Tuesday, December 18, 2012
Thursday, November 1, 2012
Wherefore just as a body is conveyed at once to its place, by its gravity or levity, unless there be an obstacle, so too thesoul the bonds of the flesh being broken, whereby it was detained in the state of the way, receives at once its reward or punishment, unless there be an obstacle
. Thus sometimes venial sin, though needing first of all to be cleansed, is an obstacle to the receiving of the reward; the result being that the reward is delayed. And since a place is assigned to souls in keeping with their reward or punishment, as soon as the soul is set free from the body
it is either plunged into hell or soars to heaven
it be held back by some debt,
for which its flight must needs be delayed until the soul is first of all cleansed."
as i grow senile i note i mellow
and am today as i write this
not a very harsh judge of my fellow hu-creatures
i take that tripartite system
hell heaven and purgatory
to suggest very few soarings and plungings
yup i figure most of us souls
are headed for the mountain hike depicted below :
this is the usual match stick study reort
its what is to be done adds up to plus zero
more highering up of lower ed
more at state expense day care
more programs to skill build
supply side eye wash
pulling every one below the median...above the median
higher wages thru better skills
and more head and hands on the job for more but really flexible hours
lets take it from another start line:
this brit report]s answers
to the savage trends in household take home
---if you don't happen to have a professional degree---
are pea sized to say the least
The usual higher the lower Ed standards
Including more years of forced schooling!
the equally usual skill supply side voodoo yammering
"Make our skilled less ...skill filled "
ya ya ya
the same old same old
cries of Moses to the God of the burning trash bin
And of course the utterly bogus just so story
a chronic and growing
mis match/ skill gap on the corporate demand side
one might ask here
What if The skills get built cheaper off shore ?
That needs an answer don't it mate ?
That has an answer
but its mostly about forex policy ultimately
Yes there's some profane chatter about a broad front of transfer system policies
to raise incomes among the low waged
a few pence more for them bottom jobsters
How about lifting
the funding burden of all those social transfer payments
to our always with us
low income households
off ...yes off totally off
the low to middle payroll class
And onto the high property class
A tax policy aimed at the scattering of economic rent sumps
so carefully nested among our institutional arrangements
could easily replace a huge hunk of the present pay roll robbery
If the present system fails to provide good paying jobs
Them make the system's beneficiaries pay for the the god damn
social compensation to the losers
Wednesday, October 31, 2012
"competing stories are the only things that distinguish the two contenders."
" In the fact-based world, they’re quite difficult to tell apart.
So really, who can blame..."
(some poor low info soul )
"... for preferring a more congenial story?"
ya there is a big slug of folks in the middle income range
that fits this portrait
more or less
whats in it for ME ! what's not in it for YOU!
caught between the charybdis of tax evading knavish free riders
and the scylla of hand out grabing lazy free loaders
but there are differences on the ground
as they say
and they are real and material even if largely unconsidered
by the paleface enrage
one straight forward example
the potus appointed board of the NLRB
to scoff at these real material differences
to agree with the proposition
neither party has done a damn thing for the middle elements of the job class
to suggest with scorn
the bastards are enthralled by their misdirected fury
"spite makes em go right "
to walk away mentally
to abandon the white wage class
by their low info/ low ed tens of millions
to getting " what they want"
and getting it " good and hard"
this fellow spirits
is the dead wrong track to follow
for progressive change artists caught here and choosing to stay here
the global titan's jelly belly
let us hope
the world of making small differences
in the hearts attached to most thoughtful heads
Wealth needs to be taxed directly which is unconstitutional
Unless we devise some sort of life time income mechanism
That includes gifts and inheritance
Playing tax man is fun
But realistically let's focus on triggering a wage boom thru tightening the job markets
and revamping social security
In exactly the opposite direct of tubbyTaylor's
Tuesday, October 30, 2012
What happened to borrowers who defaulted? On the plus side, defaulting borrowers potentially got some financial breathing room. Housing expenditures are typically about 30–35% of total household income. For many overstretched borrowers, defaulting on a mortgage and becoming a renter reduced housing expenditures considerably, although the quality of their living quarters was lower. Furthermore, the extended period between mortgage default and foreclosure allowed many borrowers to remain in their homes for a while rent-free.
Of course, foreclosure is far from a positive for most borrowers. One need only look at the estimated home equity of U.S. households to realize that borrowers perceive default to be very costly. The share of homeowners with mortgage balances exceeding the value of their houses is estimated to be about 20%. Many of these underwater borrowers appear to have a financial incentive to default. The fact that most do not default suggests borrowers see other costs to walking away from their mortgages.
One of the main costs is that access to credit is restricted for borrowers who have defaulted. Relatively little research has examined how default affects borrowers. Cohen-Cole, Duygan-Bump, and Montriol (2009) find that certain provisions in the bankruptcy code allow borrowers who have defaulted on a mortgage to get credit cards again fairly rapidly. For mortgage borrowers, Brevoort and Cooper (2011) find that those who went through a foreclosure in the recent housing crisis experienced sharp drops in their credit scores, which appear to be long lasting. Moreover, these borrowers are more likely to default on other types of debt.
We treat access to credit as a decision more or less made by lenders. In other words, at what point are they willing to lend again to a borrower with a tarnished history? In reality, borrowers may not want credit. The data only show the quantity of credit outstanding. They do not directly indicate credit demand or supply, although some inferences regarding credit supply can be made.
In addition, important institutional restrictions affect credit following mortgage default or foreclosure, especially mortgage borrowing. People with a major derogatory event on their credit history, such as foreclosure or bankruptcy, typically can’t qualify for a conventional loan securitized through government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac until four to seven years have elapsed, depending on circumstances surrounding the event. This restriction does not completely preclude lending to borrowers who have recently defaulted. A lender has the option of making the loan and keeping it on its own balance sheet instead of selling it to one of the GSEs. However, the GSEs own or guarantee the vast majority of new mortgages, which makes the restriction a powerful barrier keeping defaulters from returning to the market.
