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View Full Version : FIRE Economy Explosion Fallout -- Part I: Recession ends, depression begins - Eric Janszen



EJ
07-27-09, 01:57 PM
http://www.itulip.com/images/financialriskmeter400.jpg

FIRE Economy Explosion Fallout -- Part I: Recession ends, depression begins

• Surviving economic “recovery”
• Supply contraction
• Echo recessions

In a nationally televised speech last week, referring to the financial crisis President Obama announced that the “fire is out.” Indeed it is—in the ten-mile wide smoldering crater in the middle of the U.S. economy left by the explosion of a $20 trillion securitized nuclear debt bomb that went off in 2007. First the blast flattened the financial markets, then the “real” economy. Who could have known? (http://mpra.ub.uni-muenchen.de/15892/)

Who do we spy through our periscope poking up from our underground bomb shelter lined with Treasury bonds, CDs, and gold where we hid out from the blast since December 2007? Seven million bewildered formerly employed automobile, finance, and retail trade industry workers wandering the blackened pit, along with millions of mutual fund holders, blinking and stuttering, bombed out 401K statements in hand.

We see White House economic adviser Larry Summers standing by an abandoned, half finished housing development, or is that an RV town occupied by airline pilots and mechanics on Los Angeles International Airport’s Lot B? He’s yelling to us, and any everyone else who is still in one piece financially, that "the worst is over.”

There's Warren Buffett telling us if we don't buy stocks or we'll "miss the big gains."

There's Jim Cramer barking his latest hot stock tips, fully recovered from his ear boxing by Jon Stewart just a few months ago, imploring us to buy, buy, buy.

And why not? These guys have never led us astray before, right?

Above us, the sky is dark with vultures. They swoop down in waves to buy up foreclosed McMansions in California and Arizona, bankrupt restaurants in Ohio, and mountains of consumer goods—trucks, cars, furniture, televisions, clothing—thrown onto the market by consumers on eBay and Craig's List desperate for a few bucks.

Is that Mad Max approaching from afar through the heat ripples, government money in hand, to bottom-pick Microsoft stock and put a bid on a vacant strip mall in Vegas?

Maybe Buffett is right this time. An economy in such a state can only get better. How can it get worse?

Yet, tapping the meter on our Financial Risk radiation detector, we notice that after dipping near the Safe range the needle is again pegged in the red Unsafe zone.

This time the risk is not in the private markets but the public ones.

Through trillions in bank bailouts and fiscal stimulus our leaders are shifting bad private debts to public account. In the process they substitute one kind of credit risk for another, public for private.

No wonder a Brazilian credit rating agency recently downgraded U.S. Treasury bonds.

Q3 2009 on-time arrivals from previous forecasts


Fiscal and monetary stimulus rally (from First Bounce of the Debt Deflation Bear Market, March 2009 (http://www.itulip.com/forums/showthread.php?p=86995#post86995))
Supply-crash induced inflation (from Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again, December 2008 (http://www.itulip.com/forums/showthread.php?p=66592#post66592))
Tax receipts implosion and fiscal deficit explosion (from Road to Ruin, Final Stretch, February 2009 (http://www.itulip.com/forums/showthread.php?p=78579#post78579))

FIRE Economy Depression Quick Review—because if we don’t remind you, you’ll forget

In 2002, establishment economists tell us that no credit and housing bubble exists. We tell you otherwise (http://www.itulip.com/qc082002.htm) and warn the bubble will go on for years.

In 2007, these same geniuses admit the existence of a credit and housing bubble but claim that the economic impact of collapse will be inconsequential, that no economic recession will result. We warn in 2006 that the crashing housing and securitized debt bubble will lead to a Great Depression class recession starting in Q4 2007.

Today, the rocket scientists opine that the economic catastrophe, brought on by conditions they previously failed to see, will end like a bad dream and be replaced by a new cycle of borrowing for consumption and financial speculation, if only we click our heels together and collectively chant “There’s no place like 1999.”

(For an independent analysis of our methods for forecasting the FIRE Economy Depression starting in Q4 2007 and Debt Deflation Bear Market in 2008, see “No One Saw This Coming”: Understanding Financial Crisis Through Accounting Models (http://mpra.ub.uni-muenchen.de/15892/1/MPRA_paper_15892.pdf), Dirk J. Bezemer, Groningen University, 16 June 2009.)

“Buy stocks” broken record is back on the turntable

Warren Buffett, the world’s best stock picker and worst macro-economic forecaster weighed in Friday with the assessment that the economy is still a mess but, as he said in 2007 (http://www.itulip.com/forums/showthread.php?p=10085#post10085) and never stops saying, staying out of the stock market until recovery is clearly evident will cause investors to “miss the biggest gains.”

Such as in his investment in Goldman Sachs, for example, arranged last year by Hank Paulson.

With the S&P leaping 40% since March 2009 when we noted the First Bounce of the Debt Deflation Bear Market (http://www.itulip.com/forums/showthread.php?p=86995#post86995), it appears that everyone agrees with Buffett, especially the poor shorts whose covering turned a garden variety relief rally financed by fund managers into a runaway excess liquidity freight train.

The latest meme making the rounds: a full bore recovery is six to nine months way, and the stock market is now pricing it in.

“Recovery” is a big word. To most, it means a return to “normal,” an economy 71% driven by consumer spending, half of it debt financed. The economy bulls like Cramer are not just talking about an end to desperate selling of the family jewels to Cash4Gold to pay mortgage, auto, student loan, medical or other economic rents from the FIRE Economy that consume household income and savings. No, they mean a full-blown regression to the good old days: eating out three days a week, a vacation in Europe, buying a new car and a second home, all on credit. The fantasy life of middle class Americans.

But the U.S. economy will never revert to its pre-cash past, based as it was 30% on financially engineered credit expansion and 70% real, based on productivity growth. While that does not lead us to a forecast of soup lines and dust bowls, it does not mean happy days are here again, either.

Recession ends, depression begins

The Great Depression did not end when the economy stopped shrinking in the first quarter of 1933, after contracting in real terms by 27% over the previous three years. At the time economists heralded the event as the end of the depression. In fact, they were less than a third of the way through the ten-year period between 1930 and 1940 that came to be known as The Great Depression.

Real GDP grew by 33% in the next six years that followed, but the economy needed 54% growth just to get per-capita GDP back to where it was in 1929, ten years earlier.

Even after expanding by a third over six years from the official end of the Depression, unemployment in 1939 exceeded 17% and did not decline to pre-Depression levels until 1943, three years into the war. Most historians mark the end of the Depression at the start of WWII.


http://www.itulip.com/images/unemploy1929-1945.gif




Today, with the benefit of hindsight, no one claims that The Great Depression ended in 1933. Likewise the Japanese figured they were out of the woods in 1993, but 16 years later the Japanese economy still has not fully recovered, and recently took a major hit.



http://www.itulip.com/images/japanindustryalproduction1998-2009.gif




Japan: Industrial production 1998 to 2009



Debt deflations are like that.

Several years from now, no one will say that the FIRE Economy depression ended in Q3 2009, either.

A sharp economic contraction caused by the mass extinction of the purchasing power of private credit that followed the securitized debt bomb explosion of 2007. That acute crisis phase of the FIRE Economy Depression is over.

By the end of the first half of 2009 reverberations from that detonation died down to a dull, distant rumble. Surveying the scene we see that many areas of the economy, by geography and industry sector, suffered permanent blast damage.

By the end of the year you will hear an official announcement by the National Bureau of Economic Research that the national recession that started in Q4 2007 ended in Q3 2009. This will signify that GDP stopped declining on a quarterly basis year over year in nominal terms. However, the FIRE Economy Depression will go on for many years in its own unique way. National echo recessions are likely, and ongoing contraction in areas of the country and particular industries is guaranteed.

Not as bad as The Great Depression, not as good as 1983, like Japan 1992 to 2009 but without the cheap manufactured goods

There is no question that this time around the U.S. economy did not experience the degree of demand destruction that occurred in the early 1930s. The Fed and Treasury in 2008 were also far more aggressive than the Bank of Japan in 1992.

Government spending intervention did work to prevent the incredible scale of economic mayhem that occurred in the three years of after the crash of 1929 when nearly 40% of the banks failed and millions of depositors lost their savings. Yet anyone who expects that the end of economic contraction will be quickly followed by a sharp V shaped recovery will be disappointed. Recession attended by debt deflation, or “balance sheet recessions” as they are called by some economists, tend to drag on and on.

Irrational Recovery Exuberance

U.S. stock market investors are throwing money at the self-sustained economic recovery story, and a short squeeze is driving up stock indexes sharply.

As signs of the short term economic recovery are mistaken for organic economic growth, we will see more stories like this one, imploring the Fed to raise interest rates before inflation takes off.
Raise Rates Now! Fed Risks "Major Bout of Inflation," Economist Warns
Posted Jul 22, 2009 (Aaron Task – Tech Ticker)

Ben Bernanke is right to talk about exit strategies but risks a "major bout of inflation" by waiting, says Brian Wesbury, chief economist at First Trust Advisors.

In fact, were he Fed chairman, Wesbury would be raising rates now - as in today - rather than waiting.

Contrary to popular belief, Wesbury does not believe a little inflation is a "good thing" and says Bernanke and certain members of Obama's economics team are too worried about the Great Depression.

Also contrary to popular belief, Wesbury does not believe rate hikes will kill the economy, which he views as being much stronger than the consensus, as we'll discuss in a forthcoming segment.
The Fed has never raised interest rates following recession until after unemployment has declined for at least six months. The Fed is wired with Non-Accelerating Inflation Rate of Unemployment (NAIRU) neoclassical economic orthodoxy to believe that inflation is impossible if unemployment is rising.


http://www.itulip.com/images/mediandurationunemployment1967-July2009.gif




Unemployment is still rising and will continue to rise before finally leveling off in Q4 2009.

The Fed will not raise interest rates because the Fed believes in NAIRU. While they wait for high unemployment to magically fight inflation for them, they will stall by hiding inflation for six to nine months the usual way, behind changes in the composition of inflation indexes, substitutions of lower for higher cost versions of goods (e.g., hamburger for steak), and other tricks of the trade. But you will see it, in food prices especially.

iTulip on Inflation: “Inflation is always and ever a political phenomenon.”






The primary long term risk that we have discussed here at length is that fiscal stimulus will not produce a self-sustained recovery, that additional stimulus will be demanded by politicians, and that the U.S. may run out of foreign credit before it gets even two years down the path of moving debts from private to public account that Japan has followed for nearly 20 years. The risk is heightened by the fact that America's IMF, China, is itself a bubble economy (see Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity (http://www.itulip.com/forums/showthread.php?p=106493#post106493)).

No Next Bubble

Now it appears that re-inflation policy will not create a Next Bubble in Alternative Energy and Infrastructure to bail us out of the crash caused by the Housing Bubble (see The Next Bubble (http://www.harpers.org/archive/2008/02/0081908)); the U.S. will have to recover the old fashioned way, via saving and investment.

Do we have time?

In January we estimated a 25% decrease in income tax receipts nationally for FY 2008. The actual decline: 26% nationally.


http://www.itulip.com/forums/../images/personalincometaxrecepitsitulipJul2009.gif







Where will the federal government get the money to cover states' unemployment insurance costs?

Where will the federal government get the money to finance a second stimulus program?

If not from foreign borrowing or taxes, where will the money come from?

If from taxes on capital, what will drive future productivity gains that will create organic growth?

If you believe that the economy is neither in the early stages of organic growth nor about to experience a next bubble, a bullish scenario for stocks is hard to conceive. By the same token, the forecast for fiscal deficits and the dollar are equally bleak.

http://www.itulip.com/images/fiscaldeficitdepression.gif




What is America’s fiscal deficit threshold?





Where will we get the money? The usual place.

Lower per-capita real GDP translates into lower living standards, especially for the bottom 50% of the net worth group that went into this with little or no liquid net worth.



http://www.itulip.com/forums/../images/networth.gif





When we started posting our distribution of income, debt, and net worth charts back when we reopened in 2006 many readers thought we were making some kind of socialistic point about how unfair the distribution is.

In fact, every time we posted these charts we made the point that in the coming economic depression, the majority who have little savings to fall back on and most of the debt will need the government to bail them out at a time when tax receipts from that group evaporate due to rising unemployment and falling incomes.
Our question: Which economic group will government go after for money to pay unemployment benefits and other economic disaster support?

Our forecast: Lousy distribution of wealth in boom times means high taxes on capital and wealth redistribution during busts. It has always been so throughout history.

Our fear: Wealth redistribution becomes structural. Then we’re sunk.

The lesson: In the future boom aim policy at the wealth distribution problem so it would cause the usual backlash later. That means get rid of the rent seeking FIRE Economy and focus on productive enterprise.
Now what?





<table valign="top" align="left" border="0"><tbody><tr><td>http://www.itulip.com/forums/../images/falloutshelter.gif</td></tr></tbody></table>FIRE Economy Fallout -- Part II: Theme Change (http://www.itulip.com/forums/showthread.php?p=112044#post112044)

For those among you who have been following my forecasts over the years, my purpose in warning you about this depression since 2005 was to give you time to prepare, especially those of you who have children. Long, drawn out periods of economic hardship are tough on kids in profound ways.

But that was then.

The iTulip theme before the depression: get out of debt, horde savings in Treasury bonds, CDs, and gold, and don’t hold any money in stocks and real estate that you cannot afford to lose for the next ten to twenty years.

With the end of the FIRE Economy and the start of the Debt Deflation Era in 2008 we entered an economic and financial market forecasting environment only Kafka could love. Our forecasting perspective since we started in 1998 must adapt to this change.

Five main challenges define our forecasting task going forward, now that the FIRE Economy Depression is here:


FIRE Economy legacy debt taxes the cash flows of struggling business and households
Chronic high unemployment and under-employment as debt finance-based industries shrink or fade away but before labor markets retool to meet new national and global production needs
High energy costs due to Peak Cheap Oil
Dysfunctional political responses to challenges one, two, and three
Dysfunctional financial market response to the dysfunctional political responses to challenges one through four

The iTulip theme from here on out: pace ourselves and stay attuned to changes that create tactical opportunities. This will not be an environment for buy and hold, nor for placing large bets in any one area. more...($ubscription) (http://www.itulip.com/forums/showthread.php?p=112044#post112044)

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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flintlock
07-27-09, 07:14 PM
I like the bomb analogy.




Our fear: Wealth redistribution becomes structural. Then we’re sunk. In my opinion, this is a foregone conclusion. We have a government bubble. It's too large and makes up too big a percentage of our economy now to turn back. We will see the downside of democracy that some of our forefathers warned us about, as politicians are forced to play to the mob.

Tough times ahead. :(

Quincy K
07-27-09, 11:04 PM
Hello Fred

Unemployment leveling off in Q42009? I believe that you once predicted U-3 at 25 percent. I always thought that we would max-out at 25 percent U-6, which looks very plausible.

I would assume that you guys have now changed this number. What do you believe will be the ultimate U-3 and U-6 forecast?

metalman
07-28-09, 12:06 AM
Hello Fred

Unemployment leveling off in Q42009? I believe that you once predicted U-3 at 25 percent. I always thought that we would max-out at 25 percent U-6, which looks very plausible.

