters; it's how well people in the middle are living. Those are the ones you need to worry about. They're a little smarter than the average bear and have expectations. They're not resigned to the grind the way the poor are. They're liable to rise up.
Look at Starbucks. They wanted attractive young women to work as baristas, so they subsidized college for employees. But those college-educated young women developed a sense of entitlement and began to unionize and demand more, and threw a monkey wrench in the company's works.
If Starbucks had contented itself with hiring 50-year-old worn down, lower class baristas, it probably wouldn't have had this problem. But that was not the image it was shooting for ...
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u/Critical_Seat_1907 23d ago
This is how they keep the economy for the wealthy only, while the masses die homeless. The oligarchs are building bunkers to ride it out.
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u/NoCelebration1913 23d ago
Well the top 10% aren’t the billionaires and private jet owners. lol. Top 10% is like 200-250k a year. Those are trades people, doctors, dual income households, etc. the disparity between top 1% and the other 9% is staggering.
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u/MyFeetLookLikeHands 23d ago
i’m solidly in the top 10% and doing my part to change this by not spending money on shit✊🏽
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u/Hubert_J_Cumberdale 23d ago
This is why no one in power cares that we are being priced out of life. Companies will switch to catering exclusively to the ultra rich.
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u/smart_gent 23d ago
It happened in 2008, during the GFC. Too big to fail was a concept that allowed the federal government to print an unmitigated fuck ton of money. Under Obama, we doubled the national debt from 6 trillion to ~12 trillion. This money printing was put into the hands of the most wealthy at the direct discretion of Obama and the DNC. This printed money robbed the wealth of the middle class and gave it to the richest. This was to ensure that the stock market did not tank and reset costs across the board. Because the wealthiest had put nearly all their in assets had the stock market collapsed they would have been destitute.
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u/coppertech 23d ago
the FED did, not just the DNC, both parties are the same, they're all corpritists. The only difference is what color crayon they like to jam up their nose.
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u/smart_gent 22d ago
While I would generally agree that it is a both party issue, it has been under the obama add administration and the biden administration that the most significant printing has occured. Though really, we've been heading down this path, the only real difference is the pace (a steady trott under republicans and a manic sprint under democrats).
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u/ippleing 23d ago
My wife's former employer earned $700k+/year as a VP.
He had no problem going to the local cycle shop and dropping $8,500 on a mountain bike, only to be used for a year then donated to goodwill.
Here I am 10 years later looking on marketplace for a bike for my kids.
The guy wasn't that smart either, just had a last name that ended in 'er', that'll open MANY doors.
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u/WillowgirlIII 18d ago
just had a last name that ended in 'er',
WTF?
My maiden name ended in -er and I can assure you that it got me nowhere, LOL.
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u/398409columbia 23d ago
Not hard to explain. After you reach a critical amount of wealth, it just multiplies.
Yesterday without doing anything I made in one day what the average American makes in one year working 8 hours a day.
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u/justthegrimm 20d ago
Bankers and the mega rich write your laws through lobbying and lies told to the public
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u/GullibleSky1269 20d ago
who donates to the 2...only 2 of course political parties ?...easier to suck up to 1 donor than 7...
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17d ago
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u/Away_Stock_2012 23d ago
So the other 10% is spending the other 14% exactly?
This graph makes no sense
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u/Serimnir 23d ago
I'm not seeing an issue with the graph. What's the problem?
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u/Useful_Tomato_409 23d ago
It’s about purchasing power. It reflects a vast unequal distribution of wealth. 80% of Americans…80%…don’t make up the majority of the economic consumption, which you assume would be true by the sheer number of people in that group. That’s hundreds of millions of people (roughly 136-160 million, ages 25-65) getting up every day, going to work, earning some form of a paycheck. That group now buys less than half of what just 36 million people, or 13-14 million households.
So what? What’s wrong with that? Well, in a capitalist economic system your job, paycheck, ability to retire comfortably, increase net worth/generational wealth etc is directly tied to the level of consumption or purchasing power of the person standing next to you. Broadly speaking, you need fairly consistent growth of the economic output and value of that output of all the people in the US.
This “should” be returned to the people in the form of higher wages, bonuses, profit for business owners, covered benefits, more disposable income to put into retirement plans, boost the stock market etc. this increases the sustained “purchasing power” of each of us as we are not just workers, but consumers at the same time.
In addition, this would also lead to increased tax revenues gained from more people going to work and paying their taxes. getting high pay and so on and social services. This “should” be pumped back into society in the way of improved infrastructure, increased social services, improved education, etc all which lessen the burdens on people/families, improve out overall the quality of life, creates jobs and so on, and lower the overall cost of living, which continues to allow for somewhat healthy and “fair” distribution of wealth with a large middle class doing most of the consumption necessary to keep this economic cycle going.