Cumulative rate of return to mortgage market
The blue line in Figure 1 plots the rate for returning to the mortgage market for borrowers with no prior defaults or foreclosures. We do not know why these borrowers terminated their mortgages. They could have moved, or adjusted their housing expenditures by trading up or downsizing. Or they could have paid down their mortgages and now own their houses outright. We might expect that most borrowers who have paid off their mortgages will never return to the market. Indeed, 12 years after a termination, just above 35% of borrowers with no prior defaults have taken out new mortgages. This number may seem low. But, as the red line in Figure 1 shows, it is much higher than the average rate at which borrowers with prior defaults return to the mortgage market over the same time horizon.
Return to mortgage market following defaults
However, the 2008 cohort’s slow return to the mortgage market could also reflect tight credit supply. The mortgage finance system was severely disrupted during the financial crisis of 2007–08. The 2009 and 2010 mortgage default cohorts look very similar to the 2008 group, although they are not shown in Figure 2. By contrast, the credit environment for the 2001 and 2003 cohorts was very different in the years after their defaults. Loan terms were generally easy and subprime mortgage lending boomed.
Return to mortgage market by initial credit score
Figure 3 shows the rates of return to the mortgage market according to the borrower’s initial credit score. Borrowers who defaulted in any year within the sample are included and are divided into two groups: those with credit scores above 650, labeled prime, and those with scores of 650 and below, labeled subprime. The credit scores used are borrowers’ first scores after taking out mortgages on which they eventually defaulted.
Return to mortgage market by type of foreclosure
Are there important differences in the rate of return to the mortgage market across different types of markets? Figure 4 shows that one distinction that does not appear to matter much is the type of foreclosure law, that is, whether the borrower lives in a judicial or nonjudicial foreclosure state. This is surprising. Judicial foreclosures, in which the foreclosure must be pursued through the courts, are much more time-consuming and costly than nonjudicial foreclosures, in which the lender can serve the borrower with a notice of foreclosure and proceed to reclaim the house. All else equal, borrowers in judicial foreclosure states would be expected to be denied credit for longer periods.
Monday, October 22, 2012
outstanding total bond issues (sovereign and corporate) and global bank assets
rose from 81% to 137% ...."of Global GP (gross product),
" ..over-the-counter derivatives markets tripled in the latter five years to $285 trillion,
six times .." Global GP
Sunday, October 21, 2012
"We are rapidly evolving a fast-moving, increasingly cybernetically interlinked capital marketplace that, as Lord May observes in the Santa Fe Institute Journal, has become intertwined in ever-more complex interdependent patterns. He goes on to ask how much are we, societally, paying the financial sector to allocate capital? More importantly, is the sector allocating capital to further societal goals, or merely enriching itself and a narrow segment of the world’s population? Human nature is powerful. John Stuart Mills said, in Social Freedom: “Men do not merely desire to be rich, but richer than other men”.
Benjamin Friedman holds, in The Moral Consequences of Economic Growth, that “greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy” derive directly from economic growth. He shows that even during stagnation–let alone recession and depression–those values can vanish easily. Brad Delong observes, in reviewing Friedman, that if the majority of the people do not see an improving future, these values are at risk even in countries where absolute material prosperity remains high. Given rising political intransigence and loss of common social purpose in the U.S., and the rise of nationalistic political sentiments in Europe, the effects of increasing stagnation and inequality are becoming more evident, despite the financial sector’s phenomenal growth.
In a 2006 speech on the growing integration of the financial sector and the broader economy, Rodrigo deRato, Managing Director of the IMF, noted its supposed general stability and growth, and that from 1990-2005 the estimated sum of equity-market capitalization, outstanding total bond issues (sovereign and corporate) and global bank assets rose from 81% to 137% of GDP, while over-the-counter derivatives markets tripled in the latter five years to $285 trillion, six times global GDP, 50 times the U.S. public debt. So if the financial sector has worked, we should see proportional acceleration of growth plus improved consequences for all society.
This is not happening, as Cornia and Court report in Inequality, Growth and Poverty in the Era of Liberalization and Globalization.Global poverty reduction has stalled for 30-40 years, despite an approach to growth based on “…a neo-liberal policy package, [including] stringent focus on macroeconomic stability, liberalization of domestic markets, privatization, market solutions to the provision of public goods, and rapid external trade and financial liberalization.” They reveal that inequality has grown faster during the same period in the majority of countries for which data is available. The paper also shows that increased inequality greatly encumbers the climb from poverty and that excessively low or high levels of inequality impede growth, provoking various ills, including crime, social conflict and uncertain property rights. In the US, bank employees were found to be signing thousands of foreclosure documents without checking the information in them in so-called robo-signings that rendered the documents illegal.
All the data seem to affirm Friedman’s assertion that all societal strata should participate to maximize the moral benefits of economic growth. Further support can be found in Court’s conjecture about an optimum range of equality. This is confirmed by modeling work at Dominican University, discussed in a previous OECD Insights post, which shows that there is indeed an optimum level of equality for a given economic structure useable for policy planning, to insure capital allocation to economic growth for public purposes. Returning us to Lord May’s point that we must know how much economies are ‘paying’ the financial sector to allocate capital, including payments to banks, sovereign funds, hedge funds, private equity, and the managers, often in major international banks, of the estimated $21-32 trillion of largely secret “offshore” financial assets.
The financial crisis and subsequent Euro problems show that we are paying vast sums for a system that, as Joseph Stiglitz, former chief economist of the IMF, points out, doesn’t allocate capital where needed, causing capital flows that are pro-cyclic, exacerbating peaks and lows of business cycles. What efficient capital distributive function is served by the approximately $1.5 trillion of daily flows sloshing about in the casino of OTC foreign exchange activities, and the nearly 70% of all U.S. market trades conducted algorithmically, without human intervention?
