What is Occupy Wallstreet?

[Lissa]

Well, looking up how Real GDP/capita is calculated, then Kan's comment about wanting wages at 50% of 10k or 43% of 50k is actually a strawman argument...

I know how you want it to look, that we are worse off, but it doesn't look that way. It looks like we are slightly ahead (after taxes due to GWB and Obama tax cuts).

How can you say we're not worse off? The middle class is shrinking, the lower class is growing, the upper class is only slightly increasing. That doesn't sound at all like we're better off.

And, mysteriously enough, 2000 is about the time when I started talking about phantom growth (i.e the internet bubble was phantom capital that disappeared, the housing bubble was phantom capital that also just disappeared.) The financial institutions for some reason want us to believe that all is well and good, but I don't think it is. Something tells me that pensions are being looted, and retirement accounts based on the market continue to be at risk.

Hate to say it, but the pensions have already been looted. There's information out there and reports that show exactly that. The laws were written in such a way that a certain percentage of a pension could be retained by the prior company when said company sold or merged with another company. This means that a lot of top level executives were looting their company pensions and the workers got screwed. The overall problem is it was 100% legal because of how the laws were written by Congress.

But... This is a recent problem, and one that is correctable with the CORRECT leadership. We cannot suffer anymore of the funny US Treasury/Federal Reserve/Big Banks chicanery. I don't think this kills the American Dream. It certainly kills my faith in DC politicians to look out for my best interest.

Maybe, but I doubt that. The damage has been done and a clip I saw from MSNBC that was quite heated, but also quite true, real shows what needs to happen, that being that we need a TR right now to come in and clean out Congress because everyone there is bought, both sides of the aisle and those inbetween (the independents and few libertarians in there). Every single Congressman needs to be kicked out and legislation needs to be put in to make lobbying illegal (along with the government paying for the staff of each Congressman).

[Jester]

How can you say we're not worse off? The middle class is shrinking, the lower class is growing, the upper class is only slightly increasing. That doesn't sound at all like we're better off.

If classes are expressed in relative, not absolute terms, then there is no contradiction there. Inequality can be up, but everyone can also be richer.

And, in absolute terms, everyone is richer, with a downward bump around 2008 that puts us back to the mid-2000s in terms of wealth, but still far above the 1950s...

-Jester

[Lissa]

How can you say we're not worse off? The middle class is shrinking, the lower class is growing, the upper class is only slightly increasing. That doesn't sound at all like we're better off.

If classes are expressed in relative, not absolute terms, then there is no contradiction there. Inequality can be up, but everyone can also be richer.

And, in absolute terms, everyone is richer, with a downward bump around 2008 that puts us back to the mid-2000s in terms of wealth, but still far above the 1950s...

-Jester

Is everyone really richer or are things more affordable? Remember, what is considered a necessity today wasn't so in the 1950s. Likewise, if you look at the differences in what things cost back then and what loans were like then, it's very different from now (for example, it wasn't uncommon for home loans to be in the 15% to 17% range back in the 1950s compared to today when they are in the 4% range). So, are we really richer or are things just cheaper?

[Jester]

Is everyone really richer or are things more affordable?

I don't know if you ever studied economics, but this is incoherent. It's like asking "Is this fraction bigger? Or is the denominator just smaller?" Six of one, half a dozen of the other.

What matters are the goods you can command. If everything is twice as affordable, then you are twice as rich.

-Jester

[Lissa]

Is everyone really richer or are things more affordable?

I don't know if you ever studied economics, but this is incoherent. It's like asking "Is this fraction bigger? Or is the denominator just smaller?" Six of one, half a dozen of the other.

What matters is the goods you can command. If everything is twice as affordable, then you are twice as rich.

-Jester

Not true. Consider the following. An IBM XT computer in the early 80s cost $2.5k (for simplicity, I'm not going to throw in inflation). Now, take an equivalent machine today, a calculator, and it costs $50, if that. Does this mean just because I could buy 50 calculators instead of one XT I'm richer? No, it doesn't. This is the point I'm making. If goods are cheaper, does that mean we're richer? Not necessarily. All cheaper goods mean is that they're more accessible, it doesn't mean that consumers are richer.

[Jester]

All cheaper goods mean is that they're more accessible, it doesn't mean that consumers are richer.

And I am telling you that this is absolutely, 100%, dead wrong.

-Jester

[Lissa]

All cheaper goods mean is that they're more accessible, it doesn't mean that consumers are richer.

And I am telling you that this is absolutely, 100%, dead wrong.

-Jester

So people in Asia getting paid $1/day and while having a cell phone means they're richer?

[Jester]

So people in Asia getting paid $1/day and while having a cell phone means they're richer?

Richer than what? You can't ask me if they're better off without giving me something to compare against.

