Saturday, April 26, 2014

Thomas Piketty on Inequality and Capital

Mises Daily: Saturday, April 26, 2014 by Hunter Lewis and Peter G. Klein

Thomas Piketty, a 42-year-old economist from French academe has written a hot new book: Capital in the Twenty-First Century. The U.S. edition has been published by Harvard University Press and, remarkably, is leading the best seller list; the first time that a Harvard book has done so. A recent review describes Piketty as the man “who exposed capitalism’s fatal flaw.”  So what is this flaw?

Supposedly under capitalism the rich get steadily richer in relation to everyone else; inequality gets worse and worse. It is all baked into the cake, unavoidable.  To support this, Piketty offers some dubious and unsupported financial logic, but also what he calls “a spectacular graph” of historical data. What does the graph actually show?....... Let’s think about what this really means. Relative income of the top 10 percent did not rise inexorably over this period. Instead it peaked at two times: just before the great crashes of 1929 and 2008. In other words, inequality rose during the great economic bubble eras and fell thereafter.

 And what caused and characterized these bubble eras? They were principally caused by the U.S. Federal Reserve and other central banks creating far too much new money and debt. They were characterized by an explosion of crony capitalism as some rich people exploited all the new money, both on Wall Street and through connections with the government in Washington.....To Read More......
 
My Take - Can anyone tell me what the difference is between crony capitalism and socialist central planning schemes that interfere with the economic system?  Not much, except the word 'capitalism' in this case is a misnomer. 

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