Also in the Times, an article about FHA's problems:
“All we do is give them the down payment money to get them over that obstacle so they can start enjoying the benefits of homeownership,” said Ann Ashburn, president of AmeriDream of Gaithersburg, Md.
Is one of those benefits financial stress and foreclosure?
Closing the income gap is the key to future prosperity. Where do we get the seed money for future growth? From those who have it. Like it or not, that's where the money went. That's where the money is.
For my family, wages have been stagnant for the last 8 years. Prices rose on gas and groceries. Interest on savings never kept up with inflation.
Yes our house tripled in value but we had no desire to move. We didn't take out any equity from the house because we still would have to pay that back, so it made no sense to do that.
Amazing...this is because consumers had two jobs...their primary job and refinancing their home or using lines of credit as their second job. The second job probably paid more.
ironic, in the sense that prior to 2001, i had never heard of billion dollar pay-outs to hedge fund managers or govt bond traders making 4mm a year. the inflated money supply from 2001-on clearly and only found its way to the wealthy, the banking community, and other finance related entities. and this all came at the expense of the dollar, which has virtually destroyed the balance sheets of our middle class. the dollar is the problem. there are too many in the global mktplace. way too many..
This is an interesting discussion. I noticed that the two quotes reference the median income but not the mean. Even if this boom had been more substantial, the median income wouldn't be affected by an increase in the middle class salary. The only way the median would be affected is if the uber rich realized greater income, thus skewing the income distribution.
It seems that this situation will lead to two things:
Upper income families will be facing higher taxes, even if all that happens is the Bush tax cuts aren't extended.
Corporate profits, also at record highs as a percent of GDP, are going to fall on that basis for several years. They are going to have next to no pricing power.
A strong and expanding middle class is the only true gauge of a democracy. These figures are of no suprise seeing that democracy was and is very low on the Bush admin. to do list.
You know, the elite of the Roman Empire in its latter days didn't institute bread and circuses just to be nice. They did it because the plebes would have burned their palaces to the ground otherwise.
We have the circuses, but there must be bread as well.
If I am understanding your argument it is demonstrably false - first, it was the uber rich that made out well in the expansion that just ended and second, in previous expansions the median income rose, to wit: But weve never had an expansion in which the middle of income distribution had no wage growth.
@Samsonite - think you're confusing mean and median. Obviously the median would be affected by an increase in the middle class's incomes, whereas the mean would be distorted by increased earnings in the upper tiers.
Be leery of income statistics that are 'per household'. Household is an elastic and changing yardstick. Average household size has shrunk significantly in recent years. If the reporter wanted to be honest, he'd report on per capita income- that has been rising, both on average and at the median.
We have the circuses, but there must be bread as well.
FiveAcres
FiveAcres, is the circus you refer to the election process? Frank Zappa said once that politics was the entertainment arm of business. I never really went for his music, but his observations always seemed on the mark.
Samsonite:
I think you have it backwards. If Bill Gate"s and Warren Buffet's income quintupled, it wouldn't affect the median since they are already in the top half. It would, of course, affect the mean, which is the arithmatic average.
I was actually thinking more of the endless attention paid to troubled celebrities, but the Presidential election process here in the US qualifies as well.
The Circus is free or cheap entertainment - TV/internet. Entertainment isn't near as important as affordable food. Remember the days when you couldn't buy food with a credit card?
@Common Sense - surely you're not implying that to make W's legacy look better we should cram back in to tenements, at 12-15 per? Household size dropped well before the current "recovery."
Suecris--isn't the median the number that is in the middle? Assume that your range of incomes is 1-100, If the majority of your population sees an increase in their income, this doesn't necessarily mean that the median will increase. if your top wage earner is still making 100, the median won't change.
Average household size has shrunk significantly in recent years. If the reporter wanted to be honest, he'd report on per capita income- that has been rising, both on average and at the median.
I actually went to the stats a while back to check all this out. It's actually not easy to find these done per earner from the Census bureau as most things are done for "households". But it is there, and yes, it did rise on a per earner basis. If the household size is the same, then the analygy holds. But if it isn't, it needs to be adjusted.
Having said that, I have no doubt that wages have suffered from the WalMart effect where higher-paying jobs have fled and the replacement is lower-paying ones.
ARIES (March 21-April 19): You are learning new information. Business transactions are conducted. You're paying attention to details, but may often forget why you're doing it, or neglect the moral aspects of your activity.
Mr Mortgage writes:
"Amazing...this is because consumers had two jobs...their primary job and refinancing their home or using lines of credit as their second job. The second job probably paid more."
I think refinancing their home was many people's primary job. And many of those people "owned" several houses through loose lending.
My father always told me to avoid loose women with open sores. Maybe more fathers should have told their kids to avoid loose lending with open ARMs.
@Samsonite - I'm trying to figure out what you mean - seems to me that if the majority of incomes rise, the median MUST rise, unless somehow you arrange your majority carefully around a stationary mid-point.
In January, with the unemployment rate nearing 6%, nearly 12.6 million calls were placed to the state's toll-free phone number to apply for unemployment insurance benefits. But more than three-fifths never got through.
Frank Hartzell knows the problem all too well. A laid-off Mendocino County social services worker, he tried calling morning and afternoon, 45 times in December. The computer hung up every time until No. 46, and he was able to apply.
In January it happened again. He tried 39 more times before he reached the Employment Development Department to find out why his checks had stopped.
Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of al traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.
In my view, it seems that most of the benefits of the boom went to the big corporations, money managers and fakes like Mr Home Depot Nardelli who gets $200+ mil for leaving. Like usual the average working stiff is stiffed again.
In the midst of going to work every day, sometimes I really wonder about our system and these so called "smart people" who run it. What a mess!
Aries (March 21-April 19): Everyone around you hates you. Beware the ides of march. Don't do something stupid like the last time; try to control your temper, and perhaps things will turn out better than you expect them to. After getting hit by comet and surviving as a vegetable, you will develop amnesia and sleep with your father, only to find he actually quite liked it.
common sense: But the largest cost of living incidence is per household, not per capita. My monthly rent is the single largest line item and exceeds food, fuel, and other per-person expenses combined.
"...the F.H.A., the government agency that insures home loans for many first-time, minority and lower-income buyers, is grappling with financial woes of its own.
Housing officials say the agency will face a deficit for the first time in its 74-year history, starting in the fiscal year that begins in October. And they blame a rapidly growing and increasingly troubled sector of the F.H.A.s mortgage portfolio, known as the seller-financed down payment loan program, which has suffered from high delinquency and foreclosure rates in recent years."
Per earner incomes have risen consistently, and household size has declined, equally consistently. The whole 'problem' is an artifact of the continuing dissolution of the traditional family unit. It reflects peoples' preferences regarding how they want to live, and the fact that they now have enough income to be able to afford their own place.
Journalists at the NYT and academics spend months poring through statistics to find the means to manufacture scare stories like this, particularly in election years.
If so-called 'educated' Americans weren't so thoroughly ignorant about their own economy this sort of stuff would meet with the derision it deserves.
Suecris-i may be confused by what median means, but i was under the impression that the median was the number thats in the middle of a distribution. So from my previous post, if the majority of incomes rise, it would be the mean that would rise, but not necessarily the median. The median income might rise, but it isn't guaranteed unless the top earners income rises. From the previous example, the median wouldn't rise unless the top earners income went above 100 OR if the lowest earners income went below 1. does that make any more sense? maybe someone else will see the post and comment...
In my view, it seems that most of the benefits of the boom went to the big corporations, money managers and fakes
Well, not exactly. How about all those construction workers making money, day laborers, furniture places, lumber suppliers, etc etc. Same for the tech boom. I put a lot of money back into the system by spending when things were good, as most people do. That produces jobs too. But the argument is a smokescreen and class sress that pits people against each other instead of looking at the real issue.
I wrote a paper once about the economic effect of WalMart and other big box stores and it was tangible and real. People see lower prices as a good thing, but they aren't always. The real issue here is the kinds of jobs we're making and the people who will fill them. And, frankly, we're our own worst enemy. It's why, after doing the study, I never stepped foot in a Walmart again. And why I try to always support local businesses.
This is a bigger issue than one administration, btw, and is national in scope.
Now you see why Blackrock is managing Bear Level 2 unobservable assets @ Treasury/Fed:
Merrill Lynch is one of the world's leading wealth management, capital markets and advisory companies, with offices in 40 countries and territories and total client assets of almost $2 trillion. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. Merrill Lynch owns approximately half of BlackRock, one of the world's largest publicly traded investment management companies, with more than $1 trillion in assets under management.
Re: The Wall Streeters seem to assume that the next step will be the creation of something like the Resolution Trust Corporation..... Or, as David Rosenberg of Merrill Lynch told the firms clients last week, . . . the outright purchase (by government agencies) of illiquid mortgage-backed securities is probably required, and could employ government-backed fiscal action . . . The Federal Reserve itself could buy some of those securities, but the Fed alone cannot unclog the congestion in the capital markets, in our opinion.
Re: Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at ``the very edge'' of its legal authority.
From Nakedcapitalism (TallIndian said...): The NY FED proclaims
The portfolio consists of collateralized mortgage obligations (CMOs), the majority of which are obligations of government-sponsored entities (GSEs), such as the Federal Home Loan Mortgage Corporation (Freddie Mac), as well as asset-backed securities, adjustable-rate mortgages, commercial mortgage-backed securities, non-GSE CMOs, collateralized bond obligations, and various other loan obligations.
All valued by BSC!
And the NY FED actually states that even revealing the CUSIPS of these instruments poses a 'danger to markets'!!!!!!
Goldman Sachs Group Inc the world's biggest securities firm, on Wednesday said its exposure to illiquid, hard-to-value "level 3" assets rose to comprise a bigger part of the firm's balance sheet during the first quarter.
During one of the worst market environments in decades, when trading in many kinds of debt broke down for lack of buyers, Goldman's level 3 assets rose to $82.3 billion, or 13 percent of total assets, in the quarter ended Feb. 29.
That's up from $54.7 billion, or 10 percent of total assets, at the end of November, Goldman disclosed in its quarterly filing to the Securities and Exchange Commission. The increase was fueled largely by commercial mortgage debt as well as loans and securities backed by residential property.
Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee, wrote a letter to New York Fed Governor Timothy Geithner to inquire about the selection of BlackRock Financial Management Inc. as the asset manager for the deal that allowed JPMorgan Chase & Co. to purchase Bear Stearns at bargain-basement price.
When bank managers feared investment bank Bear Stearns' collapse, the Fed put together the emergency deal to avoid a Wall Street-wide panic. Bear Stearns was hamstrung by heavy investments in shaky mortgage-backed securities.
"Only limited details are known about the Federal Reserve's understandings with BlackRock. It appears, however, that BlackRock is now directly responsible for managing a $30 billion portfolio on behalf of the American taxpayer," Waxman wrote.
Waxman said he wants to know how the Fed came to select BlackRock, which appears to have secured a long-term deal with the Fed without competition usually sought in a government bid. Waxman said he also wants to know more about what compensation BlackRock will receive in exchange for its work.
Geithner's "testimony before the Senate Banking Committee offered few specifics" about the deal, Waxman said.
Detailing a half-dozen specific questions about the deal, Waxman asked for a response by April 18.
Speculating wildly here...have most of the earning potential lost to the middle income groups gone to the upper income groups, or have they (in addition to going to the upper income groups in the US) due to globalizationgone to build the middle class in countries like India and China?
So, what, exactly is "the real issue"?
Marcus Aurelius
"The real issue here is the kinds of jobs we're making and the people who will fill them. And, frankly, we're our own worst enemy."
Although global competition is certainly a factor, it is obvious to me that the historic influx of unskilled illegal immigrants during the past 5+ years is the primary cause of the middle class woes during that period. But don't think, I am bitter, I have disporportionally benefited from the resulting depressed blue colar wages. I'm puzzled why this cause and effect is not obvious to others.
That's sort of a simplistic way of looking at the greater concern of why median income isn't rising, isn't it? Even no-bed crony contract employ real people with real wages at prevailing rate.
In my view there are three reasons for stagnant wages (primarily): demise of the power of unions, automation and the loss of trade and skilled-labor type jobs, and dumbing down of the educational system when the vast number of newly-created jobs that are well-paying require higher congitive and educational requirements.
But I'm sure the class warfare stuff is more fun and requires less hard answers.
CR, this is the first time I completely disagree with both you and the times. Many many americans DID participate even if average wages didn't go up.
I have at least have a dozen examples of family and friends who have had houses and purchased nice cars over the last 8 years, but they started with nothing but a highschool education and good credit. How does that make any sense especially when I "missed out" because I didn't jump on the credit train. Sure they are all going to be giving some of that back now that the party is over, but I have to say that the last 8 years was GREAT for a whole lot of people. ESPECIALLY because they were able to enjoy it without higher income.
Sorry, it wasn't clear to me. I think that's not the cause. I think the cause is crony capitalism, lack of law enforcement, and greed.
I know a fellow with his own, personal 737. Yeah - he needs that. (he also leases it to the government over weekend periods for civvy flights to Iraq, at an inflated price. He also receives free maintenance for doing so).
Among he great "technological" advancememts in labor management are the corporate flooding of American markets with foreign college graduates, and the reduction or elimination of health care benefits paid by these corporations and the transfer of education costs and medical "aftercare" costs to individual workers.
But weve never had an expansion in which the middle of income distribution had no wage growth.
ven no-bed crony contract employ real people with real wages at prevailing rate.
And at a profit margin that would make Bill Gates blush. That's the problem, ipodius: the "prevailing rate" of wages hasn't changed, while the profit margins and compensation for the topmost level has soared. Free-market ideology does not support a no-bid scenario. It smacks of Fascism.
just for clarification, the US is NOT a Democracy,...it is a Republic. more precisely, it is a constitutional republic,...which uses "democratic" methods to elect officials. And recent and upcoming elections are exposing that we don't even have a pure/direct democratic voting system, rather we have an electoral college system and super-delegates that usually are close to the direct popular vote but not entirely.
I've never seen so many "CRY BABIES" on one blog. Maybe, if some of you folks actually had a day job, your income would be greater. Must be nice to be able to sit at a computer all day long and bitch & moan.