-Jester

[Lissa]

So people in Asia getting paid $1/day and while having a cell phone means they're richer?

Richer than what? You can't ask me if they're better off without giving me something to compare against.

-Jester

The point I'm making is just because something is more accessible does not connotate being richer. Just because manufacturing costs come down does not make everyone suddenly richer because of it. Lower manufacturing costs means things are more accessible. Accessibility does not connotate being richer.

Do you think just because Henry Ford figured out the assembly line, making it easier to produce cars quicker suddenly made everyone in early 20th century America richer all the sudden because the price on Ford autos fell because manufacturing them was cheaper?

This is the point of my contention. Accessibility =/= richer society.

[Jester]

Do you think just because Henry Ford figured out the assembly line, making it easier to produce cars quicker suddenly made everyone in early 20th century America richer all the sudden because the price on Ford autos fell because manufacturing them was cheaper?

Yes. Henry Ford made 20th Century America substantially richer by reducing the cost of cars. People who wanted cars, but could not afford them, could now purchase them - which is wealth. People who used to purchase cars at an expensive price, then purchased them at a cheap price, freeing up resources to be spent elsewhere - they became wealthier.

This is the single most elementary concept in economic growth. I do not see how this is even slightly contentious.

This is the point of my contention. Accessibility =/= richer society.

We agree entirely on the point of contention: whether lower prices for goods mean that society is richer, or not.

You have yet to provide anything resembling a counterargument. You are repeating your (incorrect) claim, with a question mark at the end, and when I say exactly what I've said before, you rinse and repeat. Lower prices means more purchasing power - which is the very definition of wealth.

-Jester

Afterthought: Do you have an answer to my question about the case of the poorly-paid Asian worker and their cell phone? It might be instructive.

[eppie]

But... This is a recent problem, and one that is correctable with the CORRECT leadership. We cannot suffer anymore of the funny US Treasury/Federal Reserve/Big Banks chicanery. I don't think this kills the American Dream. It certainly kills my faith in DC politicians to look out for my best interest.

So are these values corrected for the federal debt? I mean if all countries will have to really balance their checkbooks the wealth of many rich countries will decrease. More than you think. When wealth is distributed more equally in the world cheap labour becomes much less cheap making our consumption patterns much less sustainable (read more expensive).

[Jester]

When wealth is distributed more equally in the world cheap labour becomes much less cheap making our consumption patterns much less sustainable (read more expensive).

No. Wages are determined by marginal productivity. In the aggregate, people do not get paid more than they produce - this is impossible, else, what are they being paid in?

The extra production compensates, goods for goods and services for services, for the lost "cheap" labour. Nobody gets poorer when the poor get richer. Some goods which are most easily produced by extremely poor people and which are difficult to mechanize (clothes?) will get more expensive, but everything else will get cheaper.

-Jester

[eppie]

No. Wages are determined by marginal productivity. In the aggregate, people do not get paid more than they produce - this is impossible, else, what are they being paid in?

The extra production compensates, goods for goods and services for services, for the lost "cheap" labour. Nobody gets poorer when the poor get richer. Some goods which are most easily produced by extremely poor people and which are difficult to mechanize (clothes?) will get more expensive, but everything else will get cheaper.

-Jester

Look at this globally. Our consumption the west is so over the top only because we have the ability to get stuff for very very cheap.
In poor countries labour laws and environmental protection are non existant. Once people get richer they will want to have a goof life and they will start worrying about having clean drinking water or air to breath.
This is of course all increased by the running out of resources.
What I see that is gettng more expensive:
-food
-oil
-any commodity
-clothes
-gadgets
-energy

[Jester]

Look at this globally. Our consumption the west is so over the top only because we have the ability to get stuff for very very cheap.
In poor countries labour laws and environmental protection are non existant. Once people get richer they will want to have a goof life and they will start worrying about having clean drinking water or air to breath.
This is of course all increased by the running out of resources.
What I see that is gettng more expensive:

(Practically everything)

This is the "we must pay for our sins" school of economics, and I'm afraid it doesn't make much logical sense. The United States is not poorer since Germany is rich. Why, then, would they be poorer if China was rich? If people in other countries are richer, it is because they can produce more. If they produce more, then the price of goods goes down, not up. There will be readjustments of relative prices (notably, the price of unskilled, non-mechanisable, products will go up: haircuts and clothing, for instance) but overall, prices of stuff relative to labour will go down - we will be wealthier. It will take fewer hours of our time to buy a given standard of living.

Commodities, I'm fairly bullish about. Energy prices will go up, but that will lead to efficiency gains. People will waste less, because it's expensive, and we will find ways to prioritize. Fossil fuels will be redirected to the places where their marginal impact is high, and everything else will run on electricity, produced through renewable or long-lasting sources. If metals get expensive enough, we'll just go to space to get them - asteroids aplenty. Remember the Simon-Ehrlich bet - prices do not climb forever, because prices express relative, not absolute, scarcity.