I would assume that you guys have now changed this number. What do you believe will be the ultimate U-3 and U-6 forecast?

where? link. pls.

confused with... (http://www.freerepublic.com/focus/news/2266212/posts)

snacky
07-28-09, 01:32 AM
where? link. pls.

confused with... (http://www.freerepublic.com/focus/news/2266212/posts)

See http://itulip.com/forums/showthread.php?t=9528 - last sentence

metalman
07-28-09, 01:53 AM
See http://itulip.com/forums/showthread.php?t=9528 - last sentence




http://www.itulip.com/forums/../images/unemployment2007-2009itulip.gif


If we compare that animation of unemployment data to this older one of recessions since the late 1970s we see that even at the worst part of the 1980 t0 1983 recessions unemployment fell in some states even if it was rising in most states.

http://www.itulip.com/forums/../images/unemploymentMovie.gif

snacky
07-28-09, 02:32 AM
And right below that last graphic, the closing statement, " We are sticking to our forecast of 20% U3 unemployment in the U.S. by the end of 2010."

My immediate reaction when that was posted was to comb through some old posts to see if I could find a precedent forecast on the site - no luck. I also don't think that particular forecast has been revisited since.

metalman
07-28-09, 02:48 AM
And right below that last graphic, the closing statement, " We are sticking to our forecast of 20% U3 unemployment in the U.S. by the end of 2010."

My immediate reaction when that was posted was to comb through some old posts to see if I could find a precedent forecast on the site - no luck. I also don't think that particular forecast has been revisited since.

have been on this site for 10 yrs... seen 100s of forecasts.. but i can find 1 or 2 that are not within 10%.

compare to ???

art
07-28-09, 08:05 AM
I would love to see iTulip have a dedicate Forecasts page that lists each forecast, the date, the link to the post justifying the forecast (or change in forecast if it is an update).

cindykimlisa
07-28-09, 08:11 AM
Part I: Recession ends, depression begins

Part I : Manipulation continues, Depression begins, Manipulation continues, Recession ends, Depression continues, Manipulation continues

Forget the fundamentals and logical comparisons. Stay tuned to the manipulations and sieze on opportunities. Be careful not to get burned by the logical and illogical.

we_are_toast
07-28-09, 09:16 AM
And right below that last graphic, the closing statement, " We are sticking to our forecast of 20% U3 unemployment in the U.S. by the end of 2010."

My immediate reaction when that was posted was to comb through some old posts to see if I could find a precedent forecast on the site - no luck. I also don't think that particular forecast has been revisited since.

I had the same question. 9.5% is a far cry from 20%. I'm not sure why the major change in unemployment, but I disagree. I don't see the fall off in weekly claims that will level out unemployment. I'm still betting on low teens by the end of 2010.

flintlock
07-28-09, 09:22 AM
Hello Fred

Unemployment leveling off in Q42009? I believe that you once predicted U-3 at 25 percent. I always thought that we would max-out at 25 percent U-6, which looks very plausible.

I would assume that you guys have now changed this number. What do you believe will be the ultimate U-3 and U-6 forecast?


He didn't say at what rate it leveled off did he?

Raz
07-28-09, 09:35 AM
I like the bomb analogy.


In my opinion, this is a foregone conclusion. We have a government bubble. It's too large and makes up too big a percentage of our economy now to turn back. We will see the downside of democracy that some of our forefathers warned us about, as politicians are forced to play to the mob.

Tough times ahead. :(

Yep. I saw it coming [politically] thirty-five years ago.

Human nature doesn't change. The rich only get greedier and the "kept" class (tax eaters) always grows larger. The Left set it in motion with FDR and supercharged it under LBJ. Then along came the friggin' NeoCons to apply hubris and stupidity so as to detonate the delayed charge.

The explosion comes next.

Quincy K
07-28-09, 11:12 AM
He didn't say at what rate it leveled off did he?

No. But it would take a miracle for U-3 to go from 10 to 20 in just nine months. For whatever it's worth, I believe that the FED is going to continue to extend benefits which will close the gap between U-3 and U-6. They have no other choice or we will encounter civil unrest episodes(Rodney King). To a certain extent, I agree with Gerald Celente("When people have nothing to lose, they lose it"). You cannot give ordinary average citizens 150k+ instant equity in a house in just two short years and then take it away from them leaving behind only debt that they can never pay back, especially in a severe and prolonged recession. The housing bubble is the worse thing that the FED could have blown. It would not surprise me right now if over 30 percent of the adult population is technically bankrupt.

Thanks for the link Snacky and the clarification of 20 percent as opposed to 25. I was just too lazy to look it up myself.

rjwjr
07-28-09, 01:01 PM
Yep. I saw it coming [politically] thirty-five years ago.

Human nature doesn't change. The rich only get greedier and the "kept" class (tax eaters) always grows larger. The Left set it in motion with FDR and supercharged it under LBJ. Then along came the friggin' NeoCons to apply hubris and stupidity so as to detonate the delayed charge.

The explosion comes next.

Truthfully, Raz, I'm not sure how to resolve the uneven distribution of wealth "problem", but I don't think it's fair to characterize it as a liberal vs conservative issue, although it is a popular characterization.

More accurately, it is a "more capable" vs "less capable" issue. And by "capable" I mean it can take many forms, most obvious of which are intelligence, discipline, street-smarts, drive/ambition, opportunity and the like. If viewed from this perspective, the wealth will obviously flow to the "more capable" much like NBA championships flowed to Michael Jordan.

Additionally, your argument may be (hypocritically) fueling the flames of a class warfare debate when such debate is unfounded. The "rich" are not the stereotypical crooks of banking and Wall Street that are the poster boys of the "rich-bashing". In reality, the "rich", those of us that are causing and creating this uneven distribution of wealth, are you and me and our fellow iTulipers that are smarter than the average individual, or have better than average opportunity than some (I was born into a family business), or are more disciplined than most (conservative investing, not highly leveraged/in debt over our heads), more driven (investing hours and hours on iTulip and elsewhere). It is only natural that more wealth (which also includes less self-inflicted wealth destruction) flows our way. We don't do it to spite our less fortunate brethren, we don't do it out of shear greed, we don't try to hurt anyone else along the way (most of us do more direct good the more successful we become personally). No, the uneven wealth distribution just happens as a natural result of our capabilities and chosen actions versus those that are less capable and make bad decisions and possibly don't try as hard.

All that being said, I don't totally disagree that a severe uneven distribution of wealth may not be optimal for society, but I'm not sure.

I do strongly beleive that a rising tide does raise all boats. So from that perspective, what's good for us "rich" is also good for the "other half". With that in mind, I would have a great fear that any form of forced/excessive wealth redistrubution would directly harm the motivations of the more capable, more productive of us that are the wealth producers in this great Nation, which in turn, would be bad for all members of our society. You know, "Road to Serfdom" thinking. As an anology, we'd all have a more equal portion of the pie, but of a much smaller pie. I further feel that any forced wealth redistribution would only be a temporary unnatural state. As such, and with all due respect to EJ, I can't agree with his call for doing a better job of wealth equalization during boom times simply because that wealth will (eventually) find its way right back into the hands of the same wealthier (more capable) people from whence it came.

In summation, it is my opinion that uneven wealth distribution is a natural state that results from a free-market society, and that a free-market society is still the best structure/philosophy for maximizing the size of the pie (strength of an economy), even if it means some inequalities OF RESULT (of wealth) are a natural side affect. The greater pie size will offset the smaller portion of said pie for most citizens in my opinion.

All of this is easy for me to say because I am confident in my abilities and successful in my life thus far. On the other hand, I can understand why an individual who is less capable, less successful, and therefore has less wealth than average would scream for government assistance or any type of "break" or freebie or hand-out or "stick-it-to-the-rich" redistribution. Just because I can understand the thinking, however, doesn't make it right. Let's not try to fix what can't be fixed. Let's also not create class warfare where none should exist. We should idolize and emulate the typical entreprenuers, titans of industry, and all around capable, productive members of society that drive our economy, not chastize, belittle, and take from them.

Chris Coles
07-28-09, 01:04 PM
You cannot give ordinary average citizens 150k+ instant equity in a house in just two short years and then take it away from them leaving behind only debt that they can never pay back, especially in a severe and prolonged recession. The housing bubble is the worse thing that the FED could have blown. It would not surprise me right now if over 30 percent of the adult population is technically bankrupt.

The best thing they can do is indeed, go bankrupt. The faster the better for all of them. How long it takes for that lesson to sink in is another matter entirely. But that in turn bring on the worst times for all the systematic risks entailed by such actions. So the next couple of years will be made even harder caused by the steady collapse.

jk
07-28-09, 01:07 PM
there has always been a wide distribution of abilities within society, but the inequality of the distribution of wealth has varied. thus, varying abilities is not an adequate explanation of wealth distribution.

there are both policies and social norms which feed into the wealth distribution. the recent skew is as large as that in 1929, iirc- what a coincidence! it is a product of the financialization of the american economy, on the one hand, and the global labor arbitrage, on the other.

Chris Coles
07-28-09, 01:18 PM
Truthfully, Raz, I'm not sure how to resolve the uneven distribution of wealth "problem", but I don't think it's fair to characterize it as a liberal vs conservative issue, although it is a popular characterization.

More accurately, it is a "more capable" vs "less capable" issue. And by "capable" I mean it can take many forms, most obvious of which are intelligence, discipline, street-smarts, drive/ambition, opportunity and the like. If viewed from this perspective, the wealth will obviously flow to the "more capable" much like NBA championships flowed to Michael Jordan.

Additionally, your argument may be (hypocritically) fueling the flames of a class warfare debate when such debate is unfounded. The "rich" are not the stereotypical crooks of banking and Wall Street that are the poster boys of the "rich-bashing". In reality, the "rich", those of us that are causing and creating this uneven distribution of wealth, are you and me and our fellow iTulipers that are smarter than the average individual, or have better than average opportunity than some (I was born into a family business), or are more disciplined than most (conservative investing, not highly leveraged/in debt over our heads), more driven (investing hours and hours on iTulip and elsewhere). It is only natural that more wealth (which also includes less self-inflicted wealth destruction) flows our way. We don't do it to spite our less fortunate brethren, we don't do it out of shear greed, we don't try to hurt anyone else along the way (most of us do more direct good the more successful we become personally). No, the uneven wealth distribution just happens as a natural result of our capabilities and chosen actions versus those that are less capable and make bad decisions and possibly don't try as hard.

All that being said, I don't totally disagree that a severe uneven distribution of wealth may not be optimal for society, but I'm not sure.

I do strongly beleive that a rising tide does raise all boats. So from that perspective, what's good for us "rich" is also good for the "other half". With that in mind, I would have a great fear that any form of forced/excessive wealth redistrubution would directly harm the motivations of the more capable, more productive of us that are the wealth producers in this great Nation, which in turn, would be bad for all members of our society. You know, "Road to Serfdom" thinking. As an anology, we'd all have a more equal portion of the pie, but of a much smaller pie. I further feel that any forced wealth redistribution would only be a temporary unnatural state. As such, and with all due respect to EJ, I can't agree with his call for doing a better job of wealth equalization during boom times simply because that wealth will (eventually) find its way right back into the hands of the same wealthier (more capable) people from whence it came.

In summation, it is my opinion that uneven wealth distribution is a natural state that results from a free-market society, and that a free-market society is still the best structure/philosophy for maximizing the size of the pie (strength of an economy), even if it means some inequalities OF RESULT (of wealth) are a natural side affect. The greater pie size will offset the smaller portion of said pie for most citizens in my opinion.

All of this is easy for me to say because I am confident in my abilities and successful in my life thus far. On the other hand, I can understand why an individual who is less capable, less successful, and therefore has less wealth than average would scream for government assistance or any type of "break" or freebie or hand-out or "stick-it-to-the-rich" redistribution. Just because I can understand the thinking, however, doesn't make it right. Let's not try to fix what can't be fixed. Let's also not create class warfare where none should exist. We should idolize and emulate the typical entreprenuers, titans of industry, and all around capable, productive members of society that drive our economy, not chastize, belittle, and take from them.

I absolutely concur with this statement and, in my own way am trying to seek out an acceptable solution to the problem of how we create more prosperity at all levels of society.

And to add to the above, may I suggest anyone interested read the history of the Russian farmers and the collectivisation of their agriculture.
http://www.piiblog.com/2008/08/russias-farming-testing-different-kinds.html that in turn set back the Russian economy to this day.

The only way forward is to use capitalism, but with some redefinition of the way we use it to improve prosperity at the grass roots of society.

we_are_toast
07-28-09, 01:21 PM
More accurately, it is a "more capable" vs "less capable" issue. And by "capable" I mean it can take many forms, most obvious of which are intelligence, discipline, street-smarts, drive/ambition, opportunity and the like. If viewed from this perspective, the wealth will obviously flow to the "more capable" much like NBA championships flowed to Michael Jordan.

In reality, the "rich", those of us that are causing and creating this uneven distribution of wealth, are you and me and our fellow iTulipers that are smarter than the average individual, or have better than average opportunity than some (I was born into a family business), or are more disciplined than most (conservative investing, not highly leveraged/in debt over our heads), more driven (investing hours and hours on iTulip and elsewhere). It is only natural that more wealth (which also includes less self-inflicted wealth destruction) flows our way. We don't do it to spite our less fortunate brethren, we don't do it out of shear greed, we don't try to hurt anyone else along the way (most of us do more direct good the more successful we become personally). No, the uneven wealth distribution just happens as a natural result of our capabilities and chosen actions versus those that are less capable and make bad decisions and possibly don't try as hard.

All that being said, I don't totally disagree that a severe uneven distribution of wealth may not be optimal for society, but I'm not sure.

I do strongly beleive that a rising tide does raise all boats. So from that perspective, what's good for us "rich" is also good for the "other half". With that in mind, I would have a great fear that any form of forced/excessive wealth redistrubution would directly harm the motivations of the more capable, more productive of us that are the wealth producers in this great Nation, which in turn, would be bad for all members of our society. You know, "Road to Serfdom" thinking. As an anology, we'd all have a more equal portion of the pie, but of a much smaller pie. I further feel that any forced wealth redistribution would only be a temporary unnatural state. As such, and with all due respect to EJ, I can't agree with his call for doing a better job of wealth equalization during boom times simply because that wealth will (eventually) find its way right back into the hands of the same wealthier (more capable) people from whence it came.

In summation, it is my opinion that uneven wealth distribution is a natural state that results from a free-market society, and that a free-market society is still the best structure/philosophy for maximizing the size of the pie (strength of an economy), even if it means some inequalities OF RESULT (of wealth) are a natural side affect. The greater pie size will offset the smaller portion of said pie for most citizens in my opinion.

All of this is easy for me to say because I am confident in my abilities and successful in my life thus far. On the other hand, I can understand why an individual who is less capable, less successful, and therefore has less wealth than average would scream for government assistance or any type of "break" or freebie or hand-out or "stick-it-to-the-rich" redistribution. Just because I can understand the thinking, however, doesn't make it right. Let's not try to fix what can't be fixed. Let's also not create class warfare where none should exist. We should idolize and emulate the typical entreprenuers, titans of industry, and all around capable, productive members of society that drive our economy, not chastize, belittle, and take from them.

