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"We Made It Wider!" Hank Paulson Bursts Out Laughing When Asked About Wealth Inequality
Zerohedge ^ | 09/06/2015 | Tyler Durden

Posted on 09/07/2015 7:31:14 AM PDT by Cheerio

A few months ago, a hurt Ben Bernanke put on his blogger hat and set out to explain why, in his mind, the unconventional policies undertaken by the Fed in the post-crisis years have not contributed to record income inequality. As we noted at the time, epic hilarity ensued.

Bernanke’s explanation went something like this: while QE does indeed inflate asset prices, poor people have been getting poorer for quite some time, so sure, maybe the Fed contributed a little bit, but probably not a whole lot and besides, the more Keynes the better when it comes to smoothing out the business cycle and a smooth business cycle is good for everyone. Finally, Bernanke patiently explained that to the extent ZIRP punishes savers it’s nonsensical to mention it in any discussion about income inequality because after all, poor people don’t have savings.

(Excerpt) Read more at zerohedge.com ...


TOPICS: Government
KEYWORDS: abortion; deathpanels; fed; hankpaulson; incomeinequality; obamacare; paulson; tylerdurden; tylerdurdenmyass; zerocare; zerohedge; zirp
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That description is probably not as generous as it could be, but if you read Bernanke’s post it’s pretty close.

First of all, the whole "smoothing out of the busines cycle" bit is pure fiction. If anything, attempts to centrally plan the economy are leading to greater and greater boom and bust cycles. Furthermore, denying that QE has exacerbated income inequality is to assert that somehow, inflating the value of a certain set of assets doesn’t by definition widen the gap between the accumulated wealth of the people holding those assets and the people who don’t hold those assets. The St. Louis Fed seems to understand this (incidentally, they also understand that there’s no evidence whatsoever to support the notion that QE increases “healthy” inflation and/or has a demonstrable impact on output) even if Bernanke does not.

If you needed proof of the widening gap between the rich and everyone else (and the attendant rise of class segregation) beyond that presented by the St. Louis Fed study linked above and by the anecdotal evidence that’s readily observable by looking at the prices paid this year for high-end art and mega mansions, look no further than Wall Street, where, thanks to the Fed’s generosity, Lloyd Blankfein is now a billionaire.

Speaking of Goldman Sachs and income inequality, back in April, Hank Paulson and Robert Rubin sat down with Sheryl Sandberg and Tim Geithner at an event hosted by Michael Milken (no less), to discuss a variety of topics. Around a half hour into the discussion, Sandberg asks Paulson about income inequality. Here’s what happens next:

Sandberg: “Yeah, so let’s follow up on a bunch of the things we were [talking about]. Let’s start with income inequality.”

Paulson: “Ok, well.. income inequality. I think this is something we’ve all thought about. You know I was working on that topic when I was still at Goldman Sachs..”

Rubin: “In which direction? You were working on increasing it.”

Paulson then bursts out laughing: "Yeah! We were making it wider!"

Here’s the clip:
1 posted on 09/07/2015 7:31:15 AM PDT by Cheerio
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To: Cheerio

Why is this even an issue? Am I the only one who thinks this is ridiculous?

Why should wealth increase equally? How can it?

If I am worth a million and my net worth increases 5% it is a $50k increase. My neighbor has a hundred k and it increases 5% or $5k. So the gap has widened. Who except some ideologically driven moron looking to whip up the ignorant would give a damn? Why do we care about people who are just jealous of what others have?


2 posted on 09/07/2015 7:44:03 AM PDT by billyboy15
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To: Cheerio

“Wealth gap” is a truly evil concept.
What it means is that, if you save your money, or invest it in stuff that holds its value, and create legacy for your children, that is UNFAIR to folks who squandered all they had on tennis shoes, iPhones, and lottery tickets.


3 posted on 09/07/2015 7:50:47 AM PDT by Little Ray (How did I end up in this hand-basket, and why is it getting so hot?)
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To: billyboy15
Why do we care about people who are just jealous of what others have?

Excellent question, billyboy!!

4 posted on 09/07/2015 7:51:00 AM PDT by McBuff
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To: Cheerio

Nice how these wizards of smart leave the EPA costs and beef and fuel and other things out of their calculations.


