Capital in the Twenty-First Century, by Thomas Piketty (Crypto Renaissance)

[Lean]

Hi,

This new book is a wake-up call for many. http://www.economist.com/blogs/economist-explains/2014/05/economist-explains

Capitalism, Global Inequality, Economic Policy, Distributional Questions, Democracy...

I think it will be interesting to think how Bitcoin/Crytpo can join the conversation and participate offering solutions for the future.

Any ideas?

[OROBTC]

...

I cannot find the original fellow who said this, but here's an article on capital going to where it is treated the best:

http://seekingalpha.com/article/288345-capital-goes-where-its-treated-best

That's ONE reason why some of my capital is in PERU rather then the USA, it's treated better there (albeit at perhaps higher risk).

***

Piketty is just another Marxist, I believe he has admitted that himself.

[TrailingComet]

Yeah, his data is great but his solutions are a rehash of Marxist methods such as a wealth tax
Too little emphasis on fostering growth as a means to reducing inequality

[barney_stinson]

I think cryptocurrencies are our future. In the early 20th century no one could imagine the implementation of cashless payments using plastic cards, but today it is no surprise phenomenon. I think  it will happen to Bitcoin too . The main task is to avoid obstacles of countries  against crypto currency and we must continue to spread  Bitcoin.

[Beliathon]

Any ideas?

This is a 600 page book written by a statistician. I'm about 200 pages in, this is heavy and dry material! Caveat Emptor!

But if you do decide to dive in, some excellent companion reads are

-A brief history of neoliberalism
-The Empathic Civilization (Jeremy Rifkin)
-First as Tragedy, then as farce (Slavoj Zizek)
-A People's History of the United States (Howard Zinn)
-Confessions of an Economic Hitman
-The Shock Doctrine: The Rise of Disaster Capitalism (Naomi Klein)
-Earth in Mind (David W. Orr)
-Guns, Germs, and Steel

The data and analysis are sound, but I strongly disagree with the conclusions the author draws. He tells us that capitalism has systemically driven INEQUALITY all throughout history - and shows us the data to prove it! Then he says the only times inequality AREN'T increasing are times of extreme government intervention, such as the New Deal just after the Great Depression.

So capitalism naturally causes inequality, wealth basically behaves like objects in space affected by gravity. Larger masses of wealth attract wealth from smaller masses.

I read this book as a total condemnation of capitalism itself (disclaimer: I was already an anti-capitalist before reading), but the author says we should just repeat the cycle of massive redistribution of wealth from the elite 1% down to the masses, again and again and again. This horrible cycle of half a century of suffering, he wants us to do the SAME THING WE DID LAST TIME. Fuck that, and fuck him.

Capitalisms got to go. Fuckers gots ta GO!!

As far how Bitcoin is going to join the conversation, you should probably watch this Bitcoin vs. Political Power if you haven't already.

Share it with everyone.

[drsnuggles]

Found this thread after finishing Thomas Piketty his book. Would love to discuss his findings and where Bitcoin can help us.

Short summery of the book for those who didn't read it:
-rate of return on capital was during the last 200 years higher than growth, in percentage.
-if rate of return is higher than growth, capital will be more and more concentrated as long as you don't spend it, or more precise, spend less then rate of return minus growth.
-if capitial is more concentrated, the rich will be richer until a few people have all wealth, or a revolution or war starts.
-solution of Mr Piketty: progressive wealth tax: 0.1% until 200,000 euro, 1% from 200k to 1 million, 2% above 1 million.
-the bigger a persons private capital, the more affordable it becomes to hire a personal investment manager and the heigher the rate of return.
-the rich 0.1percent of society has mostly stocks, derivetives, etc, where middle class people mostly have a house as part of their capital.
-central banks should fulfill the role of lender of last resort
-gold based economy has prices which go up when large amount of new gold are discovered and down if the economy grows. Therefore, gold based economy is bad. A steady inflation is needed.

I don't think Thoma Piketty knows about bitcoin. With bitcoin you wouln't be able to rescue banks if needed. But banks wouldn't be necessary, but optional. Transactions can be done within the blockchain, but you might use a bank if you are an entrepreneur in need of money or as an individiual who wants a heigher rate with the risks that involves.

