Showing posts with label median wage. Show all posts
Showing posts with label median wage. Show all posts

13 May 2015

Stiglitz: Why Western Capitalism Has Been Failing Since 1980


As I had written some time ago in the The Fall of the American Republic: The Quiet Coup:
"I am not so optimistic that this reform is possible, because there has in fact been a soft coup d'etat in the US, which now exists in a state of crony corporatism that wields enormous influence over the media and within the government.

To be clear about this, the oligarchs are flush with victory, and feel that they are firmly in control, able to subvert and direct any popular movement to the support of their own ends and unslakable will to power.

This is the contempt in which they hold the majority of American people and the political process: the common people are easily led fools, and everyone else who is smart enough to know better has their price. And they would beggar every middle class voter in the US before they will voluntarily give up one dime of their ill gotten gains.

But my model says that the oligarchs will continue to press their advantages, being flushed with victory, until they provoke a strong reaction that frightens everyone, like a wake up call, and the tide then turns to genuine reform."
 
The article which I wrote was based on the insightful and largely ignored work by renowned economist Simon Johnson called The Quiet Coup.
 
This lecture by Stiglitz below is a little 'wonky' and uses some terminology which may be unfamiliar.

Nevertheless if you listen to it and just try to capture the main points of his discussion it will be worthwhile.
 
His basic premise is to ask why capitalism has shown a tendency to stagnation since 1980 in the United States and other parts of the West.
 
I am, as you know, an adherent to the belief that there has been a soft coup d'état in the US.  One can always quibble about the exact dates, but that is of less importance.   I have said it was shortly after Greenspan's 'irrational exuberance' speech, although the stage was certainly set for this during the 1980's with the rise of the efficient markets hypothesis, the assumption of rational wealth optimizers in the markets, and of course, the laughable supply side economics which are the old trickle down canard in drag.
 
The point, rather, is to understand what has happened, to continue to shine a light on it, and to hope that Simon Johnson is correct, that the overreach of the 'winners' will eventually provoke a reaction. 
 
Quite frankly I had thought it would have come by now.  One can rarely go wrong betting on the power of apathy and momentum, and the persistent greed of the sociopaths and their enablers.
 
After all, in the aftermath of a tragic derailment of the flagship train line in the US from Washington to Boston that could have been prevented by continuing investments in fundamental railroad infrastructure, the House of Republicans have voted to further slash Amtrak funding by $260 million. 

They are instructed to hate anything that benefits the public without putting an abundant stream of income into the pockets of their corporate money masters.  This explains their virulent animosity to Social Security, public transportation, public healthcare, public education, public infrastructure, consumer protections, environmental laws, safety regulations, product safety measures, and any sort of financial regulation that inhibits the greed and power of the Banks.

And we should be ashamed for continually standing quiet in the face of such pathological incivility.
 
But I can almost guarantee that if this crash had been the result of some sort of despicable act of terrorism for example, the public coffers would already be wide open, flowing with a Niagara of funds for homeland security and the militarization of domestic law enforcement.   Millions for the corporatized state, but little or nothing for the people.
 
I am increasingly concerned that, as has happened so many times in the past, the status quo will greet this eventual reaction for reform, justice, and equality with repression and even draconian measures to maintain what they perceive as their rightful place and power. 
 
Like apathy and momentum, it is also difficult to underestimate the self-delusion and overreach of sociopaths who would be as gods, even if they are gods of the damned.

History is replete with examples.
 





Why There Has Been No Recovery In One Simple Chart - A Harvest of Corruption


"The money was all appropriated for the top in the hopes that it would trickle down to the needy."

Will Rogers, Nov 26, 1932


“Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.”

John Kenneth Galbraith


"It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud."

Charles H. Ferguson


“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Upton Sinclair


"In regards to the price of commodities, the rise of wages operates as simple interest does, the rise of profit operates like compound interest. Our merchants and masters complain much of the bad effects of high wages in raising the price and lessening the sale of goods.  They say nothing concerning the bad effects of high profits.  They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

Adam Smith, The Wealth of Nations

"What we have are asset PRICES being whipped up as median real wages deflate."




"The problem of the last three decades is not the 'vicissitudes of the marketplace,' but rather deliberate actions by the government to redistribute income from the rest of us to the one percent.   This pattern of government action shows up in all areas of government policy."

Dean Baker

If the people have no money, they may buy no goods, even essentials, without falling ever more deeply into debt.

That is not so difficult to understand.  Unless your paycheck demands that you not only cannot understand it,  but not even see it, or talk publicly about it. 


And we see the continuing attempts by the Congress itself to thwart and undo financial reform under cover of rhetoric and canards, so that they too might get paid by the moneyed interests.

The harlots of finance and economics will say, 'You laymen simply do not understand the mysteries of our science.  Wages always lag in a recovery.'

Seven years is some lag.   Unfortunately economics these days has less in common with a natural science than it has with marketing.   And at its worst, it has become a carney sideshow.

