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1.
Wellbeing
Government Spending
Income Inequality
Stagnate
Wages
1 .
Government Spending
Helps Many
2. Causes Inflation in
Health Care and Education
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3. Resulting in Deficits
4.
Enhamced by Tax
Cheats
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Wellbeing:
Income Inequality
When Will
Income Inequality Affects
Growth
x-sizing: border-box; box-sizing: border-box">
Blame
Democracy,
Not Capitalism,
for Income Inequality
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4 G's Are The Problem
Today, the four G’s of Guns, God,
Greed and Government backing of a free market
philosophy
have created a diverse group who want less government.
Greed has created much income and wealth, but most
income has floated to the top. Much poor people wealth is tied up in
inaccessible SS and Medicare. This accumulation is not included
in traditional wealth calculations. It earns a higher return for the
poor, who get a real good deal, provided they live long enough to
collect benefits.
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 |
The Guns and God group
want limited government
which allows their simplistic lifestyle.
|
US
wealthy coastal
states have continued their efforts to help
poorer rural states by
agreeing to pay for much of Obamacare. They also wanted to increased Medicaid benefits and to increase many other
safety net programs.
"Huston
we have a problem." U.S.
rural mostly
southern states do not want help. They
feel government interferes too much into their lives, federal programs
are too expensive and payments go to undeserving people. So they lobby
for lower taxes meaning less money to Washington.
A Tale of Two Talesf
|
Government,
helped by the
neoliberals like Greenspan,
want less regulation associated with anything business
to increase their share of the pie. They would keep military and
elderly spending high with no increases for anything else.
These for G's divided our country before it was a country. |
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Our
Democratic Federalist Capitalistic Republic
is responsible for the design,
implementation and success of programs to help solve society's problems.
We will eventually succeed. but with some consternation.
People wanting income differently
distributed should vote
accordingly
but
many voters feel they have at least one more important need which they support with
Political Action Committees. |
Guns
are protected by the NRA.
God
is protected by
relegiouse
rights groups.
Greed
is
protected by
the Chamber of Commerce,
AARP and other
Super PACs.
Government
is protected unionized employees,
politicians and economists wanting to enhance their
career possibilities.
See
Public Policy Affects Income Inequality |
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|
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2.
Measuring Activity
Inflation
Employment
Uncertainty of Capitalism
Inflation
The
Value of Money
Are
Wages
Stagnate A
Politician's Dream!
Which
Data
Set Will Get the Most Votes?
 |
|
More Earned
Higher Incomes
Fewer Earned
Low Income
 |
|
Will
Inflation Come Back
People
are Currently Nervous
Much
Worse 1970-1985
History
Says Yes
Leaving Gold Standard Changed Variability of Money's
Value
 |
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3. Macro:
Lately Unemployment
Down, Wages Up
Increasing Minimum Wages Means
Temporary Job Loses |
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Source:
Canary in the coal mine? NYC small businesses struggle to survive $15 minimum wage hike: ‘They’re shutting down’
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More and More Diversified Employment
visualcapitalist |
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Uncertainty
of Capitalism
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3.
Macro
GDP
Usefulness Distributing
GDP Growing
GDP
Management
GDP Usefulness
How
US Uses GDP
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|
Macro: Distributing GDP
Consumption Gets Most, Gov Gets More.
Investment Down Lately
Net Exports Negative as Foreigners sell Good Stuf Cheap
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Growing GDP
Did Fiscal
Stimulus Packages Help
The Answer is Yes
thedailyshot.com/2020/11/30/us-consumer-spending-remained-resilient-this-month/ |
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Macro Management
Post WW 2 U.S.