If steady inflation is really needed, it could be implemented in a cryptocurrency like blackcoin.

Any thoughts on the topic: are central banks really needed? And what can bitcoin do to help solve the problem of the rich getting richer? Is inflation really needed? And doesn't his solution with progressive wealth tax simply lower the rate a bit, thererfore just delaying the process of the rich getting richer a bit?

[Unpopped]

I'l make sure to pick this book up, looks like a good read.

[Unpopped]

Any ideas?

This is a 600 page book written by a statistician. I'm about 200 pages in, this is heavy and dry material! Caveat Emptor!

But if you do decide to dive in, some excellent companion reads are

-A brief history of neoliberalism
-The Empathic Civilization (Jeremy Rifkin)
-First as Tragedy, then as farce (Slavoj Zizek)
-A People's History of the United States (Howard Zinn)
-Confessions of an Economic Hitman
-The Shock Doctrine: The Rise of Disaster Capitalism (Naomi Klein)
-Earth in Mind (David W. Orr)
-Guns, Germs, and Steel

The data and analysis is sound, but I strongly disagree with the conclusions the author draws. He tells us that capitalism has systemically driven INEQUALITY all throughout history - and shows us the data to prove it! Then he says the only times inequality AREN'T increasing are times of extreme government intervention, such as the New Deal just after the Great Depression.

So capitalism naturally causes inequality, wealth basically behaves like objects in space affected by gravity. Larger masses of wealth attract wealth from smaller masses.

I read this book as a total condemnation of capitalism itself (disclaimer: I was already an anti-capitalist before reading), but the author says we should just repeat the cycle of massive redistribution of wealth from the elite 1% down to the masses, again and again and again. This horrible cycle of half a century of suffering, he wants us to do the SAME THING WE DID LAST TIME. Fuck that, and fuck him.

Capitalisms got to go. Fuckers gots ta GO!!

As far how Bitcoin is going to join the conversation, you should probably watch this Bitcoin vs. Political Power if you haven't already.

Share it with everyone.

Thank's for this! Really explained a lot!

[neofelis]

Capitalism has created more wealth than any other political system in history.  The US started out as a capitalistic society. It has been degraded and attacked since the beginning and now is far from capitalist. But in those first 150 years, it did more to increase the wealth of the world than the previous 2500 years.

Plus it is the only moral system of government.   Every others system violates a man's natural rights in some way or another.

[Vessko]

With all due respect, Picketty's book is a complete piece of crap. He uses a wrong theory, supported by wrong data, to reach wrong conclusions.

His main thesis is that the return on invested capital increases faster than the general growth of the economy, leading to increasing inequality (because those with capital to invest get richer faster than the rest). To begin with, he confuses return on invested capital with the growth rate of capital of corporate profits - a mistake that is unforgivable even for a 1st year graduate student of economics.

His data are cherry-picked and wrong - and they are always wrong in the direction that supports his thesis, which makes him intellectually dishonest:



His conclusions are that we should increase taxes to 80% (just a reminder - taxes are basically capital stolen by the government from the productive businesses, which capital is then wasted on crap like mass spying, wars and further expansion of the government bureaucracy), wealth tax (i.e., just because you have accumulated some wealth - and paid taxes in the process of accumulating it - should be a reason enough for it to be stolen from you) and government confiscation of your business after your death, so that it cannot be passed onto your descendants).

If it is still not blindingly obvious to you how wrong and harmful his teachings are, just stop for a moment and ponder the following: the wealth inequality between the richest and the poorest in the past wasn't much different than today's (e.g., compare the wealth of Craesus with that of a destitute Roman paysan and the wealth of Bill Gates with that of some no-job, no-education, no-income, no-future schmuck from Detroit). Yet just 200 years ago, a nobleman would live in a drafty castle that couldn't possibly be heated properly in wintertime. There was no running water, no sewer and no water boiler. There was no computer, no internet, no radio, no car, no TV, and most certainly no smart phone. There wasn't even electricity (imagine, the only light at night coming from candles!), not to mention modern medicine. If one could make any of today's poor from a typical industrialized nation switch places with said nobleman for just one or two days, they would probably soon beg to be sent back. Clearly the increasing of capital returns due to capitalism has done a little something to improve the general standard of living of humanity.