Please tell me this is a letter to the Onion.

flintlock
07-28-09, 01:54 PM
No. But it would take a miracle for U-3 to go from 10 to 20 in just nine months. For whatever it's worth, I believe that the FED is going to continue to extend benefits which will close the gap between U-3 and U-6. They have no other choice or we will encounter civil unrest episodes(Rodney King). To a certain extent, I agree with Gerald Celente("When people have nothing to lose, they lose it"). You cannot give ordinary average citizens 150k+ instant equity in a house in just two short years and then take it away from them leaving behind only debt that they can never pay back, especially in a severe and prolonged recession. The housing bubble is the worse thing that the FED could have blown. It would not surprise me right now if over 30 percent of the adult population is technically bankrupt.

Thanks for the link Snacky and the clarification of 20 percent as opposed to 25. I was just too lazy to look it up myself.


Oh I agree, continuing high unemployment is a real potential powder keg. Hard to say how things will go down, but I suspect it won't be pretty as limited savings people have been living on run out. Politicians will have their hands full figuring out just how fast they can lower the US standard of living before something explodes. There's a certain segment used to poverty. Then there's others who aren't so well prepared for it. 2010 should be an interesting year. :D

Crime is already up a lot in my area. I get calls daily now to install security lighting, CCTV systems, and timers.

Not my area, but recently an Atlanta City councilman was carjacked in his neighborhood. This after weeks earlier another was robbed in a home invasion.

http://www.ajc.com/news/atlanta/atlanta-councilman-mitchell-robbed-100895.html?cxtype=rss_atlanta

flintlock
07-28-09, 02:41 PM
Another factor people forget is that the "Bar" is being raised ever higher in our society. The world becomes more complex and those who can't adapt get left behind. Unfortunately, this is going to continue as "manpower" loses out to "brainpower" in the world. My Dad used to jokingly say, "Well the world needs ditch diggers too!", implying I had done something stupid. Only now it doesn't need nearly as many ditch diggers as it used to. We should be wary of too much "progress" sometimes, lest it leave us with what amounts to a National day care service for the "not so bright". If we are not careful, that weight will become an anchor that drowns us all. Perhaps the answer is in simplifying things? People need to learn early on that their education is not a joke and that there will be consequences if they fail to learn. Right now, that message is not getting through. These days everybody gets an "A" for effort. A lot of the solution will start with our education system.

goadam1
07-28-09, 02:56 PM
where? link. pls.

confused with... (http://www.freerepublic.com/focus/news/2266212/posts)

Your loyalty is without fail. I found that the 20% claim made me queasy and panicky. This piece seems to back off from 20%. Why not admit it. I even asked them to confirm and they said 20%.

Originally Posted by goadam1
In various threads there are predictions for unemployment going to 10% or sometimes as high as 20%. What is the latest itulip best call on unemployment? Are the different predictions coming from u3 or u6 kinds of unemployment?
All of iTulip's unemployment forecasts are consistent and use the BLS's U-3 unemployment data:
In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment. Our forecasts during this crisis have tended to be on the optimistic side; steeper job losses cannot be ruled out, especially if other feedback loops intensify. For example, rising unemployment will lead to a further 20% to 40% decline in real estate prices as households lose access to income to pay mortgage debt. A further tightening of credit as the pool of credit-worthy borrowers contracts means even deeper losses in Wholesale Trade, leading to more unemployment, and so on. - Unemployment by industry: Recession or depression? - Eric Janszen
July 2, 2008 in our state by state U.S. unemployment forecast Housing Bubble Correction Update: Fasten your seat belts, here comes the jobs crash we said, “The rate of growth in unemployment in some states may shock you...” In November 2008 we published our industry sector analysis of future unemployment Unemployment by industry: Brace for Impact that concluded, “In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment.” Investors who got sucked into the early year rally (see Beware Relief Rallies Update 1: DJIA 7552 the Debt Deflation Bear Market bottom?) took a beating today when the two "surprising" unemployment reports shocked the market, producing a 245 point drop in the DJIA on the news. - Jobs crash arrives on schedule - Eric Janszen
Unemployment is forecast to go as high as 15% in 2009 and as high as 20% in 2010.

That's:
Peak 2009: 15%
Peak 2010: 20%
That said, with layoff notices some days this month coming in at a 20 million annual rate, we may have to revise our forecast upwards.
__________________

You can't get them all right.

And just say it, "stimulus works." The rest of the piece is about navigating the results. Right?
Still the best macro ideas. Still the best at calling bubbles. Still the best at seeing the big picture.

goadam1
07-28-09, 03:00 PM
"In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment."

Hey, they nailed it!

The thing about any predictive work is you course correct and you blow up the ones you get right.

goadam1
07-28-09, 03:03 PM
This piece hints that dow 5000 isn't a fixed number, too. But I wouldn't bet against a 2:1 gold to dow ratio.

goadam1
07-28-09, 03:14 PM
I had the same question. 9.5% is a far cry from 20%. I'm not sure why the major change in unemployment, but I disagree. I don't see the fall off in weekly claims that will level out unemployment. I'm still betting on low teens by the end of 2010.

Here is a different post on unemployment that is pretty spot on:

http://www.itulip.com/forums/showthread.php?t=7289

So why was there ever a 20% prediction?

Mega
07-28-09, 06:11 PM
Thank You Eric
I enjoyed that, i re read it again when "at work" or sitting in my workshop in Liverpool with bugger all to do (almost).

While i agree on most i feel you missing a number points.

1. Americans HATE taxes!......Your got REAL "Tea party" situation "Brewing" out there......Ron Paul & Schiff etc all too ready to stir the pot!

2. Americans have had a taste of "honey"....Oh boy was it nice, able slip down the Vette dealership or even the Lambo..using "Home ATM"....They not be very keen to jump into a Chevy Curze or Volt!

3. Americans Love to "welch" on the deal.....From those 1st handskakes with the Red Indians, to selling the Rockafellow buildings to Japan & "Sacked" the Ports deal with the A-RABS...nothing gives an American more of a warm felling to know he shalfed the other guy.

4. Geo-political.....The American Empire is now in its death throws, sure its still a power but its more a paper tiger, am minded of the mindset of the British in the 1950,s & 60's that just couldn't understand "It was over".

Now Eric, lets mix everything together, China holds you debt, a debt which lets face it you have NO intention of paying...........So what to do?


DEVALUATION!

You must reduce the debt, you must also try to keep you Armed forces as strong as you can. Sure cut the F22 project, cut other things but LIKE HELL are you going to give up what you taken by force.......i don't think you have much succes in Afganistan, China & Russia WILL see to that.

So, seeing how its mainly China you going to crap on, well Ok. I suspect there be "Controled inflation" over a number of years as well...........No this debt MUST be removed....by what ever means required!

& i suspect it will start to happen by Q4 2009.
Mike

leegs
07-28-09, 06:37 PM
All that being said, I don't totally disagree that a severe uneven distribution of wealth may not be optimal for society, but I'm not sure.


Of course an uneven distribution of wealth is normal in a society. I contribute to it a bit myself, although less since I quit the corporate world. However I wonder ( although of course I have no actual knowledge on this point) how material is your or my contribution to the overall skewed wealth distribution in the US. The top 1% owns 34%. I suspect that you are among the next 19% who own 50% of the wealth.
I would venture to say that many of those in the 19% came by their wealth via the means you describe, and could be said to 'deserve it'. Regardless, its impossible for me to see a situation whereby 80% of the people split up 8% (yes eight) is fair or healthy or sustainable.

a warren
07-28-09, 07:18 PM
Thank You Eric
I enjoyed that, i re read it again when "at work" or sitting in my workshop in Liverpool with bugger all to do (almost).

While i agree on most i feel you missing a number points.

1. Americans HATE taxes!......Your got REAL "Tea party" situation "Brewing" out there......Ron Paul & Schiff etc all too ready to stir the pot!

2. Americans have had a taste of "honey"....Oh boy was it nice, able slip down the Vette dealership or even the Lambo..using "Home ATM"....They not be very keen to jump into a Chevy Curze or Volt!

3. Americans Love to "welch" on the deal.....From those 1st handskakes with the Red Indians, to selling the Rockafellow buildings to Japan & "Sacked" the Ports deal with the A-RABS...nothing gives an American more of a warm felling to know he shalfed the other guy.

4. Geo-political.....The American Empire is now in its death throws, sure its still a power but its more a paper tiger, am minded of the mindset of the British in the 1950,s & 60's that just couldn't understand "It was over".

Now Eric, lets mix everything together, China holds you debt, a debt which lets face it you have NO intention of paying...........So what to do?


DEVALUATION!

You must reduce the debt, you must also try to keep you Armed forces as strong as you can. Sure cut the F22 project, cut other things but LIKE HELL are you going to give up what you taken by force.......i don't think you have much succes in Afganistan, China & Russia WILL see to that.

So, seeing how its mainly China you going to crap on, well Ok. I suspect there be "Controled inflation" over a number of years as well...........No this debt MUST be removed....by what ever means required!

& i suspect it will start to happen by Q4 2009.
Mike


What a great post! I look forward to more mega-long posts

Raz
07-28-09, 09:08 PM
Truthfully, Raz, I'm not sure how to resolve the uneven distribution of wealth "problem", but I don't think it's fair to characterize it as a liberal vs conservative issue, although it is a popular characterization.

More accurately, it is a "more capable" vs "less capable" issue. And by "capable" I mean it can take many forms, most obvious of which are intelligence, discipline, street-smarts, drive/ambition, opportunity and the like. If viewed from this perspective, the wealth will obviously flow to the "more capable" much like NBA championships flowed to Michael Jordan.

Additionally, your argument may be (hypocritically) fueling the flames of a class warfare debate when such debate is unfounded. The "rich" are not the stereotypical crooks of banking and Wall Street that are the poster boys of the "rich-bashing". In reality, the "rich", those of us that are causing and creating this uneven distribution of wealth, are you and me and our fellow iTulipers that are smarter than the average individual, or have better than average opportunity than some (I was born into a family business), or are more disciplined than most (conservative investing, not highly leveraged/in debt over our heads), more driven (investing hours and hours on iTulip and elsewhere). It is only natural that more wealth (which also includes less self-inflicted wealth destruction) flows our way. We don't do it to spite our less fortunate brethren, we don't do it out of shear greed, we don't try to hurt anyone else along the way (most of us do more direct good the more successful we become personally). No, the uneven wealth distribution just happens as a natural result of our capabilities and chosen actions versus those that are less capable and make bad decisions and possibly don't try as hard.

All that being said, I don't totally disagree that a severe uneven distribution of wealth may not be optimal for society, but I'm not sure.

I do strongly beleive that a rising tide does raise all boats. So from that perspective, what's good for us "rich" is also good for the "other half". With that in mind, I would have a great fear that any form of forced/excessive wealth redistrubution would directly harm the motivations of the more capable, more productive of us that are the wealth producers in this great Nation, which in turn, would be bad for all members of our society. You know, "Road to Serfdom" thinking. As an anology, we'd all have a more equal portion of the pie, but of a much smaller pie. I further feel that any forced wealth redistribution would only be a temporary unnatural state. As such, and with all due respect to EJ, I can't agree with his call for doing a better job of wealth equalization during boom times simply because that wealth will (eventually) find its way right back into the hands of the same wealthier (more capable) people from whence it came.

In summation, it is my opinion that uneven wealth distribution is a natural state that results from a free-market society, and that a free-market society is still the best structure/philosophy for maximizing the size of the pie (strength of an economy), even if it means some inequalities OF RESULT (of wealth) are a natural side affect. The greater pie size will offset the smaller portion of said pie for most citizens in my opinion.

All of this is easy for me to say because I am confident in my abilities and successful in my life thus far. On the other hand, I can understand why an individual who is less capable, less successful, and therefore has less wealth than average would scream for government assistance or any type of "break" or freebie or hand-out or "stick-it-to-the-rich" redistribution. Just because I can understand the thinking, however, doesn't make it right. Let's not try to fix what can't be fixed. Let's also not create class warfare where none should exist. We should idolize and emulate the typical entreprenuers, titans of industry, and all around capable, productive members of society that drive our economy, not chastize, belittle, and take from them.

I was only offering pithy comments on the sad reality of the human condition, and had no idea that I would set off a debate on class warfare! :eek:

Any success I've had in business has been due to a wonderful partnership with a fellow stockbroker ten years younger than I who I met in the mid-1980s. He provided the entrepreneural ingenuity and I provided the analytical management - he's a great idea man who looks for what works, while I'm the guy who could always see ahead of time what won't work. This melding provided profitable opportunity and also kept us out of any major trouble. (And 70 hour work weeks for about 10 years also helped!)

Let me say at the outset what won't work: Socialism. Less wealth is produced. And forced redistribution of wealth through heavy taxation is simply mob rule, and no more appetizing to me than the rule of financial oligarchs and banksters. And no, I don't live my life guilt-ridden over whatever success I've had - it was all earned honestly without screwing the men and women who worked for us.
But I do see a very dangerous period directly ahead for the United States.

We are living in an age of moral midgets. People who would have been shunned twenty+ years ago by society at large are now popular celebrities and political officeholders. And many wealthy people - some that I know - have no wish to even look at the disparity all around them, much less seek to help formulate a solution. Maybe there isn't one, but it should concern them. Our society is apathetic, dependant, coarser, greedier, overfed and overindulged, and I fear altogether unprepared for the hurricane that is likely bearing down on us. There is a spiritual quality to stable societies as well as a material one, and I fear we've lost it.

That's what I was thinking when I posted my brief comment.

marvenger
07-28-09, 09:14 PM
einstein couldn't get promoted past patent clerk either. conforming to social norms is a large part of it, not just ability.

ThePythonicCow
07-28-09, 09:41 PM
There is a spiritual quality to stable societies as well as a material one, and I fear we've lost it.Perhaps it is not that we lost it, but rather that we haven't gained it yet.

Human civilization has grown rather dramatically in size, scope, speed, power and complexity this last century. There has been a veritable explosion of industry, energy, communications, computation, transportation, population, science, technology, wealth, ...

We've got a bit of sorting out to do first before we learn how to structure civilization on such a scale with any semblance of stability or spirituality.

rjwjr
07-29-09, 12:17 AM
Please tell me this is a letter to the Onion.

Sorry, but I honestly am not sure of the point you are making. I have the gut feeling that we disagree, but you don't even explain why you highlighted some of my passages and opinions, some more than others. If you'd like to articulate your position or objections then I'll try my best to expand on my arguments and opinions.

rjwjr
07-29-09, 12:32 AM
Of course an uneven distribution of wealth is normal in a society. I contribute to it a bit myself, although less since I quit the corporate world. However I wonder ( although of course I have no actual knowledge on this point) how material is your or my contribution to the overall skewed wealth distribution in the US. The top 1% owns 34%. I suspect that you are among the next 19% who own 50% of the wealth.
I would venture to say that many of those in the 19% came by their wealth via the means you describe, and could be said to 'deserve it'. Regardless, its impossible for me to see a situation whereby 80% of the people split up 8% (yes eight) is fair or healthy or sustainable.