A supposedly Constitutional representative (democratic) Republic. In a pure Democracy, blood would run in the streets. The Constitutional Republic places limitations on the will of the majority.
Say what you want about Walmart, bit it grew into a powerhouse by being better than anyone else, particularly in supply chain.
However I was in one last week and grabbed a cart. Front wheel was wonky so I grabbed another. It was a little iffy, too. During my travels through the store, I realized that it has a fifth wheel at the front which doesn't normally touch the ground. This had been located too close to the front wheels such that, when reversing the cart, one front wheel would turn 90 degrees and abut aforesaid fifth wheel, then drag. Often, when resuming forward motion, the other would do the same. So the cart was friggin' useless (unergonomic is far too weak a word here) unless pushed forward only. And every one of several hundred carts in the store presumably the same. You can call this a metaphor for something if you like, but I was just aghast that someone had accepted delivery of these things instead of saying "all defective examples of a design little improved in 80 years, moron, we're not paying." Sam Walton must be a-turnin-over, but then, he was a stickler for "buy American" from what I've read, so mert cart function is probably the least of his worries.
Amazing...this is because consumers had two jobs...their primary job and refinancing their home or using lines of credit as their second job. The second job probably paid more." I call that the "Molly and me and the HELOC makes three" income family.
At some level, the increased concentration of wealth represents the financial "industry" using greater leverage on the "real" economy of people who make actual, you know, stuff.
Samsonite said: "...So from my previous post, if the majority of incomes rise, it would be the mean that would rise, but not necessarily the median. The median income might rise, but it isn't guaranteed unless the top earners income rises. From the previous example, the median wouldn't rise unless the top earners income went above 100 OR if the lowest earners income went below 1...."
Correct.
"One type of average, found by arranging the values in order and then selecting the one in the middle. If the total number of values in the sample is even, then the median is the mean of the two middle numbers. The median is a useful number in cases where the distribution has very large extreme values which would otherwise skew the data."
Word to all future Hobos: Always vent a can of beans before placing it into the fire. Otherwise, the can explodes, and you'll be bean-pocked (and marked as a hobo) for life.
JD writes:
"Although global competition is certainly a factor, it is obvious to me that the historic influx of unskilled illegal immigrants during the past 5+ years is the primary cause of the middle class woes during that period. But don't think, I am bitter, I have disporportionally benefited from the resulting depressed blue colar wages. I'm puzzled why this cause and effect is not obvious to others."
I was unaware that, 5 years ago, the middle class typically worked in jobs not requiring documentation. Perhaps blaming the people on the bottom for stagnation in the middle is not obvious because it isn't true?
I don't think "no-bid contracts" and "employ people at the prevailing rate" go together.
My favorite is this bit where, instead of imposing civil or criminal penalties (which would go to the treasury), the administration appoints a monitor/crony to supervise corporate compliance. John Ashcroft, your check for $52MM is at the front desk. Sadly, there's a part of me that would really like to see the mob rise up and do the right thing. Maybe I'm watching the wrong circus?
Damn, that's growth. Very roughly, sales rose there about 150,000 from a year ago, about the same, or more, than domestic sales here fell in a similar period. I think using the annual rate in unit terms, China may have just passed us. In $$ terms there's a big difference in unit price.
I was looking into car sales in other developing countries, I believe they're rising 20+% in Brazil, and in India growth has slowed a lot.
Even here, middle-class lickspittles of the rich rush in to deny the undeniable. Income and wealth inequality are at their highest levels since 1929. The middle class is dying, the rich are enjoying a new Gilded Age--a fact as unassailable as the round earth and the blue sky.
This is why I think the forecast is gloomier than CR predicts.
First, the transformation of the media into a propaganda arm of the ruling class is complete. Unexamined talking points have made gullible McMansion dwellers into apologists for Paris Hilton and Peter Peterson. This is precisely why federal policy was long hostile to the amassing of large estates--to prevent the concentration of political power in a dangerously inflexible oligarchy.
Second, the basic model of our economy is now unworkable. At the plankton level, the economic ecosystem has to start with an income stream from consumers--which is why the fancy structured securities had to be based on subprime mortgages. Stripped of income from their productivity gains, consumers have been relying on borrowing--feeding leverage with leverage. Now that spigot has been turned off. There is nothing left at the bottom of the food chain.
Historically, the flattening of the wealth pyramid has tended to occur in very quick and ugly ways.
Marcus, i don't buy for a second that we look at the top tier and extrapolate some sort of general thought process from it. I'm sure there are high-earner bad guys in the same proportion that there are low earners having babies so they can keep taking government handouts. They cancel each other out in the scheme of things and you never get anywhere looking at extremes only. The arguments using these examples are just absurd.
In my three points (though not the only ones) we have no advocate left for wage earners that can negotiate for them as a class (that was the union's job but they killed themselves by some strange notion that the guy on the line should make as much as the guy in the front office), a lot of those jobs are now done by machines/lasers/robots anyhow, and the educational system is so screwed up that we're not producing enough home talent to fill the now more intellectually-based jobs that are out there (hence my having to resort to H1Bs and importing students from other countries BECAUSE there isn't anyone here to even fill the positions who are qualified).
And frankly, I think the major fault is the public education system that now doesn't make anyone actually learn anything but is more interested in getting them to pass standardized tests ("Don't teach grammar because they don't count it on the MCAS" but yet they can't write a legible email intro for a job and in the trash they go) coupled with parents that think little Johnny should get an A because a B makes him feel less intelligent than Suzy, even though he IS. That was enough of a rant for this morning.
Sebastian-thanks for pointing this out. this article doesn't really say anything about the middle class. by just looking at the median, the middle class could potentially have realized substantial increases in their income (maybe they did, maybe they didn't), but unless the rich realized gains as well, the median woudl stay the same. interesting.
Median household and median family are two measures frequently used. MHI can vary and is generally pushed up or down by economic presure. During the later part of 2000-2007, we had a significant birth expansion. People were feeling richer and family sizes increased.
If you want to use the change in MH population to debunk the data, you can. You just need to swing the the needle over to larger losses instead of small gains.
Marcus, I'm 70 years old and retired. And, I live off my investments (small commercial RE in So. Cal) Yes, I worked my ass off to get to this place. I'm 2nd generation of a family business and my son is the 3rd generation in the business. Never been on unemployment or welfare. And, born in Vienna, Austria. I love this country. Work hard and you get ahead. Thanks for asking!
At $110 a barrel of oil, I think its useful to check on the Fed's crystal ball. After all, its been forecasting oil prices for some time now. How'd they do? Some excerpts from the Fed minutes:
3/'05: One source of upward pressure on inflation had been the rise in energy prices, and it seemed reasonable to expect that these prices would level out or even decline mildly
Oil Price: $55
8/'06: Moreover, while energy prices had risen further in the intermeeting period, energy prices could well level out in coming quarters.
Oil Price: $70
3/'08: Even with a substantial easing at this meeting, most members saw overall inflation as likely to moderate in coming quarters, reflecting a projected leveling-out of energy and commodity prices
Well does anyone expect insight from the Old Grey Lady? The NYT's? Didn't think so.
Doesn't surprise me. When UAW worker average compensation was $141K to $151K and those jobs either move to the lower cost areas of the US or off-shore, median family income will go down.
Paying a UAW worker $150K was unsustainable. From the chart they were paid 50% too much, maybe more. Factor that into the NYTs 'median'.
Oh, and don't mention Greenspan bubblenomics that created an overheated stock market and wages during the 1990's. Whose inflation numbers are they using? The governments? LOL
Galbraith cited extreme, and growing, income inequality has one of the causes of the depression. The measure used by economists is the Gini coefficient.
The Chicago Tribune published an article on Nov 17, 2005, stating that median income in Illinois dropped from a high of $52,515 in 1999 to $45,606 in 2004. Adjusted for inflation, median income in 2004 was as low as it had been since 1989.
Paying a UAW worker $150K was unsustainable. From the chart they were paid 50% too much, maybe more. Factor that into the NYTs 'median'.
What people don't like to hear is that a job is only worth a certain amount of money. People are fond of diss-ing the rich, but why did american auto manufacturers get into the sorry state they right now?
ipodius: I actually went to the stats a while back to check all this out. It's actually not easy to find these done per earner from the Census bureau as most things are done for "households". But it is there, and yes, it did rise on a per earner basis. If the household size is the same, then the analygy holds. But if it isn't, it needs to be adjusted.
It's a bit more complecated yet. The other variable is workforce participation, which has dropped. This could completely offset any increase in wages per earner. Whether it's bad or not depends on why less people are participating: is it that they don't want to work, or can't find a decent job.
Actually all you have to do is look at what Gold has done since 2001
60K in 2008 is akin to around 25K in 2001.
My partner and I were discussing what we would like to possibly sell our business for in a few years. The first suggestion - let's define the price in Gold or Euros. If in Dollars we want to consider DXY in 2008 as a yardstick.
doom writes:
Idea? Very "UnAmerican" I must admit. But I think anyone running on this platform will win in a landslide.
It goes something like this. New tax rates:
First 100K of income to a family.....0 tax rate
From 100K to 200.....5%
from 200K to 500K....10%
And then we crank it up!
From 500K to 1 million.... 40%
From 1 mill to 2 mill..... 50%
From 2 mill to 5 mil..... 60%
From 5 mill to 10 mill.... 70%
Over 10 mill..... 90%
These 'plans' are intellectually dishonest. This world is becoming very moblie. What happens when the top brackets leave the US? Ah, the bottom brackets are left with your socialist debt bill. Why? Because you will ask for more entitlement programs while tax revenue declines. Why more entitlement programs? Because you are playing class warfare and voting yourself more money from other peoples pockets.
Second, the basic model of our economy is now unworkable. At the plankton level, the economic ecosystem has to start with an income stream from consumers--
I have to disagree with this. The "plankton level," isn't consumers buying stuff, it's people adding value by turning raw materials into stuff. Making stuff. The idea that we can be a nation of shopkeepers OR Wallmart greeters is false. Our economy can't exist for long on the basis that we'll borrow money from the Chineese to buy stuff from them and pay them back with the profits from selling that stuff to each other.
There are plenty of euphanisms to cover up the precise outcome, but it's simple.
Free trade reduces wage disparities between countries until transportation costs differences are all that's left, eventually. Takes time, because investment has a time horizon.
So, bottom line, free trade implemented rapidly means disruption and job loss is rapid.
The better strategy is free trade implemented slowly, with safeguards to prevent child labor and equalize environmental protection costs (towards the better level of protection).
This isn't political, just sensible.
So....rapid free trade like we had meant we had to have a "jobless recovery", etc., etc.
Don't have time to read the comments, but the one thing that strikes me about this is: Who needed the raise? When you're cash-out refinancing to pay for everything, you probably feel less motivated to go ask your boss for a raise.
If alternative sources of "income" are gone, and if there weren't/when there isn't a recession, then you'll probably see people demand higher wages.
Please. Perhaps you should go back to listening to Rush. Immigration is what keeps this country alive, and a big reason why the EU has not done so well...they don't allow it. The class that actually, you know, EMPLOYS people you want to stay. Patriotism is the last refuge of the clearly ignorant. And you want them to spend their money here too because, you know, it keeps people employed.
And now I've got to go and keep people employed....
To keep the government's hands off of my assets (e.g., 'As of today, in the interest of safety, given the stock market meltdown that we just had, all IRAs must be held in TIPS'), I just moved money from a tax-free to a taxable account.
Paying a UAW worker $150K was unsustainable. From the chart they were paid 50% too much, maybe more. Factor that into the NYTs 'median'.
MPinCO, not that auto workers aren't well compensated, but the article you linked is a hatchet job. The key word is "compensation", which includes all benefits (medical, retirement, etc). In the article they try to make a point by comparing this to the "salary" of a college professor, which does not include benefits.
To be clear, I'm not arguing that auto workers wages won't have to drop, but this sort of comparison and partial truth is designed to deceive.
MPinCO writes:
Well does anyone expect insight from the Old Grey Lady? The NYT's? Didn't think so.
Doesn't surprise me. When UAW worker average compensation was $141K to $151K and those jobs either move to the lower cost areas of the US or off-shore, median family income will go down.
MPinCO, management compensation that is 100 times base worker salary is also unsustainable. NOBODY is worth that much more than anybody else working in the same place of business. They just aren't. To the degree they are, the market is being controlled.
...why did american auto manufacturers get into the sorry state they right now?
Part of it was bad product, but considerable blame has to go to unfunded retiree liabilities and overoptimistic pension fund growth assumptions. When you build a corporate structure that way, you build one that must continually grow, otherwise the labor input into each car you sell is one guy on the line and four retirees. When economists say that free market prices tend toward marginal cost of production, they mean that some Japanese or Korean company will compete at the cost excluding the four unfunded retirees.
It is interesting the Proxy Voting Policies which connect Blackrock to conflicts of interest:
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Time for some back breaking taxes for the rich (those with annual incomes over $1M or assets over $10M). That should go a long way towards cutting national debt and chasing out the predators whose company the poor are better off without.
marcus please. i know neither of us are trolls, but should one chose to emmigrate from the US then that is their god given right. doesn't make them traitors.
re: Free Trade
shocker isn't that our country is based on free trade among our united states? unified currencies? harmonized regulations?
all these things that are good for the goose are good for the gander, no?
does mean what i think it means?
i mean, it worked for us once and united us (disparate languages, cultures, incomes, economies, currencies) and brought us to this point (for better or worse)
Hugo Chavez already tried this, with disastrous results.
Venezuela is an economic basket case. Oil production is in freefall. There is little commercial construction. When I was in Caracas a couple of years ago the official exchange rate was something like 2200 Bolivar/Dollar, the black market rate was about 5000. Monied and professional people are fleeing the country at an alarming rate.
An economic accomodation with the rich is always necessary. This is not to say that things in the US have definitely been skewed in favor of the wealthy, but without some moderation the results can be disastrous.
It would be interesting to know what measure of inflation they used to normalize to 2007 dollars. The ~3% published number, or the ~7% shadow number (counting food and energy).
I suspect real wages have actually dropped more significantly than the published number implies.
