Panic of 2008

Summers: Economic Inequality a Problem, but not the Fed Chair's Responsibility

Well, OK, I'm summarizing. I was startled to read at Agent Orange that Summers was a progressive thinker because Summers recognizes the massive increase in economic inequality that has taken place over the past three or four decades:

It would be, however, a serious mistake to suppose that our only problems are cyclical or amenable to macroeconomic solutions. Just as evolution from an agricultural to an industrial economy had far reaching implications for society, so too will the evolution from an industrial to a knowledge economy. Witness structural trends that predate the Great Recession and will be with us long after recovery is achieved: The most important of these is the strong shift in the market reward for a small minority of persons, relative to the rewards available to everyone else. In the United States, according to a recent CBO study, the incomes of the top 1 percent of the population have, after adjusting for inflation, risen by 275 percent from 1979 to 2007. At the same time, incomes for the middle class (in the study, the middle 60 percent of the income scale) grew by only 40 percent. Even this dismal figure overstates the fortunes of typical Americans; the number unable to find work or who have abandoned the job search has risen. In 1965, only 1 in 20 men between ages 25 and 54 was not working. By the end of this decade it will likely be 1 in 6—even if a full cyclical recovery is achieved.
...

 
There is no issue that will be more important to the politics of the industrialized world over the next generation than its response to a market system that distributes rewards increasingly inequitably and generates growing disaffection in the middle class. ...

Topic: 

Column: 

3

'Fixing' Social Security in One Step: Fix the Economy.

So, the Serious People in The Village, run clear across the ideological spectrum from hard right to center right, are telling us that even if we do not like the Social Security benefit cuts that they propose ...

... and among the Serious People the only difference is how deep they want to cut benefits and whether they want to cover up the fact that they are cutting benefits under verbiage that they would prefer to be opaque but which is all too transparent ...

... but we have to do it because otherwise the trust fund will be exhausted in the late 2030's.

Is this from a correctly functioning crystal ball? They talk as if it is, but at the same time there is no secret that these are simply projections. These projections are projecting forward from the way we are running our economy at present. So change the rules of the game, we change the projection.

Topic: 

Column: 

3

Economic Populist: CBO, on the public dime, peddles BS to the public.

Burning the Midnight Oil for Economic Populism

Yves Smith at the excellent and insightful Naked Capitalism has recently been taking at a close look at the role of the Congressional Budget Office, the vaunted "CBO", in the "fiscal cliff" scam that the corporate aristocracy is attempting to perpetrate on us mere commoners.

Topic: 

3

Economic Populist: Capping Bush Tax Cuts fixes over half of fiscal problem

Burning the Midnight Oil for Economic Populism

Among the many things entirely lost in the mainstream media coverage of the "fiscal cliff" are the nature and magnitude of the country's fiscal challenge. The magnitude is why it is not a crisis, and the nature is why we would be better off "just doing nothing" ~ letting the whole Bush tax cuts expire and scrapping the zombie spending cuts ~ is better than the vast majority of "fixes" floating around in the mainstream media.

Topic: 

3

Economic Populist: Glass-Steagall Is Not Enough Anymore

Burning the Midnight Oil for Economic Populism

From Treasury and Risk: "U.S. Banks Spawn 10,000 Units":

The biggest U.S. banks created more than 10,000 subsidiaries in the past 22 years as they expanded, using legal structures to pay lower taxes and escape tighter regulation, according to a Federal Reserve study.
...
Critics including Thomas Hoenig, a Federal Deposit Insurance Corp. board member, say the biggest firms are too complicated to manage. The 2010 Dodd-Frank Act asked the FDIC and Fed to make sure the largest banks, if they get into trouble, can be wound down without collapsing the rest of the financial system. U.S. Senator Sherrod Brown has proposed legislation to force their breakup.
...
The 1999 repeal of the Depression-era Glass-Steagall Act was the main catalyst for the biggest banks getting bigger, the Fed study concluded. The assets of the largest lenders have since tripled to $15 trillion. Hoenig has called for reinstating Glass-Steagall, which separated investment and commercial banking, while Brown’s proposal would limit asset size.

Topic: 

0

Economic Populist: Why Is Europe's Economy Imploding?

Burning the Midnight Oil for Economic Populism

(NB. This is a copy and paste of what started as a "blog post". See also the original blog post for some excellent contributions by commentators there)


The European Union is in a world of hurt right now, as economies go. The crises in Greece and elsewhere are becoming famous, and latest confidence surveys from Germany (pdf) suggest Germany is risking recession.

The problem? The system was built broken, based on unfounded fantasies about how real world economies actually work. Or, as John Maynard Keynes said nearly a century ago:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

Topic: 

0

Why Is Europe's Economy Imploding?

The European Union is in a world of hurt right now, as economies go. The crises in Greece and elsewhere are becoming famous, and latest confidence surveys from Germany (pdf) suggest Germany is risking recession.

The problem? The system was built broken, based on unfounded fantasies about how real world economies actually work. Or, as John Maynard Keynes said nearly a century ago:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

Topic: 

0
Subscribe to RSS - Panic of 2008