Keynes may have lost the 1944 Bretton Woods battle for a solution that transcended national financial self-interest but his plans for an international clearing agency are prophetic, especially considering how the combined financial sector dominates national and international policy for its own ends “ As Keynes said, “… no country can . . . safely allow the flight of funds for political reasons or to evade domestic taxation or in anticipation of the owner turning refugee. Equally, there is no country that can safely receive fugitive funds, which constitute an unwanted import of capital, yet cannot safely be used for fixed investment.” Right again, Lord Maynard."
when thinkng of
hydra headed rent scooping
lbo ing parasiting
private parts equitizing
flying sharkoid mega blob
speed of light
hi fi laputo
future means and methods
of a RED hot global governance
a fantasy launch
an uncle ize national hi fi laputa !
Wednesday, October 3, 2012
Tuesday, October 2, 2012
> you purpose that the people exercise power. A democracy means the
> people in arms, so the above groups will be able to protect
> themselves. In any case a democracy necessarily needs a democratic
> media. All current states have oligarchic media, who engage in hate
> campaigns. Thus the need for the left to agitate for democratic
> media,which necessarily cannot be capitalist."
> It would be unkind to parse that into shreds, because I think he means
> well, but I do know something about group protection and exercises of
> power. That's what it comes down, always. There comes a point in the
> process where everyone but the groups in direct conflict just wants
> the conflict to stop and they no longer care all that much about the
> rights and wrongs of the affair."
op responds :
in other words
"justice and fairness no longer motivate people to live with the disruptions.."
i think of any protracted struggle between union labor and corporate management
that spreads wildly and widely in waves
from industry to industry region to region
if there is stalemate
at some point
the moment of "popular turn off "comes
and then ...yikes
and 1946 america
or late 70's britain
'the...poor ass hole ' phase
turns into the ' everyone buts' revulsion
" no longer care all that much about the
rights and wrongs of the affair."
they just want it over
and given the bourgeois hegemony
---hell its "their" state and their media--
when the bulk of the uninvolved "people "
hit the reset button
the deeply embedded class tilt of the system
works against the unions
a deep spontaneous popular reaction gets effectively translated into a surface reaction...
against the side that can be stomped
within the confines of the existing institutional arrangement
ie dah unions
the media abets the reactionary route to stablizing the class system
by shifting the weight of the mittel stand against the unions
mike lofgren :
"Some liberal writers have opined that the different socio-economic perspectives separating the "business" wing of the GOP and the religious right make it an unstable coalition that could crack. I am not so sure. There is no fundamental disagreement on which direction the two factions want to take the country, merely how far in that direction they want to take it. The plutocrats would drag us back to the Gilded Age, the theocrats to the Salem witch trials"
that is one of the great "products" of thirty five years of relentless " mass program-ing "
easily countered by FDR style politics
but the Dems since 76 have prefered their own brand of values politics
it works better with the public objectives of their donor base
Tuesday, September 25, 2012
this from the cleveland FED no less
income inequality between households grows two ways :
"if the concentration index of labor and/or capital rises "
"if there is a shift from the less concentrated labor income
to the more concentrated capital income"
enter the share calculation....
According to the FED elves model
" the labor share trend has declined since 1980, with an accelerated drop in the 2000s,"
"In the BEA data, the trend declined from
as high as
69 percent before 1980
66.9 percent in 2000,
64.9 percent today
". In the BLS data, the trend declined from
approximately 64.5 percent before 1980
62.8 percent in 2000,
59.8 percent today.
" According to these measures, the trend in the labor share declined 1.5 to 2 percentage points between 1980 and 2000, and then dropped an additional 2 to 3 percentage points, for a total of 4 to 4.5 percentage points."
here's the code to the magic trend line build by these FED elves
" A Model of the Labor Share"
" the labor share fluctuates cyclically around an underlying slow-moving trend"
"The labor share
right after the beginning of a recession
during the rest of the recession and the initial phase of the recovery
picks up and returns to trend
during the later phase of the recovery. "
"the labor share is related to the tightness of the labor market:
when unemployment is high
when unemployment is low.
a high level of unemployment
tends to be followed by a decline in the labor share"
"The correlation between the unemployment gap
and the change in the labor share
over the subsequent year is negative and large "
"in the long run
. The main factors:
"technology available to produce goods and services.
increased globalization and trade openness,
changes in labor market institutions and policies."
------nice and laconic eh ?-----
the simple calculation:
". To compute the trend,
begin with the labor share,
the cyclical component "
" separate the long-run trend
from transitory components ."
how much income inequality is wage structure changes ?
not much eh ?
its that capital income thing isn't it
you know increases in capital income concentration
"has dominated the dynamics of income inequality during the past two business cycles"
Friday, September 7, 2012
"Restoring clarity and predictability are essential for igniting hiring and investment. Yet in so many areas, from tax rates to energy policy to labor regulation to trade, the Obama administration has only added to the lack of clarity and the uncertainty. The most dramatic illustration came midsummer, when the absence of presidential leadership brought the country to the precipice of default. Uncertainty is the enemy of growth, investment, and hiring."I think this calls for a revisiting of Kalecki's "Political Aspects of Full Employment." Every time I re-read this piece, I am re-inforced in my idea that it is a work of great profundity. What is more, it is written in an accessible, popular style, which even further increases its value.
In particular, I think this passage is of the utmost importance for interpreting the Romney "plan":
"Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis."However:
"[O]nce the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of 'sound finance' is to make the level of employment dependent on the state of confidence."That just about says it, don't it?
(This is only one of the brilliant passages in the piece. Really, I recommend reading it.)