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Samsonite, you seem to have some bizarre notion of "middle class" to go along with your shaky grasp of "median".
People with incomes around the middle of the distribution of incomes are middle class. If the median wage is stagnant or declining then by definition the wages of the middle class aren't going up.
@anotherrajh - that misleading $150K figure (and others like it) was manufactured to include - depreciation on the factory building and machinery, maintenance and upkeep of same, utilities for running the factory, etc. etc. Believe me, no UAW rank and file member ever earned $150K, not even close. Not legally, anyway.
AP--you're right about my definition of "middle class," as i really have no idea how it's defined. however, you're wrong about my understanding of the median. if the median wage is stagnant, all that means is the middle of the income distribution hasn't changed. From this you can imply that the highest and lowest of the wage earners are making the same thing. The mean would be much more informative in this case.
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60,500? That should get you a 5bdr, 4bathroom home in a nice school district-- with a three car garage for the H2, the Lexus, and the Porsche (for the weekends).
Samsonite, you've still got "median" wrong. You're taking the average of the highest and lowest values. This is called the midpoint of the range. The median is something else. You line up all of the values in order and pick the one in the middle. It most explicitly does not care how much the people at the top or bottom make. It measures only what people in the middle make.
No. I encourage capital gains. It's just that 50 million in capital gains and paying the same tax rate as someone making 100K capital gains is a bit unfair.
Hey, I KNOW this is not perfect. I'm almost embarrased to put out this idea. BUT, i think it will be overwhelmingly better for the majority of the country at the expense of a few. And those few will still be alright.
Now, we have those few, rich beyond belief and the majority of the country in shambles.
I'm pretty fed up with this "blame the workers" stuff. No job is guaranteed, and there will always be displacements, but these self-rightous "it's their own fault they're suffering" arguments are nauseating!
Along with rights come responsibilities. Rights without responsibilities leads to tyranny.
Who else will be taxed? Should we do away with taxes completely?
The most admirable American I ever encountered was an immigrant Korean who owned 5 or 6 Dry cleaners in the DC area. Why? His goal was to become the highest taxed person in his new country, on the logic that the wealthy should support the system that allowed them to prosper. That man is an AMERICAN.
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Part of being a free country is allowing people to leave. Letting people do whatever they want, as long as they remain inside, is only the freedom of a prison.
Government workers at the federal, state, and local levels have, for most part, seen steady pay increases and a slowly rising standard of living. Those who pay government salaries haven't.
Meanwhile, it's become ever more costly to do business in America, laregly because of ever increasing regulations. Those who impose the regulations - the class of workers who make up more than 20% of the economy - don't bear the costs and, in fact, receive pay increases year after year and then retire with nice pensions.
Let these people leave like their ancestors came: with nothing but the shoes on their feet. You don't get to take the capital with you. Want to leave America? Good. Get. The. Fuck. Out. Traitors.
Apartheid was slavery? It was mean. It was immoral. It was not slavery.
Yeah, South Africans are living longer, healthier lives now that the capitalists are gone:
"...The country's unofficial unemployment rate hovers at around 40 percent...South Africa's crime rate is one of the highest in the world, and there's the HIV/AIDS pandemic dealing a severe blow to the population, as well as to the economy..."
Venezuela will be better off for the loss of their ruling class. Ask a peasant.
That's just the point that was made, wasn't it? They'll ALL be peasants. So unless you're ready to give up everything you have and live like one Marcus, perhaps you might want to rethink that. And you know what's going to happen in Venezuela? There's going to be another coup/rigged election and they'll displace the current rich with another group that will become the rich. And on it goes. Ask the peasants the history of South American government..or even Russian ones. The same system gets put into place over and over again. And the funny thing is the class structures don't change. Just the people calling themselves one or the other.
How about a 50% tax on the capital gains when selling real estate.
That would just push real estate into being the property of corporations so that it is technically never sold. That is why businesses in California don't pay property taxes; selling the corporation that owns a piece of property doesn't trigger a reassessment.
krugman posted a graph in the last week from a professor that showed two lines, one income growth under repubs bucket by wealth and the other under democrats. The democrat line was roughly horizontal (equitable), the republican line was lower, but 45 degrees up (rich got richer, middle to poor got poorer).
What it didn't show was the all important "tail" at the top where the real self-enrichment has taken off (not just in the USA - in russia, in china, in the gulf states).
BTW: my original comment wasn't about taxation, per se. It was about leaving our "homeland" because you feel you will be treated more "fairly" elsewhere. Like I said: Good riddance. And good luck in your new land.
I'll say this again...I don't mind paying taxes at all and, in fact, I think there should be a HUGE tax on estates (I'm with Buffet) to keep from establishing a class of monied elite that lives off past generations and contributes nothing.
I live in the first world and want first world services and I'll pay for that. What I object paying for is idiotic government policies and crap projects. If it meant that I would pay even 200 more a year in taxes to fund SS, I'd gladly pay it. If it meant paying more for guaranteed medical care that was the best available in the developed world, I'd gladly pay for that.
This crap of "let the government stay away from my money" is just that...crap. Go live on an island or somewhere in the third world where you can have unstable governments that don't tax. And then get your throat slit in the night while people take everything you have because the only pay the police can have is corrupt money. Some of you need to travel more so you can see what it's actually like in the world.
Sometimes, prices are out of whack, e.g., the S&P 500 today, given its P/E of 20.
Speculating on the fall of the stock market is 'evil'? Nah, it just speeds up the price adjustment process. That is the 'societal good' done by speculators.
Same with real estate speculators. They just speed up the price adjustment process, up or down.
Just don't allow socialized losses for speculators, or anyone.
Like I said: Good riddance. And good luck in your new land.
Yes and real Americans are glad that other governments said that...like Germany in the 30's and 40's when all their brains came here to escape such ultra-nationlist types. It's why we got the bomb first, and a huge impact on our leg up in competition in sciences.
What an idiotic sentiment to have! This eat the rich stuff is really tiresome. I don't know about you, but I'm hoping to have money when I retire and if the country is populated
with people who feel like you, I'll gladly take my money and spend it elsewhere, helping those who are more enlightened out.
Marcus said: Rush would be the first traitor to leave.
Easy, easy with the Buzz words! Traitor? Why, because you don't agree with him? Marcus, when you go "over the top" with the name calling, you lose all your credibility.
"And at a profit margin that would make Bill Gates blush. That's the problem, ipodius: the "prevailing rate" of wages hasn't changed, while the profit margins and compensation for the topmost level has soared. Free-market ideology does not support a no-bid scenario. It smacks of Fascism." Marcus Aurelius | 04.09.08 - 10:44 am
Hey, while we were all p1ssing back and forth about all of this, the stock market was actually going down on bad news. What the hell is that about??? lol
I don't live under some altruistic delusion that being rich equates to bad. I thought it was what one aspired to in this country. If you aspire to be poor, then that's fine too. Just don't aspire to be poor and then want to take things away from the rich because being poor wasn't as good as you thought it would be.
"That is why businesses in California don't pay property taxes; selling the corporation that owns a piece of property doesn't trigger a reassessment."
Well, no. Not exactly. This is a long-running misunderstanding with California property tax law. If I get a chance, maybe I'll pull out the old Revenue and Taxation code and explain.
Greenspan working at a hedge fund and then this guy; is it any wonder we have collusion and corruption destroying Rome at an accelerated pace! If you think it's crazy now, just wait as Nero goes insane with abusive power in his remaining 9 months!
Re: he best way to describe Peter Fisher is that he's one of those behind-the-scenes guys who keep Wall Street from coming apart at the seams--which it almost does every few years. As the recently departed undersecretary for domestic finance at the Treasury, believe you me, Peter Fisher is known to every fiscal power broker from D.C. to Delhi. He's an unusual guy. For one, he gets visibly excited talking about financial policy. And for another, he's been pretty good at implementing it. He's also obsessed with the business of risk.
Now Fisher has hung up his government scepter to join bond house BlackRock. (Fisher was on everyone's short list to head the New York Fed or lead the New York Stock Exchange.) It's a cashing-in of chips, partly.
A-: '...Maybe on one of the many fat, no-bid govt contracts...'
Strictly private sector. Developing, manufacturing, and marketing medical devices.
My last turn at the government trough was as a Naval Officer over '85-'90. Seeing how politics could derail rational financial and economic decisions -- even when far-removed, stationed on seagoing vessels -- permanently cured me of ever working with the government.
Samsonite writes:
"Sebastian-thanks for pointing this out. this article doesn't really say anything about the middle class. by just looking at the median, the middle class could potentially have realized substantial increases in their income (maybe they did, maybe they didn't), but unless the rich realized gains as well, the median woudl stay the same. interesting."
I thought the median was expressed as the income level where half of the households made more and half made less. In that scenario the top earners could have seen signifigant gains without any increase in the median.
Consider an economy with 5 households; 2 on the bottom, 2 on the top and 1 in the middle.
The bottom 2 make 20K the middle one makes 50K and the top 2 make 100K. In that case the median income would be 50K since exactly half the households make more and half make less.
Fast forward to the end of an expansion. The bottom 2 make 20K the middle one makes 50K still (no gain) and the top 2 make 150K. The median is still 50K since half make more and half make less than that figure. So incredible gains at the top are not reflected in the median incomes, although the mean would rise.
The U.S. economy has performed quite well during the five years of the Iraq war. CNBC's Larry Kudlowa Friend of the Blogruns a few of the numbers:
Real GDP has increased by 16 percent, or 3 percent annually. The unemployment rate has hovered below a historically low 5 percent for quite some time. Nearly 10 million jobs have been created. Household net worth has increased by $20 trillion. Industrial production has expanded by 13.5 percent. Even home prices, despite the current correction, have increased by 20 percent. Global GDP has averaged nearly 5 percent annually. The capitalization of the world's stock markets increased 159 percent, or $35 trillion. Meanwhile, new emerging-market economies saw their stock market index collectively rise by 223 percent.
It wasn't an expansion, it was a Ponzi Scheme. Institutional Lenders enabled it, and real estate was the "investment" vehicle that they led us to drive off a cliff. I was a mortgage broker for over 10 years. Here is my view of the situation.
The mortgage banking industry (key concept, those that created the programs ie; Lenders, not those that sold the programs available, ie; Brokers created this mess by changing two simple concepts:
1) Property Appreciation;
Old definition - gain in the salable value of real estate due to significant structural improvements in the property (not new paint and granite countertops) or improvement in the local economy in which higher incomes create sustainable new demand.
New definition - some other sucker will bid more, so we can take anyone's guess...
2) Real Estate Investor;
Old definition - an individual with more than 2 years proven experience in managing rental property at a profit, qualifying full doc using 75% of market rent to offset the investor property mortgage, OR an individual with less than 2 years experience in managing rental property at a profit, with the ability to qualify full doc using 75% of market rent to offset the investor property mortgage for the investment property payment and all other debt at no more than a 45% back end ratio.
New definition - the most recent idiot to bid on this property, surely another idiot will bid more and buy it soon, who cares about profitability?
When we allowed unqualified morons to get into bidding wars for property on which there was no chance of them being able to carry the debt, we guaranteed this mess. Now we have huge numbers of properties that are failed "investments" that forced up pricing across the board. Asset deflation is guaranteed back down to the level of median income being able to qualify for a median home. Any steps taken to change this are pushing the proverbial boulder uphill...
Your rational comments and responses are welcome at PSGute@aol.com
Ipodius @ 12:20
You and I probably don't see eye to eye on politics, but this comment hit the nail RIGHT on the head.
IIRC Bill Gates's dad said something similar about 2 years ago, adding that Bill wouldn't be where he is if he had been born in west Africa.
If someone drilled down into the income data and correlated that with what line of work people were in, I'm guessing you would find that people who made commission-driven income in real estate and financial services etc. showed healthy gains in recent years--gains that came to a screeching halt in 2007.
Those of us not in a position to make money from the bubble in RE, lending, borrowing etc. had flat or declining incomes in real terms. That would describe me. I didn't increase spending when the market value of my home soared, and I'm not going to decrease it (below its already low level) now that my home's market value is headed down.
But when you subtract the phony bubble income, and the phony purchasing power from inflated home equity that some people chose to spend, you get a pretty big hit on consumer spending.
Venezuela will be better off for the loss of their ruling class. Ask a peasant.
Marcus A., DownSouth, and MPinCO -
iPodius at 12:14 pretty much has it right.
Some observations on the Venezuelan 'ruling class'- in fact there's none, although in Chavez's pseudo-socialist view, it includes anyone who has two dimes to rub together and doesn't support the current regime.
Now, the country's educated are fleeing. Not the "ruling class", as Marcus suggested. The "Bolivarian Revolution" has spawned its own 'ruling class' of sycophantic hangers-on who profess the ideology of the regime so the can leach off the endemic corruption. Locals call the the "Boli-bourgeosie." They don't rule, they just drive Audis and Hummers in return for wearing red and swearing fealty.
The country will not "be better off" for the departure of those who are actually leaving - since those "aristocrats" who are leaving are predominantly people who don't give a damn about politics but who want to put their education to use in a liberalized economy. Which is increasingly difficult when the government is nationalizing everything from energy production to cement-making. (And then mismanaging it into the ground.)
The government is presently importing physicians from Cuba (that Mecca of medical science) because the brain drain is so severe. Of course, the importing only serves to reinforce the underlying phenomenon.
Now, the peasants rising up are generally angry about crime (Caracas was murder capital of the world when I was last there) and, surprise, inflation, caused by rampant government spending, and shortages, caused by government prices caps. This was widely viewed as having caused the Chavez administration to lose its first election a few months back.
In short, Venezuela is not your textbook example of redistributive fairness and economic justice.
By the way - where the heck is Jas Jain in this string? This kind of discussion usually draws one good vitriolic post making excessive use of the word "dopes". Called it in sick today?
Sorry for the long post, but some folks were off the reservation.
quoting Malaclypse:
I was unaware that, 5 years ago, the middle class typically worked in jobs not requiring documentation... Malaclypse | 04.09.08 - 10:58 am |
Then let me take this oppourtunity to explain to you how a dynamic economic model works: If person 'A' is suppling a service for $20/hour, in this case a blue colar job, then person 'B', in this case an illegal alien, starts providing the same service for $8/hour, then person 'A' will be forced to lower his hourly rate to compete for work with person 'B'.