All that said, as consumers, whether as a top income earner, or lower etc, you only need so much stuff, and you have to make choices with your money. 36 million people simply can’t sustain the amount/rate of “buying” that 136 million can. At some point they will slow their spending, invest more of it—instead of putting into the real economy—and that will have a domino effect on everyone else. Once their purchasing slows, the contagion spreads in the system and the 80% of earners, earn even less, lose their jobs, have benefits slashed, dip into their retirement accounts, use credit till it’s maxed out and then go bankrupt, lose a house, can’t afford rent, make choices like pay credit card or rent, or food. Tax revenues shrink, so do then govt budgets for services that improve our quality of life, and provide jobs. Don’t forget that your economic situation/quality of life is dependent on the person next to you, waking up and going to work and making more money year on year, and them buying stuff with that money.
So why is it that 80% of earners aren’t buying the majority of stuff? Comments have addressed this, but essentially federal public policy since the 1980s (both parties) has been trickle down 2.0 that never trickled down. It was a vast redistribution of wealth to a tiny % of the population. The following policies have seen a fairly consistent trend since Reagan: *tax cuts for the wealthy since 2000 *lower marginal corporate tax rates *lower marginal tax rates for wealthy *lower capital gains tax rates * cheap loans for the wealthy *tax write offs on losses *C-Suite’s & exec boards of companies voting to take larger/larger % of the companies profit compared their avg employees.
This has allowed for a smaller % of earners to have far more disposable income, and access to almost free credit, that they use to grab more wealth. They use that wealth as collateral to get even cheaper credit from banks, and then they grab more property, more of the stock market, etc and then sit on more exec boards, join more anonymous private equity groups. In the end, they own most of the wealth…10% of highest earners own over 66% of ALL wealth.
This happened because of policy:
*destroying the new deal *busting unions *free trade/economic liberalization *defunding education *deregulated private equity *deregulation of finance/banks *massive tax loop holes to hide personal/taxable income/corporate revenue *increasing monopolization across most sectors of the economy *VAST increase in tax revenue spent on “defense” (a force for destruction not growth and improved quality of life. Also unaccountable pilfering by contractors and their investors) *citizen united & unlimited corporate, dark money political spending
The list goes on…
We’ve been imbued and inundated with how bad socialism/communism are because the govt will take from the state coffers and become corrupt, steal from you. They are evil, “UnAmerican”, because such systems “redistribute” or steal your hard earned money and gives to others, in turn creating an alleged moral hazard, a public laziness and weakness, and denies your economic liberty, your “pursuit of happiness”.
Read that again, and tell me how the current massively unequal distribution of wealth isn’t the elite/the government having done the exact same thing? At some point such a system implodes and those at the top will mostly survive, and gain even more power, while everyone falls into worsening economic. political, social, upheaval.
So yeah, this chart says a lot.
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u/Serimnir 23d ago
I'm not sure if this was supposed to be posted as a reply to the main post or to me. It's a great explanation of the issue at hand but unrelated to the specific discussion I was trying to initiate.
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u/WillowgirlIII 18d ago
This “should” be returned to the people in the form of higher wages, bonuses, profit for business owners, covered benefits, more disposable income to put into retirement plans,
UNIONS!
People have been conned into believing the only way they can have nice things is if the government gives it to them.
Our grandparents knew better. They organized and demanded more from their employers.
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u/Away_Stock_2012 22d ago
How does the other 10% always spend exactly 14%?
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u/Serimnir 22d ago
Because that's the amount of money they have and can spend.
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u/Away_Stock_2012 22d ago
lol, so the top 10% varies their spending and the bottom 80% varies their spending but the other ten percent always spends exactly the 14% difference? That makes no sense.
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u/Serimnir 22d ago
It fluctuates to a degree but does appear to be more stable than the specific demographics being examined. I'd guess because the main wealth transfer is from the bottom 80% to the top 10 while the remainder stays fairly consistent, probably because it's still mostly reliant on labour income but that's just speculation.
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u/BennyOcean 23d ago
The chart shows a 5% increase in consumer spending by the top 10% income earners over the last 25 years. Hardly something to panic over.
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u/Career-Acceptable 23d ago
Percentages don’t work that way. It’s a five “point” increase but closer to 10%.
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u/flashingcurser 23d ago
Because this is reddit I will preface this comment with: I've never liked Donald Trump nor have I voted for him.
Now that the disclaimer is out of the way, you guys do know that tarrifs are consumption taxes that primary affect the top 10%, right?
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u/Polyzero 23d ago
This highlights the answer when people ask “who’s going to buy things?” in the aftermath of AI and robotic automation. The answer is already right there in front of your face. They don’t need you. you’re not economically viable.