Wednesday, September 5, 2012
Moving money from the bottom to the top lowers consumption because higher-income individuals consume a smaller proportion of their income than do lower-income individuals (those at the top save 15 to 25 percent of their income, those at the bottom spend all their income). The result: until and unless something else happens, such as an increase in investment or exports, total demand in the economy will be less that what the economy is capable of supplying - and that means there will be unemployment. In the 1990s that "something else" was the tech bubble; in the first decade of the twentieth-first [sic] century, it was the housing bubble. Now the only recourse is government spending.
Unemployment can be blamed on a deficiency in aggregate demand (the total demand for goods and services in the economy, from consumers, from firms, by governemtn, and by exporters); in some sense, the entire shortfall in aggregate demand - and hence in the U.S. economy - today can be blamed on the extremes of inequality. As we've seen, the top 1 percent of the population earns some 20 percent of its income, a shift of just 5 percentage points to the poor or middle who do not save - so the top 1 percent would still get 15 percent of the nation's income - would increase aggregate demand directly by 1 percentage point. But as that money recirculates, output would actually increase by some 1 1/2 to 2 percentage points. In an economic downturn such as the current one, that would imply a decrease in the unemployment rate of a comparable amount. With unemployment in early 2012 standing at 8.3 percent [the same as today's figure! - Ed.], this kind of a shift in income could have brought the unemployment rate down close to 6.3 percent. A broader redistribution, say, from the top 20 percent to the rest, would have brought down the unemployment further [sic], to a more normal 5 to 6 percent.
Tuesday, August 28, 2012
This is directly counter to the predictions of mainstream economics. Most economists - who tend to fit observed realities to their models, rather than the other way around - simply explain away these trends, or devolve into thinly-veiled moralisms (along the lines I describe in the earlier post). Even the best of them do not seem to deal with the subject square-on, or come up with accessible explanations which can be politically deployed.
Thus, Joeseph Stiglitz, when describing the deplorable fate which has befallen the majority of wage-earners over the last 4 decades (!), resorts to either an overly general theory of "over-supply of unskilled labor" (as in his recent book), or the rarefied notion of "asymmetric information."
If we are to break out of the ideological shackles of "inequality of access" or the liberal/conservative debate around "equal opportunity" (see the previous post), we are going to need sturdier tools than this.
Simply put, the basic conclusion that we are led to by the real dynamics of work suggest that workers, rather than being denied access to the Elysian Fields that are made available to those with superior social value, are, in fact, imprisoned within their workplaces, locked-in to bad and worsening conditions. Or, to say it another way - they are trapped in work relations of increasing exploitation.
Does that put it bluntly enough? Read on, and I think I can sharpen this analysis...
Friday, August 17, 2012
Wednesday, August 15, 2012
Saturday, August 11, 2012
Sunday, August 5, 2012
"Prosperity Economics: Building an Economy for All," by Jacob Hacker and Nate Loewentheil, and supported by the Economic Policy Institute provides a useful manifesto to contrast with the prevailing Austerity Economics. But it is misnamed: it is focused more on improving the lot of the middle class than that of ordinary working Americans. (To contrast with the wealthy, the manifesto uses the term "middle class," not the more accurate "working class" or "working Americans.") And it relies too much on government spending; it does not seem to trust workers with the fruits of their own labor.
A better approach to the current economic malaise is to identify the problem of low wages as being fundamental, affecting not only the living standards of poorer Americans, but also directly being the cause of the insufficiency of aggregate demand to achieve fuller employment – the crux of our current lingering recession. What we are suffering from in the current recession, like the Great Depression, is "under-consumption as a result of extremely unequal distribution of income."
The problem should be faced directly: the political economy of wage-setting should be completely changed over time, reversing the trends of recent decades. Nothing short of this sweeping goal will fix the problems of unemployment and the working poor. The elements of a new labor policy would include setting and indexing a general living wage, shifting the collection of Social Security and Health costs from employers and employees, eliminating payroll taxes, strengthening and enforcing labor laws, and mortgage debt relief for struggling households. Note that this would put more money into the hands of ordinary working Americans, not into the hands of government.
Admittedly, on page 41 of "Prosperity Economics" there is a policy recommendation to raise the minimum wage so that "Americans who work are able to support themselves and their families." But this is lost in the welter of recommendations, such as expanding support for housing (which would involve government money), expand job training (government money again), economic revitalization strategies (government money), create pathways out of low-wage work (government money), a national innovation foundation (government money), expand the Manufacturing Extension Program (government money), augment investments in clean energy (government money), and increase federal investments in R&D by 50% (government money again). Would measures like these truly be conducive to full employment in the short run -- or effective in the long run? Do they place enough trust in businesses large and small to figure out what to invest in and how?
One area where we believe that government taxation is essential is to pay for universal, more cost-effective, single-payer health insurance. There are two reasons for this. One is to remove the cost of health care off employment. This single measure would dramatically increase the competitiveness of U.S. manufacturers and be an important component of a full-employment economy. The other reason is to provide a pathway to reducing health costs and making the health care industry more efficient. Health services would be provided by private providers, but with improved government regulation of the cost. Generally, however, we believe that ordinary working Americans are the best repositories of the income they have generated.
The title "Prosperity Economics" is inspiring and sets the right tone for the many constructive policy proposals in this manifesto, but we believe it would be strengthened by a more fundamental focus on the workplace conditions being experienced by the vast majority of Americans.
Saturday, July 28, 2012
till the post S= kamp collapse and the clinton frugal miracle
then gwot ..now another squeeze down this one largely local
speaking of tranfer payments
Thursday, July 26, 2012
as to still not knoweth
the tax foundation
is a plutonic US prime center cut
reactionary kazoo ?
its sole offering
a brand of k street casuistry
doubled charged with horse feathers and fact twists
and then honked away
day and night
in the key of d flat
a mischievous blue ribbon noise box
in the latest issue
these well heeled counter revolutionary cads
sally forth yet again
to play ace water board team
and of course
its the hapless "gold standard " CBO data base
that confesses to another
in a very long and very crooked series
of fourth tier of hell lies
the task scotch the persistent rumors of growing income inequality
thank heaven we can trust in every industrious truth terrier PK
to rip out the rotten stuffings of this nasty new business section chew toy
but first the brutalized TF facticular discovery :
"the whole post is kind of a classic of disinformation: pretense that income taxes are the only taxes? Check. Bemoaning the rising share paid by the rich, while ignoring their rising share of income? Check. Whining that the lucky duckies with low incomes don’t pay enough? Check."
and he hurth forth this clarion all of the real down town long haul truth :
voila the terrible ride of the top .01-ers:
Wednesday, July 25, 2012
"reducing the debt burden through
the door to bank runs."
read this and you will free your mind !!!!