As a consequence of this economic dynamic I can hire English speaking, American citizen, skilled and unskilled laborers today for far less (adjusted for infalation) than I could ten years ago. The great influx of illegal aliens willing to work for poverty wages has dragged down the wages of the American middle class.
I've enjoyed watching the toadies of the rich prostrate themselves. The lickspittles fawn for the favor of their masters, who laugh them to scorn when they notice them at all, like ugly and annoying little dogs who conveniently catch a mouse now and then.
First, the idea that 90%+ marginal rates will turn America into Venezuela would have come as a surprise to Eisenhower, since he did just fine with them.
The rich are not going to "flee" the world's largest economy, nor forswear the income they earn here--which is precisely the income that would be taxed.
If Paris Hilton or Peter Peterson think they can do as well as foreigners in Shanghai, let them.
Are these numbers before or after taxes? If they are before taxes, then the median household was likely better off in recent years because of slightly lower tax rates. For a graph of tax rates at various income levels, see Mankiw's blog (URL below), which shows that the median (and lower incomes) had tax rates about 2 percentage points lower in 2007 than they did in 2001.
OK. I admit I stopped reading the luxury-priced tabloid about 10 years ago so I'm not about to register for it online. And I've never before commented at CR, but it seems to me that someone ought to have fact checked Leonhardt's claim. "Median American family" income of $61K in 2007? Inflation-adjusted or not, that stat is jacked-up on its face.
I'm looking at ACS 2007, YE 2006 HOUSEHOLD median income now. HINC-01--Part 1
$48.2K
Does Leonhardt explain somewhere in the article what part of wage and salary gain of $12.8K, or +26%, is attributable to inflation?
hey Mr. Kudlow
"Real GDP has increased by 16 percent, or 3 percent annually. The unemployment rate has hovered below a historically low 5 percent for quite some time. Nearly 10 million jobs have been created. Household net worth has increased by $20 trillion. Industrial production has expanded by 13.5 percent. Even home prices, despite the current correction, have increased by 20 percent."
well, i dont want to trash your dreams but hasnot USD imloded against EUR during the past few years? and wasnt it something like over 40-50%? from 0.8 to 1,6 ouch
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The recession never did end. Now comes the Depression. What is going to prevent this? A $600 vote-buying check? War with Iran? Nope - nothing will stop this outcome.
"I don't live under some altruistic delusion that being rich equates to bad. I thought it was what one aspired to in this country. If you aspire to be poor, then that's fine too. Just don't aspire to be poor and then want to take things away from the rich because being poor wasn't as good as you thought it would be."
First of all, no one aspires to be poor. Anyone that would say such a thing has never been poor.
Secondly, the main objections that I see here in the comments is to rich people that have benefitted greatly from making their wealth in the US suddenly saying that they want to take their ball and go elsewhere because the US population, which helped fund that accumulation of wealth, says that it's time to pony up some more dough into the community chest due to hard times. It used to be considered unpatriotic to complain about paying your taxes or skimp on your obligations as a citizen. Yet, now we have millions of citizens that see no problem with doing so, and excoriate anyone that dare suggest otherwise. It's a perfect illustration into what 30 years of extreme Republican ideology has done to our country.
Do you think we'll see mass emigration from the US?? China, the middle east, India and Brazil are booming, while things in the US look horrible. Anybody here planning on moving to one of these economic paradises?
I love this idea that somehow the Dems are the party of the "people". You've not been paying attention to where they get their money. They are now more under the thumb of corporate American than the Repubs are.
And for the record, let's talk about career deflation. We've moved skilled people out of good paying jobs down to entry level ones, primarily workers 40 and up. Younger folks need to pay attention to this. It means that your changes for making good money are going to dry up once you get into your 40s. Might want to put a little urgency into building wealth at a younger age. You may not get much of a chance.
It is called a neoliberal economy. What we have subjected third world countries to is now being practiced in the American economy as well.
It is the same story all over the world now, higher GDP while the middle, working and farming classes see their income decline while the top 1% are making money hand over fist. The are poor being increasingly marginalized to slums while the multi nationals privatize resources, farmland, fisheries and public infrastructure.
We need to renounce all these trade agreements and withdraw from the WTO.
Protectionism is the new word for patriotism, as the multi nationals gut our sovereignty with the super sovereignty of the WTO rules, ruled on by an extra national court and enforced by a foreign banking concern, the Bank of International Settlements.
The shysters hijacked the economy at the expense of the middle class.
Truth is many parts of the country never recovered from the Reagan Recession.
GSCO playin 3 card monte
And it's not just stagnant income-- people are assuming more (and more serious) financial risks of various kinds without any compensation.
While waiting for Bill Gates and Warren Buffet to step onto my elevator (yeah, old joke), I can't help but think:
"That depends on what the meaning of bottom is."
It apparently has been defined up to the 40th-50th percentile or thereabouts. Can someone do the math?
I love the smell of class warfare in the morning.
Also in the Times, an article about FHA's problems:
“All we do is give them the down payment money to get them over that obstacle so they can start enjoying the benefits of homeownership,” said Ann Ashburn, president of AmeriDream of Gaithersburg, Md.
Is one of those benefits financial stress and foreclosure?
E
Why is this a surprise to anyone? It's all about the global labor arbitrage. The big corporations won, and the big investors; everyone else lost.
And now, we're running out of money to buy their goodies. Horrors!
Closing the income gap is the key to future prosperity. Where do we get the seed money for future growth? From those who have it. Like it or not, that's where the money went. That's where the money is.
For my family, wages have been stagnant for the last 8 years. Prices rose on gas and groceries. Interest on savings never kept up with inflation.
Yes our house tripled in value but we had no desire to move. We didn't take out any equity from the house because we still would have to pay that back, so it made no sense to do that.
Amazing...this is because consumers had two jobs...their primary job and refinancing their home or using lines of credit as their second job. The second job probably paid more.
And I still see comments on different boards that put the blame on Clinton or the Dems in Congress because they have been in control for one year.
ironic, in the sense that prior to 2001, i had never heard of billion dollar pay-outs to hedge fund managers or govt bond traders making 4mm a year. the inflated money supply from 2001-on clearly and only found its way to the wealthy, the banking community, and other finance related entities. and this all came at the expense of the dollar, which has virtually destroyed the balance sheets of our middle class. the dollar is the problem. there are too many in the global mktplace. way too many..
And John Paulson took home $1 billion last year. The divison between rich and poor has never been greater--or more poignant.
This is an interesting discussion. I noticed that the two quotes reference the median income but not the mean. Even if this boom had been more substantial, the median income wouldn't be affected by an increase in the middle class salary. The only way the median would be affected is if the uber rich realized greater income, thus skewing the income distribution.
It seems that this situation will lead to two things:
A strong and expanding middle class is the only true gauge of a democracy. These figures are of no suprise seeing that democracy was and is very low on the Bush admin. to do list.
You know, the elite of the Roman Empire in its latter days didn't institute bread and circuses just to be nice. They did it because the plebes would have burned their palaces to the ground otherwise.
We have the circuses, but there must be bread as well.
Good audio link from Jesse Cafe American on our pseudo economy about 40 minutes long
NPR Media Player
Samsonite,
If I am understanding your argument it is demonstrably false - first, it was the uber rich that made out well in the expansion that just ended and second, in previous expansions the median income rose, to wit: But weve never had an expansion in which the middle of income distribution had no wage growth.
@Samsonite - think you're confusing mean and median. Obviously the median would be affected by an increase in the middle class's incomes, whereas the mean would be distorted by increased earnings in the upper tiers.
Anyone who viewed Prof. Warren's "Coming Collapse of the Middle Class" linked here the other night, isn't surprised.
YouTube - The Coming Collapse of the Middle Class
Be leery of income statistics that are 'per household'. Household is an elastic and changing yardstick. Average household size has shrunk significantly in recent years. If the reporter wanted to be honest, he'd report on per capita income- that has been rising, both on average and at the median.
We have the circuses, but there must be bread as well.
FiveAcres
FiveAcres, is the circus you refer to the election process? Frank Zappa said once that politics was the entertainment arm of business. I never really went for his music, but his observations always seemed on the mark.
Samsonite:
I think you have it backwards. If Bill Gate"s and Warren Buffet's income quintupled, it wouldn't affect the median since they are already in the top half. It would, of course, affect the mean, which is the arithmatic average.
Bob_in_MA,
I was actually thinking more of the endless attention paid to troubled celebrities, but the Presidential election process here in the US qualifies as well.
The Circus is free or cheap entertainment - TV/internet. Entertainment isn't near as important as affordable food. Remember the days when you couldn't buy food with a credit card?
The hoi polloi vs. the hoiy-toity. Who ya' got?
@Common Sense - surely you're not implying that to make W's legacy look better we should cram back in to tenements, at 12-15 per? Household size dropped well before the current "recovery."
Suecris--isn't the median the number that is in the middle? Assume that your range of incomes is 1-100, If the majority of your population sees an increase in their income, this doesn't necessarily mean that the median will increase. if your top wage earner is still making 100, the median won't change.
common sense writes:
Be leery of income statistics that are 'per household'.
That seems a fair point. But even by that measure, haven't the gains of the last 30 years been paltry compared to the 30 previous ones?
Average household size has shrunk significantly in recent years. If the reporter wanted to be honest, he'd report on per capita income- that has been rising, both on average and at the median.
I actually went to the stats a while back to check all this out. It's actually not easy to find these done per earner from the Census bureau as most things are done for "households". But it is there, and yes, it did rise on a per earner basis. If the household size is the same, then the analygy holds. But if it isn't, it needs to be adjusted.
Having said that, I have no doubt that wages have suffered from the WalMart effect where higher-paying jobs have fled and the replacement is lower-paying ones.
ZODIACAL CONSIDERATIONS FOR TODAY
ARIES (March 21-April 19): You are learning new information. Business transactions are conducted. You're paying attention to details, but may often forget why you're doing it, or neglect the moral aspects of your activity.
Mr Mortgage writes:
"Amazing...this is because consumers had two jobs...their primary job and refinancing their home or using lines of credit as their second job. The second job probably paid more."
I think refinancing their home was many people's primary job. And many of those people "owned" several houses through loose lending.
My father always told me to avoid loose women with open sores. Maybe more fathers should have told their kids to avoid loose lending with open ARMs.
The driver of the economic boom was the additional debt that was taken by the household. Mortgage, credit cards, etc.
@Samsonite - I'm trying to figure out what you mean - seems to me that if the majority of incomes rise, the median MUST rise, unless somehow you arrange your majority carefully around a stationary mid-point.
Update from the golden state:
In January, with the unemployment rate nearing 6%, nearly 12.6 million calls were placed to the state's toll-free phone number to apply for unemployment insurance benefits. But more than three-fifths never got through.
Frank Hartzell knows the problem all too well. A laid-off Mendocino County social services worker, he tried calling morning and afternoon, 45 times in December. The computer hung up every time until No. 46, and he was able to apply.
In January it happened again. He tried 39 more times before he reached the Employment Development Department to find out why his checks had stopped.
"We understand that it's frustrating, but EDD has taken steps to reduce the backlog," a spokeswoman for Gov. Arnold Schwarzenegger said.
Jobless benefit phones jammed - Los Angeles Times
Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of al traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.
Jens O. Parsson Dying of Money.
In my view, it seems that most of the benefits of the boom went to the big corporations, money managers and fakes like Mr Home Depot Nardelli who gets $200+ mil for leaving. Like usual the average working stiff is stiffed again.
In the midst of going to work every day, sometimes I really wonder about our system and these so called "smart people" who run it. What a mess!
More on WaMU fallout
Media Missed Details of WaMu Story | Banks | Financial Articles & Investing News | TheStreet.com
Aries (March 21-April 19): Everyone around you hates you. Beware the ides of march. Don't do something stupid like the last time; try to control your temper, and perhaps things will turn out better than you expect them to. After getting hit by comet and surviving as a vegetable, you will develop amnesia and sleep with your father, only to find he actually quite liked it.
common sense: But the largest cost of living incidence is per household, not per capita. My monthly rent is the single largest line item and exceeds food, fuel, and other per-person expenses combined.
Admittedly, I have a rather no-frills lifestyle.
From the NY Times...
Looming Deficit Impedes Federal Housing Agency
"...the F.H.A., the government agency that insures home loans for many first-time, minority and lower-income buyers, is grappling with financial woes of its own.
Housing officials say the agency will face a deficit for the first time in its 74-year history, starting in the fiscal year that begins in October. And they blame a rapidly growing and increasingly troubled sector of the F.H.A.s mortgage portfolio, known as the seller-financed down payment loan program, which has suffered from high delinquency and foreclosure rates in recent years."
- NY Times 09fha.html
Who could have knew???
Per earner incomes have risen consistently, and household size has declined, equally consistently. The whole 'problem' is an artifact of the continuing dissolution of the traditional family unit. It reflects peoples' preferences regarding how they want to live, and the fact that they now have enough income to be able to afford their own place.
Journalists at the NYT and academics spend months poring through statistics to find the means to manufacture scare stories like this, particularly in election years.
If so-called 'educated' Americans weren't so thoroughly ignorant about their own economy this sort of stuff would meet with the derision it deserves.
Suecris-i may be confused by what median means, but i was under the impression that the median was the number thats in the middle of a distribution. So from my previous post, if the majority of incomes rise, it would be the mean that would rise, but not necessarily the median. The median income might rise, but it isn't guaranteed unless the top earners income rises. From the previous example, the median wouldn't rise unless the top earners income went above 100 OR if the lowest earners income went below 1. does that make any more sense? maybe someone else will see the post and comment...
In my view, it seems that most of the benefits of the boom went to the big corporations, money managers and fakes
Well, not exactly. How about all those construction workers making money, day laborers, furniture places, lumber suppliers, etc etc. Same for the tech boom. I put a lot of money back into the system by spending when things were good, as most people do. That produces jobs too. But the argument is a smokescreen and class sress that pits people against each other instead of looking at the real issue.