The problem in today's society is not inequality. The problem is the lack of free markets, the governments meddling with idiotic regulations that prevent small businesses from getting off the ground (while not troubling the big businesses at all and even helping reduce their competition), crony capitalism, price fixing (including the price of credit, i.e., the interest rates), money printing, waste of capital by the government on wars and various uneconomic boondoggles and so on.

Not surprising that the mainstream economists (paid stooges of the governments) loved Picketty's book, though, especially the part where he says they should increase taxes.

[zimmah]

A global and massive tax on wealth may sound nice, but in reality it will most likely only make a few people even more wealthy, and everyone else unable to catch up because of the extreme taxes.

I also mostly agree with the guy above me. Taxes mostly serve he wrong purposes, and right now it seems like the government only taxes for collecting money and keeping you poor. Taxes keep increasing, and we have taxes on things we never had taxes on even 100 years ago. For example income tax was not even known before 1916 or so in almost every country. Now most western countries have income taxes up to 52% or higher. That's ridiculously high. And as if that wasn't enough they also tax you when you are spending your hard earned money by VAT which adds 21% to pretty much everything you buy.

Some things like energy even add even more tax. In the Netherlands the electricity price is about 70% tax and 30% real price. And that's even if you buy green energy. So the whole bullshit of 'pollution' is just a scam.

And what so they do with all this money? Wage wars and make bureaucracy and have huge salaries and bonuses. While cutting spending on important things like education and healthcare.

Instead of cutting on their own income. In fact I believe ministers should be paid minimum wage. At least we'll know for sure minimum wage will than be guaranteed to be sufficiently high to actually sustain yourself. And  before you tell me to study and get a real job, I'm an aviation engineer. I just think ministers don't deserve to get paid half a million a year while increasing taxes and simultaneously reduce spending. And than have the nerve to say minimum income is enough. So many poor people even in first world countries, it's just not right. If even here people are having trouble to pay for dinner, what about real third world countries?

[weisoq]

With all due respect...

I also don't agree with his conclusions because I don't believe wealth equality is any sort of natural human state, even in a free market. But if you're going to post that chart you should also post or reference the rest of the ongoing FT vs picketty dialogue.

...note that a 44% wealth share for the top 10% (and a 12.5% wealth share for the top 1%, according to the FT) would mean that Britain is currently one the most egalitarian countries in history in terms of wealth distribution; in particular this would mean that Britain is a lot more equal that Sweden, and in fact a lot more equal than what Sweden as ever been (including in the 1980s). This does not look particularly plausible.

What is good about the conversation is it offers data so perhaps we can start moving on from everything defined as socialism is theft vs socialism for the rich, to realise that most people seem to get stuffed whatever the -ism. To start asking why, whatever our biases. As the OP inferred, maybe things are changing and how we transact and think of money will definitely change. Bitcoin and cryptos have a role in that future and would be good to see more focus on solutions before they're made for us - whether by the state or business.

http://www.thedailymash.co.uk/news/society/thomas-pikettys-capital-hailed-as-an-unread-classic-2014052987018
No I haven't read it yet either.

[Beliathon]

Capitalism has created more wealth than any other political system in history.  The US started out as a capitalistic society. It has been degraded and attacked since the beginning and now is far from capitalist.

On the contrary, the modern United States is the purest distillation of capitalist society since the gilded age. If you don't like what the USA has become, you don't like capitalism. Accept it.

His main thesis is that the return on invested capital increases faster than the general growth of the economy, leading to increasing inequality (because those with capital to invest get richer faster than the rest). To begin with, he confuses return on invested capital with the growth rate of capital of corporate profits - a mistake that is unforgivable even for a 1st year graduate student of economics.

If this is confusing and frustrating to you, it's because you don't understand that economics is a pseudo-science. It exists solely to support and uphold the cult of capitalism.