Monday, July 23, 2012
For those who are interested in comparing and contrasting the current Great Recession with the Great Depression, Wikipedia has several interesting articles on the Great Depression. They are fact-filled; for instance, we were surprised to learn that in 1933 a group of millionaires, led by the Du Pont and J.P. Morgan empires, and alarmed by Roosevelt's plan to redistribute wealth from the rich to the poor, plotted to overthrow the Roosevelt administration by means of a military coup "and install a fascist government modeled after Mussolini's regime in Italy." Fortunately, the general whom they recruited to lead the uprising ratted on them to Congress. Since then, I suppose the would-be fascist businessmen have consoled themselves with fomenting military dictatorships abroad, in Latin America and elsewhere.
Wikipedia has a long, fact-filled and quite theoretical discussion of "The Causes of the Great Depression." It notes that some economists at the time (and later John Kenneth Galbraith), "popularized a theory that had some influence on Franklin D. Roosevelt. It held that the economy produced more goods than consumers could purchase, because the consumers did not have enough income. According to this view, in the 1920s wages had increased at a lower rate than labor productivity. Most of the benefits of the increased productivity went into profits, which went into the stock market bubble rather than into consumer purchases. Thus the unequal distribution of wealth throughout the 1920s caused the Great Depression.
"According to this view, the root cause of the Great Depression was global overinvestment while the level of wages and earnings from independent businesses fell short of creating enough purchasing power. It was argued that government should intervene by an increased taxation of the rich to help make income more equal. With the increased revenue the government could create public works to increase employment and 'kick start' the economy.
"In the USA the economic policies had been quite the opposite until 1932. The Revenue Act of 1932 and public works programs introduced in Hoover's last year as president and taken up by Roosevelt, created some redistribution of purchasing power."
We couldn't have said it much better ourselves, except perhaps to point out that the solution we favor, or at least would put on a par with putting more money into the hands of government to fund public works programs – as well as infrastructure, education, etc. -- is a set of fair wage policies that would put more money into the hands of working Americans.
Tuesday, July 17, 2012
"The Coming Crisis" Last Time Around
In June 2005, Lewis Lapham of Harper's Magazine hosted a forum on "the coming crisis." The three discussants included Paul Krugman and Glenn Hubbard. Predictably, Krugman thought that "there is a 50 percent chance that the outcome is pretty calamitous"…while Hubbard said that "nothing in this story suggests to me any kind of imminent crisis."
Nothing remarkable here, right? Both pundits were just taking their standard positions, Hubbard the incrementalism of the Chicago style of economics, and Krugman a Keynesian approach. And one could then go on to attack Hubbard for being out of touch with reality and to laud Krugman for being prescient?
But economic ideology and economic reality are not so neat. The feared crisis they were talking about was NOT the bursting of the domestic U.S. housing-centered financial bubble and the ensuing Great Recession, but the much-anticipated crisis of the debt-burdened dollar. If we had disclosed that the third person in the forum was Peter G. Peterson, we would have given the game away, because he has of course been the most outspoken critic of the government deficit, and the most apocalyptic in his forecasts of the consequences of debt.
We now know what crisis these experts should have been focusing on at the time. In 2007, about two years after this forum was held, the U.S. housing market collapsed, taking mortgages and other risky assets with it, and by 2008 the whole U.S. financial system was in crisis.
By March 2009 U.S. stocks had lost half their value. But not the dollar! And not U.S. Treasury bonds! When risk spread from the U.S. to investments across the world it was, paradoxically, the dollar that was increasingly seen as a safe haven. And U.S. Treasury securities were seen as the least risky assets, not the worthless paper instruments of a state desperately trying to fund endless deficits, like some banana republic. Part of the reason is that, while Americans have been preoccupied with their own financial and economic problems, people abroad have placed more emphasis on the problems in other countries like the weaker members of the euro bloc, and seen the U.S. economy in a more favorable light as relatively stable , and Treasury bills and bonds as "risk-free" securities.
Consider the record of the last seven years. As regards U.S. Treasury debt, the interest rate on the 30-year Treasury bond has fallen, not risen. It has hovered around 4% for much of that period, and is currently below 3%. True, the U.S. dollar index, reflecting the average price of the dollar in other currencies, has fluctuated considerably, but as of today it is down by only 10% or so (from a level of about 90 in 2005 to about 80). Taking a somewhat longer perspective, the index had admittedly peaked at around 120 in 2002, and from that point it had already fallen by about one third (to about 90) by the time of the forum in 2005. But these declines were relatively gradual and orderly.
By no stretch of the imagination, then, has there been any kind of dollar crisis, and the debt crisis that occurred in 2007-2009 and caused the economic depression was not a crisis of government debt but one of household and private financial sector debt. From the perspective of mid-2012, Paul Krugman deserves lower marks than Glenn Hubbard in this debate, predicting a dollar crisis that didn't happen. And Pete Peterson comes across as Chicken Little; so far, the sky hasn't fallen, as far as debt and the dollar are concerned.
The Coming Crisis This Time Around?