I wrote a paper once about the economic effect of WalMart and other big box stores and it was tangible and real. People see lower prices as a good thing, but they aren't always. The real issue here is the kinds of jobs we're making and the people who will fill them. And, frankly, we're our own worst enemy. It's why, after doing the study, I never stepped foot in a Walmart again. And why I try to always support local businesses.
This is a bigger issue than one administration, btw, and is national in scope.
Aquarius January 20 - February 18: The stars ask you to trust them on this: Gather your pitch forks and shovels.
Now you see why Blackrock is managing Bear Level 2 unobservable assets @ Treasury/Fed:
Merrill Lynch is one of the world's leading wealth management, capital markets and advisory companies, with offices in 40 countries and territories and total client assets of almost $2 trillion. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. Merrill Lynch owns approximately half of BlackRock, one of the world's largest publicly traded investment management companies, with more than $1 trillion in assets under management.
Re: The Wall Streeters seem to assume that the next step will be the creation of something like the Resolution Trust Corporation..... Or, as David Rosenberg of Merrill Lynch told the firms clients last week, . . . the outright purchase (by government agencies) of illiquid mortgage-backed securities is probably required, and could employ government-backed fiscal action . . . The Federal Reserve itself could buy some of those securities, but the Fed alone cannot unclog the congestion in the capital markets, in our opinion.
Re: Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at ``the very edge'' of its legal authority.
From Nakedcapitalism (TallIndian said...): The NY FED proclaims
The portfolio consists of collateralized mortgage obligations (CMOs), the majority of which are obligations of government-sponsored entities (GSEs), such as the Federal Home Loan Mortgage Corporation (Freddie Mac), as well as asset-backed securities, adjustable-rate mortgages, commercial mortgage-backed securities, non-GSE CMOs, collateralized bond obligations, and various other loan obligations.
All valued by BSC!
And the NY FED actually states that even revealing the CUSIPS of these instruments poses a 'danger to markets'!!!!!!
I have no doubt that wages have suffered from the WalMart effect where higher-paying jobs have fled and the replacement is lower-paying ones.
Ah, supply-and-demand is now called the WalMart Effect...
ipodius | 04.09.08 - 10:25 am
So, what, exactly is "the real issue"?
Samsonite, you have mean and median reversed. Your reasoning is, I believe, correct, but your terms are backwards.
OT
Goldman Sachs Group Inc the world's biggest securities firm, on Wednesday said its exposure to illiquid, hard-to-value "level 3" assets rose to comprise a bigger part of the firm's balance sheet during the first quarter.
During one of the worst market environments in decades, when trading in many kinds of debt broke down for lack of buyers, Goldman's level 3 assets rose to $82.3 billion, or 13 percent of total assets, in the quarter ended Feb. 29.
That's up from $54.7 billion, or 10 percent of total assets, at the end of November, Goldman disclosed in its quarterly filing to the Securities and Exchange Commission. The increase was fueled largely by commercial mortgage debt as well as loans and securities backed by residential property.
Goldman's hard-to-value assets rose in 1st-qtr
| Reuters
Uh-Oh
After taking a couple weeks away from civilization, I can see that the economy looks as gloomy as when I left.
Statistics like those in the NYT just reinforce what we already know: most of us have just been treading water.
The really nasty part is how much less $60,500 in 2007 is compared to $61,000 in 2001.
As Warren Buffett said : George Bush has allowed the sharks to sell of the farm and are now richer then anytime since the Victoria Age.
All at the expense of the American middle class.
Crazy thing is Americans voted for Bush twice and millions will still vote for McCain simply because he wears the republican logo.
Further evidence of the approaching critical mass. Bring on the creative destruction.
Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee, wrote a letter to New York Fed Governor Timothy Geithner to inquire about the selection of BlackRock Financial Management Inc. as the asset manager for the deal that allowed JPMorgan Chase & Co. to purchase Bear Stearns at bargain-basement price.
When bank managers feared investment bank Bear Stearns' collapse, the Fed put together the emergency deal to avoid a Wall Street-wide panic. Bear Stearns was hamstrung by heavy investments in shaky mortgage-backed securities.
"Only limited details are known about the Federal Reserve's understandings with BlackRock. It appears, however, that BlackRock is now directly responsible for managing a $30 billion portfolio on behalf of the American taxpayer," Waxman wrote.
Waxman said he wants to know how the Fed came to select BlackRock, which appears to have secured a long-term deal with the Fed without competition usually sought in a government bid. Waxman said he also wants to know more about what compensation BlackRock will receive in exchange for its work.
Geithner's "testimony before the Senate Banking Committee offered few specifics" about the deal, Waxman said.
Detailing a half-dozen specific questions about the deal, Waxman asked for a response by April 18.
Speculating wildly here...have most of the earning potential lost to the middle income groups gone to the upper income groups, or have they (in addition to going to the upper income groups in the US) due to globalizationgone to build the middle class in countries like India and China?
So, what, exactly is "the real issue"?
Marcus Aurelius
"The real issue here is the kinds of jobs we're making and the people who will fill them. And, frankly, we're our own worst enemy."
That was in the post. Was that not clear?
s@TH | 04.09.08 - 10:31 am
No-bid, crony contracts are now SOP.
Never trust the greedy to look out for your personal or national interests.
I the median went down because everyone got to write-off their $60k SUVs.
Although global competition is certainly a factor, it is obvious to me that the historic influx of unskilled illegal immigrants during the past 5+ years is the primary cause of the middle class woes during that period. But don't think, I am bitter, I have disporportionally benefited from the resulting depressed blue colar wages. I'm puzzled why this cause and effect is not obvious to others.
No-bid, crony contracts are now SOP.
That's sort of a simplistic way of looking at the greater concern of why median income isn't rising, isn't it? Even no-bed crony contract employ real people with real wages at prevailing rate.
In my view there are three reasons for stagnant wages (primarily): demise of the power of unions, automation and the loss of trade and skilled-labor type jobs, and dumbing down of the educational system when the vast number of newly-created jobs that are well-paying require higher congitive and educational requirements.
But I'm sure the class warfare stuff is more fun and requires less hard answers.
The mirage and folly of a FIRE based economy.
CR, this is the first time I completely disagree with both you and the times. Many many americans DID participate even if average wages didn't go up.
I have at least have a dozen examples of family and friends who have had houses and purchased nice cars over the last 8 years, but they started with nothing but a highschool education and good credit. How does that make any sense especially when I "missed out" because I didn't jump on the credit train. Sure they are all going to be giving some of that back now that the party is over, but I have to say that the last 8 years was GREAT for a whole lot of people. ESPECIALLY because they were able to enjoy it without higher income.
ipodius | 04.09.08 - 10:33 am
Sorry, it wasn't clear to me. I think that's not the cause. I think the cause is crony capitalism, lack of law enforcement, and greed.
I know a fellow with his own, personal 737. Yeah - he needs that. (he also leases it to the government over weekend periods for civvy flights to Iraq, at an inflated price. He also receives free maintenance for doing so).
The new patriotism in action. How admirable.
but the super rich got super richer!
trickle down!
In 20 years the middle will get their $500 back.
The world is flat, and so are wages. Unfortunately, prices aren't.
Among he great "technological" advancememts in labor management are the corporate flooding of American markets with foreign college graduates, and the reduction or elimination of health care benefits paid by these corporations and the transfer of education costs and medical "aftercare" costs to individual workers.
But weve never had an expansion in which the middle of income distribution had no wage growth.
I'm shocked, shocked!
ven no-bed crony contract employ real people with real wages at prevailing rate.
And at a profit margin that would make Bill Gates blush. That's the problem, ipodius: the "prevailing rate" of wages hasn't changed, while the profit margins and compensation for the topmost level has soared. Free-market ideology does not support a no-bid scenario. It smacks of Fascism.
just for clarification, the US is NOT a Democracy,...it is a Republic. more precisely, it is a constitutional republic,...which uses "democratic" methods to elect officials. And recent and upcoming elections are exposing that we don't even have a pure/direct democratic voting system, rather we have an electoral college system and super-delegates that usually are close to the direct popular vote but not entirely.
This is the concurrent Quintuple HIT the US middle class is feeling now and why this recession won't be brief or mild.
Nominal Wages negative for years
Loss of cash flow sources (borrowing)
Inflation on a tear
Increased debt service
Loss of purchasing power
There is no quick fix from congress or anywhere. Gonna be a massive grind, complicated by capital flight
I've never seen so many "CRY BABIES" on one blog. Maybe, if some of you folks actually had a day job, your income would be greater. Must be nice to be able to sit at a computer all day long and bitch & moan.
craig | 04.09.08 - 10:45 am
A supposedly Constitutional representative (democratic) Republic. In a pure Democracy, blood would run in the streets. The Constitutional Republic places limitations on the will of the majority.
tollroad | 04.09.08 - 10:48 am
So, what affords you the opportunity to post?
Personally, I'm self-employed, and quite comfortable. I highly recommend it.
Who needs a middle? Tsarist Russia didn't have a middle. The last French monarchy didn't have a middle.
Oh, wait,...
Say what you want about Walmart, bit it grew into a powerhouse by being better than anyone else, particularly in supply chain.
However I was in one last week and grabbed a cart. Front wheel was wonky so I grabbed another. It was a little iffy, too. During my travels through the store, I realized that it has a fifth wheel at the front which doesn't normally touch the ground. This had been located too close to the front wheels such that, when reversing the cart, one front wheel would turn 90 degrees and abut aforesaid fifth wheel, then drag. Often, when resuming forward motion, the other would do the same. So the cart was friggin' useless (unergonomic is far too weak a word here) unless pushed forward only. And every one of several hundred carts in the store presumably the same. You can call this a metaphor for something if you like, but I was just aghast that someone had accepted delivery of these things instead of saying "all defective examples of a design little improved in 80 years, moron, we're not paying." Sam Walton must be a-turnin-over, but then, he was a stickler for "buy American" from what I've read, so mert cart function is probably the least of his worries.
Amazing...this is because consumers had two jobs...their primary job and refinancing their home or using lines of credit as their second job. The second job probably paid more." I call that the "Molly and me and the HELOC makes three" income family.
At some level, the increased concentration of wealth represents the financial "industry" using greater leverage on the "real" economy of people who make actual, you know, stuff.
ipodius,
Why insist on a possibly false dichotomy? Wherefore the demise of the power of unions?
That is, your three reasons are well taken, but neither exhaustive nor mutually exclusive with others...
Samsonite said: "...So from my previous post, if the majority of incomes rise, it would be the mean that would rise, but not necessarily the median. The median income might rise, but it isn't guaranteed unless the top earners income rises. From the previous example, the median wouldn't rise unless the top earners income went above 100 OR if the lowest earners income went below 1...."
Correct.
"One type of average, found by arranging the values in order and then selecting the one in the middle. If the total number of values in the sample is even, then the median is the mean of the two middle numbers. The median is a useful number in cases where the distribution has very large extreme values which would otherwise skew the data."
median Definition
The mean would be skewed by the extremes, but not the median.
So, the NYT article would seem to suggest things didn't improve for anybody, and it wasn't just the middle-class who lost out.
Sebastia
CR/Tanta,
Have you read the letter? It fits well with your Volcker Shrine!
404 Not Found
This what our country will look like in two years - hobos riding Warren Buffet's railways
H-SPHERE
Word to all future Hobos: Always vent a can of beans before placing it into the fire. Otherwise, the can explodes, and you'll be bean-pocked (and marked as a hobo) for life.
JD writes:
"Although global competition is certainly a factor, it is obvious to me that the historic influx of unskilled illegal immigrants during the past 5+ years is the primary cause of the middle class woes during that period. But don't think, I am bitter, I have disporportionally benefited from the resulting depressed blue colar wages. I'm puzzled why this cause and effect is not obvious to others."
I was unaware that, 5 years ago, the middle class typically worked in jobs not requiring documentation. Perhaps blaming the people on the bottom for stagnation in the middle is not obvious because it isn't true?
Income data by quintile would be more informative.
I found a graph of income by quintile up through 2002. Interesting how the top 20% participate much more during booms.
Changes in Household Income by Quintiles « Visualizing Economics
Anyone have a better source of data?
I don't think "no-bid contracts" and "employ people at the prevailing rate" go together.
My favorite is this bit where, instead of imposing civil or criminal penalties (which would go to the treasury), the administration appoints a monitor/crony to supervise corporate compliance. John Ashcroft, your check for $52MM is at the front desk. Sadly, there's a part of me that would really like to see the mob rise up and do the right thing. Maybe I'm watching the wrong circus?
For those on China/decoupling watch, from Bloomberg: China's Car Sales Rose 24% in March on New Models
Damn, that's growth. Very roughly, sales rose there about 150,000 from a year ago, about the same, or more, than domestic sales here fell in a similar period. I think using the annual rate in unit terms, China may have just passed us. In $$ terms there's a big difference in unit price.
I was looking into car sales in other developing countries, I believe they're rising 20+% in Brazil, and in India growth has slowed a lot.
"I've never seen so many "CRY BABIES" on one blog."
You must have good eyes. I can only see myself.
Even here, middle-class lickspittles of the rich rush in to deny the undeniable. Income and wealth inequality are at their highest levels since 1929. The middle class is dying, the rich are enjoying a new Gilded Age--a fact as unassailable as the round earth and the blue sky.
This is why I think the forecast is gloomier than CR predicts.
First, the transformation of the media into a propaganda arm of the ruling class is complete. Unexamined talking points have made gullible McMansion dwellers into apologists for Paris Hilton and Peter Peterson. This is precisely why federal policy was long hostile to the amassing of large estates--to prevent the concentration of political power in a dangerously inflexible oligarchy.
Second, the basic model of our economy is now unworkable. At the plankton level, the economic ecosystem has to start with an income stream from consumers--which is why the fancy structured securities had to be based on subprime mortgages. Stripped of income from their productivity gains, consumers have been relying on borrowing--feeding leverage with leverage. Now that spigot has been turned off. There is nothing left at the bottom of the food chain.
Historically, the flattening of the wealth pyramid has tended to occur in very quick and ugly ways.
Just saying.
R. Cramdown,
Perfect example. Thanks.
P.S: From what I've seen of Ashcroft, we'll probably get a nice, color-coded warning system out of this "investment" in America.