[Vessko]

But if you're going to post that chart you should also post or reference the rest of the ongoing FT vs picketty dialogue.

Actually, the chart was from Piketty – Not Even His Data Are Worth Anything (the whole article is well worth the read). Some other useful articles on this subject:

Inequality Used to Promote Wealth Grab by the State
A Monstrous Aberration
Is Capitalism Doomed?
What You Need to Know about the Wealth Inequality Debate

Also, I generally dislike Martin Armstrong's writings, but on this particular subject he is spot-on:

The Two Most Dangerous Ideas
Thomas Piketty – Another Economist on the loose out to DESTROY the World as We Know it.
Rock-Star Economist Piketty & His Bogus Data
Piketty – The Greatest Justification to Just Rob Anyone Who Has more Than You

[Vessko]

On the contrary, the modern United States is the purest distillation of capitalist society since the gilded age.

Ho-ho-ho. Contemporary USA is closer to fascism than to capitalism. (Many people accuse Obama of having socialist policies but the truth is that "big government in cahoots with big business covered by a lot of propaganda" is actually the fascist economic model, not the socialist one. The socialist model is "the government owns everything and you own nothing".) Free market capitalism died in the USA pretty much with the creation of the Federal Reserve. Free market capitalism requires a free market in everything and you can't have a free market if one entity has a monopoly on fixing the prices of credit.

To begin with, he confuses return on invested capital with the growth rate of capital of corporate profits - a mistake that is unforgivable even for a 1st year graduate student of economics.

If this is confusing and frustrating to you, it's because you don't understand that economics is a pseudo-science. It exists solely to support and uphold the cult of capitalism.

Nonsense. Clearly, you are one of those who doesn't know things even a first-grader is supposed to know. Economics is no more "pseudo-science" than history, sociology, psychology, etc. It is not an exact science, yes - but this doesn't mean that it is not a science. It is a social science instead.

I bet you don't know the difference between the two, either. In exact sciences you start from the facts, postulate a theory, conduct a reproducible experiment and from its results establish the validity of the theory. You can't use this approach in social sciences, because they study the behavior of humans and that is not-reproducible. We can't repeat the Great Depression, in order to verify our theories about it - and even if we could, the exact outcome is likely to be different the second time. That's why in social sciences you start from the theory. Then you check how well it explains the existing facts and whether its predictions turn true in the future.

There isn't just "one" economic theory, either. There are at least five or six - fascist, socialist, monetarist, marginalist, keynesian, Austrian... Each one of them explains how society works economically in different ways. By far not all of them support capitalism, either. Most people who have bothered studying all of them and whose salary does not depend on not understanding them see that the Austrian school is the "most correct" one - in the sense that it most adequately explains the observed reality and its predictions most often come true...

[weisoq]

But if you're going to post that chart you should also post or reference the rest of the ongoing FT vs picketty dialogue.

Actually, the chart was from...Some other useful articles on this subject...

It doesn't matter whether I like reading Lew Rockwell or Krugman, discussion from preconceived ideology is pointless and leads nowhere. I think we're well beyond mass blame offering anything productive, and if you're a martin armstrong reader you'll know that many think shit generally tends to happen anyway. You should try reading sources yourself rather than from a starting point of secondary preconceptions, be that piketty or hayek. You may end up with the same conclusion, but then at least its your own.

[acoindr]

Peter Shiff had a great response to the Piketty book where he comments on comedian Bill Maher praising the book.

Peter Schiff - Marxism Rebranded

Near the end Peter notes European immigrants left everything to come to America, with nothing but the clothes on their back, going to a country where they had no money, didn't speak the language, where there were no safety nets, where there was only capitalism, and did so because that's what the poor wanted. The poor knew there were no nets whatsoever to catch them if they fell, but there was no government standing in their way.

So to answer this thread's original question that's how Bitcoin/cryptocurrency can help, by restoring the opportunities of a free market to those who seek them. A final Schiff quote on tax:

If we had the type of high taxes that Bill Maher thinks built the middle class, if the Founding Fathers had started America with a 70-90% income tax, do you think we ever would have expanded beyond the original 13 colonies? The Native Americans would still be in charge around here, if we had those kinds of income taxes from day one. We would never have amounted to anything.