But somehow one gets a feeling that the financial markets are hiding more than they are revealing, that all is not hunky-dory with debt and the dollar. It is not only a matter of the sluggish state of the U.S. (and world) economy. There is a growing sense of unreality in the current economic debates, which are mostly of a short-term Keynesian nature, focused on whether the amount of government stimulus is enough to get us out of the Great Recession, or whether the spreading call for "austerity" in Europe and the U.S. could soon take the world economy in the other direction, toward a second dip of the recession.
Meanwhile, while most economists have remained focused on the Great Recession, the federal government deficit has still been there, averaging over $2 trillion a year during the four years 2008 to 2011. And the international trade deficit (including other "current account" items) has still been there – averaging $500 billion a year in those four years. But the financial markets don't seem to care, with investors now willing to buy 10-year U.S. Treasury notes with a coupon of under 2%, and Treasury bonds with a coupon of under 3%. Since inflation is expected to run at 2 or 3 percent a year, it appears that investors have such confidence in the financial probity of the United States that they are willing to invest in its sovereign debt at rates that are not hardly expected to keep up with inflation.
In fact, the only people who seem to care about this situation are hypocritical Republican politicians who, after turning a blind eye to the profligacy of the Bush years, want to use debt as a stick to beat down liberal budget proposals and "starve the beast" of government.
Meanwhile, as in the early stages of a horror movie, we in the audience sense that the protagonists are in great danger, while they are going about their lives in blissful ignorance. Our friend Martin Kenner likes to say, "It's the blow you don't see coming that knocks you down."
Trying to anticipate the blow that we haven't seen coming, we ask the direct question: at some point, won't the world's creditors say enough is enough when it comes to lending to the U.S. government? The U.S. government deficit is extending as far as the eye can see, but as Herb Stein said, "If something cannot go on forever, it will stop." Won't it be more and more clear to lenders that this is a case of good money following bad? Won't they knock U.S. Treasury securities from their "Risk Free" pedestal and demand an increasing risk premium?
It seems that there are two issues that will determine the feasibility of U.S. fiscal policies in the medium term. One is whether there are or will be credible signs that the U.S. is shifting from debt-dependence to fiscal prudence, i.e., from cyclical deficit in the short run to structural surplus in the long run. And the answer to this question at the present time must be no. Right now, the federal government has a valid cyclical reason for continuing with deficit financing, namely of course the need to stimulate the economy and bring it out of the recession. But the magnitude of the recession is such that there seems to be no end to the need for fiscal stimulus. Accordingly, the need for deficit spending will remain.
But the calls for prudent fiscal management are bound to grow. The easy part is behind us. From here on, politicians will increasingly attack the government for running an endless deficit, and they will also, inconsistently, resist the need to increase taxes on the wealthy and on business to pay for it. It is always easier for Congress to spend money beyond the government's means than to raise taxes. If and when, finally, the time for raising taxes comes, will Congress – and the American people -- be up to the challenge? And will they try to put the burden on those who can afford it, rather than on the poor and the middle class, who are already struggling?
The other issue is the relative confidence that investors and governments have in the U.S. economy (and polity) compared with that of the other major currency blocs. Today, the euro is the dollar's chief potential rival, but Europe is in a state of deficit and disarray. However, it is only prudent to expect that if and when Europe begins to stabilize and the euro becomes a more respected reserve currency, there will be an increase in the cost of borrowing by the U.S. And what about the relatively stable Japanese yen? And the rising Chinese renminbi?
So, after all, it seems the U.S. must sooner or later experience a time of reckoning in which it becomes hard to find buyers for the dollar or for Treasury bonds. The dollar must fall and inflation and interest rates must rise. But it is hard to predict the timing and shape of these and other associated developments.
One thing is clear: it will become much more difficult to finance the U.S. debt, and fiscal responses to that problem could be crucial. Government debt could be a huge drag on the economy, just as private household debt is now. In other words, while exports should help to strengthen the economy, the debt load could severely depress it.
The kind of partial analysis presented here focuses on a few economic and financial variables, and there are many other variables that will affect the developments discussed here, and in turn will be affected by them. To the extent that we experience a large fall of the dollar, it is likely that U.S. import prices and inflation will rise. U.S. exports will be more competitive internationally and should do well. To the extent that interest rates payable on fixed-interest investments rise, the cost of borrowing by Main Street firms will rise, which must have a depressing effect, other things equal. And bond prices (which move in the opposite direction) must fall, and investors will lose a lot of money during the transition to a higher-rate environment. Stock prices may hold up, however, if exports and earnings are rising. Much will depend on the responses of other countries. If U.S. exports gain market share, and the U.S. fends off competitive imports, the U.S. will succeed in exporting recession, but the reverse will be the case if other countries competitively devalue their currencies and there is a trade war in which the U.S. loses market share. Clearly, there is a complex set of interactions here. Not least, the accumulated national debt could have a potentially crippling effect on the economy, despite the boost from exports. Hopefully, however, this brief analysis will provide an introduction to some of the issues.
Sunday, July 15, 2012
Joseph Stiglitz's new book, The Price of Inequality: How Today's Divided Society Endangers our Future. (W.W. Norton, New York, 2012) is a very important contribution to the debate about the harmful economic and other effects of extreme inequality. The book is broad and deep, and our quick review here will hardly even touch the surface. We would encourage people to read this well-written book in its entirety.
Stiglitz has no illusions about the way in which the market economy is working in the United States. He has lengthy discussions about rent seeking and market imperfections as sources of income of the 1%, and little confidence in the labor market as a mechanism for setting fair wages in the policy framework that has prevailed in the country in the last three or four decades.
Stiglitz's discussion (at pages 85 et seq.) of the harmful macroeconomic effects of inequality is worth quoting at length, because it decisively breaks rank with today's timid market economists:
It is perhaps no accident that this crisis, like the Great Depression, was preceded by large increases in equality: when money is concentrated at the top of society, the average American's spending is limited, or at least that would be the case in the absence of some artificial prop, which, in the years before the crisis, came in the form of a housing bubble fueled by Fed policies. The housing bubble created a consumption boom that gave the appearance that everything was fine. But as we soon learned, it was only a temporary palliative.
