If everything you’re postulating here is “pure economics”, would you mind placing it in the context of an economic framework for the sake of precision? Something rudimentary like the macro credit-debt cycle is fine.

As it stands, your exposition appears fairly politically loaded, and your specific claim that crashes are “manufactured” rather than an emergent side effect of market dynamics is, to me, an extraordinary claim that requires commensurately extraordinary evidence.

It’s not at all clear to me how you’re getting from (“there exist people who benefit from systemic market corrections”) to (“market corrections are manufactured by a subset of people who benefit by them”). As another question illustrating this point, would you say that people purchasing homes with overextended mortgages during the housing market bubble were contributing to that crash? If so, did they have a part in “manufacturing” it even though they didn’t benefit? How do you reconcile the ideas of market participants with agency, systemic volatility, and irrational exuberance with the idea of a conspiratorial group capable of systematically driving a market crash?

1. You can't get all people to play this game.

2. You can't get people margin called if the stock price doesn't drop enough.

You can get 1 if you complicate loans (Mortgage based securities); and you can get 2 if you make the issue related to the whole economy. So people get bankrupted instead of margin called. Their house is sold instead of the stock.

Same game, bigger market.

That being said I don't believe the "rich" or the "powerful" are doing it. I don't believe in Conspiracy theories. I think this "movement" is inherent in the nature of the market and the humans who play around it. It burns both the poor and the rich, but it magnifies inequality whether by making the rich richer or creating new riches.

The wealthiest people in the world are wealthy by virtue of the gains made on the assets they already have. So, in a bull market, their assets grow while someone without assets is left behind. The inverse is true, too - they'll proportionally lose to the same degree in a crash - as while a poor person may have no investments, the wealthy person's investments will crash in line with the market. There won't be a financial cushion, at least not a significant one.

Books have been written around timing markets and it's generally accepted that it cannot be done reliably. To get out before a crash then buy cheap would require you to predict three different moments accurately: when to get in, when to get out, and then when to buy on the "cheap". Timing even one reliably requires luck or clairvoyance.

"Rich people have the financial cushion to not be impacted in the slightest way by such crashes". This is clearly false - wealthy people don't keep mountains of cash lying around as they would miss out on the growth in bull markets, and as a result their wealth would decrease relative to their peers.

Investors generally just become relatively poorer during a crash then make it back and more during the next bull market, at least that's how it's worked until now. There's an old quote I can't find the source of right now that sums it up fairly aptly:

"Stocks go down faster than they go up... but they go up further than they go down".

Some wealthy people do. E.g. Warren Buffett's Berkshire Hathaway was sitting on 100 billion dollar in cash last summer [1]. If he doesn't find anything that is fairly priced, he prefers to sit on his cash and wait.

[1] http://fortune.com/2017/08/07/warren-buffett-berkshire-hatha...

...

"This is clearly false - wealthy people don't keep mountains of cash lying around as they would miss out on the growth in bull markets, and as a result their wealth would decrease relative to their peers."

I read with great interest the two volumes that Niall Ferguson wrote of the history of the Rothschild family.[1]

It's a fascinating work that serves well to bridge the gap of European history between Napolean and World War One.

I bring it up here because the Rothschild family did indeed do exactly what the parent comment suggested that "rich people" do. They quietly did their simple banking business year after year, piling up profits and assets that were repeatedly poured into down markets when they viewed that assets had become cheap.

This was not market timing - this was simply patience. The down market always comes and their simple, boring factoring and discounting was always reliable.

[1] _The House of Rothschild_ ("The World Banker")

> Books have been written around timing markets and it's generally accepted that it cannot be done reliably. To get out before a crash then buy cheap would require you to predict three different moments accurately: when to get in, when to get out, and then when to buy on the "cheap". Timing even one reliably requires luck or clairvoyance.

This doesn’t strike me as true, unless you’re describing the subset of academic economists who agree with EMH in some form. In particular, the first sentence on its own appears to be evidently untrue; it’s clear that there are many parties, including economists and financiers, who attempt to time the market and generally forecast macroeconomic shifts.

CNBC is probably a good example of this. When you don't predict anything specific, you can never be wrong.

(Clairvoyance was not meant seriously, I should have made that clear!)

The field of economics seems to have a ways to go before it can be used reliably to predict things.

It is further warped by the fact that although the anti-interventionalists are probably right, the interventionalists are the ones who do all the consulting and take all the jobs and give all the advice - because they are .. interventionalists. And who wants to pay a consultant to tell them "don't do anything, and there's nothing you can do."

Conspiracy theories might well be defined just by the application of the fallacy, "if someone benefits, then they intended it".

And here we see this fallacy being applied. Sound like a textbook conspiracy to me. The extremely weathly are not interested in increasing their net wealth, only in specific purchases to further their goals -- which are very easy to undermine with crashes.

People who are merely wealthy might possibly wish to increase their general wealth and therefore believe a crash will help them do that. That is an incredibly outsized risk for a wealthy person to needlessly take however.

Slightly tangential, but neat: that fallacy has a name! It's the "Post hoc ergo propter hoc" fallacy: https://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc

There might be a more specific named fallacy for when post-hoc happens with regard to individuals' intentions and benefits rather than causes and effects in general though.