I understand your point, I really do. I don't even want to say something as strong as "I disagree with you." Instead, I'll temper it by saying; I'm worried that any "solution" to this supposed problem will be worse for the overall economy (and quite possibly worse for the less wealthy) than the current solution. Also, it's your opinion that the second 19% "earned" their wealth more than the top 1%, or that the bottom 80% deserve more than 8%. Who says how much more is enough? It's wide open to opinion and a very slippery slope.

In a perfect world we'd have true equality of opportunity...the rest is then up to the individual. That equality of opportunity is what we should nurture and protect, not a physical, after-the-fact redistribution. As I've stated before, that redistributed money will just find its way back into the hands of the "more capable" eventually anyway.

rjwjr
07-29-09, 12:52 AM
3. Americans Love to "welch" on the deal.....From those 1st handskakes with the Red Indians, to selling the Rockafellow buildings to Japan & "Sacked" the Ports deal with the A-RABS...nothing gives an American more of a warm felling to know he shalfed the other guy.


Mike,

You %&%&&% %$$^$^ #%%@.

You should be ashamed of yourself for characterizing Americans this way. It is simply NOT true and I take offense to your ignorant comment. You need to think before you make statements as derogatory, inflamed, and untrue as these.

By the way, are you even sure it was "Americans" who shook hands with the "Red Indians" or is it possible it was a contingent of Brits looking for a fresh start and religious freedom.

Jeeshz, man, uncool, very uncool.

Chris Coles
07-29-09, 03:49 AM
I was only offering pithy comments on the sad reality of the human condition, and had no idea that I would set off a debate on class warfare! :eek:

Any success I've had in business has been due to a wonderful partnership with a fellow stockbroker ten years younger than I who I met in the mid-1980s. He provided the entrepreneural ingenuity and I provided the analytical management - he's a great idea man who looks for what works, while I'm the guy who could always see ahead of time what won't work. This melding provided profitable opportunity and also kept us out of any major trouble. (And 70 hour work weeks for about 10 years also helped!)

Let me say at the outset what won't work: Socialism. Less wealth is produced. And forced redistribution of wealth through heavy taxation is simply mob rule, and no more appetizing to me than the rule of financial oligarchs and banksters. And no, I don't live my life guilt-ridden over whatever success I've had - it was all earned honestly without screwing the men and women who worked for us.
But I do see a very dangerous period directly ahead for the United States.

We are living in an age of moral midgets. People who would have been shunned twenty+ years ago by society at large are now popular celebrities and political officeholders. And many wealthy people - some that I know - have no wish to even look at the disparity all around them, much less seek to help formulate a solution. Maybe there isn't one, but it should concern them. Our society is apathetic, dependant, coarser, greedier, overfed and overindulged, and I fear altogether unprepared for the hurricane that is likely bearing down on us. There is a spiritual quality to stable societies as well as a material one, and I fear we've lost it.

That's what I was thinking when I posted my brief comment.


Raz, when I made use of the comments made against your post, rather than address yours directly, I was not implying that I did not agree with what you had said, rather, that I agreed with what RJWJR had said. And, to follow on, yes, you are correct and I do appreciate your own clarification; "There is a spiritual quality to stable societies as well as a material one, and I fear we've lost it."

So in a way, you have opened the debate to the real challenge ahead.

mesyn191
07-29-09, 05:29 AM
More accurately, it is a "more capable" vs "less capable" issue.
This doesn't come anywhere near to explaining away the disparity in wealth redistribution that has taken place at an ever increasing level since the 1970's though. If you add more value to your company/economy than say a janitor for instance you should definitely make quite a bit more, but several hundred times more? I don't think so, not even if you're the CEO/CFO of a multi billion dollar company that gets record profits.

People used to be able to own a home with just one job, and it wouldn't be a great job or one with long hours either, nor could they get a great home of course just a "OK" one. But they could still do it with a single blue collar 9 to 5 job. Now days to own a home, even with the massive depreciation that has taken place in many areas, you need a dual income earner family and they both have to work decent paying jobs too. And that is for an "OK" home, a good home in a good area is still impossibly expensive for many or even most people right now, you have to be rich to afford one.

In order for things to become affordable again for many prices will either have to go way down or wages go way up. We may see the worst of both of those options though if current trends are maintained (falling wages + rising prices). In which case the wealth disparity will only continue to grow, the US will end up like any other banana republic, even more so than it is now. Nearly all the wealth (and power) will be in the hands of a very few rich people , then there'll be a small middle class, and then at the bottom a huge pool of desperately poor.

touchring
07-29-09, 08:53 AM
In order for things to become affordable again for many prices will either have to go way down or wages go way up. We may see the worst of both of those options though if current trends are maintained (falling wages + rising prices). In which case the wealth disparity will only continue to grow, the US will end up like any other banana republic, even more so than it is now. Nearly all the wealth (and power) will be in the hands of a very few rich people , then there'll be a small middle class, and then at the bottom a huge pool of desperately poor.


It may take a lot than just expensive housing before a revolution happen, like what happened in China, before the communist took power, lawness, bandits roaming the countryside and canabalism from starvation. Then, no amount of money from the capitalists, or the US could stop the communist from taking over. Of course, things became worst after mao came in, but that's another matter.

rjwjr
07-29-09, 09:48 AM
"This doesn't come anywhere near to explaining away the disparity in wealth redistribution that has taken place at an ever increasing level since the 1970's though."

Then what does explain it? The money will eventually flow to the more capable earners no matter how many times you hand some back to the less capable earners.


"If you add more value to your company/economy than say a janitor for instance you should definitely make quite a bit more, but several hundred times more? I don't think so, not even if you're the CEO/CFO of a multi billion dollar company that gets record profits."


This is strictly your opinion. In reality, a CEO/CFO of a multibillion dollar company that gets record profits is creating a tremendous amount of wealth for a large number of stakeholders (employees, shareholders, vendors), which includes a large number of everday folks. It's up to the Board/owners of that company to decide how much that CEO/CFO is worth. It's certainly not up to you and your opinion.


"People used to be able to own a home with just one job, and it wouldn't be a great job or one with long hours either, nor could they get a great home of course just a "OK" one. But they could still do it with a single blue collar 9 to 5 job. Now days to own a home, even with the massive depreciation that has taken place in many areas, you need a dual income earner family and they both have to work decent paying jobs too. And that is for an "OK" home, a good home in a good area is still impossibly expensive for many or even most people right now, you have to be rich to afford one."

So, who are you mad at and who do you think should change this? Did the damned "rich" do this to us again? Should the government nationalize homebuilders and, via taxes on the "rich", build all of us a McMansion? You should read The Two Income Trap by Elizabeth Warren and her daughter. It will dispel some of your misconceptions and misguided angst.

jk
07-29-09, 09:56 AM
This doesn't come anywhere near to explaining away the disparity in wealth redistribution that has taken place at an ever increasing level since the 1970's though. If you add more value to your company/economy than say a janitor for instance you should definitely make quite a bit more, but several hundred times more? I don't think so, not even if you're the CEO/CFO of a multi billion dollar company that gets record profits.

People used to be able to own a home with just one job, and it wouldn't be a great job or one with long hours either, nor could they get a great home of course just a "OK" one. But they could still do it with a single blue collar 9 to 5 job. Now days to own a home, even with the massive depreciation that has taken place in many areas, you need a dual income earner family and they both have to work decent paying jobs too. And that is for an "OK" home, a good home in a good area is still impossibly expensive for many or even most people right now, you have to be rich to afford one.

In order for things to become affordable again for many prices will either have to go way down or wages go way up. We may see the worst of both of those options though if current trends are maintained (falling wages + rising prices). In which case the wealth disparity will only continue to grow, the US will end up like any other banana republic, even more so than it is now. Nearly all the wealth (and power) will be in the hands of a very few rich people , then there'll be a small middle class, and then at the bottom a huge pool of desperately poor.
housing is a particularly good example of how the financialization of the american economy has increased income inequality. it also speaks to hudson's point that lower taxes have just allowed more income to be diverted to debt service, raising asset prices instead of building infrastructure.

these smug "ability" arguments are really a joke! tell me why, if disparities are merely the product of different abilities, distribution has varied so much over the course of history, even within the same political systems? i guess those 20-something mortgage brokers and real estate hustlers are really among the most "able"! or they were until quite recently. suddenly, they're not so "able" any more. what happened?

jiimbergin
07-29-09, 10:12 AM
"This doesn't come anywhere near to explaining away the disparity in wealth redistribution that has taken place at an ever increasing level since the 1970's though."

Then what does explain it? The money will eventually flow to the more capable earners no matter how many times you hand some back to the less capable earners.





Part of the explaination is greed and power. I was an insurance executive. Usually the number 2 or 3 in several companies. What I saw was the CEO and President using what I called GABA ( Generally accepted Bonus accounting). What bonus they would get each year was the driving force behind most of the decisions they made, not necessarily what was best for the company and employees in the long run.

jim

we_are_toast
07-29-09, 11:09 AM
Sorry, but I honestly am not sure of the point you are making. I have the gut feeling that we disagree, but you don't even explain why you highlighted some of my passages and opinions, some more than others. If you'd like to articulate your position or objections then I'll try my best to expand on my arguments and opinions.

The arrogance of the implication that rich people posses such traits as "intelligence", "discipline", "drive/ambition", and thus causing wealth to flow their way, suggests that poor people are poor because they are ignorant, undisciplined, and lazy, and deserve their lot in life. To imply such a thing, suggests such a lack of understanding of the "other half" that some would exclude intelligence as a characteristic of the implier.

If you ask people to name the most intelligent people in history, you get scientists, philosophers, writers... but you seldom here businesspeople. This seems to suggest that dedicating ones life to the accumulation of material goods is not looked upon as an intelligent endeavor.

A 2008 Gallup poll ranking honesty/ethics in professions, ranks Business executives (often associated with rich people) near the bottom of the list, below congressman, Lawyers, and labor union leaders, and a couple ticks above car salesman.

One could easily argue that wealth flows towards the rich due to their arrogance, dishonesty, and unethical behavior. Does Bernie Madoff, the geniuses that brought us MBS', CDO's, CDS's ring a bell? The disaster we now face wasn't created by the "other half". But since this is off topic for this thread, I certainly won't make that argument here.

I hope the topic can get back to well reasoned analysis, rather than how the rich are rich due to their superior character.

Rajiv
07-29-09, 11:23 AM
One could easily argue that wealth flows towards the rich due to their arrogance, dishonesty, and unethical behavior. Does Bernie Madoff, the geniuses that brought us MBS', CDO's, CDS's ring a bell? The disaster we now face wasn't created by the "other half".

Some here (at itulip forums) would argue that the shepherd has a right to fleece his flock.

lurker
07-29-09, 11:25 AM
there has always been a wide distribution of abilities within society, but the inequality of the distribution of wealth has varied. thus, varying abilities is not an adequate explanation of wealth distribution.

there are both policies and social norms which feed into the wealth distribution. the recent skew is as large as that in 1929, iirc- what a coincidence! it is a product of the financialization of the american economy, on the one hand, and the global labor arbitrage, on the other.

I agree.

I think there are two main things that causes inequality of income and where the US has strayed far from the optimum over the past 30 years:

1) The rich have become too greedy and too arrogant in believing that only those in the top percentiles of income are "wealth creators".
This fails to recognize that the "wealth creators" would not be able to create said wealth if noone supplied their water, electric, gas, and took their trash and treated their sewage. By starving those in less skilled profession the "wealth creators" risk destroying the infrastructure that allows them to create wealth. We all stand on one another's shoulders when we do what we do.

I see this failing as a social problem: a disintegration of a society that views its future somewhat collectively (we really are all in this together) into a society of dog eat dog. We know that humans are a successful species precisely because of our abilities to communicate and cooperate. The more we go it alone the less successful we will be.

2) Partially resulting from 1) changes in tax policy that reward existing wealth much more greatly than work. The campaign to abolish the estate tax is an example. The USA has become a rentier economy and that guarantees sclerosis of innovation and production of true wealth.

The solution: time IMO. These things cannot be fixed, but they fix themselves over the generations, only to then repeat in future generations as past lessons are forgotten.

sgominator
07-29-09, 11:48 AM
the ten-year period between 1930 and 1940 that came to be known as The Great Depression.
<!-- / icon and title --><!-- message -->

I have a feeling that period will be retroactively called "The Medium Depression". :eek:

touchring
07-29-09, 12:59 PM
I have a feeling that period will be retroactively called "The Medium Depression". :eek:


Is this really the depression, i don't see it yet, not at least in the asia pacific region, there is far too much hot money and liquidity flowing in from the west, and from china.

The 2002-2003 recession is far worst than the current one at least till today. I don't know about next year though.

mesyn191
07-29-09, 03:07 PM
Then what does explain it?
The FIRE economy. More specifically the changes that have been made since at least the Regan era (I'd argue things really started to change for the worst with Nixon) that have more and more favored the rich, while being promoted as being otherwise. The middle/poor are now the rentier class, wealth is extracted from them to support the system and enrich the few, its neo-feudalism as has been noted by others like Hudson.


The money will eventually flow to the more capable earners no matter how many times you hand some back to the less capable earners.
The same way the wealth flowed to Madoff or the guys who ran AIG-FP or the union workers at Chrysler? Anything to make a profit right?


This is strictly your opinion.
Its got some basis in reality though. After all, did this hypothetical CEO/CFO really earn the money or did he/she just take advantage of stupidity/imbalances in the market? Is profit the sole measure of worth/value?


It's up to the Board/owners of that company to decide how much that CEO/CFO is worth.
Thats a bit of a joke these days though, the way things are currently set up its almost impossible for a board to dictate earnings for many of the CEO's/CFO's. These people get almost anything they want these days, golden parachutes included.


So, who are you mad at and who do you think should change this?
I was just giving an example of how much things have changed for the middle/poor class over the decades, you seemed unaware of it if not flat out unsympathetic, I was unsure of which but I guess we know now don't we?


Should the government nationalize homebuilders and, via taxes on the "rich", build all of us a McMansion?
No, I think they should let them all fail, same thing goes for the banks and financial companies.

jiimbergin
07-29-09, 03:29 PM
Thats a bit of a joke these days though, the way things are currently set up its almost impossible for a board to dictate earnings for many of the CEO's/CFO's. These people get almost anything they want these days, golden parachutes included.


This is exactly what I experienced (BTW I did get a golden parachute since the big boys did and, of course, I did not turn it down)

jim

cindykimlisa
07-29-09, 05:45 PM
We are living in an age of moral midgets. People who would have been shunned twenty+ years ago by society at large are now popular celebrities and political officeholders. And many wealthy people - some that I know - have no wish to even look at the disparity all around them, much less seek to help formulate a solution. Maybe there isn't one, but it should concern them. Our society is apathetic, dependant, coarser, greedier, overfed and overindulged, and I fear altogether unprepared for the hurricane that is likely bearing down on us. There is a spiritual quality to stable societies as well as a material one, and I fear we've lost it.