5 posted on 09/07/2015 7:56:22 AM PDT by CincyRichieRich (1984 Now)
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To: billyboy15

Because if you create enough poor, desperate people they will come after what YOU have.

They should have real financial education in the public schools. Financial ignorance drives much of the income inequality.

Along with making poor life decisions.


6 posted on 09/07/2015 7:56:43 AM PDT by crusher2013 (Liberalism is Aristocracy masquerading as equality)
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To: Little Ray

YEs, but if you have zero incentive for savers who just see their money eaten away by inflation greater than interest if they try to save, why should they not spend on current needs/wants rather than getting eaten up?


7 posted on 09/07/2015 7:59:03 AM PDT by ichabod1 (Spriiingtime for islam, and tyranny. Winter for US and frieeends. . .)
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To: billyboy15

This article is not about the free market. This is about a bunch of elites manipulating the market with funny money, with the effect of making themselves and their rich friends richer and most everyone else poorer. Sending interest rates through the floor means that younger people don’t learn the value of saving and older people don’t collect any revenue on their savings, even though inflation (e.g., food, rent) is turning those savings into dust.

Income inequality is inevitable. Thatt doesn’t mean that manipulating the market to increase inequality is a good thing.


8 posted on 09/07/2015 8:14:50 AM PDT by AZLiberty (No tag today.)
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To: billyboy15
"Who except some ideologically driven moron looking to whip up the ignorant would give a damn?"

You are 100% correct. The "wealth gap" has been widening since the Industrial Revolution. But it's not just the so-called "robber barons" of the late 1800s who became wealthy. The wealth of all Americans has increased greatly. And it's still increasing.

My six siblings and I are far better off than our parents. And because my father was a hard worker, we went from lower middle class (i.e. poor) to middle class when I was a child.

Now several of my siblings have wealth of over one million dollars, and the others are doing well too. My wife and I are not wealthy, but we are doing quite nicely. Because somebody else became made a lot more money or became a billionaire does not bother me in the slightest.

9 posted on 09/07/2015 8:15:02 AM PDT by driftless2
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To: AZLiberty

Explain how this manipulation is working and exactly how it makes some poorer.


10 posted on 09/07/2015 8:31:53 AM PDT by billyboy15
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To: crusher2013

No one is “creating poor”, the poor are creating themselves.

Making education available does not assure it will be taken any more than 2 people creating a child assures they will raise it properly.


11 posted on 09/07/2015 8:36:53 AM PDT by billyboy15
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To: billyboy15

UNFAIR UNFAIR

You used real numbers, and real math. White privilege and micro aggression.

And you used logic, to top off the offense.


12 posted on 09/07/2015 8:37:06 AM PDT by Scrambler Bob (Using 4th keyboard due to wearing out the "/" and "s" on the previous 3)
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To: billyboy15
Actually we have a problem with income distribution in this country, but it's not what the left thinks it is. It's that too much income is going to crooks.

Among the crooks are (in no particular order)


13 posted on 09/07/2015 8:42:53 AM PDT by The_Reader_David (And when they behead your own people in the wars which are to come, then you will know...)
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To: Cheerio

there is no wealth inequality

there is human inequality stemning from many causes but mostly the making of many poor decisions that are at root laziness.

that is, laziness over and over easy way out decisions result in the inability to earn


14 posted on 09/07/2015 8:48:09 AM PDT by bert ((K.E.; N.P.; GOPc.;+12, 73, .. Iran deal & holocaust: Obama's batting clean up for Adolph Hitler)
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To: billyboy15

Actually our fearless Govt. “invites” the Poor from other very poor countries into our country just to keep it “fair.” Sort of a built-in wealth gap maker machine.


15 posted on 09/07/2015 8:56:12 AM PDT by Sioux-san
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To: AZLiberty

“This is about a bunch of elites manipulating the market with funny money, with the effect of making themselves and their rich friends richer and most everyone else poorer.”