Marcus, i don't buy for a second that we look at the top tier and extrapolate some sort of general thought process from it. I'm sure there are high-earner bad guys in the same proportion that there are low earners having babies so they can keep taking government handouts. They cancel each other out in the scheme of things and you never get anywhere looking at extremes only. The arguments using these examples are just absurd.
In my three points (though not the only ones) we have no advocate left for wage earners that can negotiate for them as a class (that was the union's job but they killed themselves by some strange notion that the guy on the line should make as much as the guy in the front office), a lot of those jobs are now done by machines/lasers/robots anyhow, and the educational system is so screwed up that we're not producing enough home talent to fill the now more intellectually-based jobs that are out there (hence my having to resort to H1Bs and importing students from other countries BECAUSE there isn't anyone here to even fill the positions who are qualified).
And frankly, I think the major fault is the public education system that now doesn't make anyone actually learn anything but is more interested in getting them to pass standardized tests ("Don't teach grammar because they don't count it on the MCAS" but yet they can't write a legible email intro for a job and in the trash they go) coupled with parents that think little Johnny should get an A because a B makes him feel less intelligent than Suzy, even though he IS. That was enough of a rant for this morning.
File:United States Income Distribution 1967-2003.svg - Wikipedia, the free encyclopedia
Better graph. Note that the 50th percentile did not participate in income gains
beer, anyone?
What Power Looks Like | Newsweek World | Newsweek.com
Fill 'er up matty.
Sebastian-thanks for pointing this out. this article doesn't really say anything about the middle class. by just looking at the median, the middle class could potentially have realized substantial increases in their income (maybe they did, maybe they didn't), but unless the rich realized gains as well, the median woudl stay the same. interesting.
matty:
Me, too. I need a little buzz while I watch the circus.
Got any bread? I've got more cheese than anyone knows what to do with.
Median household and median family are two measures frequently used. MHI can vary and is generally pushed up or down by economic presure. During the later part of 2000-2007, we had a significant birth expansion. People were feeling richer and family sizes increased.
If you want to use the change in MH population to debunk the data, you can. You just need to swing the the needle over to larger losses instead of small gains.
ipod, marcus: see my last posts on the thread below. Happy to share with those who have shared with me.
I like to place this article next to today's WSJ article:
Demand Soars for Firms That Fit Out Private Jets
Demand Soars for Firms That Fit Out Private Jets - WSJ.com
More tax cuts for the rich!
Marcus, I'm 70 years old and retired. And, I live off my investments (small commercial RE in So. Cal) Yes, I worked my ass off to get to this place. I'm 2nd generation of a family business and my son is the 3rd generation in the business. Never been on unemployment or welfare. And, born in Vienna, Austria. I love this country. Work hard and you get ahead. Thanks for asking!
At $110 a barrel of oil, I think its useful to check on the Fed's crystal ball. After all, its been forecasting oil prices for some time now. How'd they do? Some excerpts from the Fed minutes:
3/'05: One source of upward pressure on inflation had been the rise in energy prices, and it seemed reasonable to expect that these prices would level out or even decline mildly
Oil Price: $55
8/'06: Moreover, while energy prices had risen further in the intermeeting period, energy prices could well level out in coming quarters.
Oil Price: $70
3/'08: Even with a substantial easing at this meeting, most members saw overall inflation as likely to moderate in coming quarters, reflecting a projected leveling-out of energy and commodity prices
Oil Price: $110
Idea? Very "UnAmerican" I must admit. But I think anyone running on this platform will win in a landslide.
It goes something like this. New tax rates:
First 100K of income to a family.....0 tax rate
From 100K to 200.....5%
from 200K to 500K....10%
And then we crank it up!
From 500K to 1 million.... 40%
From 1 mill to 2 mill..... 50%
From 2 mill to 5 mil..... 60%
From 5 mill to 10 mill.... 70%
Over 10 mill..... 90%
I don't know exactly how it should be to collect the appropiate tax revenues. But along the lines with this concept in mind.
Put in provissions to stop all the loopholes. There are many, I'm sure.
This will be class warfare. But the masses will win. It's called democracy. Put it up for a vote and see what the MAJORITY will say.
I'll be OK making 500k a year and paying $35,000 in federal taxes. How about you?
Well does anyone expect insight from the Old Grey Lady? The NYT's? Didn't think so.
Doesn't surprise me. When UAW worker average compensation was $141K to $151K and those jobs either move to the lower cost areas of the US or off-shore, median family income will go down.
U of M Economics professor tackles tough question of UAW wages — Autoblog
Paying a UAW worker $150K was unsustainable. From the chart they were paid 50% too much, maybe more. Factor that into the NYTs 'median'.
Oh, and don't mention Greenspan bubblenomics that created an overheated stock market and wages during the 1990's. Whose inflation numbers are they using? The governments? LOL
Galbraith cited extreme, and growing, income inequality has one of the causes of the depression. The measure used by economists is the Gini coefficient.
The CIA has a helpful list by country.
Generally, developing countries have high scores, Germany, France and Scandinavia the lowest.
We, China, Brazil and Russia all have very high scores.
In trying to determine how bad a world slowdown will be, this is one factor I think is important.
The Chicago Tribune published an article on Nov 17, 2005, stating that median income in Illinois dropped from a high of $52,515 in 1999 to $45,606 in 2004. Adjusted for inflation, median income in 2004 was as low as it had been since 1989.
The article was quoting The State of Working Illinois 2005. So the boom certainly didn't help the lower and middle classes in Illinois.
BTW, what's the definition of middle class?
[url=http://www.itulip.com/forums/showpost.php?p=33156&postcount=11]Income growth by quintile: 1947-1979 and 1980-2007[/url]
Hmmm... looks right enough - anyone know why that didn't work?
Income growth by quintile: 1947-1979 and 1980-2007
David Pearson, nice summation.
Nope.
goldman is in trouble
Goldman Sachs Level 3 Assets Jump, Exceeding Rivals'
Paying a UAW worker $150K was unsustainable. From the chart they were paid 50% too much, maybe more. Factor that into the NYTs 'median'.
What people don't like to hear is that a job is only worth a certain amount of money. People are fond of diss-ing the rich, but why did american auto manufacturers get into the sorry state they right now?
"It's called democracy"
Unqualified democracy, where 51 percent of the people can legally do away with the rights of the remaining 49 percent, leads to tyranny."
Age of Turbulence p. 345
Alan Greenspa
I just cut and pasted the original post...worked fine. Interesting graph. It definitely re-affirms the point.
ipodius: I actually went to the stats a while back to check all this out. It's actually not easy to find these done per earner from the Census bureau as most things are done for "households". But it is there, and yes, it did rise on a per earner basis. If the household size is the same, then the analygy holds. But if it isn't, it needs to be adjusted.
It's a bit more complecated yet. The other variable is workforce participation, which has dropped. This could completely offset any increase in wages per earner. Whether it's bad or not depends on why less people are participating: is it that they don't want to work, or can't find a decent job.
see graph here: Labor force - Wikipedia, the free encyclopedia
Actually all you have to do is look at what Gold has done since 2001
60K in 2008 is akin to around 25K in 2001.
My partner and I were discussing what we would like to possibly sell our business for in a few years. The first suggestion - let's define the price in Gold or Euros. If in Dollars we want to consider DXY in 2008 as a yardstick.
doom writes:
Idea? Very "UnAmerican" I must admit. But I think anyone running on this platform will win in a landslide.
It goes something like this. New tax rates:
First 100K of income to a family.....0 tax rate
From 100K to 200.....5%
from 200K to 500K....10%
And then we crank it up!
From 500K to 1 million.... 40%
From 1 mill to 2 mill..... 50%
From 2 mill to 5 mil..... 60%
From 5 mill to 10 mill.... 70%
Over 10 mill..... 90%
These 'plans' are intellectually dishonest. This world is becoming very moblie. What happens when the top brackets leave the US? Ah, the bottom brackets are left with your socialist debt bill. Why? Because you will ask for more entitlement programs while tax revenue declines. Why more entitlement programs? Because you are playing class warfare and voting yourself more money from other peoples pockets.
Brilliant!
Good volume on S&P 500 futures purchases.
Breaks my heart that the schmucks/shysters/shylocks will have to throw more good money after bad today to keep their game going.
I don't usually post here but the level of mathematical illiteracy about what median means is frankly frightening.
To demonstrate explicitly what the terms mean I will give the following example
Suppose incomes for three people A,B and C are
A=1
B=1
C=10
The mean is (1+1+10)/3=6
the median is 1 (as that is in the middle of the distribution)
the mode is also 1 (as that is the most frequent occuring).
If after an economic expansion the incomes are now
A=1
B=3
C=20
the mean is (1+3+20)/3=12 (Double!)
the median is 3 (Triple!)
Suppose this expansion is followed by a Bush expansion
Then and the incomes are
A=1
B=1
C=40
The mean is now 42/3=18 (50% increase!)
the median however is back to 1
Thank you for your attention.
MPinCO | 04.09.08 - 11:26 am
What if they leave? Fuck the traitors. let them go. Good riddance.
Immigration tax: 95% of ALL holdings.
Ironically enough I can't do arthmitic the mean in the first example is 4 and in the second is 8 and the last is 14.
Oh, yeah: and good luck in Paraguay.
Second, the basic model of our economy is now unworkable. At the plankton level, the economic ecosystem has to start with an income stream from consumers--
I have to disagree with this. The "plankton level," isn't consumers buying stuff, it's people adding value by turning raw materials into stuff. Making stuff. The idea that we can be a nation of shopkeepers OR Wallmart greeters is false. Our economy can't exist for long on the basis that we'll borrow money from the Chineese to buy stuff from them and pay them back with the profits from selling that stuff to each other.
The relevant words here are "free trade".
There are plenty of euphanisms to cover up the precise outcome, but it's simple.
Free trade reduces wage disparities between countries until transportation costs differences are all that's left, eventually. Takes time, because investment has a time horizon.
So, bottom line, free trade implemented rapidly means disruption and job loss is rapid.
The better strategy is free trade implemented slowly, with safeguards to prevent child labor and equalize environmental protection costs (towards the better level of protection).
This isn't political, just sensible.
So....rapid free trade like we had meant we had to have a "jobless recovery", etc., etc.
Don't have time to read the comments, but the one thing that strikes me about this is: Who needed the raise? When you're cash-out refinancing to pay for everything, you probably feel less motivated to go ask your boss for a raise.
If alternative sources of "income" are gone, and if there weren't/when there isn't a recession, then you'll probably see people demand higher wages.
Immigration tax: 95% of ALL holdings.
Please. Perhaps you should go back to listening to Rush. Immigration is what keeps this country alive, and a big reason why the EU has not done so well...they don't allow it. The class that actually, you know, EMPLOYS people you want to stay. Patriotism is the last refuge of the clearly ignorant. And you want them to spend their money here too because, you know, it keeps people employed.
And now I've got to go and keep people employed....
I wish we had tax rates like that.
To keep the government's hands off of my assets (e.g., 'As of today, in the interest of safety, given the stock market meltdown that we just had, all IRAs must be held in TIPS'), I just moved money from a tax-free to a taxable account.
Tax rate (federal, California, excise): 52%. Lovely.
Good news: as high as 52% is, I guarantee the rate will be higher next year.
Remember: as recent as 1980, we had a federal marginal tax rate of 70%:
Top US Marginal Income Tax Rates, 1913--2003 (TruthAndPolitics.org)
Paying a UAW worker $150K was unsustainable. From the chart they were paid 50% too much, maybe more. Factor that into the NYTs 'median'.
MPinCO, not that auto workers aren't well compensated, but the article you linked is a hatchet job. The key word is "compensation", which includes all benefits (medical, retirement, etc). In the article they try to make a point by comparing this to the "salary" of a college professor, which does not include benefits.
To be clear, I'm not arguing that auto workers wages won't have to drop, but this sort of comparison and partial truth is designed to deceive.
Umm...I think he means 95% tax to people leaving. Sounds like South Africa.
ipodius | 04.09.08 - 11:33 am
I think you misread or misconstrued my post. he question was, what happens when the upper class leaves the US due to high taxes.
My answer stands.
Rush would be the first traitor to leave. I can't understand why he hates America so,
OT: Won't somebody please think about the dogs?!
Losing a pet along with the house - Washington Post- msnbc.com
MPinCO writes:
Well does anyone expect insight from the Old Grey Lady? The NYT's? Didn't think so.
Doesn't surprise me. When UAW worker average compensation was $141K to $151K and those jobs either move to the lower cost areas of the US or off-shore, median family income will go down.
MPinCO, management compensation that is 100 times base worker salary is also unsustainable. NOBODY is worth that much more than anybody else working in the same place of business. They just aren't. To the degree they are, the market is being controlled.
Maybe I should have said, expatriation.
Marcus,
Thank you for that tip on beans! From one hobo to another, tramps need to help one another!
trollroad:
Da nada.
...why did american auto manufacturers get into the sorry state they right now?
Part of it was bad product, but considerable blame has to go to unfunded retiree liabilities and overoptimistic pension fund growth assumptions. When you build a corporate structure that way, you build one that must continually grow, otherwise the labor input into each car you sell is one guy on the line and four retirees. When economists say that free market prices tend toward marginal cost of production, they mean that some Japanese or Korean company will compete at the cost excluding the four unfunded retirees.
Back on topic,
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Time for some back breaking taxes for the rich (those with annual incomes over $1M or assets over $10M). That should go a long way towards cutting national debt and chasing out the predators whose company the poor are better off without.
marcus please. i know neither of us are trolls, but should one chose to emmigrate from the US then that is their god given right. doesn't make them traitors.
re: Free Trade
shocker isn't that our country is based on free trade among our united states? unified currencies? harmonized regulations?
all these things that are good for the goose are good for the gander, no?
does mean what i think it means?
i mean, it worked for us once and united us (disparate languages, cultures, incomes, economies, currencies) and brought us to this point (for better or worse)
Marcus Aurelius,
Hugo Chavez already tried this, with disastrous results.
Venezuela is an economic basket case. Oil production is in freefall. There is little commercial construction. When I was in Caracas a couple of years ago the official exchange rate was something like 2200 Bolivar/Dollar, the black market rate was about 5000. Monied and professional people are fleeing the country at an alarming rate.