Micro Competitive Adjustments
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U.S. Economic Normality
1945 -2015
Bailouts
Safety Net
Profits vs. Labor
Wellbeing
page 2
|
New Normal
#1 Rising Income
WW 2 generated savings, pent-up demand and few foreign few competitors
generated 25 years of high
profits higher wages and cooperative unions.
 |
New Normal #2 Oil Embargos and Competition
Began Wage Stagnation
Japan's competitive manufacturing sector
accelerated causing stagnate Rust Belt wages and employment. Why? Japan
got lucky when gas efficient small green cars required change and U.S.
manufacturing responded by protected profits with less quality improving
capital investment. Unions protected current workers by accepting
a
two-tier wage system minimizing new worker wages. Feeling
pressure Japan built modern U.S. plants.
See
How the U.S. Squandered Its Steel Superiority and
The End of the International Liberal Order?
1hr: 28 min |
 |
|
New Normal #3 Financial Instability from
Philosophical Change
1980's U.S. and England Returned to Conservative Lax Business Regulation
because increased regulation and increased welfare provisions had upset many voters.
Think Great Society and lax derivative regulation.
1980's Major Investments Banks Went Public
creating a need to balance client needs with equity needs.
Think expansion of financial industry's share of GDP.
1980's Accounting Standards Declined
as accountancy firms struggled to balance commitments to audit
standards with the desire to grow their consultancy business.
Think
off-balance-sheet items and
Arthur Anderson Scandal.
1980's
Home Equity Loans
Increased Current Consumption and Lowered Savings as they replaced
equity building home improvement loans.
Think many not prepared for retirement.
|
1983 Reverse Mortgages Approved for FHA loans.
Think less retirement savings.
1999 Gramm–Leach–Bliley Act Increased Systemic Financial Risk
once limited by the Glass-Steagall Great Depression Act. Initiated by
Republicans it was signed by President Clinton.
Think financial industry expansion. See
Five Bad Bush/Clinton Policies
2004 Uptick Short Rule of 1938 rescinded. Think
stock market gambling.
2006 FASB requirement that housing assets be mark-to-market decreased
financial system collateral.
Action resulted from a 1991 Government Accountability Office investigation
of the $160,000,000,000
savings
and loan bailout.
Think moral hazard.
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From
Financial Crisis to
Recession
to
Great Recession to Recovery
1. 2007-8 Financial Crisis was tamed by the Federal Reserve.
2. 2008-9 Recession was tamed by monetary and fiscal policy.
3. European financial instability and world-wide austerity slowed economic recovery
and income growth
for all but the very, very, very wealthy. Think top 1/10th of one-percent.
4.
Great Recession Recovery Has Varied Around the World |
|
Understanding Balance Sheet Recessions
They are
infrequent, severe, and long-lasting. Understanding them is necessary when
judging society's efforts to manage The Great Recession. It is like understanding a doctor's attempt
to relieve a headache requires knowing the level of difficulty. Was it a
Migraine Headache? A balance sheet is
caused by high levels of private sector
debt. Assets must equal liabilities plus
equity. If assets values like housing collateral fall below their
associated debt, equity must make up the difference or insolvency results
and debt must be repaid. Think 1837, 1873, 1890 & 1929 See
Most Severe US Recessions.
Was Our Great Recession a Balance
Sheet Recession?
Economist
Paul Krugman feels the
financial crisis ..."was one manifestation of a
broader problem... associated with a "balance sheet recession."
Economist Richard Koo wrote Japan's 1990- ?
"Great Recession "was a "balance
sheet recession." |
What Led To The
Great Recession?
1. Free Market Capitalism Lowered Regulation.
2.
Innovative Expanded Investment Banking.
3. Global Trade Imbalances
|
|
China 2012
Germany 2012
Saudi
Arabia 2009
Japan 2011
Russia 2012
4. Finance/Housing
Easy Money Bubbles |
$214B
208B
150B
119B
81B
|
Great Recession Stages
from
The Shifts and the Shocks by Martin Wolf
1. A more complex unstable financial/credits system
resulted in extreme optimism in
good times and panic in bad times.
Think derivatives, securitization,
credit default swaps all
managed by hedge funds.