During my years in the corporate world I saw the effects of financial manipulation. I saw factories in the US closed while the funds that would have bought new equipment to modernize the US factory and make it competitive was spent to build a replacement overseas. I saw senior executives one year borrow $3 billion to fund a stock buyback which increased reported EPS (earnings per share) and allowed them to maximize their bonus based solely on EPS. The next year the stock was trading 35% below the buyback price but the $3 billion in debt was still a $3 billion obligation of the corporation. I also saw financial and legal executives given operating positions for which they were not prepared, and in which they performed poorly, for the sole purpose of dressing up their resumes with an operating position in preparation for a future CEO assignment. In many cases the companies they ran for a short period of time were damaged to the point they were divested or shut down. The passing over of highly qualified and experienced operating managers for these jobs resulted in a talent drain that negatively impacted performance in future years.

In 19th and 20th centuries, when American’s great industrial infrastructure was built, CEO’s were drawn from the product side of the business (manufacturing and R&D) or the customer side of the business (sales and marketing). These executives understood the products the company made and the customer needs. In the 1970’s the power in the CEO office and board seats shifted to the financial executives and lawyers, many MBA graduates of prestigious schools such as Harvard and Wharton. The new generation of CEO’s were financial manipulators (buyers and sellers of assets) and not builders and visionaries. The new breed of CEO’s destroyed businesses, jobs and were responsible for the offshoring of American manufacturing. Concurrent with the destruction of companies, people and shareholder equity occurring during the great wave of buyouts, restructuring, and offshoring came a significant increase in executive pay. Before the 1970’s executive compensation was primarily salary based and the average CEO earned about 10 times the salary of the average hourly employee. Today CEO and senior executive pay is allegedly “performance” based (stock options and bonuses) and is 100 times or more the pay of the average worker even in corporations reporting several years of disappointing returns. Somehow the “performance” goals triggering high bonus payouts and option awards get met even when sales and earnings are mediocre.

In the same way bankers earn extraordinary incomes, even when their banks fail. In 2008 the government bailed out banks, and by 2010 the same senior executives at Goldman Sachs, JP Morgan, and Citibank who demanded and received a taxpayer bailout were paying themselves multimillion dollar bonuses and granting themselves lucrative stock options. Under true capitalism, those executives would have been fired in 2008 and begging on the streets in 2010.

Having seen the raped of many once great US companies, the unnecessary offshoring of many factories employing middle class Americans, and the government backing of irresponsible greedy bankers I’m unable to blame wealth disparity on the working people of the US. Those working people have endured 20 years of declining real incomes.

The truth is, income disparity in the US today is not due to Adam Smith’s invisible hand of the marketplace. It is due to the control of capital by a few who in collusion with government weight the scales in favor of the legal and investment class.


16 posted on 09/07/2015 8:56:38 AM PDT by Soul of the South (Yesterday is gone. Today will be what we make of it.)
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To: billyboy15

The old saying goes “Poor folks have poor ways”. So in that sense we don’t disagree.

However I do think much of the income inequality is deliberate social engineering and it is smart and humane to counter this.

Also not everyone who is poor did it to themselves. Life can be very cruel and unfair.


17 posted on 09/07/2015 9:08:27 AM PDT by crusher2013 (Liberalism is Aristocracy masquerading as equality)
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To: Cheerio

Seems pretty cynical to import tens of millions of the poorest people on earth and then complain about a wealth gap.


18 posted on 09/07/2015 9:10:25 AM PDT by Trailerpark Badass (There should be a whole lot more going on than throwing bleach, said one woman.)
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To: billyboy15

While I agree with you, the policies that have been implemented by the regime are evil, and are causing serious financial problems for most people, while propping up their cronies.

The QE has driven the value of money down, and while the government insists that there’s no inflation, every thing required to live your life costs more.

In addition to that, the unnatural depression of interest rates both discourage savings and encourage investment, which is causing a huge bubble in stock prices.

Eventually, interest rates will have to come up, and it will tank the stock market, hurting small investors who can’t afford to be in hedge funds.

I honestly think the coming stock market crash will dwarf 2008.

Mark


19 posted on 09/07/2015 9:27:47 AM PDT by MarkL (Do I really look like a guy with a plan?)
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To: crusher2013

How is income inequality “deliberate”?


20 posted on 09/07/2015 9:36:08 AM PDT by billyboy15
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