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The cause of retail and asset price inflation is by definition and accounting identity rent-seeking - ie the demand for profit/rent in excess of cost.

An estimate that sticks in my mind is that 30% of the price of everything today in the USA is due to rent paid to the financial sector. This is probably larger than the effective government tax rate from all levels of government combined, and, in its effects, it is additive. So people, other than those on the receiving end of this flow, have to make do with the 40% of their income remaining to them. The synergy in this case is that the government serves as both tax collector and as the enforcer of the arrangements that enable the financial sector to continue charging such exorbitant rent.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Dec 22nd, 2012 at 01:02:25 PM EST
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And the result is lowering the available money for consumer discretionary spending further empowering - em-moneying? - the FIRE sector with respect to the Real Economy.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Sat Dec 22nd, 2012 at 01:11:45 PM EST
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The name of the game is differential accumulation. As wealth becomes more and more concentrated not only will the economy further be strangled, but I can even imagine a scenario where, with so much of the asset base in the hands of the few, it becomes favorable to their interests to destroy the monetary system so as to facilitate even further looting. It will never be necessary to do so, but it might become desirable to some. It would recapitulate the Morgan Bank's actions in the 1870s in withdrawing gold from circulation after they had gotten the US back on the gold standard. That greatly facilitated their wealth consolidation by enabling them to foreclose on so many to whom they had made loans, capturing not only much of the money loaned but also the asset which secured the loan and most of the increased value the borrowers had added to the enterprises.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Dec 22nd, 2012 at 03:28:19 PM EST
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