Environmental issues are important, but something else entirely - our ability to produce cheap stuff is not going to deteriorate, even as we push our planet further and further. But, until the day we tip ourselves over the edge, our productivity and wealth will continue to increase. Indeed, that's why environmental issues scare me more than resource shortages - there is no automatic economic mechanism for solving those problems.

-Jester

[kandrathe]

So are these values corrected for the federal debt? I mean if all countries will have to really balance their checkbooks the wealth of many rich countries will decrease. More than you think. When wealth is distributed more equally in the world cheap labour becomes much less cheap making our consumption patterns much less sustainable (read more expensive).

The numbers I listed are GDP per person, which is a rough measure of the final value of goods and services produced in a year, along with income, and family income. The growing gap is showing that while productivity is growing, the wage earners (& family) share is growing more slowly (at times keeping just ahead of inflation).

Part of the problem is explained by demographics, in that 2010 is 65 years after the baby boom began, and theoretically the first boomers will begin to retire. So, consequently, 2010 was the year that had the maximal number of workers in the economy. Now, as boomers retire, and there are fewer replacements, the value of labor should increase between now and 2030. The downside is that we are broke, just as the costs for caring for the boomers will begin to increase. The current recession has been a set back too, creating about 30 to 40 million job shortfall which we need to "make up".

As for "national net worth"... The US rough GDP per year is $14.5 trillion, and the gross debt is about $15.5 trillion and growing between a half to 1.5 trillion per year. If we could reduce spending or increase taxes enough, we could pay it down substantially in a decade or two. The hidden problem is the $100 trillion we have yet to pay for in unfunded liabilities (due to pensions, and social spending promises). I've proposed before that our government might be trying to inflate our way out of debt, making today's problems shrink away, bringing with it high inflation. We, like many other countries, have leveraged our future, and hopefully the gamble was worth it. I think it is a bit irresponsible to not ensure that the borrowed money is truly invested in things that will have a pay back down the road (e.g. infrastructure that helps the economy).

So, looking again at the previous graph, increasing taxes (or letting GWB & Obama tax cuts expire) would reduce everyone's take home pay, but begin to curb a bit of the deficit. It might also slightly impinge on the economy, because I feel that government spending first had to take the money from an economy discerning person or business.

I'm elated that China's success has lifted 300 million people out of poverty. I'm a little chaffed that they manipulated their currency and destroyed a bunch of the US and Europe's manufacturing capacity. But, as Jester said, wealth is not a zero sum game. They took a shortcut, and burned us a little. Their gain was not at our expense, even though it may seem that way.

Our problem is that the world has changed, and we are still expecting it to be as it was right after WWII. There was no competition to US manufacturing, so we could afford to be extravagant with regulations and the cost of labor. There was no where else the capital could go, and being that they had a monopoly, they could afford to let prices on everything go up. Naturally, now the capitalists have gone to where the labor is cheapest and the regulations are the least restrictive.

When I think about sustainable, I think about two things. The abundance of the resource, and the impact of it's acquisition and use. Some natural resources are limited, so we may not be able to make everything we want, but we are innovative enough to use substitutes. And, like Jester, I'm worried about how a more productive world will affect the environment. There is a direct correlation between a nations wealth, and its consumption of energy. This is what makes me sleepless sometimes.

[Jester]

As for "national net worth"... The US rough GDP per year is $14.5 trillion, and the gross debt is about $15.5 trillion and growing between a half to 1.5 trillion per year. If we could reduce spending or increase taxes enough, we could pay it down substantially in a decade or two. The hidden problem is the $100 trillion we have yet to pay for in unfunded liabilities (due to pensions, and social spending promises).

None of that is hidden. It's all right there in the budget. The increase in the debt includes, rather than excludes, the payments on the "unfunded" liabilities (whatever a funded liability is - a liability where you have a mountain of gold waiting in a vault to pay it back?)

Just think of it as a part of the budget. Makes it much easier.

I've proposed before that our government might be trying to inflate our way out of debt, making today's problems shrink away, bringing with it high inflation.

We can only dream. Sadly, attempts at generating inflation (and, just maybe, the accompanying fall in unemployment) have turned out to be almost useless. The US is still stuck with near-deflation, record unemployment, and stagnant nominal growth.

-Jester

[kandrathe]

None of that is hidden. It's all right there in the budget. The increase in the debt includes, rather than excludes, the payments on the "unfunded" liabilities (whatever a funded liability is - a liability where you have a mountain of gold waiting in a vault to pay it back?)

