THOMAS PIKETTY, 696 PAGES OF FOOLERY DESTROYED IN LESS THAN FIVE MINUTES

A French egghead academician with no business experience, Thomas Piketty, believes he has discovered the fatal flaw of capitalism so much so that Piketty wasted time writing an almost 700-page book about it and something like a whopping 15 years of his life researching it.

Piketty believes there is relationship between the rate of growth of an economy as expressed by GDP and the rate of return enjoyed by capitalists. 

Piketty calls the rate of return earned by capitalists R and the GDP, G. Piketty claims that when the return to capitalists is greater than GDP growth (R > G), "the past devours the future." 

The return to capitalists (their share of profit) can grow faster than GDP, easily. However, there is a limit, a limit Piketty fails to see precisely because Piketty knows nothing of trade and thus authentic economics.

If Piketty knew reality he would know this: 

The return to capitalists never can exceed total profit. All returns to capitalists are shares of profit and not sales.  

Profit is what is stands after paying expenses, including all wages and what politicians take as their taxes.

GDP is merely the sum of all sales. Alternatively, GDP can get calculated as the sum of all incomes. It means the same.

It's irrelevant if return to capitalists has grown at 9% or 90%. It's irrelevant that return to capitalists for any firm or all firms grows faster than GDP. 

Always, profit is a fraction of sales. Said another way, always, profit is a fraction of GDP. 

In the end, profit acts as limit. It's impossible to have a share of profit exceed 100%. 

Piketty needs a lesson in trade, or commerce, or what is truly authentic economics and not the foolery of academia economics.

The entirety of trade, or commerce, or real economics ties up with two words — property and profit.

All trade gets governed by one one, true, infrangible law and one axiom — the Law of Prices and the Axiom of Profit. The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer set the price. The Axiom of Profit holds the sum of sales must at least equal the cost of production or the producer goes to ruin. 

The name for property put to making stuff is called capital. The name for property put to purchase and sale for cash and credit is wealth.  

Though most think of property as things possessed, property always has meant the right of ownership and never the thing owned. Only when property gets created, can trade arise between two persons. 

Without profit from effort, anyone would lack buying power to buy anything else. Without property, no one can trade. 

At less than break even, anyone would stop trying to produce property. No one works at a loss.

When profit is growing on the same sum of sales, this means producers are becoming more efficient. When profit is growing on increasing sales, this means ever more of the whole economy are gaining buying power and becoming efficient. This ever more includes workers and entrepreneurs.

What Piketty fails to realize that when he Piketty says "capital reproduces itself faster than output increases," in so many words, Piketty has said capital reproduces itself faster than wealth. 

This is good! All should want capital to grow faster than wealth! Without capital there can be no wealth! 

In CAPITALISM. BECAUSE WITHOUT IT, YOU WOULD BE LIVING AS A BARE SUBSISTENCE SAVAGE, I show how laborers would toil barely producing anything, living by bare subsistence without capitalism.

Again, because Piketty only understands the fake world of academia economics and doesn't understand the real world of trade, Piketty fails to see that when the rate of return to capitalists is growing faster than profit, capitalists are enjoying greater bargaining power against entrepreneur-adventurers.

Interest is a price and conforms to the Law of Prices. In the credit market, capitalists bid down in a Dutch auction against each other. Entrepreneur-adventurers bid up in an English auction against each other.

This better bargaining power of capitalists has arisen because there are not enough capitalists engaged in intra-capitalist competition and not enough entrepreneur-adventurers at all.

Entrepreneur-adventurers are futures speculators who ensure enough capitalists remain in business, but not too many. Thus, entrepreneur-adventurers are natural regulators of capitalists.

When there is too much bureaucracy with too much regulation, this pushes up costs and stands as a barrier to entry for too many would-have-been-otherwise entrepreneur-adventurers. The shrinking field of entrepreneurs leads to better bargaining power for capitalists.

Robert E. Litan of the Brookings Institute has revealed for the first time in 30 years, business "deaths" in the U.S. exceeded business "births" and only 600,000 net new jobs were created in each quarter of 2012 (Declining Business Dynamism in the United States: A Look at States and Metros).

So as a campus Marxist, what is Piketty's prescription to cure the ills of his false conclusion? Why Piketty sounds the socialist battle cry — Tax the rich! Off with their heads!

Of course, Piketty can't see implication of his prescription. Curtailing capital will result in far fewer products and thus far fewer ventures. Worse, curtailing capital will lead to less employment and much lower wages owing to more employment competition for fewer jobs on lower capital. 

Instead, the winning move would be to end all subsidy for the poor and end minimum wage laws. Subsidy to the working poor ends up being a subsidy to capitalists.

It is an unassailable fact of trade, that absent subsidy of workers in the form of welfare, wages would rise. No one would work at a loss (wages - living expenses). Market forces would force employers to pay more.

A wage is a price and conforms to the the Law of Prices. Even laborers get constrained by the great Axiom of Profit. 

All laborers also are capitalists as labor is the poor man's capital. Labor is the sale of work through time.  

Labor without capital results in bare subsistence savagery. It is to capital alone that profit can arise. 

Labor creates property. Capital creates property efficiently so profits might get earned. 

Profits whether realized or expected are the source of all prices. 

Piketty is clueless. Piketty doesn't understand reality. Piketty lives by irreality forged from indoctrination.

After the fall of the Berlin wall and the dissolution of the Soviet Union, all believed the idiocy of socialism at long last had died. Yet, campus Marxists are like cockroaches. You can't kill them. And the lie in wait for times to spread their diseases into the minds of the young and desperate.

For a look at Piketty and the numbers, check out UT OH, SOMEONE BETTER TELL THOMAS PIKETTY ABOUT L >G TOO.


For even more, read THOMAS PIKETTY, REVIVALIST PREACHER OF BORN-AGAIN SOCIALISM. THE SECOND GREAT AWAKENING OF SOCIALISM HAS COME TO AMERICA