Preach on brother

flintlock
07-29-09, 06:09 PM
I've noticed Mega posts getting longer also. :D Nice.

Good point rjwjr, we were mostly all Brits back when the sleaziest deals were struck with the Indians.:D

But I have to agree with Mega that more recent American business dealings bring to mind the term " lying weasels". But we lie to ourselves every bit as much as we do to other countries. Its not like its a nationalistic thing.

flintlock
07-29-09, 06:13 PM
We are living in an age of moral midgets. People who would have been shunned twenty+ years ago by society at large are now popular celebrities and political officeholders. And many wealthy people - some that I know - have no wish to even look at the disparity all around them, much less seek to help formulate a solution. Maybe there isn't one, but it should concern them. Our society is apathetic, dependant, coarser, greedier, overfed and overindulged, and I fear altogether unprepared for the hurricane that is likely bearing down on us. There is a spiritual quality to stable societies as well as a material one, and I fear we've lost it.

Preach on brother



Agree. That's what I've been saying for a long time. A lot of America's problem is a moral issue though that isn't popular to talk about these days. Some think you can throw out morals and let reason and knowledge take its place. It never works.

metalman
07-29-09, 06:22 PM
Agree. That's what I've been saying for a long time. A lot of America's problem is a moral issue though that isn't popular to talk about these days. Some think you can throw out morals and let reason and knowledge take its place. It never works.

ok... so... you're sent back in time 200 yrs... you're sitting with john adams... you are explaining this...


Port Star Running for Senate (http://www.gouverneurtimes.com/index.php?option=com_content&view=article&id=3346:port-star-running-for-senate&catid=54:worldnational-news&Itemid=153)

BATON ROUGE, La. (AP) — Stormy Daniels strode onstage at a downtown Baton Rouge restaurant in a tight black blouse with a plunging neckline and a knee-length skirt in the popular purple of Louisiana State University. She introduced herself with a warning."For those of you who don't know who I am," she told the lunch crowd at The Roux House, "I'd suggest that you don't Google that until you get home from work."

She's a Louisiana-born porn star who says she is considering a 2010 run for the U.S. Senate seat currently held by Republican David Vitter, whose family-values reputation was marred in 2007 when his name was linked to a Washington prostitution ring.

Jim Nickerson
07-29-09, 07:22 PM
metalman, I don't know what TF one'd say to John Adams, but it is not hard to explain today. At least, apparently, the LA porn-star is honest, and that in itself were she elected might very well place her into the den of thieves.

There is a whole lot of bitching going on here about lack of morality in business and politics, but no one is suggesting a possible answer, and I keep thinking about what is the answer, and I flat out don't know. It would seem that the answer isn't election of more who run on family values, in that "family values" seems to encompass lying a whole lot when it applies to those in politics.

metalman
07-29-09, 07:30 PM
metalman, I don't know what TF one'd say to John Adams, but it is not hard to explain today. At least, apparently, the LA porn-star is honest, and that in itself were she elected might very well place her into the den of thieves.

There is a whole lot of bitching going on here about lack of morality in business and politics, but no one is suggesting a possible answer, and I keep thinking about what is the answer, and I flat out don't know. It would seem that the answer isn't election of more who run on family values, unless "family values" encompasses lying a whole lot.

unpalatable...

The author goes on to say that building a viable third party to restore democracy to America requires that Progressive intellectuals—Libertarians in modern parlance—roll up their pant legs, climb down from the Ivory Tower, and wade into the gutter of American politics. (http://www.itulip.com/forums/showthread.php?p=111464#post111464)

thunderdownunder
07-29-09, 07:35 PM
And Raz, some predicted it many centuries ago.

If some lose their whole fortunes, they will drag many more down with them . . . believe me that the whole system of credit and finance which is carried on here at Rome in the Forum, is inextricably bound up with the revenues of the Asiatic province. If Those revenues are destroyed, our whole system of credit will come down with a crash."
-- Cicero, 66 B.C. (Translation by W.W. Fowler, 1909)

Back then the correction of the problem was also offered by the same man

"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn't want to go bankrupt. People must again learn to work, instead of living on public assistance."
-- Cicero, 55 BC

Clearly if you fail to learn from history you are damned to repeat it.

Just substitute the Roman Forum with US Congress and absolutely nothing has changed. Watch Asia very carefully because if it falls ill you will have a financial pandemic of proportions that will cause total social collapse.

Thankfully China has, today, started to pull back on the bridle. They are at least wise enough to see a runaway bubble
but is it enough?

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAffZhhb91RM

ThePythonicCow
07-29-09, 07:56 PM
There is a whole lot of bitching going on here about lack of morality in business and politics, but no one is suggesting a possible answer, and I keep thinking about what is the answer, and I flat out don't know.Morality and ethics that trescend generations can only be the result of attending the school of hard knocks for generations.

There is no short cut. We will not live long enough to see this play out. We can just do our little part to tend to our own well being, help out our relatives and neighbors, and contribute what we can to the larger scale learning.

Human civilization mushroomed to a much greater level of complexity over the last century. It may take us humans a few centuries to figure out how to properly manage this new fangled power in a way that works both on the large scale and for the fair treatment and well being of individuals.

cjppjc
07-29-09, 08:01 PM
Some here (at itulip forums) would argue that the shepherd has a right to fleece his flock.


Maybe I haven't been paying enough attention.

The subjects of spirtuality and greed have come up here. They seem mutually exclusive. Someone once said that greed was inevitable in the absence of an inner aim. It seems true to me.

vinoveri
07-29-09, 08:18 PM
there will be no universal justice and peace (i..e, no utopia), at least not until the "lion lays down with the lamb". There may be periods of great prosperity and peace, but those never last; corrupt human nature cannot be trusted and it cannot be kept down without continual supervision and exercising the wisdom that has been handed down to us from our forebearers. But modernism has chucked that wisdom down into the sewer

history is before us; how much more do we need to see that generation after generation, century after century, millenium after millenium, the same sad and sorry "soap operas" are re-played by man. Murder, treachery, deceit and manipulation ... oppression.

Human nature is with us till the end, my friends. The modern man is no different or superior at his core than the ancient man The fallacy is believing that we are "progressing" toward an inevitable "good end".
Look at the facts of history for goodness sake. Technical advances, and raised standards of living, long life spans, etc. are all good, but they have yet to change who we are at the core (and some might argue, they have served as excuses to cut the ties with the past and reason itself).

rjwjr
07-29-09, 08:20 PM
these smug "ability" arguments are really a joke! tell me why, if disparities are merely the product of different abilities, distribution has varied so much over the course of history, even within the same political systems? i guess those 20-something mortgage brokers and real estate hustlers are really among the most "able"! or they were until quite recently. suddenly, they're not so "able" any more. what happened?

If you think my arguments are "smug" or that I am implying that I am a better person than someone less wealthy, then you are missing my point completely and you are implying that I am a type of person that I most definitely am not.

I simply feel it's obvious that some people know what it takes to create (and hang onto) wealth, and some people don't. It has nothing to do with character. I, for example, am supremely confident that I could start from nothing today and, within 10 years, could be worth at least $1,000,000. It's not "smug", it's the confidence of having run two businesses (I left the family business for 6 years in '99-'05 to start a completely unrelated business to prove to myself that I could be successful without the family business safety net) coupled with the confidence of having a bit of profound knowledge about what it takes to succeed. There are many others reading this post (a large majority of iTulipers I bet) that have the same confidence. And, importantly, we don't accumulate our wealth by being crooked, dishonest, or taking advantage of others. Here's a simple example...

If the goverment gave everyone a $25,000 tax refund, most of us iTulipers (a group made up primarily of the "more capable") would buy physical gold or pay down debt or stock-up on food or in some way "invest" most, if not all of this unexpected windfall. On the other hand, I'm convinced that the vast majority of others, the "less capable" would buy a car (probably financing some of it) or take a vacation or buy new clothes or some other way to start the process of sending the wealth right back to the wealth creators. This doesn't make these "spenders" worse people, it simply makes them "less capable" of improving their position in life. They may get a real thrill out of the new car, but they're increasing the wealth disparity between themselves and their iTulip-minded, "more capable" wealth accumulators. Nobody took advantage of the "less capable" in this example, they were free to make whatever decision they wished with their $25,000 rebate. The "more capable" didn't steal it from them, however, they did own the car dealership, resort, or clothing store in which the "less capable" spent their refund.

The bottom line is that I simply mean "less capable" of building and holding onto their money, not "less capable" in character, person, charity, honesty or any other way. I remain convinced that wealth disparity is a fact of life and, yes, it is PRIMARILY a result of the concious and free decisions made by each individual. You can take money from the wealthy and give it to the less wealthy over and over and over, and the money will find it's way back to (mostly) the same (type of) people. Do it too often, or too severely, and the wealthy (which are also the wealth creators) will leave the country or retire or in some way cease to create as much wealth. You'll likely lose all of the honest and honorable entreprenuers and business owners, only to be left with the real cheats and opportunists.

bart
07-29-09, 08:21 PM
There is a whole lot of bitching going on here about lack of morality in business and politics, but no one is suggesting a possible answer, and I keep thinking about what is the answer, and I flat out don't know.

I've posted 2 of these a few times before here... to a resounding *thump*



According to Aristotle one Greek city state had a fundamental law: anyone proposing revisions to the constitution did so with a noose around his neck. If his proposal lost he was instantly hanged.

In Roman times Ventotene, known as Pandataria, was used to exile disgraced Roman noblewomen. The Emperor Augustus sent his daughter Julia there because of her adultery.

The Coinage Act of 1972 included the death penalty for altering gold & silver coin purity... and the coins have remained pure.



I'm not much of a fan of capital punishment... but am a lot less of a fan of cultures or societies crashing... and worse.

Until such time as there are consistent and large penalties for real anti-social and similar acts, they will continue. That's a very unpopular view... and that doesn't make it less true.

Jim Nickerson
07-29-09, 08:49 PM
I've posted 2 of these a few times before here... to a resounding *thump*



According to Aristotle one Greek city state had a fundamental law: anyone proposing revisions to the constitution did so with a noose around his neck. If his proposal lost he was instantly hanged.

In Roman times Ventotene, known as Pandataria, was used to exile disgraced Roman noblewomen. The Emperor Augustus sent his daughter Julia there because of her adultery.

The Coinage Act of 1972 included the death penalty for altering gold & silver coin purity... and the coins have remained pure.

I'm not much of a fan of capital punishment... but am a lot less of a fan of cultures or societies crashing... and worse.

Until such time as there are consistent and large penalties for real anti-social and similar acts, they will continue. That's a very unpopular view... and that doesn't make it less true.

Capital punishment is not unpopular with me, the shortcoming with it only being if we do not have honest prosecutors (always gets back to honesty).

I seriously believe the only way to change the current system is for most all of the voters to unite (which is an impossibility) and call for a change to the bill of rights to wipe out freedom of speech in which it can be presently be interpreted that monetary donation to political candidates is a "form of free speech." To change the constitution would require a national slate of candidates dedicated to making the change of the constitution, then if all that happened, it would further take a state-wide slate of candidates to be elected who would promise to ratify the contitutional amendment. I don't think that will ever happen.

I definitely think that the punishment for all elected officials proven guilty of corruption should be that they are painfully put to death. Anything short of that will be pissing into the wind when you are downwind.

cjppjc
07-29-09, 11:16 PM
there will be no universal justice and peace (i..e, no utopia), at least not until the "lion lays down with the lamb". There may be periods of great prosperity and peace, but those never last; corrupt human nature cannot be trusted and it cannot be kept down without continual supervision and exercising the wisdom that has been handed down to us from our forebearers. But modernism has chucked that wisdom down into the sewer

history is before us; how much more do we need to see that generation after generation, century after century, millenium after millenium, the same sad and sorry "soap operas" are re-played by man. Murder, treachery, deceit and manipulation ... oppression.

Human nature is with us till the end, my friends. The modern man is no different or superior at his core than the ancient man The fallacy is believing that we are "progressing" toward an inevitable "good end".
Look at the facts of history for goodness sake. Technical advances, and raised standards of living, long life spans, etc. are all good, but they have yet to change who we are at the core (and some might argue, they have served as excuses to cut the ties with the past and reason itself).


Yes I agree. In fact I've written this thought about man before. The lion and the lamb, as all old teachings is about the individual.

c1ue
07-30-09, 04:49 AM
The bottom line is that I simply mean "less capable" of building and holding onto their money, not "less capable" in character, person, charity, honesty or any other way. I remain convinced that wealth disparity is a fact of life and, yes, it is PRIMARILY a result of the concious and free decisions made by each individual.

I think part of what you may not be admitting is that your own circumstances are not identical to everyone else.

Being a part of a successful family business means you have reputation and connections. This matters when it comes to trust in your new businesses products, getting loans, knowing who to talk to and where to go, understanding tax and regulatory issues, etc etc

To say that you did all this without any assistance is bulls**t of the highest order. Your education, background, friends, social tier, etc etc all had influence in this.

Try doing the same as minority without a college education, friends, or reputation.


I'm not much of a fan of capital punishment... but am a lot less of a fan of cultures or societies crashing... and worse.

I am a fan of capital punishment, as well as having a regulation equating some level of white collar crime as qualifying, but I also acknowledge that capital punishment means some number of innocent people getting executed for crimes they did not commit.

The problem is that a lot of people can't agree to this last part.

Certainly it should never be policy to do so, but queasiness over this is why we have people living on Death Row for decades.

Chris Coles
07-30-09, 05:17 AM
I think part of what you may not be admitting is that your own circumstances are not identical to everyone else.

Being a part of a successful family business means you have reputation and connections. This matters when it comes to trust in your new businesses products, getting loans, knowing who to talk to and where to go, understanding tax and regulatory issues, etc etc

To say that you did all this without any assistance is bulls**t of the highest order. Your education, background, friends, social tier, etc etc all had influence in this.

Try doing the same as minority without a college education, friends, or reputation.

Some of you will know that I am in the process of writing a small book that sets out my own thinking, based upon my ideas for a Capital Spillway Trust, http://www.chriscolesholdings.com/page3.html and a lot of other papers I have written over the years. As Bobola has just today kindly come back to tell me he has agreed to my including his questions, I move a little closer to being able to launch it as a free PDF file. I will let you all know when it becomes available.

For now, I have to agree with c1ue here. The problem is not of equality of individual, but of access to the capital to be able to move forward. I well remember watching a TV interview with Lord White http://www.nytimes.com/1995/08/25/obituaries/lord-white-72-who-liked-role-as-a-business-buccaneer-is-dead.html who explained, (as an Englishman), how he had started in New York with "nothing". But on close inspection, he had an immense wealth behind him, money to spend for over a year, smart apartment, access to every form of help imaginable. His "Capital" base must have run to many hundreds of thousands of $US; but he still felt he had started with nothing but the shirt on his back.

History is littered with examples of individuals with good ideas that they could never bring forward for the simple reason, they never could get access to the capital and other resources they need to be able to try and succeed. That is the problem and, if I have anything to do with it, it can be eliminated.

