Harold Meyerson has a lucid, insightful column in the Washington Post today about the recent financial mess:
The key lesson Americans need to learn from today's troubles is how to distinguish faux prosperity from the genuine article. Over the past hundred years, we've experienced both. In the three decades after World War II we had the real thing. Led by our manufacturing sector, productivity increased at a rapid clip and median family incomes rose at a virtually identical rate. The value of the American work product grew significantly and that value was shared with American workers.
But we've had other periods of apparent prosperity that were based not on broad increases in personal income but on the inflation of assets. So it was with stocks in the late 1920s, a time when most Americans lacked substantial purchasing power. So it was with the dot-com bubble of the late '90s. And so it was with the rising value of American homes in recent years.
...
... And out of this debacle emerge two paramount lessons for our highest-ranking policymakers: Regulate the American financial sector, which is now turning to the government for a bailout. And commit the government to doing all in its power to generate broad-based prosperity, through laws enabling workers to bargain collectively, through a massive public commitment to projects "greening" the economy, through provision of universal health coverage and affordable college educations.
Comments
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Gar Lipow Posted 4:24 am
20 Mar 2008
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amazingdrx Posted 4:40 am
20 Mar 2008
No more corporate welfare and hedge fund disaster bailouts. No more currency devaluation and runaway inflation to bail out corporate crime.
Don't let these corpoRATS get their hands on the climate through carbon trading. Like they got their hands on people's homes, through hedge fund scamming.
http://amazngdrx.blogharbor.com/blog
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sindark Posted 4:48 am
20 Mar 2008
a sibilant intake of breath
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John Dewey Posted 6:12 am
20 Mar 2008
For this reason, many economists believe inflation has been significantly overstated for at least 30 years.
http://query.nytimes.com/gst/fullpage.html?res=9C00E5D616 ...
http://www.pittsburghlive.com/x/pittsburghtrib/s_425055.h ...
http://www.qando.net/details.aspx?Entry=3606
If these economists are correct - if inflation has been overstated for decades - then comparisons of median real incomes over those three decades are flawed.
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anotherID Posted 6:30 am
20 Mar 2008
Since 1992 when PPI & CPI was re-jiggered to reduce COLA costs on SS, it has been significantly understated. BTW, nice article from 1997...
http://www.shadowstats.com/
Try reading Barry Ritholtz...
More non-reality based nuttery as BR would say.
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Gar Lipow Posted 9:30 am
20 Mar 2008
First I will note that the consumer price index used to calculate social security was recalculated in a way that lowered the rate of increases some time ago on just this theory - but that inflation indexed bonds use the old method. In short, the bond market does not think inflation is overstated.
To see why, let's look at computers getting cheaper for the same amount of power. There are two reason why this is not anti-inflationary.
One reason is that computers were once a luxury for most individuals, and even for many businesses. When something moves from luxury to necessity, price drops don't necessarily lower the cost of living. I would say that the majority of office jobs these days require you to have home computer.
The other is that a lot of the value of computers is their ability to exchange information with other computers. A surviving XT which you once might have paid a thousand dollars for is now toxic waste someone might pay you to take away. But the problem is you would be able to read almost no files generated by other computers, you would have one hell of time surfing today's internet. Given the size of emails and the prevalence of spam, you might even have trouble accessing email - though there might be ways to work around that. An Xt was a lot more valuable when other people were using XTs too.
Another excuse that is sometimes used substitutability. "If the price of pork goes down people can buy chicken." Notice how healthy that example is. In reality the price of chicken has risen and the price of pork has dropped - not quite such a healthy substitution. Note also that this suddenly drops a point right wing economists usually insist on - that economics does not judge preferences. All of the sudden, they are saying the peoples preferences for A over B is not enough reason to treat B as less valuable than A. Which might be fine if they took that position on anything else. In point of fact, there are reasons to think inflation is understated - because the types of adjustments that I'm saying are invalid are being used to some extent.
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Pangolin Posted 9:36 am
20 Mar 2008
The fact that you can buy an I-pod with 80 gigs of memory is irrelevant if you are sleeping in your car because you cannot afford housing due to health problems. How many people just do without health care nowadays? I'm one of those.
Cash flow economics is crap because the money is entirely fictional. It's a consensual hallucination that your greenbacks have more value than your paperbacks. Manipulation by elites renders the calculations of cash flow economists moot.
The only scientifically valid economics is energy flow economics. The amount of heat is takes to boil a liter of water is the same (at sea level) anywhere in the world. Ben Bernanke cannot change the thermal value of your 20 lb bag of charcoal from New York but he can surely devalue that c-note in the back of your wallet.
The biggest problem with fiat money IMHO is that it leads to poor decision making about energy flows and environmental costs of human actions. We don't register the "socialized costs" of burning coal until it is far too late to easily correct them.
People feel broke because they ARE broke and no amount of finger pointing at their flat screen TV's will convince them otherwise. Selling the TV will not pay the mortgage or the doctors bills and they know it.
Put the Carbon Back
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anotherID Posted 9:46 am
20 Mar 2008
And deflation in the things we want. (cheap, toxic electronics, stucco boxes, paper assets, surfboards from China, etc.)
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SMLowry Posted 3:48 am
21 Mar 2008
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amazingdrx Posted 4:21 am
21 Mar 2008
"It is mainly just commodity inflation, real estate is deflating."
He wants more rate lowering and bailouts from the fed. Caring not a bit that "commodity inflation" is at the base of all inflation in everything we buy. Lowering the buying power of our real wages and our standard of living.
Hedge funds have shifted scamming in the mortgage realm to scamming in corn/ethanol related farmland. They are pushing up another bubble, and another crisis, this time targeted at farmers.
http://amazngdrx.blogharbor.com/blog
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anotherID Posted 6:30 am
21 Mar 2008
Developing nations hunger for more protein and BIOFUELS!
A food BTU and an energy BTU will reach price parity on way or the other.
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John Dewey Posted 10:51 am
21 Mar 2008
As sindark pointed out, the value we recieve per $ for so many consumer items has greatly increased since the mid-70's. Economists argue that common inflation statistics do not take this better quality of goods into account. One example of higher quality goods is the standard automobile, which once had an economic life of about 120,000 miles but now are driven for twice that much.
Because inflation indices determine benefit amounts for retirees and many who receive other government assistance, it has been politicaly difficult to make rational changes to those indices.
Why is the inflation rate so relevant to this current topic? Because the conversion of prior wages to today's dollars determines whether median wages have increased or declined. IMO, if inflation had been properly measured from 1970 until today, BLS wage statistics would show a significant increase in wages for most jobs.
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amazingdrx Posted 1:46 pm
21 Mar 2008
http://amazngdrx.blogharbor.com/blog
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