Moving money from the bottom to the top lowers consumption because higher-income individuals consume a smaller proportion of their income than do lower-income individuals (those at the top save 15 to 25 percent of their income, those at the bottom spend all of their income). The result: until and unless something else happens, such as an increase in investment or exports, total demand in the economy will be less than what the economy is capable of supplying – and that means there will be unemployment. In the 1990s that "something else" was the tech bubble; in the first decade of the 21st century, it was the housing bubble. Now the only recourse is government spending.
Unemployment can be blamed on a deficiency in aggregate demand (the total demand for goods and services in the economy, from consumers, from firms, by government, and by exporters); in some sense, the entire shortfall in aggregate demand – and hence in the U.S. economy – today can be blamed on the extremes of inequality. As we've seen, the top 1 percent of the population earns some 20 percent of U.S. national income. If that top 1 percent saves some 20 percent of its income, a shift of just 5 percentage points to the poor or middle who do not save – so the top 1 percent would still get 15 percent of the nation's income – would increase aggregate demand directly by 1 percentage point. But as that money recirculates, output would actually increase by some 1 ½ to 2 percentage points. In an economic downturn such as the current one, that would imply a decrease in the unemployment rate of a comparable amount. With unemployment in early 2012 standing at 8.3 percent, this kind of shift in income could have brought the unemployment rate down close to 6.3 percent. A broader redistribution, say, from the top 20 percent to the rest, would have brought down the unemployment further, to a more normal 5 to 6 percent.
Stiglitz explains how the government's response to weak demand – low interest rates – led to bubbles in tech investments and housing – how deregulation made things worse, and how what we now call "austerity" has reduced government spending, the reverse of what was required.
One should note, however, that Stiglitz's argument on the effects of inequality is more descriptive and less analytical than that of Michael Kumhof and Romain Ranciere, which was reviewed on this blog on May 15: Inequality, Leverage and Crisis, IMF Working Paper WP/10/268, November 2010. Their paper really nailed the issue by developing a model that traced the causation from inequality to leverage (excessive mortgage borrowing) and crisis when the mortgage bubble burst.
A footnote on the OECD Economic Survey of the U.S.
The OECD's June 2012 Economic Survey of the United State contains a much weaker discussion than that of Stiglitz or Kumhof and Ranciere. It is agnostic regarding the macroeconomic damage caused by inequality, concluding that "there is no consensus in the economic literature that reducing inequality would be harmful to economic growth." Which falls short of a finding that reducing inequality – at least, reducing extreme inequality -- would actually be beneficial to economic growth, as clearly shown by Stiglitz, and Kumhof and Ranciere, and argued in the founding paper of this blog (see Home Page, click on "Read the Paper").
Needless to say, waiting for consensus on inequality among wobbly-kneed economists would be like waiting for consensus on climate change or the theory of evolution among Kentucky Republicans. The closest the OECD gets to the nub of the recent problems is the half-hearted statement that "Some have identified income inequality as one of the causes of the financial crisis since it may have encouraged subprime borrowing by households who tried to make up for their lack of income." It does not mention the complementary problem that the excessive savings of corporations and the wealthy provided the supply side of the subprime bubble, and the way in which the Fed enabled the growth of unsustainable subprime mortgages by its policy of easy money and lax regulation.
index for all:
the level in 1995 :
check out that orange line
that's the geeter with the heater:
"the employment to population ratio"
the rest is all corporate market capitalism
doing its 'one damn thang after another' act
Saturday, July 14, 2012
some of us have called on uncle for years to take over
all our existing corporate sponsored ' defined benefit 'plans
take em over
assume their obligations
and tax the bejesus out of their former "corporate managers "
like those hideous profit pots are a bunch of 18th century french peasants
we citizen enrages
need to rebuild the federal back stop system with fat hacked off the corporate haunch ;
The Pension Benefit Guarantee Corporation (PBGC) is in trouble and headed for a lot more
right today we need to stop the board room clip joint operations
that run their pension obligations thru a chapter 11 bankrupcy court
and from there right out of existence
poof gone !
like promises to the natives by a settler community
that's where the PBGC comes in
to pick up the obligation ...but only in part of course
--operates much like fidc for despositors
theres's a limit to the coverage ---
the day of the corporate fringe massacres is at hand and has been at hand
for over two decades now
and in a growing crescendo of court ordered slate wipe offs rip outs and vanishments
this is obvious to all of us looking into the crater where once union contracts existed
but uncle stepping in now and taking over prior to court action
..ya i mean uncle coming in pre emptively
putting a stop to this ...like ending a hideously uneven bloody faced bout ...
friends it 's certainly well past due
the longer uncle lingers the more fringe fucks.... the more ruined retirements
and yet as with most
recent "ought versus is " state plays
uncle is heading in exactly the oposite direction:
"On Friday, July 6, President Obama signed into law a bill that would renew transportation programs and extend low interest rates on student loans for one year. ..
tucked away within the bill’s pages was a little-noticed proposal to further erode the funding of workers’ pensions. ...This bill in a brilliant sleight of hand ...