Chris Coles
07-30-09, 05:22 AM
Morality and ethics that transcend generations can only be the result of attending the school of hard knocks for generations.

There is no short cut. We will not live long enough to see this play out. We can just do our little part to tend to our own well being, help out our relatives and neighbours, and contribute what we can to the larger scale learning.

Human civilization mushroomed to a much greater level of complexity over the last century. It may take us humans a few centuries to figure out how to properly manage this new fangled power in a way that works both on the large scale and for the fair treatment and well being of individuals.

To my mind, this is the most profound statement of fact that I have ever seen anywhere.

I do not know who you are, but to my way of thinking, you should come out of the shadows and stand up proudly, as one of the great thinkers of our time.

*T*
07-30-09, 05:34 AM
Capital punishment is not unpopular with me, the shortcoming with it only being if we do not have honest prosecutors (always gets back to honesty).

Folks whinge about the fallibility of govt. and its investment choices... I fail to see it killing any more effectively.
Someone please explain to me why state should have the right to kill.

bart
07-30-09, 10:30 AM
Folks whinge about the fallibility of govt. and its investment choices... I fail to see it killing any more effectively.
Someone please explain to me why state should have the right to kill.

Self defense, just like individuals.

raja
07-30-09, 02:01 PM
There is a whole lot of bitching going on here about lack of morality in business and politics, but no one is suggesting a possible answer, and I keep thinking about what is the answer, and I flat out don't know. It would seem that the answer isn't election of more who run on family values, in that "family values" seems to encompass lying a whole lot when it applies to those in politics.
I don't think there is a solution available now, due to the fact that it's human nature for a certain percent of the population to be greedy and feel a sense of entitlement.

The rich are probably not wise enough to refrain from pushing things too far. When that happens, there will be a revolution . . . mostly non-violent, but still injurious in other ways to the rich. Of course, those with similar inclinations (but previously lacking opportunity) will rise to the top to take their place, starting the cycle over again.

The only real solution I see is the discovery of a source of free (or nearly free) energy made available to every human on the planet . . . .
There will still be the usual corruption and greed, but the intensity level will be ratcheted down considerably . . . like decriminalizing drug use, which would cut the crime and violence rates dramatically.

bart
07-30-09, 03:26 PM
I don't think there is a solution available now, due to the fact that it's human nature for a certain percent of the population to be greedy and feel a sense of entitlement.
...


Appropriate penalties virtually always stop or control undesired or unwanted behavior.

Jim Nickerson
07-30-09, 03:34 PM
Appropriate penalties virtually always stop or control undesired or unwanted behavior.

I agree with that bart. Were is not for societal retribution for killing others, I might well have killed a couple of people over my lifetime, and given similar provocation and the presence of a fatal disease I could see myself taking certain types out, or at least trying.

T above asked why the state should have the right to kill? My answer is some people deserve to be killed and not necessarily in a humane fashion.

I also agree with clue that some white collar crimes are so egregious, the perps should face the death penalty. Easily Madoff comes to mind.

rjwjr
07-30-09, 03:46 PM
I think part of what you may not be admitting is that your own circumstances are not identical to everyone else.

Being a part of a successful family business means you have reputation and connections. This matters when it comes to trust in your new businesses products, getting loans, knowing who to talk to and where to go, understanding tax and regulatory issues, etc etc

To say that you did all this without any assistance is bulls**t of the highest order. Your education, background, friends, social tier, etc etc all had influence in this.

Try doing the same as minority without a college education, friends, or reputation.


c1ue,

Specific to my situation, you are making a number of unfounded assumptions...
1] It is true, I am not a minority.
2] I do NOT have a college education.
3] I did not have "friends" in the business I started or in that market.
4] I did not have a "reputation" in the market. My family business is in refrigeration, whereas the business I started was in audio/video and home wiring.
The fact is I started from scratch as much as I could when I ventured out on my own. I didn't get any loans from family, use any connections or contacts related to the family business (other than the same accounting firm for the benefit of continuity on tax matters).

You state that I'm not admitting that my own circumstances are not identical to everyone else. I retort that your mindset is defeatist and bullshit. Everyone has the same opportunity to start a business like I did. The fact that you even bring-up the issue of me not being a minority reflects a mindset of barriers and excuses. I don't have that mindset and I am not alone. I can tell that the vast majority of fellow iTulipers also possess it.

Starting from scratch, a positive, can-do, capable mindset will outearn a defeatist, scared, excuse-ridden mindset everytime, so no matter how much of my earnings the government takes from me, I'm always going to get it back from mindsets like yours. But as I stated early in this thread, I can understand why your mindset keeps yelling for a more level playing field, government assistance, and protection from the "rich", but honestly, it would never be enough, would it?

bart
07-30-09, 03:59 PM
I agree with that bart. Were is not for societal retribution for killing others, I might well have killed a couple of people over my lifetime, and given similar provocation and the presence of a fatal disease I could see myself taking certain types out, or at least trying.

T above asked why the state should have the right to kill? My answer is some people deserve to be killed and not necessarily in a humane fashion.

I also agree with clue that some white collar crimes are so egregious, the perps should face the death penalty. Easily Madoff comes to mind.


And sometimes or even frequently, capital punishment or violence or jail time or similar is far from as good as public shunning or disgrace or penalties applied to one's family or having all or most of one's money taken away, etc.

In other words, "banishment" of some type can easily send a better and more permanent message - just a "time out" with the volume turned way up.

c1ue
07-30-09, 06:41 PM
1] It is true, I am not a minority.


Minority itself isn't necessarily a handicap - being a Jew comes to mind. But being say a black male in Oakland...now that's a little different.


2] I do NOT have a college education.

Having an official college education were it an Ivy league is helpful, but having the background of being able to go to college is equally helpful. Gates comes to mind. But again the point is having been part of a successful family business, you already have an education in many parts of running a business: figuring out cash flow, hiring practices, regulatory compliance, etc etc.


3] I did not have "friends" in the business I started or in that market.

So you never sold anything to anyone you knew? You never dealt with any advertising/accounting/local government/customers you knew?

Well, that's tough to do even if you are trying.

4] I did not have a "reputation" in the market. My family business is in refrigeration, whereas the business I started was in audio/video and home wiring.

Again, unless you've moved to a new state, it is impossible to say that your previous work had no impact.

But if you choose to think that everything you've done was value created in a vacuum, that is your own choice.

From my point of view, it is impossible to separate your past from your present unless you move to somewhere where literally no one knows who you are. In these days of LinkedIn and what not, that also is becoming really difficult - the good old boy network of yesteryear is nothing compare to the internet enabled cliques of today.

Even understanding basic accounting is something which the typical college graduate doesn't get - much less the federal/state/local business regulatory environment.

ThePythonicCow
07-31-09, 01:41 AM
To my mind, this is the most profound statement of fact that I have ever seen anywhere.
Thank-you for the kind words.

jk
07-31-09, 09:57 AM
If you think my arguments are "smug" or that I am implying that I am a better person than someone less wealthy, then you are missing my point completely and you are implying that I am a type of person that I most definitely am not.

I simply feel it's obvious that some people know what it takes to create (and hang onto) wealth, and some people don't. It has nothing to do with character. I, for example, am supremely confident that I could start from nothing today and, within 10 years, could be worth at least $1,000,000. It's not "smug", it's the confidence of having run two businesses (I left the family business for 6 years in '99-'05 to start a completely unrelated business to prove to myself that I could be successful without the family business safety net) coupled with the confidence of having a bit of profound knowledge about what it takes to succeed. There are many others reading this post (a large majority of iTulipers I bet) that have the same confidence. And, importantly, we don't accumulate our wealth by being crooked, dishonest, or taking advantage of others. Here's a simple example...

If the goverment gave everyone a $25,000 tax refund, most of us iTulipers (a group made up primarily of the "more capable") would buy physical gold or pay down debt or stock-up on food or in some way "invest" most, if not all of this unexpected windfall. On the other hand, I'm convinced that the vast majority of others, the "less capable" would buy a car (probably financing some of it) or take a vacation or buy new clothes or some other way to start the process of sending the wealth right back to the wealth creators. This doesn't make these "spenders" worse people, it simply makes them "less capable" of improving their position in life. They may get a real thrill out of the new car, but they're increasing the wealth disparity between themselves and their iTulip-minded, "more capable" wealth accumulators. Nobody took advantage of the "less capable" in this example, they were free to make whatever decision they wished with their $25,000 rebate. The "more capable" didn't steal it from them, however, they did own the car dealership, resort, or clothing store in which the "less capable" spent their refund.

The bottom line is that I simply mean "less capable" of building and holding onto their money, not "less capable" in character, person, charity, honesty or any other way. I remain convinced that wealth disparity is a fact of life and, yes, it is PRIMARILY a result of the concious and free decisions made by each individual. You can take money from the wealthy and give it to the less wealthy over and over and over, and the money will find it's way back to (mostly) the same (type of) people. Do it too often, or too severely, and the wealthy (which are also the wealth creators) will leave the country or retire or in some way cease to create as much wealth. You'll likely lose all of the honest and honorable entreprenuers and business owners, only to be left with the real cheats and opportunists.
you still have not explained how, given the unchanging disparity of abilities among the population over generations, nonetheless the income distribution changes over time. more specifically, you have not addressed the fact that recently incomes have become more unequal than at any time since 1929, yet the distribution of abilities - however defined- over the population is no more extremely dispersed. what's changed?

radon
07-31-09, 01:32 PM
And sometimes or even frequently, capital punishment or violence or jail time or similar is far from as good as public shunning or disgrace or penalties applied to one's family or having all or most of one's money taken away, etc.

In other words, "banishment" of some type can easily send a better and more permanent message - just a "time out" with the volume turned way up.

There will always be a fraction of the population that is willing to risk breaking the law for money no matter what the punishment. Many laws currently on the books are simply being selectively enforced. Creating new laws or changing penalties doesn't address this problem.

radon
07-31-09, 01:44 PM
you still have not explained how, given the unchanging disparity of abilities among the population over generations, nonetheless the income distribution changes over time. more specifically, you have not addressed the fact that recently incomes have become more unequal than at any time since 1929, yet the distribution of abilities - however defined- over the population is no more extremely dispersed. what's changed?

Technology drives this in part. Many jobs in have disappeared because of labor saving devices. The bulk of the jobs that no longer exist did not require any sort of intelligence, ambition, or creativity. These low paying jobs have been marginalized disproportionally because they are the easiest to automate.

As an example I remember an interesting project a few years ago involving warehouse automation. Nobody seemed to concerned with the fate of the forklift drivers.

dcarrigg
07-31-09, 02:11 PM
I further feel that any forced wealth redistribution would only be a temporary unnatural state. As such, and with all due respect to EJ, I can't agree with his call for doing a better job of wealth equalization during boom times simply because that wealth will (eventually) find its way right back into the hands of the same wealthier (more capable) people from whence it came.

In summation, it is my opinion that uneven wealth distribution is a natural state that results from a free-market society, and that a free-market society is still the best structure/philosophy for maximizing the size of the pie (strength of an economy), even if it means some inequalities OF RESULT (of wealth) are a natural side affect. The greater pie size will offset the smaller portion of said pie for most citizens in my opinion.


Respectfully, I think that you may be missing a big issue in labeling wealth redistribution an "unnatural state." Every society in the history of humanity, bar none, has redistributed wealth. Always. No matter the economic system. It simply must be done.

The older paternalistic-feudal model let the "more capable" (by birthright) be saddled with the responsibility for overseeing the "less capable" (by birthright).

The advent of the bourgeois revolution allowed the third estate to cancel much of the birthright legacy (although not through forms of inheritance and real estate holdings) and allowed for the competitive model of which you now speak.

Of course, this was before standard wage employment. Since the rise of political equality over the last century has occurred concurrently with the rise of standard wage employment, two interesting results have occurred.

1) Wealth redistribution happens de facto through an owner dictating wage to employees based on how much profit an owner wishes to keep in reserve or for personal purposes (owner can be extrapolated to shareholder).

2) Growing income inequality becomes a political issue due to political equality - through labor movements, unionization, and pressure on elected leaders (Since all of the money in the world - while it may buy lobbyists - still only gets you one vote).

So I think that your characterization of wealth redistribution as an "unnatural state" is incorrect considering the realities of living in a modern liberal democracy.

Further, I find that growing wealth inequality can actually result in shrinking the pie you speak of by causing political instability and thereby threatening property rights.

There is no use owning a mansion (http://www.mississauganews.com/news/article/34154--mansion-murder-trial-date-set) or jewelry store (http://www.philly.com/inquirer/local/nj/20090724_N__Phila__man_charged_in_jewelry_heist_at _Boyds.html) when you can't keep it safe - no matter how much more productive you are.

bart
07-31-09, 02:17 PM
There will always be a fraction of the population that is willing to risk breaking the law for money no matter what the punishment. Many laws currently on the books are simply being selectively enforced. Creating new laws or changing penalties doesn't address this problem.

That's not the problem that I was attempting to address.

What I'm referring to is a quite broad issue. Selective enforcement is a portion of the whole area that also should have much higher penalties.

jk
07-31-09, 03:24 PM
Technology drives this in part. Many jobs in have disappeared because of labor saving devices. The bulk of the jobs that no longer exist did not require any sort of intelligence, ambition, or creativity. These low paying jobs have been marginalized disproportionally because they are the easiest to automate.

As an example I remember an interesting project a few years ago involving warehouse automation. Nobody seemed to concerned with the fate of the forklift drivers.
i think technology and, as i said earlier, financialization and the global labor arbitrage are all implicated. but financialization, in particular, has been a political and cultural choice, not just an economic one. look at ej's lists of the 100's of bankers who got million dollar bonuses in spite of making bad decisions. and the mortgage brokers and real estate hustlers and condo flippers who made bundles. my point is that there's more to income disparities than "ability."

Raz
07-31-09, 03:46 PM
there will be no universal justice and peace (i..e, no utopia), at least not until the "lion lays down with the lamb". There may be periods of great prosperity and peace, but those never last; corrupt human nature cannot be trusted and it cannot be kept down without continual supervision and exercising the wisdom that has been handed down to us from our forebearers. But modernism has chucked that wisdom down into the sewer

history is before us; how much more do we need to see that generation after generation, century after century, millenium after millenium, the same sad and sorry "soap operas" are re-played by man. Murder, treachery, deceit and manipulation ... oppression.

Human nature is with us till the end, my friends. The modern man is no different or superior at his core than the ancient man The fallacy is believing that we are "progressing" toward an inevitable "good end".
Look at the facts of history for goodness sake. Technical advances, and raised standards of living, long life spans, etc. are all good, but they have yet to change who we are at the core (and some might argue, they have served as excuses to cut the ties with the past and reason itself).

Have you been reading my thoughts?

About three days ago I began thinking about the appalling ignorance of the "enlightened" class in the United States. The "white wine, Volvo and cheese" set (I know a lot of these people) who aren't even aware of Ptolemy's Amalgest - the astonomical handbook used in the Middle Ages. He stated that in relation to the nearest star outside our own solar system, the earth is so small as to be only a mathematical point.