An economic accomodation with the rich is always necessary. This is not to say that things in the US have definitely been skewed in favor of the wealthy, but without some moderation the results can be disastrous.
"Unqualified democracy, where 51 percent of the people can legally do away with the rights of the remaining 49 percent, leads to tyranny."
In this case, it will be 90% of the people doing away with the rights of 10%.
Besides there are many brilliant minds out here, NOT making millions that would be happy to step in at these new tax brackets to take over.
Like I said, there are loopholes. Like people leaving the US with their money.
Just like the government can force a bailout down our throats, they can also implement a tax for taking your money overseas.
I'm sure with enough planning something can be worked out to cut the loopholes. 90% of the people will have more money.
Hey, I know this is "UnAmerican". But so is what is going on today. We are socializing the losses to help some keep their gains.
Same thing here in a way, only this time, we're helping the overwhelming masses.
It would be interesting to know what measure of inflation they used to normalize to 2007 dollars. The ~3% published number, or the ~7% shadow number (counting food and energy).
I suspect real wages have actually dropped more significantly than the published number implies.
How about estate taxes and elimination of trusts.
How about a 50% tax on the capital gains when selling real estate. So then land is worth what it can earn in production not speculation.
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Samsonite, you seem to have some bizarre notion of "middle class" to go along with your shaky grasp of "median".
People with incomes around the middle of the distribution of incomes are middle class. If the median wage is stagnant or declining then by definition the wages of the middle class aren't going up.
What is "UnAmerican" is leaving your country because you are no longer able to gain and maintain obscene wealth.
Don't forget: We ask youngsters to die for this shit.
I say put up or get the F out.
Venezuela will be better off for the loss of their ruling class. Ask a peasant.
Jobi-
The mean is (1+1+10)/3=6
I think your logic is valid but your math is flawed (I just point out the first of multiple math errors).
@anotherrajh - that misleading $150K figure (and others like it) was manufactured to include - depreciation on the factory building and machinery, maintenance and upkeep of same, utilities for running the factory, etc. etc. Believe me, no UAW rank and file member ever earned $150K, not even close. Not legally, anyway.
AP--you're right about my definition of "middle class," as i really have no idea how it's defined. however, you're wrong about my understanding of the median. if the median wage is stagnant, all that means is the middle of the income distribution hasn't changed. From this you can imply that the highest and lowest of the wage earners are making the same thing. The mean would be much more informative in this case.
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We can do the same thing on capital gains.
capital gains of less than 100k in a year....0 taxes
from 100k to 200K... 10%
etc. until you make millions in capital gains per year. Than you get hit hard. That'll be good for the top CEO's who leach of the stockholders.
Now smaller investors can keep their gains. Again, I know, lot's of loopholes. We'll figure them out if we put our minds to it.
But imagine the difference for a regular family.
What is everyone so worked up about?
60,500? That should get you a 5bdr, 4bathroom home in a nice school district-- with a three car garage for the H2, the Lexus, and the Porsche (for the weekends).
Duh!
why would you disincentive-ize someone to create capital gains (which dont necessarily come from speculation mind you)?
Samsonite, you've still got "median" wrong. You're taking the average of the highest and lowest values. This is called the midpoint of the range. The median is something else. You line up all of the values in order and pick the one in the middle. It most explicitly does not care how much the people at the top or bottom make. It measures only what people in the middle make.
Maybe it's time to stop trying to teach math to the trolls.
No. I encourage capital gains. It's just that 50 million in capital gains and paying the same tax rate as someone making 100K capital gains is a bit unfair.
Hey, I KNOW this is not perfect. I'm almost embarrased to put out this idea. BUT, i think it will be overwhelmingly better for the majority of the country at the expense of a few. And those few will still be alright.
Now, we have those few, rich beyond belief and the majority of the country in shambles.
Suecris, I certainly do believe you.
I'm pretty fed up with this "blame the workers" stuff. No job is guaranteed, and there will always be displacements, but these self-rightous "it's their own fault they're suffering" arguments are nauseating!
dc1000 | 04.09.08 - 11:56 am
Along with rights come responsibilities. Rights without responsibilities leads to tyranny.
Who else will be taxed? Should we do away with taxes completely?
The most admirable American I ever encountered was an immigrant Korean who owned 5 or 6 Dry cleaners in the DC area. Why? His goal was to become the highest taxed person in his new country, on the logic that the wealthy should support the system that allowed them to prosper. That man is an AMERICAN.
Immigration tax: 95% of ALL holdings.
Marcus Aurelius
Yeow. Limiting immigration worked really well for the USSR and Eastern Europe. And look at Cuba, all cars are classics!
C'mon, M-A-; is South Africa really better off today now that the folks who had the money left?
Not according to the South Africans that I speak with.
Some folks provide labor, some folks provide management, some folks provide leadership, some folks provide capital.
You need all four groups. Trust me, the rich will get their money out of country whether you like it or not.
The last thing that we in the U.S. will need is flight of capital. Who else will start up new companies out of the ashes?
Post-Armageddon, you could try to restart things using barter. You will have better success if it is gold as the medium of exchange.
So, you need the capitalists, as they will have the gold in their Swiss banks.
But, feel free to imprison and fine them when they break laws.
Bob_in_MA | 04.09.08 - 12:01 pm
You missed the point. Go back and read it and the post I responded to, again.
Jesus help me. No one reads the whole thread.
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jg | 04.09.08 - 12:03 pm
Oh yeah. South Africa was a model of efficient capitalism as long as they had apartheid.
Same was true of the pre-Civil war, slave-holding USA.
Capitalism works best when an entrepreneur can own its workforce.
Part of being a free country is allowing people to leave. Letting people do whatever they want, as long as they remain inside, is only the freedom of a prison.
Well, I just ran some numbers for my own situation in the Lake Woebegone suburb of Raleigh.
Even including a year of unemployment, my income has risen by an annual average of 4% since 2000, beating inflation.
A mortgage refinance along the way that reduced my monthly payment added discretionary income, on top of pay increases.
As to my house, it's risen in value by an average of 4.5% annually since I bought it in 2000, which also beat inflation.
Sebastia
Marcus,
I'm here for you, what do you need help with?
Just want to make sure everyone here knows Tanta put up a new post.
Government workers at the federal, state, and local levels have, for most part, seen steady pay increases and a slowly rising standard of living. Those who pay government salaries haven't.
Meanwhile, it's become ever more costly to do business in America, laregly because of ever increasing regulations. Those who impose the regulations - the class of workers who make up more than 20% of the economy - don't bear the costs and, in fact, receive pay increases year after year and then retire with nice pensions.
jg | 04.09.08 - 12:03 pm
Read my post before you respond, goddamnit.
Let these people leave like their ancestors came: with nothing but the shoes on their feet. You don't get to take the capital with you. Want to leave America? Good. Get. The. Fuck. Out. Traitors.
Good luck in Dubai!
Ok,
I want you all to go to your rooms and take a nap!
Friend of Jesus | 04.09.08 - 12:06 pm
Are you Jesus?
marcus,
you know the tax rates we objected to as revolutionaries (forgetting for a minute who was levying them) are microscopic compared to what we pay now.
would an anti tax revolution be unamerican today?
we've become exactly what we revolted from then.
the founding fathers would be fringe lunatics today (unless they were true politicians and then they'd just say whatever would get them in power)
Marcus,
No, I'm the guy that wants to crucify Blackrock and connet my pension abuse quest to The Fed abuse linked to antitrust shit...etc...
I need to wear several hats as I post; I'm on your side, I think, who can say?
FOJ@TH
dc1000:
I'm all for the freedom to leave, and reasonable taxation. Government can't spend without taxation. Those who benefit the most, pay the most.
Apartheid was slavery? It was mean. It was immoral. It was not slavery.
Yeah, South Africans are living longer, healthier lives now that the capitalists are gone:
"...The country's unofficial unemployment rate hovers at around 40 percent...South Africa's crime rate is one of the highest in the world, and there's the HIV/AIDS pandemic dealing a severe blow to the population, as well as to the economy..."
CNN.com - Transcripts
Keep the capitalists, tax them reasonably, and fine/imprison the lawbreakers.
Venezuela will be better off for the loss of their ruling class. Ask a peasant.
That's just the point that was made, wasn't it? They'll ALL be peasants. So unless you're ready to give up everything you have and live like one Marcus, perhaps you might want to rethink that. And you know what's going to happen in Venezuela? There's going to be another coup/rigged election and they'll displace the current rich with another group that will become the rich. And on it goes. Ask the peasants the history of South American government..or even Russian ones. The same system gets put into place over and over again. And the funny thing is the class structures don't change. Just the people calling themselves one or the other.
g | 04.09.08 - 12:13 pm
It was worse than slavery - it as complete and total disenfranchisement. And what was the employment rate under apartheid?
Keep the capitalists, tax them reasonably, and fine/imprison the lawbreakers.
Can I have an AMEN on that?
M-A-: "...Those who benefit the most, pay the most..."
15% of $1,000 = $150
15% of $10 million = $1.5 million.
Low rates for all does that, M-A-.
How about a 50% tax on the capital gains when selling real estate.
That would just push real estate into being the property of corporations so that it is technically never sold. That is why businesses in California don't pay property taxes; selling the corporation that owns a piece of property doesn't trigger a reassessment.
AP--hey sorry for confusing you. i was way off with my definition of median. anyway, thanks for pointing it out.
jg | 04.09.08 - 12:15 pm
15% of $1,000 = poverty
15% of $10 million = not so much.
M-A- is a friend of Jesus ('Jesus help me'), so we'll ask him to offer an 'Amen.
krugman posted a graph in the last week from a professor that showed two lines, one income growth under repubs bucket by wealth and the other under democrats. The democrat line was roughly horizontal (equitable), the republican line was lower, but 45 degrees up (rich got richer, middle to poor got poorer).
What it didn't show was the all important "tail" at the top where the real self-enrichment has taken off (not just in the USA - in russia, in china, in the gulf states).
BTW: my original comment wasn't about taxation, per se. It was about leaving our "homeland" because you feel you will be treated more "fairly" elsewhere. Like I said: Good riddance. And good luck in your new land.
I'll say this again...I don't mind paying taxes at all and, in fact, I think there should be a HUGE tax on estates (I'm with Buffet) to keep from establishing a class of monied elite that lives off past generations and contributes nothing.
I live in the first world and want first world services and I'll pay for that. What I object paying for is idiotic government policies and crap projects. If it meant that I would pay even 200 more a year in taxes to fund SS, I'd gladly pay it. If it meant paying more for guaranteed medical care that was the best available in the developed world, I'd gladly pay for that.
This crap of "let the government stay away from my money" is just that...crap. Go live on an island or somewhere in the third world where you can have unstable governments that don't tax. And then get your throat slit in the night while people take everything you have because the only pay the police can have is corrupt money. Some of you need to travel more so you can see what it's actually like in the world.
Unchecked capitalism trumps patriotism, once again.
Oh, and the bad rap on speculators: undeserved.
Sometimes, prices are out of whack, e.g., the S&P 500 today, given its P/E of 20.
Speculating on the fall of the stock market is 'evil'? Nah, it just speeds up the price adjustment process. That is the 'societal good' done by speculators.
Same with real estate speculators. They just speed up the price adjustment process, up or down.
Just don't allow socialized losses for speculators, or anyone.
ipodius | 04.09.08 - 12:20 pm
Amen.
(and I should have said, "Jupiter help me".
Like I said: Good riddance. And good luck in your new land.
Yes and real Americans are glad that other governments said that...like Germany in the 30's and 40's when all their brains came here to escape such ultra-nationlist types. It's why we got the bomb first, and a huge impact on our leg up in competition in sciences.
What an idiotic sentiment to have! This eat the rich stuff is really tiresome. I don't know about you, but I'm hoping to have money when I retire and if the country is populated
with people who feel like you, I'll gladly take my money and spend it elsewhere, helping those who are more enlightened out.
Marcus said: Rush would be the first traitor to leave.
Easy, easy with the Buzz words! Traitor? Why, because you don't agree with him? Marcus, when you go "over the top" with the name calling, you lose all your credibility.
Hmmm, you never had any credibility. Never mind.
Marcus, I think if you are referring to types that don't WANT to pay for what I outlined, then I TOTALLY agree with you.
Patriotism = pay whatever taxes government calls for?
Ever hear of the Boston Tea Party?
Sometimes, civil disobedience is called for.
Everyone please read this truth again:
"And at a profit margin that would make Bill Gates blush. That's the problem, ipodius: the "prevailing rate" of wages hasn't changed, while the profit margins and compensation for the topmost level has soared. Free-market ideology does not support a no-bid scenario. It smacks of Fascism." Marcus Aurelius | 04.09.08 - 10:44 am
Ipoduis, you sound like one of them.
Hey, while we were all p1ssing back and forth about all of this, the stock market was actually going down on bad news. What the hell is that about??? lol
Given your Jupiter preference, M-A-, you should move from 'Jesus help me' to 'By Jove.'
Definition 3: Jove Definition | Definition of Jove at Dictionary.com
Ipoduis, you sound like one of them.
I don't live under some altruistic delusion that being rich equates to bad. I thought it was what one aspired to in this country. If you aspire to be poor, then that's fine too. Just don't aspire to be poor and then want to take things away from the rich because being poor wasn't as good as you thought it would be.
Okay, thanks for the stock market update, i-.
I'm off to being a capitalist pig, now, driving my indentured servants/slaves.
jg writes:
Patriotism = pay whatever taxes government calls for?
Ever hear of the Boston Tea Party?
Sometimes, civil disobedience is called for.
jg |
who,what,when,where,how?
"...imagine if there hadn't been a housing bubble to drive consumer spending? No wonder so many people think the 2001 recession never ended."
Imagine that the Sun revolves around the Earth.
Imagine that the South had won the Civil War.
Imagine all the people.....
Imagine not dragging red herrings across the bottom of the pot.
"That is why businesses in California don't pay property taxes; selling the corporation that owns a piece of property doesn't trigger a reassessment."
Well, no. Not exactly. This is a long-running misunderstanding with California property tax law. If I get a chance, maybe I'll pull out the old Revenue and Taxation code and explain.