The top end tax bracket needs to go well above 50% to make it riskier to invest what's left in those markets, rather than taking a risk on starting or growing a business, the expenses of which are 100% tax deductible.

There might be isolated cases of that happening, but in general, nothing close to that.

>...In fact, if you look at a fifty-year period after World War II, home prices were absolutely steady. In 1947 the Case-Shiller index stood at 110, and in 1997, adjusted for inflation, it stood at 110 again.

http://www.motherjones.com/kevin-drum/2010/08/chart-day-hous...

There is a chart at the bottom of the article.

In terms of wages, it is more realistic to focus on total compensation:

>...Economists long have noted that focusing on AHE rather than total compensation yields an inaccurate picture of labor compensation due to the omission from AHE of employer-provided benefits.

https://files.stlouisfed.org/files/htdocs/publications/es/07...

The page has 2 charts showing the differences when you compare wages to total compensation.

The tax burden has basically gone opposite of what you imply. For example, the top 10% paid 49% of taxes in 1980 and paid 70% in 2014. (http://www.ntu.org/foundation/page/who-pays-income-taxes) The "top marginal rate" means very little by itself. What matters is the effective rate which takes into account the credits/deductions that are allowed, the other lower tax rates, etc.

>...The top end tax bracket needs to go well above 50% to make it riskier to invest what's left in those markets, rather than taking a risk on starting or growing a business, the expenses of which are 100% tax deductible.

If the effective federal tax rate would be > 50% and there would likely be state taxes also, why would anyone invest in a small business? The vast majority of new businesses fail in the first 5 years. With such high tax rates, why take a risk when the vast majority of the time almost all the money will be lost and if you are able to make a successful business, taxes will take almost all the profit? Much more rational to invest in government bonds.

Where people want to live and work are cities. If you look at urban housing vs wages, housing has grown 3x compared to wages. Considering urban areas isolate cases is somewhere in between funny and absurd.

>The tax burden has basically gone opposite of what you imply.

I have neither stated nor implied anything about tax burden. I've only stated incentives and their consequences.

> For example, the top 10% paid 49% of taxes in 1980 and paid 70% in 2014. (http://www.ntu.org/foundation/page/who-pays-income-taxes) The "top marginal rate" means very little by itself.

The top marginal rate is a threat, with a real consequence. Of course the vast majority will try to avoid it, it's how they avoid it that matters.

> What matters is the effective rate which takes into account the credits/deductions that are allowed, the other lower tax rates, etc.

No, that's not what matters. I'm not trying to make sure the effective rate is either fair or equal among people who make the same income. What I want to do is incentivize a greater velocity of money, rather than rich people who don't need to save another dime, causing inflated housing and stock prices by stashing money there. I want the risk of saving money at the top end to be at least equal to that of starting or growing a business. And right now top end tax rates are so damn cheap it is way less risky to pay that cheap ass tax, and stuff the rest in real estate or stocks, than it is to take a 100% tax deduction and start or grow a business. That's bad.

And you increase the risk of being a hoarder with the real threat of taking most of that income away, above a certain amount. It doesn't matter that in 1928 probably only 5 people in the whole country paid 90+% income tax on their last $100,000 earned. The very fact that insane rate existed was the incentive for most everyone else to do something with their money rather than nothing. And it's the something else that is the benefit to society. Not how much revenue the government raised from it.

What you said was "That's why a house costs on average 24 times more today than in 1960,"

You didn't say you were only taking about urban areas, and you have given no evidence that a house costs on average 24 times more today than 1960 when adjusted for inflation. You also haven't given any evidence that the increases in the house prices are due to the tax rates especially when there are more obvious factors.

>...I have neither stated nor implied anything about tax burden.

What you said was "It's a neo-feudal give away."

>...What I want to do is incentivize a greater velocity of money,

Increasing aggregate demand isn't some magic solution to every economic problem. Long term what makes a country wealthy is increased productivity.

>...The very fact that insane rate existed was the incentive for most everyone else to do something with their money rather than nothing.

The WW II rates of 90+ percent don't mean "...incentive for most everyone else to do something with their money rather than nothing". It actually means the opposite of what you mean. If the government will take any gains you make, you invest the money in bonds that won't be taxed. If, for example, you want to incentive people to invest in new businesses, you would look at lowering the tax rates for that investment - not increase them.

As a rule, most economists are opposed to very high marginal tax rates due to the inefficiencies they introduce - compensation being moved to non-salary, money wasted on CPAs, lawyers and lobbying congress for special deductions, dead weight losses for economic activity that isn't done, etc.

I think the reasons for why cycles happen in economies are many. It's probably desirable to reduce the amplitude of the cycles, but I'm not convinced humans are capable of that. Due to biological reasons, reward functions are almost always short term. Humans, as individuals and societies, are not very good at optimisations at longer time scales.

I'd like to think that we are capable of more, but it may be that we are not. AI (at some stage) might be able to help us there, if it turns out to have better predictive power than humans - and doesn't lead to more ruin rather than improvement in the human condition.

See eg http://econlog.econlib.org/archives/2017/11/old_classical_m....

Some countries like Israel, Australia (or to a lesser extent the UK) had more competent central banks. See https://marketmonetarist.com/2014/04/24/how-stan-fischer-pre... for a piece about the example of Israel.