Just think of it as a part of the budget. Makes it much easier.

Maybe "hidden" is the wrong word. It is more that media, and therefore politicians are myopically focused on the present deficit and budget (when not blathering about the Republican's game of circular firing squad.) There is a future decade or two of dwindling tax revenues, and increasing social spending which needs resolving. Revenues from individuals will decrease, and the total number of wage earners decreases. Unless, they get sensible with immigration policies, and start attracting the best and the brightest workers now to come to the US. This can only happen if we preserve the US as a place where corporations want to be, and hire people. Otherwise, we end up in a downward spiral, where companies leave, our productivity drops, tax base weakens further, infrastructure fails, and then... bedlam.

I've proposed before that our government might be trying to inflate our way out of debt, making today's problems shrink away, bringing with it high inflation.

We can only dream. Sadly, attempts at generating inflation (and, just maybe, the accompanying fall in unemployment) have turned out to be almost useless. The US is still stuck with near-deflation, record unemployment, and stagnant nominal growth.

I'm afraid that when the match on our economy is finally lit, pent up inflation demand will explode beyond what they can handle. We'll have to wait and see.

[Jester]

Otherwise, we end up in a downward spiral, where companies leave, our productivity drops, tax base weakens further, infrastructure fails, and then... bedlam.

There has never once been a single case of an industrially developed nation entering into such a death spiral. While that does not mean it's theoretically impossible, the USA today (and going forward) is richer than almost every nation in history. What are the odds it is going to fall completely to pieces? I'd say vanishingly small. If Britain survived the 1970s, and Japan the 1990s, surely the US is going to survive the 2010s and 2020s?

I'm afraid that when the match on our economy is finally lit, pent up inflation demand will explode beyond what they can handle. We'll have to wait and see.

We've been doing a lot of waiting, and not a lot of seeing - it's been over three years since the crisis and the first injections. At what point to you keep waiting, and at what point do you abandon the model that generated the expectations that do not match the evidence?

-Jester

[kandrathe]

There has never once been a single case of an industrially developed nation entering into such a death spiral. While that does not mean it's theoretically impossible, the USA today (and going forward) is richer than almost every nation in history. What are the odds it is going to fall completely to pieces? I'd say vanishingly small. If Britain survived the 1970s, and Japan the 1990s, surely the US is going to survive the 2010s and 2020s?

There is historical precedence, though, when looking at empires. The USA is not so much an empire of conquest, but one of economic and military influences and alliances. Our grip on "power" may loosen, and we become more irrelevant, and then it is possible that Asia will become more influential (having most of the worlds population). I'm not saying it's going to be like the barbarians at the gates of Rome, but we've been one of the clarion calls in the world for democracy, freedoms, and human rights. Even though at times, our overt, and covert actions are completely hypocritical. It is possible that the "new sheriff" won't share our values.

I'm afraid that when the match on our economy is finally lit, pent up inflation demand will explode beyond what they can handle. We'll have to wait and see.

We've been doing a lot of waiting, and not a lot of seeing - it's been over three years since the crisis and the first injections. At what point to you keep waiting, and at what point do you abandon the model that generated the expectations that do not match the evidence?

I'm waiting for a period of sustained economic growth. Unless, you were talking about "what the Fed is trying to do" -- which I would say is simple... They've done their utmost to influence the factors possible through monetary policy. What is lacking is action by Congress to make dramatic changes in political policies to "encourage" growth. Most everything they've done so far has been a wash. Yes, we had some stimulus, but that has been undone by costly changes to regulations now endured by US companies. Reserving the argument on the necessity of the changes, the timing was horrendous. It made a bad situation worse, and then deflated the sails once the economic winds began to change. Speaking of deflating the sails... We are encountering a 2nd stumble in the recovery now, as worries over Europe's issues cause our side of the pond to remain entrenched and over cautious. This time, it's not the Congress and Obama's fault. Although, I feel he has failed to lead an economic progress over the past 6 months. The super committee was a colossal blunder, and who ever had that (unconstitutional) idea should be resigned. We need all Congress and the President to stick their political necks out, take positions and defend them, so that we the voters can decide which duds to toss out in 2012.

I would also add that here is an example of why federalism works better than a strong central government. Now we have both 40 to 45 messed up State's budgets, and a messed up Federal budget. I'd opt for just the 40-45 messed up States budgets. It's amazing to me how the Republicans have shifted closer and closer to Ron Paul's position, now if only they would embrace his stance on US foreign policy.

[Jester]

There is historical precedence, though, when looking at empires.

Britain and France each lost empires, and they seem no worse for wear. Neither does democracy, for that matter.

I'm waiting for a period of sustained economic growth.

To abandon or reinforce a hypothesis about inflation? Why does that make sense?

-Jester