Nobody would have ratified the Constitution that's for damn sure. Nobody would have been dumb enough to ratify it, but assuming they were dumb enough to do it, everybody would have left.

[drsnuggles]

With all due respect, Picketty's book is a complete piece of crap. He uses a wrong theory, supported by wrong data, to reach wrong conclusions.

How could you say that, if you didn't read the book? The graph with the "corrected" data, uses servey data. As stated clearly in the book, this is wrong for two reasons: 1) servey data is only used for the last data point, so you have a mix of sources. 2) Survey data always underestimates the capital people have, since the richest people don't answer and the top 1% do not tell all they have. Check Thomas Piketty's response as well for more details about the FT critics.

.. wealth tax (i.e., just because you have accumulated some wealth - and paid taxes in the process of accumulating it - should be a reason enough for it to be stolen from you) and government confiscation of your business after your death, so that it cannot be passed onto your descendants)...

Wealth tax is not ment for those with "some" wealth, but for the rich which have 4,5 million euro or more. Mr Piketty proposes a tax of 0,1% until 200.000 for statistics and 1% above 200.000 and it gets progressive upwards. Where the very rich could be taxed 5 to 10%. To get the numbers straight, the richest 1% have around 25 times more in Europe then average: 4,5 million versus 180.000 euro. In the US this is 35 times more (8 million dollar and more). The very rich 0,1% will have several times this amount of money, lets say 100 million or more. The reason he proposes this, is not because the very rich work very hard for their money. It's because if you are very rich, you mostly don't work anymore, nor do any of your children. You just live of the difference between rate of interest and the rate of growth, for generations and generations.

And yes, there still are very rich working people, like Bill Gates. But I doubt Mr Gates is motivated by money, since he gives it away. I don't think the very rich working people, would be demotivated, if they have to give a large part of the rate of return on their capital to the state in the form of taxes. Not working very rich people, will of course complain, since their children might need to work a little.

Yet just 200 years ago, a nobleman would live in a drafty castle that couldn't possibly be heated properly in wintertime. There was no running water, no sewer and no water boiler. There was no computer, no internet, no radio, no car, no TV, and most certainly no smart phone. There wasn't even electricity (imagine, the only light at night coming from candles!), not to mention modern medicine. If one could make any of today's poor from a typical industrialized nation switch places with said nobleman for just one or two days, they would probably soon beg to be sent back. Clearly the increasing of capital returns due to capitalism has done a little something to improve the general standard of living of humanity.

Please be aware that Mr Piketty is not against capitalism. He just points out the wealth distribution is changing, in favor of the rich (1%) and the very rich (0,1%) of the population. If this trend continues, the very rich, have all, end everyone below them has nothing. This implies everyone working, while having near to nothing and being indebted, while the very rich don't work at all and have all the wealth. This trend will continue, unless we do something about it, or a revolution or war breaks out.

My opinion: I prefer not to have a war. A revolution (bitcoin powered) would be nice and maybe there are better solutions then those proposed by Mr Piketty.

The problem is the lack of free markets, the governments meddling with idiotic regulations that prevent small businesses from getting off the ground (while not troubling the big businesses at all and even helping reduce their competition), crony capitalism, price fixing (including the price of credit, i.e., the interest rates), money printing, waste of capital by the government on wars and various uneconomic boondoggles and so on.

This is where you and me fully agree . It makes the problem worse. Money printing is almost not discussed in the book of Mr Piketty. Lets discuss them here!

Not surprising that the mainstream economists (paid stooges of the governments) loved Picketty's book, though, especially the part where he says they should increase taxes.

Mainstream economics do not really like what he says. Just check out the Financial Times critics or google "Piketty wrong". Most economics are part of the 1%. Oh and about the increase taxes: keep in mind that according to Mr Piketty, only the very rich (0,1%) part of society should pay substantially more taxes. He clearly states that this tax will only result in a few percent of GDP and thus not a way to make the very rich pay for all. The goal of the tax is to not make the rich any richer without working: just because the rate of interest is heigher that the rate of growth.