REDUCED the amount that corporations pay
into their grossly underfunded pension systems"
read more at the counter punch link above .....
behold biff reynolds !
looking like a parady of one of his patrons
much like a dog comes to mimic its master i guess
i find it great fun to occasionally note
this notorious slippery eel of a rich man's hack at work
"love ya biff
hows the kidney stones?"
he of the now long since famous
reynolds numbers on the turbulence in the flow of truth
produced by water boarding household income data
read it.. u can get a fine sense of the confessional art
of number racking
you know i read stuff like this about the great out there
and i figure we must have a parallel earth
a bizzaro gold plated earth
with shiny friendly plutonian features
okay its much unlike here
where the face of a plutonian
can pretty much everytime
scares the wits
out of charging He- Bear
take this sardonic clincher from our sincere reporter mr biff
beaming an update to us
from our twin earth ....planet plutonia :
"Perhaps it is time for the CBO to issue a corrected report:"
“The share of income received by the top 1%
fell from 11.8% in 1985 to 11.5% in 2009.”
gotta love that for its understated "right up yer ass" ism
for the anbitious fact moles among u
here's the eclairlike " back bone " to reynolds latest shimmy dancer :
" The U.S. economy has grown considerably over the past three decades. However, there is a prevailing sentiment that the middle class and the poor have been left behind"
can you guess where this unvarnished enquiry into the hard facts
is headed brothers and sisters ?
to refute all the stuff like this
churned out by our nation's donated tax exempt
dollar mill stink tanks
would indeed daunt the stoutest sewer voyageurs
among us pinkos
tit for tat
battle every " issue paper " produced
by these cork screw outfits ..yikes !
what with their non stop
pay out of seriously good money
to literally hundreds and tens of hundreds
of these eager scurrying thousand legged
hack-cademy scholar-creepees .....
why my lord
that would require
a full time staff of prolly 100 furiously scribbling beta level red angels
not really worth the effort for us mortal slobs eh ?
better we just continue to produce "our own " plain fact sheets instead
sure we need to perpetrate an occasional
u know an atrocity of sorts
on one or two of the leading figures
among all these plutonian singing insects and fact barbers
but no more then that
come to think of it
mr peeevey reynolds here
wouldn't be such a bad choice for a personal scrub down now would he
--a nice link to a review of his many past efforts
exposed in livid detailed colors
would be handy to have at one's unblushing pink finger tips---
Thursday, July 12, 2012
There are two "common sense" explanations which spring readily to mind, and which should therefore be dealt with first:
- Inequality of tasks
- Inequality of people
But in a world where all else is equal, these unpleasant qualities should be "factored in" to the negotiation over terms of work and compensation. To some extent, this holds true in the world: some people voluntarily spend 4-6 months away from their families on an oil rig in exchange for higher pay, work as a cop for a while in anticipation of an early retirement, etc. But in many more cases, we see just the opposite prevail: "dirty" jobs with longer hours and worse pay than other jobs, which are often unnecessarily dangerous. Meatpacking, farm work, food processing, and warehouse work are examples of entire industries made up of primarily of "bad" jobs. The economy, it seems, tends to concentrate and aggravate, rather than disperse and alleviate, the odiousness of "dirty" jobs.
So the nature of the tasks is clearly not a sufficient explanation for why some jobs are bad...
forget about incentives to "invest"
contemporary advanced societies have more then too much spontaneous
aggregate accumulation already hence the need for so much usury
but how about incentives to be more productive ?
can taxes reduce the supply of time and effort ?
read the link
"for the same amount of cost, a program that requires work will indeed lead to more work than one that does not. "
"EITC and welfare reform have done better on the work front than did AFDC. "
need for reforms
" Combined effective marginal tax rates from dozens or hundreds of phase-outs can be very high and certainly lead to hidden and confusing government."
" The rates are especially high for low-to-moderate income households with children and include hundreds of billions of dollars of marriage penalties as well. "
"These high tax rates also extend into many middle-income programs as well. "
" (a) seeking broad-based social welfare reform rather than adopting programs one-by-one with multiple phase-outs,
(b) starting to emphasize opportunity and education over adequacy and consumption;
(c) putting tax rates directly in the tax code to replace implicit tax rates,
(d) making work an even stronger requirement for receipt of various benefits
(e) adopting a maximum marginal tax rate for programs combined,
(f) letting child benefits go with the child and wage subsidies go with low-income workers rather than combining the two. "
a look at the total tax and transfer system's income profile
--get an f ing mag-glass ---
some utterly off the cuff remarks unrelated to the paper:
why might a diabolic system
have two plans
tax cuts at the margin like your high flyers get in reaganomics
for the lower orders of wagelings higher taxes
the jaw bone of an ass
right across the back side
think of two forces inside one jobbler/producers head
one force wants more market stuff
the other force wants more leisure
job hours offered are the outcome of this tussle of forces
now imagine the survival level is about your earning max potential
cut your take home wage and you either don't have enough
or you work more hours...right ?
nothing will stop you from trying to get enough hours to survive
ya its like being under water
no matter how much harder it may get to keep going higher and higher
you'll do it till you surface
these critters can really be wacked to hell...and have been
however imagine you are easily surviving
and suddenly you get a raise per hour
you might reduce your life time job hour plans eh ?
take a bit more leisure
that second force has cut in here
so again taxing your ass off will induce more offered hours
so when do we get to the point where lowering hourly rates might
reduce hours offered ?
when you got so much task related income
every increase gets off set at least in part
by offering less hours
my guess this never happens to our "high market achievers"
but according to reaganomics it does
reagan himslef claimed he'd of taken more roles
in his hay days past
if back then his marginal tax rate hadn't been so damn high
how his eagerness to work more
could produce more roles to play in aggreaget instead of simply seeing the availible roles more hogger by the lucky/gifted few
is left undiscovered i might add
but that's another thread
but hey we hit another poser
what if we change not the average tax but the tax on additional job or task income
now rethink all this two force tussle bull shit
using marginal changes
its this that gets reaganized:
additional hours or higher rates per hour
are compensated at reduced income ?
again look at your underwaters first
they'll still take more hours at least till their heads are above water
in fact they 'll take as many hours as they can get
even at a reduced marginal pay rate
which btw is exactly what happens to lots of souls
now in the income related social transfer payment system
now look at middlers the bulk of the production force
all are likely still looking for more income not more leisure
reaganites at the top ?
well you decide
joe stglitiz contends we oughta have progressive average income taxes
and flatly regressive marginal taxes on job/ task income
more or less pro rated by hours worked
make sense to you ?
i prefer a human capital tax
a tax on wealth in market evaluated
out put potential