Yes the ancients were all a bunch of ignoramuses and we are so "enlightened". :rolleyes:

bart
07-31-09, 04:00 PM
The Apology is enlightening too, although long.


http://classics.mit.edu/Plato/apology.html

*T*
08-01-09, 09:18 AM
That's not the problem that I was attempting to address.

What I'm referring to is a quite broad issue. Selective enforcement is a portion of the whole area that also should have much higher penalties.

I don't believe higher penalties in general act as a strong deterrent. I think that the likelihood of getting caught is the determining factor.

bart
08-01-09, 01:00 PM
I don't believe higher penalties in general act as a strong deterrent. I think that the likelihood of getting caught is the determining factor.

One of many ways to deal with that is having penalties shared by those who knew but did not speak up or do anything. Also note that I modified higher penalties with reliable and consistent.

And before anyone posts the obvious, what I'm talking about is currently quite unrealistic and "blue sky"... but also its not an absolute in all of human history or the social sciences.

flintlock
08-01-09, 11:05 PM
To my mind, this is the most profound statement of fact that I have ever seen anywhere.

I do not know who you are, but to my way of thinking, you should come out of the shadows and stand up proudly, as one of the great thinkers of our time.

I remember my teacher making us watch this documentary back in the 70s when I was a grade school kid. Kind of lame by today's standards, but even then people saw that life was getting ever more complex at an exponentially increasing rate.

http://en.wikipedia.org/wiki/Future_Shock

Slimprofits
08-02-09, 12:42 PM
This morning on ABC's This Week, George Stephanopolous asked Geithner about extending benefits for up to 1.5 million people that will see them expire at the end of 2009:

http://blogs.abcnews.com/george/2009/08/geithner-administration-to-address-extending-unemployment-benefits.html

The New York Times reported this morning that up to 1.5 million people could lose their benefits by year’s end. When I pressed Geithner for a response, he promised the administration would “do enough to bring this economy back” and pledged to take up the issue “as we get closer to the end of this year.”

***

There is not a political chance that the Democrats don't extend the benefits, even if no Republicans go along with it.

Quincy K
08-02-09, 01:30 PM
This morning on ABC's This Week, George Stephanopolous asked Geithner about extending benefits for up to 1.5 million people that will see them expire at the end of 2009:

http://blogs.abcnews.com/george/2009/08/geithner-administration-to-address-extending-unemployment-benefits.html

The New York Times reported this morning that up to 1.5 million people could lose their benefits by year’s end. When I pressed Geithner for a response, he promised the administration would “do enough to bring this economy back” and pledged to take up the issue “as we get closer to the end of this year.”

***

There is not a political chance that the Democrats don't extend the benefits, even if no Republicans go along with it.

Why wouldn't they extend the benefits? After all, it's only paper and deficits don't matter.

metalman
08-02-09, 04:34 PM
ft agrees...

US GDP (http://www.ft.com/cms/s/2/ece82636-7dd9-11de-8f8d-00144feabdc0.html)

Published: July 31 2009 14:56 | Last updated: July 31 2009 19:01

Spot the supposed improvement: 0, -1.9, -3.3, -3.9. That is the progression of year-on-year percentage growth rates for the US economy over the past four quarters. Yes, but the decline is slowing, reply optimists. The sequential fall in output was only 1 per cent (http://www.ft.com/cms/s/0/34977262-7d48-11de-b8ee-00144feabdc0.html), according to Friday’s second-quarter data, compared with -6.4 per cent before.

But of course things feel better. The economy is on massive doses of stimulus spending and cheap money. Government consumption surged 6 per cent quarter on quarter, which took some of the sting out of the overall contraction. Low interest rates cooled the meltdown in business and residential investment. Washington has also helped in other ways. Real incomes rose slightly, thanks to increased benefit payments and lower tax receipts.

GRG55
08-02-09, 06:53 PM
This morning on ABC's This Week, George Stephanopolous asked Geithner about extending benefits for up to 1.5 million people that will see them expire at the end of 2009:

http://blogs.abcnews.com/george/2009/08/geithner-administration-to-address-extending-unemployment-benefits.html

The New York Times reported this morning that up to 1.5 million people could lose their benefits by year’s end. When I pressed Geithner for a response, he promised the administration would “do enough to bring this economy back” and pledged to take up the issue “as we get closer to the end of this year.”

***

There is not a political chance that the Democrats don't extend the benefits, even if no Republicans go along with it.

Here's a link to the NYT article referenced with a little graphic included.

If the present trends continue by the time this is over people will be less concerned about affording laptops, movies, and summer camp fees...unfortunately.



Prolonged Aid to Unemployed Is Running Out (http://www.nytimes.com/2009/08/02/us/02unemploy.html?_r=1)
By ERIK ECKHOLM (http://topics.nytimes.com/top/reference/timestopics/people/e/erik_eckholm/index.html?inline=nyt-per)
</NYT_BYLINE>Published: August 1, 2009

Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution...

...Unemployment insurance is now a lifeline for nine million Americans, with payments averaging just over $300 per week...

...Calls are rising for Congress to pass yet another extension this fall, possibly adding 13 more weeks of coverage in states with especially high unemployment. As of June, the national unemployment rate (http://www.bls.gov/news.release/laus.nr0.htm) was 9.5 percent, reaching 15.2 percent in Michigan. Even if the recession begins to ease, economists say, jobs will remain scarce for some time to come.

“If more help is not on the way, by September a huge wave of workers will start running out of their critical extended benefits, and many will have nothing left to get by on even as work keeps getting harder to find...

</NYT_HEADLINE><SCRIPT language=JavaScript type=text/JavaScript>function getSharePasskey() { return 'ex=1406952000&en=e24d0c099585a90d&ei=5124';}</SCRIPT><SCRIPT language=JavaScript type=text/JavaScript>function getShareURL() { return encodeURIComponent('http://www.nytimes.com/2009/08/02/us/02unemploy.html');}function getShareHeadline() { return encodeURIComponent('Prolonged Aid to Unemployed Is Running Out');}function getShareDescription() { return encodeURIComponent('Tens of thousands of workers have used up their benefits, and the numbers are expected to soar in the months to come.');}function getShareKeywords() { return encodeURIComponent('Unemployment Insurance,Subprime Mortgage Crisis,House of Representatives');}function getShareSection() { return encodeURIComponent('us');}function getShareSectionDisplay() { return encodeURIComponent('US');}function getShareSubSection() { return encodeURIComponent('');}function getShareByline() { return encodeURIComponent('By ERIK ECKHOLM');}function getSharePubdate() { return encodeURIComponent('August 2, 2009');}</SCRIPT>

Ann
08-02-09, 06:58 PM
Here's a link to the NYT article referenced with a little graphic included.

If the present trends continue by the time this is over people will be less concerned about affording laptops, movies, and summer camp fees...unfortunately.



Prolonged Aid to Unemployed Is Running Out (http://www.nytimes.com/2009/08/02/us/02unemploy.html?_r=1)
By ERIK ECKHOLM (http://topics.nytimes.com/top/reference/timestopics/people/e/erik_eckholm/index.html?inline=nyt-per)
</NYT_BYLINE>Published: August 1, 2009

Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution...

...Unemployment insurance is now a lifeline for nine million Americans, with payments averaging just over $300 per week...

...Calls are rising for Congress to pass yet another extension this fall, possibly adding 13 more weeks of coverage in states with especially high unemployment. As of June, the national unemployment rate (http://www.bls.gov/news.release/laus.nr0.htm) was 9.5 percent, reaching 15.2 percent in Michigan. Even if the recession begins to ease, economists say, jobs will remain scarce for some time to come.

“If more help is not on the way, by September a huge wave of workers will start running out of their critical extended benefits, and many will have nothing left to get by on even as work keeps getting harder to find...

</NYT_HEADLINE><SCRIPT language=JavaScript type=text/JavaScript>function getSharePasskey() { return 'ex=1406952000&en=e24d0c099585a90d&ei=5124';}</SCRIPT><SCRIPT language=JavaScript type=text/JavaScript>function getShareURL() { return encodeURIComponent('http://www.nytimes.com/2009/08/02/us/02unemploy.html');}function getShareHeadline() { return encodeURIComponent('Prolonged Aid to Unemployed Is Running Out');}function getShareDescription() { return encodeURIComponent('Tens of thousands of workers have used up their benefits, and the numbers are expected to soar in the months to come.');}function getShareKeywords() { return encodeURIComponent('Unemployment Insurance,Subprime Mortgage Crisis,House of Representatives');}function getShareSection() { return encodeURIComponent('us');}function getShareSectionDisplay() { return encodeURIComponent('US');}function getShareSubSection() { return encodeURIComponent('');}function getShareByline() { return encodeURIComponent('By ERIK ECKHOLM');}function getSharePubdate() { return encodeURIComponent('August 2, 2009');}</SCRIPT>

The American unemployed shall never again suffer as in the 1930s.

Unemployment insurance shall always be paid.

Today we have: the printing press. :D

cjppjc
08-02-09, 07:16 PM
Anyone here who is unemployed from a well paying job, like to educate us on how much unemployment insurance they receive?

bart
08-02-09, 08:17 PM
It speaks for itself:



http://www.nowandfutures.com/images/gdp_revisions.png

bart
08-02-09, 08:26 PM
In general, unemployment benefits are based on an individual's earnings in the base period. As of December, 2008, CA benefits ranged from $40 to $450. California state unemployment benefits are subject to Federal income taxes, and you may elect to have taxes withheld from your unemployment check.


http://swz.salary.com/salarywizard/layouthtmls/swzl_unemployment_CA.html#Benefits

Jay
08-02-09, 08:44 PM
Appropriate penalties virtually always stop or control undesired or unwanted behavior.
I generally agree with this statement when it pertains to planned crimes, which appears to be its context. Crimes of passion are not effectively limited by penalty, and those also happen to be the crimes which most often evoke capital punishment.

Ann
08-02-09, 09:38 PM
Anyone here who is unemployed from a well paying job, like to educate us on how much unemployment insurance they receive?

An article I found for my father who had the say question stated that unemployment insurance pays 38 cents of each salary dollar, on average. The article was several years old. Sorry. I cannot find it again, but I do recall that number. It struck me at the time as low.

cjppjc
08-02-09, 09:57 PM
How much? In general, unemployment benefits are based on an individual's earnings in the base period. As of December, 2008, NJ benefits ranged from $85 to $560. New Jersey state unemployment benefits are subject to Federal income taxes, and you may elect to have taxes withheld from your unemployment check

ASH
08-03-09, 06:22 PM
i think technology and, as i said earlier, financialization and the global labor arbitrage are all implicated. but financialization, in particular, has been a political and cultural choice, not just an economic one. look at ej's lists of the 100's of bankers who got million dollar bonuses in spite of making bad decisions. and the mortgage brokers and real estate hustlers and condo flippers who made bundles. my point is that there's more to income disparities than "ability."

jk -- I think one comes to different conclusions about the link between financial outcome and ability depending upon whether one is most concerned about the outliers and the extremes of income disparity, versus understanding the meat of the population in the center of the distribution. In my view, the various opinions expressed on this topic in this thread are all valid in context. If one is concerned about why there is a non-uniform distribution of wealth and seeks to explain the distribution within a few standard deviations of the mean, then ability has a lot to do with it. This is especially true within a particular trade or profession (which adjusts out some of the structural biases that lead to extreme income disparity). But if one is most concerned about the degree of income disparity, then one has to understand the outliers, and in this case the structural and cultural issues which have been cited are the dominant factors. I see the clash of opinions arising because (a) we are most incensed by the outliers, and (b) we find it offensive if the general validity of the link between ability and wealth is stretched to seemingly justify the outliers on the basis of merit. In fact, the structural and cultural arguments which best explain the outliers do not invalidate an ability-based model to explain the majority of the wealth distribution, and the ability-based model doesn't explain the outliers very well.

zoog
08-03-09, 07:10 PM
Anyone here who is unemployed from a well paying job, like to educate us on how much unemployment insurance they receive?


An article I found for my father who had the say question stated that unemployment insurance pays 38 cents of each salary dollar, on average. The article was several years old. Sorry. I cannot find it again, but I do recall that number. It struck me at the time as low.



How much? In general, unemployment benefits are based on an individual's earnings in the base period. As of December, 2008, NJ benefits ranged from $85 to $560. New Jersey state unemployment benefits are subject to Federal income taxes, and you may elect to have taxes withheld from your unemployment check

Generally it is approximately 50% of your former weekly salary / 40-hr pay, based on what you made in the last few quarters. However there is a maximum cap (this may vary by state?) so depending on just how "well paying" your job was, the percentage could be less.

Note: I am not unemployed... yet?:eek: ... but looked into the topic a couple months ago to run the numbers on what my life might be like if I do lose my job.

leegs
08-03-09, 08:37 PM
jk -- I think one comes to different conclusions about the link between financial outcome and ability depending upon whether one is most concerned about the outliers and the extremes of income disparity, versus understanding the meat of the population in the center of the distribution. In my view, the various opinions expressed on this topic in this thread are all valid in context. If one is concerned about why there is a non-uniform distribution of wealth and seeks to explain the distribution within a few standard deviations of the mean, then ability has a lot to do with it. This is especially true within a particular trade or profession (which adjusts out some of the structural biases that lead to extreme income disparity). But if one is most concerned about the degree of income disparity, then one has to understand the outliers, and in this case the structural and cultural issues which have been cited are the dominant factors. I see the clash of opinions arising because (a) we are most incensed by the outliers, and (b) we find it offensive if the general validity of the link between ability and wealth is stretched to seemingly justify the outliers on the basis of merit. In fact, the structural and cultural arguments which best explain the outliers do not invalidate an ability-based model to explain the majority of the wealth distribution, and the ability-based model doesn't explain the outliers very well.

As is true of all your posts, this one is well articulated and right on in IMO . . . except the last phrase 'majority of the wealth distribution'.

The majority in terms of number of people - yes I think you are right. The majority in terms of dollars - I can't agree. I would certainly think that the top 1% would qualify as outliers, yet they own ~40% of the wealth. One could argue that in our current system, a near majority of wealth distribution in terms of dollars is present in the outliers, and arguably not primarily attributable to ability.

It is the extreme nature of this disparity, resulting from our oligopoly, that in my opinion really overshadows the typical concern over redistribution of wealth, using taken to mean middle class folks paying for welfare moms with Cadillacs.

Of course there are many good reasons to object to excessive amounts of the latter type of wealth redistribution, but I think the bigger problem is the redistribution in the other (upward) direction.

jk
08-03-09, 09:25 PM
jk -- I think one comes to different conclusions about the link between financial outcome and ability depending upon whether one is most concerned about the outliers and the extremes of income disparity, versus understanding the meat of the population in the center of the distribution. In my view, the various opinions expressed on this topic in this thread are all valid in context. If one is concerned about why there is a non-uniform distribution of wealth and seeks to explain the distribution within a few standard deviations of the mean, then ability has a lot to do with it. This is especially true within a particular trade or profession (which adjusts out some of the structural biases that lead to extreme income disparity). But if one is most concerned about the degree of income disparity, then one has to understand the outliers, and in this case the structural and cultural issues which have been cited are the dominant factors. I see the clash of opinions arising because (a) we are most incensed by the outliers, and (b) we find it offensive if the general validity of the link between ability and wealth is stretched to seemingly justify the outliers on the basis of merit. In fact, the structural and cultural arguments which best explain the outliers do not invalidate an ability-based model to explain the majority of the wealth distribution, and the ability-based model doesn't explain the outliers very well.
ash, i think your argument is well-taken, but doesn't address the evolution of wealth disparity over time, even within the same political/economic system. why is wealth disparity \more extreme recently than any time since the 1920's? something changed, and it is not the distribution of abilities over the population.