But we might feel better about all this uncertainty if the corruption and distortion that have become embedded in our laws and economic theories, that preceded this and led to a long term secular stagnation in median incomes, had been changed in any meaningful way since the financial crisis. 

And they have not.    But yet we marvel that our condition seems intractable, unsolvable.

This is the root of our problem.  It is old as Babylon, and evil as sin.  If we sow greed to the worst of our desires, we will reap a harvest of corruption.




09 December 2014

US Middle Class Wealth Has Collapsed, Consumed by the Gods of Finance


"As flies to wanton boys are we to the gods.
They kill us for their sport."

William Shakespeare, King Lear


“Reality denied comes back to haunt.”

Philip K. Dick, Flow My Tears, the Policeman Said

Let's file this under 'why aren't people buying things and saving more?'

Yes I know that wealth is not income. That is a small consolation when you don't have much of either.

The Recovery™ is like Equal Justice™ these days of the Pax Americana and Pax Brittanica.

It is reserved for some, and keeps two sets of books.

Median Household Net Worth is back to what it was in the 1960's.

At least we had better music then.

So who are you going to vote for this time?  Bush, or Clinton?

And may the odds be ever in your favour.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.




19 November 2014

Can You Help the Fed Figure Out What Is Wrong With The Recovery™



Why doesn't the public spend and save more?



"We are determined to make every American citizen the subject of his country's interest and concern; and we will never regard any faithful law-abiding group within our borders as superfluous.

The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."

Franklin D. Roosevelt, Second Inaugural Address


18 October 2014

No Recovery: Longest Sustained Fall In UK Real Wages In Recorded History


Why is there no sustainable recovery?

Because of the policy errors of the West to save the corrupt financial system, but abandon the people whom 'the system' is intended to serve.

You may read the story about why the Bank of England is likely to keep interest rates low, which accompanies this graph, in the Financial Times.




08 November 2013

Non-Farm Payrolls Report - Small Business Creation Boomed In October


Did new small business jobs creation boom in October during the government shutdown/default crisis?

Well, you might think so by looking at the Bureau of Labor Statistics 'Birth-Death' model report contained in today's October Non-Farm Payrolls Report.

According to the Birth Death Adjustment there were 126,000 jobs added in October. And what an October it was apparently. These are the most new jobs added for any October going back to 2003, which is as far back as my own spreadsheet goes.

A more usual number might be around 103,000 or less. So, someone thinks it was a strong October jobs market.

You can look at the historical Birth-Death Model numbers from 2000-2012 here. And there is a list of Frequently Asked Questions here.

As I have cautioned in the past, the Birth Death number is added to the Non-Seasonally adjusted number, and then seasonally adjusted. So it is not a 'pure addition.'

The Non-Farm Payrolls report contains very large numbers, on the order of 137+ million jobs which are estimated and deseasonalized, and then further revised for the next two months. So reacting strongly to a particular monthly jobs report is a bit of a Wall Street and political game.

What is more important is the trend in the number of jobs, and the quality of the jobs, both in hours worked and hourly compensation.

Another statistics worth noting is the Labor Force Participation Rate.  There is a fairly good commentary on that data from this Payrolls report here.  There was a similar issue with the Households Report since it dealt with the layoffs from the government shutdown differently than the headline NFP report. 

As an aside, when I hear some financier talking about 'the new normal,' as they were on financial television today, it makes me want to gag.  They are attempting to justify the results of their fraud and financial repression as a necessity, just business as usual. There is nothing 'normal' about this current economic environment.  We are in a financialized society where big money dominates public policy for its own ends.

Getting back to the Non-Farm Payrolls number, the big hoohah question is always, 'Is the government lying?' I think it is fair to say that they are certainly putting their best foot forward, in this and quite a number of things.

I am a little more concerned about the lies that take the US into wars of aggression to be frank. But economic deception can have very bad long term effects when coupled with bad economic policy decisions such as those we are seeing today, that are propagating and even increasing an inherently unstable economy.

All things considered, and not just the numbers in this report,  the recovery is weak, and real median wages do not support any sustainable recovery.  Inequity is increasing, and policy supports and subsidizes this growing inequality in both political and economic power.

Keep an eye on the real median wage, and you will have some indication on how the American public is faring. Although the calculation of inflation is fraught with the fog of politics. John Williams of Shadowstats has done some excellent work in this area.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

And that is the bottom line.




In this case the smaller the seasonality factor the bigger the jobs increase because the raw number is being divided by and reduced in September and October to arrive at the seasonal adjustment.  But there are so many estimates involved that the answer really lies in the trends and even more importantly the quality of the jobs.




04 January 2013

Wages: The Median and the Mean


The 'mean' is the average of all wages.

The 'median' is the wage in the middle, that is, what is earned by those people in the numerical middle of the population.

And the ratio of the median to the mean continues to fall, as the rich get richer, and a large part of the country is left behind, as a matter of policy.

This is the plight of 'the 47%.'



Source: SSA