Geez, talk about off-topic!
Greenspan working at a hedge fund and then this guy; is it any wonder we have collusion and corruption destroying Rome at an accelerated pace! If you think it's crazy now, just wait as Nero goes insane with abusive power in his remaining 9 months!
Re: he best way to describe Peter Fisher is that he's one of those behind-the-scenes guys who keep Wall Street from coming apart at the seams--which it almost does every few years. As the recently departed undersecretary for domestic finance at the Treasury, believe you me, Peter Fisher is known to every fiscal power broker from D.C. to Delhi. He's an unusual guy. For one, he gets visibly excited talking about financial policy. And for another, he's been pretty good at implementing it. He's also obsessed with the business of risk.
Now Fisher has hung up his government scepter to join bond house BlackRock. (Fisher was on everyone's short list to head the New York Fed or lead the New York Stock Exchange.) It's a cashing-in of chips, partly.
"I'm off to being a capitalist pig, now, driving my indentured servants/slaves." jg | 04.09.08 - 12:31 pm
Maybe on one of the many fat, no-bid govt contracts.
Marcus Aurelius writes:
Venezuela will be better off for the loss of their ruling class. Ask a peasant.
Should be posted at the top of every thread. Especially as those "peasants" rise up and overthrow the real totalitarians - socialist and progressives.
anyone who thinks wages have kept up with inflation and rising costs is a moron.
A-: '...Maybe on one of the many fat, no-bid govt contracts...'
Strictly private sector. Developing, manufacturing, and marketing medical devices.
My last turn at the government trough was as a Naval Officer over '85-'90. Seeing how politics could derail rational financial and economic decisions -- even when far-removed, stationed on seagoing vessels -- permanently cured me of ever working with the government.
Nice try, though, schmuck.
Medical devices...totally unrelated to gov't spending. Sure. Right.
PS> It's the next bubble to pop.
Samsonite writes:
"Sebastian-thanks for pointing this out. this article doesn't really say anything about the middle class. by just looking at the median, the middle class could potentially have realized substantial increases in their income (maybe they did, maybe they didn't), but unless the rich realized gains as well, the median woudl stay the same. interesting."
I thought the median was expressed as the income level where half of the households made more and half made less. In that scenario the top earners could have seen signifigant gains without any increase in the median.
Consider an economy with 5 households; 2 on the bottom, 2 on the top and 1 in the middle.
The bottom 2 make 20K the middle one makes 50K and the top 2 make 100K. In that case the median income would be 50K since exactly half the households make more and half make less.
Fast forward to the end of an expansion. The bottom 2 make 20K the middle one makes 50K still (no gain) and the top 2 make 150K. The median is still 50K since half make more and half make less than that figure. So incredible gains at the top are not reflected in the median incomes, although the mean would rise.
Is this not right?
The U.S. economy has performed quite well during the five years of the Iraq war. CNBC's Larry Kudlowa Friend of the Blogruns a few of the numbers:
Real GDP has increased by 16 percent, or 3 percent annually. The unemployment rate has hovered below a historically low 5 percent for quite some time. Nearly 10 million jobs have been created. Household net worth has increased by $20 trillion. Industrial production has expanded by 13.5 percent. Even home prices, despite the current correction, have increased by 20 percent. Global GDP has averaged nearly 5 percent annually. The capitalization of the world's stock markets increased 159 percent, or $35 trillion. Meanwhile, new emerging-market economies saw their stock market index collectively rise by 223 percent.
Especially as those "peasants" rise up and overthrow the real totalitarians - socialist and progressives. MPinCO | 04.09.08 - 12:37 pm | #
Are you talking about the cruel tyrants who are crushing the peasants of Sweden?
It wasn't an expansion, it was a Ponzi Scheme. Institutional Lenders enabled it, and real estate was the "investment" vehicle that they led us to drive off a cliff. I was a mortgage broker for over 10 years. Here is my view of the situation.
The mortgage banking industry (key concept, those that created the programs ie; Lenders, not those that sold the programs available, ie; Brokers created this mess by changing two simple concepts:
1) Property Appreciation;
Old definition - gain in the salable value of real estate due to significant structural improvements in the property (not new paint and granite countertops) or improvement in the local economy in which higher incomes create sustainable new demand.
New definition - some other sucker will bid more, so we can take anyone's guess...
2) Real Estate Investor;
Old definition - an individual with more than 2 years proven experience in managing rental property at a profit, qualifying full doc using 75% of market rent to offset the investor property mortgage, OR an individual with less than 2 years experience in managing rental property at a profit, with the ability to qualify full doc using 75% of market rent to offset the investor property mortgage for the investment property payment and all other debt at no more than a 45% back end ratio.
New definition - the most recent idiot to bid on this property, surely another idiot will bid more and buy it soon, who cares about profitability?
When we allowed unqualified morons to get into bidding wars for property on which there was no chance of them being able to carry the debt, we guaranteed this mess. Now we have huge numbers of properties that are failed "investments" that forced up pricing across the board. Asset deflation is guaranteed back down to the level of median income being able to qualify for a median home. Any steps taken to change this are pushing the proverbial boulder uphill...
Your rational comments and responses are welcome at PSGute@aol.com
Ipodius @ 12:20
You and I probably don't see eye to eye on politics, but this comment hit the nail RIGHT on the head.
IIRC Bill Gates's dad said something similar about 2 years ago, adding that Bill wouldn't be where he is if he had been born in west Africa.
ipodius | 04.09.08 - 12:20 pm | #
Well said.
BREAKING NEWS
Merrill Lynch May Post First-Quarter Loss on $6 Billion to $6.5 Billion in Further Write-Downs:
Douglas Watts writes:
Especially as those "peasants" rise up and overthrow the real totalitarians - socialist and progressives. MPinCO | 04.09.08 - 12:37 pm | #
Are you talking about the cruel tyrants who are crushing the peasants of Sweden?
The Venezuelan tyrants that recently nationalized the concrete industry. Any bets on how long before the "peasants" no longer have any concrete?
If someone drilled down into the income data and correlated that with what line of work people were in, I'm guessing you would find that people who made commission-driven income in real estate and financial services etc. showed healthy gains in recent years--gains that came to a screeching halt in 2007.
Those of us not in a position to make money from the bubble in RE, lending, borrowing etc. had flat or declining incomes in real terms. That would describe me. I didn't increase spending when the market value of my home soared, and I'm not going to decrease it (below its already low level) now that my home's market value is headed down.
But when you subtract the phony bubble income, and the phony purchasing power from inflated home equity that some people chose to spend, you get a pretty big hit on consumer spending.
Marcus Aurelius writes:
Venezuela will be better off for the loss of their ruling class. Ask a peasant.
Marcus A., DownSouth, and MPinCO -
iPodius at 12:14 pretty much has it right.
Some observations on the Venezuelan 'ruling class'- in fact there's none, although in Chavez's pseudo-socialist view, it includes anyone who has two dimes to rub together and doesn't support the current regime.
Now, the country's educated are fleeing. Not the "ruling class", as Marcus suggested. The "Bolivarian Revolution" has spawned its own 'ruling class' of sycophantic hangers-on who profess the ideology of the regime so the can leach off the endemic corruption. Locals call the the "Boli-bourgeosie." They don't rule, they just drive Audis and Hummers in return for wearing red and swearing fealty.
The country will not "be better off" for the departure of those who are actually leaving - since those "aristocrats" who are leaving are predominantly people who don't give a damn about politics but who want to put their education to use in a liberalized economy. Which is increasingly difficult when the government is nationalizing everything from energy production to cement-making. (And then mismanaging it into the ground.)
The government is presently importing physicians from Cuba (that Mecca of medical science) because the brain drain is so severe. Of course, the importing only serves to reinforce the underlying phenomenon.
Now, the peasants rising up are generally angry about crime (Caracas was murder capital of the world when I was last there) and, surprise, inflation, caused by rampant government spending, and shortages, caused by government prices caps. This was widely viewed as having caused the Chavez administration to lose its first election a few months back.
In short, Venezuela is not your textbook example of redistributive fairness and economic justice.
By the way - where the heck is Jas Jain in this string? This kind of discussion usually draws one good vitriolic post making excessive use of the word "dopes". Called it in sick today?
Sorry for the long post, but some folks were off the reservation.
Breaking news
Merrill Lynch May Post First-Quarter Loss on $6 Billion to $6.5 Billion in Further Write-Downs
A-, I'm counting on it, that that bubble -- medical spending -- will pop.
Venture capital backed startups, in which I have worked for the past eight years, will be a thing of the past, I expect.
That's why I working hard to accumulate a large hoard of nuts, because we have a long, long winter ahead.
quoting Malaclypse:
I was unaware that, 5 years ago, the middle class typically worked in jobs not requiring documentation... Malaclypse | 04.09.08 - 10:58 am |
Then let me take this oppourtunity to explain to you how a dynamic economic model works: If person 'A' is suppling a service for $20/hour, in this case a blue colar job, then person 'B', in this case an illegal alien, starts providing the same service for $8/hour, then person 'A' will be forced to lower his hourly rate to compete for work with person 'B'.
As a consequence of this economic dynamic I can hire English speaking, American citizen, skilled and unskilled laborers today for far less (adjusted for infalation) than I could ten years ago. The great influx of illegal aliens willing to work for poverty wages has dragged down the wages of the American middle class.
The U.S. economy has performed quite well during the five years of the Iraq war...
Keep drinking the kool-aid.
GDP has been puffed by HELOCs and under-reported inflation. Un/under-employment is really around 9%. Household worth is a bubble now going POP.
I've enjoyed watching the toadies of the rich prostrate themselves. The lickspittles fawn for the favor of their masters, who laugh them to scorn when they notice them at all, like ugly and annoying little dogs who conveniently catch a mouse now and then.
First, the idea that 90%+ marginal rates will turn America into Venezuela would have come as a surprise to Eisenhower, since he did just fine with them.
The rich are not going to "flee" the world's largest economy, nor forswear the income they earn here--which is precisely the income that would be taxed.
If Paris Hilton or Peter Peterson think they can do as well as foreigners in Shanghai, let them.
Are these numbers before or after taxes? If they are before taxes, then the median household was likely better off in recent years because of slightly lower tax rates. For a graph of tax rates at various income levels, see Mankiw's blog (URL below), which shows that the median (and lower incomes) had tax rates about 2 percentage points lower in 2007 than they did in 2001.
http://bp2.blogger.com/_djgssszshgM/R8rESIAaVeI/AAAAAAAAARs/aCvq98bbTpo/s1600-h/tax+rates+by+quintile.gif
MPinCO writes:
Especially as those "peasants" rise up and overthrow the real totalitarians - socialist and progressives.
MPinCO? "Master of Philosophy in Coprophagia?
OK. I admit I stopped reading the luxury-priced tabloid about 10 years ago so I'm not about to register for it online. And I've never before commented at CR, but it seems to me that someone ought to have fact checked Leonhardt's claim. "Median American family" income of $61K in 2007? Inflation-adjusted or not, that stat is jacked-up on its face.
I'm looking at ACS 2007, YE 2006 HOUSEHOLD median income now.
HINC-01--Part 1
$48.2K
Does Leonhardt explain somewhere in the article what part of wage and salary gain of $12.8K, or +26%, is attributable to inflation?
hey Mr. Kudlow
"Real GDP has increased by 16 percent, or 3 percent annually. The unemployment rate has hovered below a historically low 5 percent for quite some time. Nearly 10 million jobs have been created. Household net worth has increased by $20 trillion. Industrial production has expanded by 13.5 percent. Even home prices, despite the current correction, have increased by 20 percent."
well, i dont want to trash your dreams but hasnot USD imloded against EUR during the past few years? and wasnt it something like over 40-50%? from 0.8 to 1,6 ouch
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Best,
"the 2001 recession never ended."
how true.
The recession never did end. Now comes the Depression. What is going to prevent this? A $600 vote-buying check? War with Iran? Nope - nothing will stop this outcome.
No jobs, no savings, no future.
"I don't live under some altruistic delusion that being rich equates to bad. I thought it was what one aspired to in this country. If you aspire to be poor, then that's fine too. Just don't aspire to be poor and then want to take things away from the rich because being poor wasn't as good as you thought it would be."
First of all, no one aspires to be poor. Anyone that would say such a thing has never been poor.
Secondly, the main objections that I see here in the comments is to rich people that have benefitted greatly from making their wealth in the US suddenly saying that they want to take their ball and go elsewhere because the US population, which helped fund that accumulation of wealth, says that it's time to pony up some more dough into the community chest due to hard times. It used to be considered unpatriotic to complain about paying your taxes or skimp on your obligations as a citizen. Yet, now we have millions of citizens that see no problem with doing so, and excoriate anyone that dare suggest otherwise. It's a perfect illustration into what 30 years of extreme Republican ideology has done to our country.
Hey,
Do you think we'll see mass emigration from the US?? China, the middle east, India and Brazil are booming, while things in the US look horrible. Anybody here planning on moving to one of these economic paradises?
I love this idea that somehow the Dems are the party of the "people". You've not been paying attention to where they get their money. They are now more under the thumb of corporate American than the Repubs are.
And for the record, let's talk about career deflation. We've moved skilled people out of good paying jobs down to entry level ones, primarily workers 40 and up. Younger folks need to pay attention to this. It means that your changes for making good money are going to dry up once you get into your 40s. Might want to put a little urgency into building wealth at a younger age. You may not get much of a chance.
It is called a neoliberal economy. What we have subjected third world countries to is now being practiced in the American economy as well.
It is the same story all over the world now, higher GDP while the middle, working and farming classes see their income decline while the top 1% are making money hand over fist. The are poor being increasingly marginalized to slums while the multi nationals privatize resources, farmland, fisheries and public infrastructure.
We need to renounce all these trade agreements and withdraw from the WTO.
Protectionism is the new word for patriotism, as the multi nationals gut our sovereignty with the super sovereignty of the WTO rules, ruled on by an extra national court and enforced by a foreign banking concern, the Bank of International Settlements.
Did they adjust for the size of the "average American family". My bet is there where more single parent (and single income) families in 2007.
Time to pay the price for the pyramid scheme social programs of yesteryear. Let the FDR depression begin.