2. Savings glut created
as
emerging countries lowered borrowing and increased trade surpluses
after
the 1997
Asian Debt Crisis
made their foreign dollar dominate debt unsustainable. They expanded trade and kept personal consumption below economic growth. Less consumption and borrowing plus a trade
surplus increased Dollar, Euro, and Yen
reserves.
Think
China and Russia.
3. Aggregate demand stagnated
as trade surplus countries didn't spend. Germany's 2005 economic
renewal was saved and Japan's private sector saved much more after
their 1990's credit bubble exploded. Adding to the demand shortage
were companies who maintained profit by decreasing capital investment
spending despite historically low interest rates. Globalization and technology also
helped them maintain profit as wage increases were limited to most valuable employees.
State and local governments, especially those with underfunded pension systems, also cut
expenditures.
Think
Mercantilism.
4. Increased current account deficits by wealthy nations balanced world trade.
Higher demand for
foreign goods
was made possible by massive central bank supported |
low interest
loans. The FED's historic monetary expansion was made possible by
continued low inflation caused by expanded Flat World competition
and low oil prices. Innovative financing and lax financial regulation also fostered
expanded financial asset demand.
Think excess OPEC savings
financed the 1970's
Latin American Debt Crisis leading to Savings and Loan Crisis.
5. Real Estate and Stock bubbles came as
expected from low long-term real interest rates. New home buyers borrowed surplus savings and
investors devoured growing unique debt securities created by an expanding
finance industry promising insured difficult to understand
almost guaranteed financial instruments.
Leverage rose dramatically. Fraud, near fraud
and data manipulation exploded. See
Brief History of Financial Bubbles.
6. Poor Crisis Management by politicians as
their economic advisors believed market capitalism would prevent
serious recessions. The
Great Moderation solidified this view. Possibility of new financial
instrument contagion were not understood. When panic started,
political, intellectual and bureaucratic leaders resisted quick action in areas
that required cooperation. A
US depression was avoided by FED, Treasury and Congressional efforts
that were slowed by austerity. Iceland, Ireland, Greece, Spain and
Portugal experienced economic depression.
See
The Great Recession.
Part 2 Financial Bailout, Economic Recovery, Poverty Stuck at 15%, Income Stagnates
and Wellbeing Grows
12/18/15 |
|
Financial Bailouts, Economic Recovery,
Poverty Stuck at 15%, Profit vs. Labor, Wellbeing Grows, Asian Competition |
New Normal # 5
Poverty Stuck at 15%
Some believe the 15.5% poverty rate should
be lowered. After "...correcting the
2013 poverty rate for noncash food and housing
benefits, refundable tax
credits, and the upward bias in
the CPI-U ..."the rate drops from 14.5% to
4.8%.
War on Poverty-Was It Lost
Others believe it should be raised as
it doesn't account for geographic and demographics differences.
See
Poverty Rates How Flawed Measure Drives Policy
Other
Data 1
Data 2 Think many use true but not
necessarily appropriate data to foster their POLITICAL beliefs.
Example: With our obesity problem how could anyone have believed that many went to bed hungry during the
Great Recession. Calculation ignored food stamps and subsidized
school lunches. |
|
 New Normal # 6
Profit
Beating Labor
Twenty-first century war expenditures helped profit recover after a
dot-com
bubble recession, then crash with The Great Recession and then
grow to
new heights. US Companies have competed very well in a flat world using
technology, outsourcing to Asia, Mexico...and by keeping wage
increases low.
Source Total compensation has done better although Obama Care gave companies an opportunity to again lower compensation.
Source
More
Data 1
Data 2
Think Rust Belt then NAFTA and soon TPP?
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New Normal #7
Wellbeing Increased Continually
 |
1. Society's continued stability has resulted in tremendous economic growth
which is
the key determinate of well-being.
Public safety net,
child
safety, and
adjusted poverty rate have all improved
dramatically since the
Gilded Age. Think
economic continued economic distress in
Russia, Europe, Japan and China.
2) Scientific achievements have continuously added to citizen well-being.
Think cured diseases, smart phones, streaming audio-video, Gillette Stadium ...