WDCRob
08-03-09, 09:49 PM
I don't know if it's online anywhere, but I saw a presentation by Robert Shiller at the Library of Congress a couple years ago where he was talking about the change in the distribution of income. (ETA: just searched his homepage and didn't find the presentation there.)

Wish I could remember the details now, but IIRC he made a pretty good case that it was tax policy that had driven the increasing gap between the have and the have nots.

He suggested we index inequality, and adjust policy to maintain whatever level of inequality we agreed was appropriate.

jk
08-03-09, 09:51 PM
I don't know if it's online anywhere, but I saw a presentation by Robert Shiller at the Library of Congress a couple years ago where he was talking about the change in the distribution of inequality. (ETA: just searched his homepage and didn't find the presentation there.)

Wish I could remember the details now, but IIRC he made a pretty good case that it was tax policy that had driven the increasing gap between the have and the have nots.

He suggested we index inequality, and adjust policy to maintain whatever level of inequality we agreed was appropriate.
that's a great, rational idea. unfortunately it requires that we make conscious decisions about things we can barely bear to think about, let alone discuss. it requires we take responsibility in a way that our polity is incapable of.

ASH
08-03-09, 11:03 PM
The majority in terms of number of people - yes I think you are right. The majority in terms of dollars - I can't agree. I would certainly think that the top 1% would qualify as outliers, yet they own ~40% of the wealth. One could argue that in our current system, a near majority of wealth distribution in terms of dollars is present in the outliers, and arguably not primarily attributable to ability.

I should have been clear. I agree with you. I meant the majority of the population -- not the majority of the wealth.

ASH
08-04-09, 12:08 AM
ash, i think your argument is well-taken, but doesn't address the evolution of wealth disparity over time, even within the same political/economic system. why is wealth disparity \more extreme recently than any time since the 1920's? something changed, and it is not the distribution of abilities over the population.

I didn't specify a mechanism, but here's my take on what affects the extrema, framed as my take on wealth in general. (Mind you, somebody like me theorizing about wealth is a lot like a virgin writing a sex column.)

The trivial case is when one is wealthy to begin with. An enormous pile of capital times a modest rate of return can result in an impressive income and compounding wealth -- provided one is able to avoid farming management of the fortune out to Madoff types, or dissipation of the family fortune by incompetent offspring. Tax law is the most important non-ability-related factor which I can think of that changes over the decades, and which would affect the rate of increase of old wealth.

Most of the other ways to be wealthy involve the same structural feature: income that scales with volume of business transacted, concentration by hierarchy, and a large volume of business. No one gets wealthy earning a base salary. In order to get wealthy, you need an income that scales with the volume of business, shared among as small a number of beneficiaries as possible. That's one reason small business owners often rank high in the income distribution (income related to business volume -- if profitable -- and concentration by hierarchy). Law firm partners who share in profits also do quite well, as do those at the top of multi-level marketing companies, and the like. In many of these cases, business volume and the ability to turn a profit is highly dependent upon ability, but the structure of the compensation native to a particular profession acts as a multiplier. In other words, if you are good and work in a profession where structurally your income is tied to business volume and is concentrated by company hierarchy, then you will do much better financially than someone of equal ability working in a salaried position.

That brings me to the case du jour, which is the financial industry. The reason we see such out-sized bonuses at financial companies is much the same as above. However, more so than the other cases cited, the effort required to provide the services does not scale linearly with the volume of business (measured in dollars invested), so investment bankers can increase the amount of money they manage without having to dilute the bonus pool accordingly. Further, financial leverage means that an investment banker can transact in sums many multiples of that entrusted to his care, and profit accordingly. To the extent, then, that wealth consists of skimming off a modest percentage of an astronomical sum, investment banking is structurally in a sweet spot.

The main non-ability-related factors which affect the extent to which these structural games can be exploited include tax law (again), and the financialization of the economy (which you pointed out). The impact of changing tax law is pretty obvious. I think financialization of the economy is important, because when the volume of economic activity loses its moorings in real things, then volume-related income can grow accordingly.

Chris Coles
08-04-09, 04:18 AM
Over the last few months I have been working on completing a new book, not this time about gravity, but the way the FIRE economy has removed access to equity capital investment at the grass roots of society and how we might resolve the problem by the acceptance of a set of rules for such investment. The book is finished, and will be distributed for free as a closed, readable only PDF file. But, as I have work to do on my web site and I have to resolve how to fund the first batch of the book itself; it is not yet available. (I am aiming to use this free PDF as viral marketing to see if I can self fund the rest of my ongoing adventure). The title will be: The Road Ahead from a Grass Roots Perspective. I give you chapter 10, The Fulcrum for Change. I must add, this chapter, taken on its own, does not give a complete view of what I am trying to get across, but it does address what I believe is the starting point for the debate about why we have a distortion of prosperity.

Chapter 10

The Fulcrum for Change

Before we can define what must be altered to bring about the changes needed, we have to look back to where the FIRE economy began and learn a classic lesson from history. I believe that we can define that beginning precisely, both in time and location. It was at a meeting in London in 1964 between two individuals, Jim Slater and Peter Walker and a London Based savings institution. The conversation went something like this.

Slater Walker; we have identified a company that we believe has hidden value and we have come to you because we need funding to enable us to purchase a block of their shares sufficient to be able to take control of that company and break it up to “unlock” that hidden value. (Up to that point in time, a public company was considered to be sound and well run if it had, over time, built up internal prosperity, some in the form of a cash surplus, some in fully depreciated property with an understated “book value” are two examples sufficient to give you an idea of the picture Slater Walker presented).

They got the funding and they proceeded to do precisely what they had set out to do, they broke up the company and released substantial hidden value to the shareholders, the original savings institutions. Once this single event became visible, an unstoppable new paradigm slowly emerged which we now describe as the FIRE economy. Looking back, at the time, it was so easy to see the short, even medium term benefits.

But no one saw that they had also changed the fundamental direction of the responsibilities of the savings institution; from external, arms length investment, to internal investment with the primary aim of generating additional prosperity for the savings institution at the expense of the overall prosperity of the external community.

That the underlying philosophy of the savings institution changed direction and where in the past they had invested the savings of the nation – at arms length and thus without an expectation of control over the external community of savers; they now invested to bring increased prosperity to the savings institution.

The balance between the prosperity of the external community and the internal savings institutions changed. From that moment onwards, all investment became centred upon the need to maximise the prosperity of the savings institutions, what we now describe as the FIRE economy.

From that momentous meeting onwards, Savings institutions lost sight of their underlying responsibility to invest equity capital to create long term prosperity at arms length and instead concentrated upon investment into “privateers” who would bring that prosperity back into the savings institutions.

What should have happened was the savings institution should have told Slater Walker that they could have all the funding they needed to compete with the existing company and through competition, force the existing company into using its hidden value to in turn compete against them. What happened instead is that from that moment, the savings were not invested as equity capital into new industry, but were instead, invested back into the institutions themselves.

At first sight, that simple statement seems innocuous but in fact, it underpins the complete destruction of the industrial society. Instead of investment of savings into industry created by the industrious of the savers community, all future investment had to compete with the returns available internally to the FIRE economy. Savings were from then onwards used internally, within the institutional economy to change the value of the paper assets held by the institutions.

Investment between the institutions from that moment became the dominant producer of the income of the institutions.

Let me give you an example, a parallel if you like. If a savings institution buys 10 million new issued shares, say of a base issue value of say, $0.10, ten cents, then the issued capital of the company will be $1 million. So the value of the investment into job creation for the savers of the local community is $1 million. But the stock market value might now be, say, $60 and the savings institution now buys those same 10 million shares for $600 million from another similar savings institution, that money, the $600 million, is not invested as new job creation equity capital back into the savers local community; but instead, the money stays within the savings institutions internal economy. The savings are not invested into the local community, but instead drained off and used by the institutions for their own benefit.

Once you change the emphasis from investment of equity capital into the industrious of the community of savers; to investment BETWEEN the savings institutions, you automatically lock out the savers who now cannot benefit directly from local investment. And that is exactly what has happened. The prosperity of the community has been surrendered and instead used as the base investment between institutions.

By far the majority of that prosperity has now been transferred from the local communities into the holdings of the savings institutions as investment between the institutions.

And that brings in another consequence of the way this new intra institutional investment has developed. If you invest savings as equity capital to create new employment into the local community, the money has to be used to pay all those job creation costs I have described earlier. So no matter if that business fails, the investment retains a value as the money circulates within the local community.

But if you instead take those savings and allow the savings institution to pay another savings institution a NOTIONAL value, (for a $0.10 share certificate), of, say, $60 this morning and the value later that day reduces to say, $50; that reduced value is totally lost; evaporated. There is no value other than the notional value anyone will place upon the share based upon what the stock market places as a market on the value. While values go up everyone can pretend that this is the way to make more money than by investment into the local community; but the moment the trend turns down, all those savings can completely disappear with no benefit to anyone. Exactly what is happening today! Much more importantly, now we can see from history where we, the savers, the people of the external communities, have to drive the debate. We have to address the fundamental philosophy of the savings institutions. We must forge a new order.

Savings institutions have to recognise they have a duty to invest the majority of the savings of their local communities back as equity capital, via free marketplaces, under free market rules into a fully competitive free society. Investment into inter/intra institutional vapourware must stop.

Savings must be reinvested back into local communities as equity capital. There is no other road towards a prosperous free enterprise community. Every other road perpetuates the mistakes of past history with a feudal mercantile economy dominated by the intra institutional investment policies of the FIRE economy that very effectively destroy value in a downturn.

Finally, perhaps of even greater importance is a need to recognise why, all those decades ago, before Slater Walker, housing costs for the employees and business rents in general in the likes of London were so much lower. In a capitalist economy, where the savings are directed back into equity investment into job creation within the local communities; it made no sense to raise asset values. Why? Surely the imperative to make money from rents and increased asset values, (as increased income for the financial institutions), should remain? I take you back to the debate about the need for incentive to keep costs low. In a capital based society it makes no sense at all to drive up the costs of fixed assets. You are creating a competitive society where you need to keep fixed costs as low as possible. By that, you in turn create low rents, which in turn reduce the pressure to pay ever higher wages to cover the costs of the fixed assets. In truth, I doubt that anyone, other than the financial institutions, has benefited in any way at all from the ever rising costs of housing. Higher rents, mortgages, business premises rents drive up the cost of everything to the point where your local community can no longer compete against most other nations.

Yes, your banks have made a fortune. But now your local economy can no longer compete against lower cost nations to the extent that the majority of you are left with low quality jobs, no skills, no opportunities for the young and a constant, ever present problem of trying to address unemployment within more and more communities throughout the nation. You will not be able to achieve prosperity for the majority until you let go of the notion that prosperity comes from driving up asset prices. Prosperity comes from investing equity capital into the industrious job creators within your local communities, not fixed assets.

rjwjr
08-06-09, 11:40 AM
you still have not explained how, given the unchanging disparity of abilities among the population over generations, nonetheless the income distribution changes over time. more specifically, you have not addressed the fact that recently incomes have become more unequal than at any time since 1929, yet the distribution of abilities - however defined- over the population is no more extremely dispersed. what's changed?

The power of compound interest.

This may seem like a flippant answer, but it is my serious answer. "The rich get richer" is true in many respects. Obviously not true for Mike Tyson, many pro athletes, many lottery winners, etc., but definitely true for most capable wealth creators.

Ghent12
08-06-09, 03:53 PM
The power of compound interest.

This may seem like a flippant answer, but it is my serious answer. "The rich get richer" is true in many respects. Obviously not true for Mike Tyson, many pro athletes, many lottery winners, etc., but definitely true for most capable wealth creators.
That reminds me of a line from Chris Rock. Of course he brings race into just about every one of his jokes, as that's his schtick, but here is his take on the difference between rich and wealthy:
"People don't know the difference between being rich and being wealthy. Most people look at Michael Jordan and say, 'Damn! He's wealthy!' but he's actually just rich. The white dude that signs his check, now that's wealthy."

lurker
08-07-09, 09:14 AM
The power of compound interest.

This may seem like a flippant answer, but it is my serious answer. "The rich get richer" is true in many respects. Obviously not true for Mike Tyson, many pro athletes, many lottery winners, etc., but definitely true for most capable wealth creators.

And the tax codes.

The US is a rentier economy, run for and by the wealthy. The tax codes reflect this. Income earned from work is taxed more heavily than income from existing wealth.

And this is why the rich are getting richer.

thriftyandboringinohio
08-07-09, 03:41 PM
Anyone here who is unemployed from a well paying job, like to educate us on how much unemployment insurance they receive?


In Ohio, unemployment table tops out at an annual salary of $52,312; if you made more than that your unemployment check is no bigger. Max benefit in Ohio is a person with three or more dependants receiving $503 per week.

cjppjc
08-07-09, 05:11 PM
In Ohio, unemployment table tops out at an annual salary of $52,312; if you made more than that your unemployment check is no bigger. Max benefit in Ohio is a person with three or more dependants receiving $503 per week.


Thanks for the info.

Btw: You don't know thrifty and boring till you meet me.:D

Rajiv
08-08-09, 11:44 AM
Here are the maximum weekly amounts by state (http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/11/20/national/a140117S46.DTL)

Maximum weekly benefits range from $210 in Mississippi to $900 in Massachusetts (This would be someone with 11 kids - for 0 kids it is $628)




Alabama — $235

Alaska — $320

Arizona — $240

Arkansas — $409

California — $450

Colorado — $455

Connecticut — $576

Delaware — $330

District of Columbia — $359

Florida — $275

Georgia — $320

Hawaii — $523

Idaho — $364

Illinois — $511

Indiana — $390

Iowa — $426

Kansas — $407

Kentucky — $415

Louisiana — $258

Maine — $496

Maryland — $380

Massachusetts — $900

Michigan — $362

Minnesota — $538

Mississippi — $210

Missouri — $320

Montana — $386

Nebraska — $298

Nevada — $362

New Hampshire — $427

New Jersey — $560

New Mexico — $455

New York — $405

North Carolina — $476

North Dakota — $385

Ohio — $493

Oklahoma — $392

Oregon — $463

Pennsylvania — $547

Puerto Rico — $133

Rhode Island — $641

South Carolina — $326

South Dakota — $285

Tennessee — $275

Texas — $378

Utah — $427

Vermont — $409

Virginia _$363

Virgin Islands — $454

Washington — $515

West Virginia — $408

Wisconsin — $355

Wyoming — $387