See
Health Problems Solved.
3) Personal Income increased continuously if not always rapidly
because nature and nurture improved the personal characteristics
needed to enhance wellbeing.
Think Russia, China, and
Europe's really slow recovery from the Great Recession. Source
Is The Country In Trouble,
Will Stagnate Income Hurt Our Children and
Recent
Decades Ranked By Problems.
see
Crisis of
Capitalism 11:10 video is an interesting Marxian view i.e.
Bernie Sanders
Return to page 1 Send thoughts to
antonw@ix.netcom.com |
New Normal # 8 Asian
Competition
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|
1. The Good
Cold War to 1980
AD > AS
Full Employment Goal =
Inflation, Debtors Paradise
US
Credit Expansion
equates AD with AS. |
2. The Bad
Neoliberal Economic Reset 1980-2008
AS > AD
Business Responded to Inflation
Led to
Deflation. a Creditors Paradise
|
3. The Ugly
Reactions to Neoliberalism
2008-
Sustained
Deflation
Created Winners-Losers
Globalization Failed
Pickett's R > G
Back to Equilibrium with Increased Income Inequality |
|
to 1980
Politics
Strong Unions
Restricted Labor Markets
Central Government Strong
Central Bank Weak
Finance Weak
|
1980-2008
Politics
Weak Unions
Open Flexible
Globalized Labor Markets
Government Less
Economic Responsibility
Central Bank
More
Economic Responsibility
Finance Strong |
2008-
Politics
Lack of Bank Regulation
High
Leverage
Short-Term Reserves Were in
Euros
When Dollar Were Required
Academic Economist Ignored Economic Effects of Financial
Market
|
Economics
Sustained Inflation
Wages Got All-Time High
Capital Got All-Time Low
Real Debt Decreases
Inequality Low |
Economics
Secular Deflation
Labor Got All-Time Low
Capital Got All-Time High
Inequality High |
Economics
Government Helped
Top and Bottom
Creating Middle Income Envy
|
Economic
Theory |
Manorialism
had Lords with
legal economic power supported financially from his landholdings with legal obligatory contributions of the peasantry. |
Tariffs increased powerful, helped private "infant"
industries. Trade was limited
with
industrial specialization
providing
growth.
|
Private property, individual liberty
|
backed by a
constitutional
Democracy. |
Property/Contract Rights
eventually yield to
human
Rights/Liberties
See
Lochner v. NY |
Free Markets Rule
GATT Globalism
WTO aid Agriculture |
Nationalistic
Backlash |
|
Surplus |
Agriculture + Gold +Luxuries |
|
Diseases Cured, Basic Necessities |
Preventive Medicine |
Retirement |
|
Oligarchs |
Church + Monarchy +Guilds
+Traders
+ Merchants |
+ Corporations |
Wealthy Few +
Politicians |
+ Interest Groups |
+ Social Media
moguls |
|
Control
Method |
Eternity in Hell or Heaven+
Physical
punishment |
+ Economic Rewards |
+
Political Rewards
|
+ Self Interest |
|
Work Structure |
Wool Weaver Households |
Cotton Factory Workers |
Unionized Manufacturing Workers |
|
|
Taxpayers |
Surfs + Farmers + Guilds
+Bankers +Importers |
|
+ Corporations |
|
+ Individuals |
|
Waste |
+ Military
Spending |
|
|
+ Education Spending |
|
Oligarchs Provided |
Safety |
+
Infrastructure |
|
+ Sanitation + Health |
+ R&D +
Universal Education
|
+
Education + Security |
|
Oligarchs |
Anarchy |
|
+ Trade Unions |
|
+ Government Replace Unions |
|
+Social
Networks |
|
Key Asset |
Land + Gold |
Natural Resources + Transportation |
|
|
Energy Source
|
Humans Animals, Water, Wind
|
+ Steam
|
+ Electricity |
+ Oil |
+ Atom
|
+ Nature |
|
Key Exporters |
India, China |
+ England |
+ US + Germany |
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|
