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On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern?
Because the economy is a circuit, so the money there will flow everywhere anyway. The problem is on the role of savings (and thus on the reason as to why we save).
For old timer economists (before Keynes, but they were still dominant before the crisis) all savings are investment (S = I, note that it is always right in the long run), so altho rich save more (and consume less), they invest those savings, and the money flow back into the circuit anyway. It's the same idea as the infamous "trickle down" economics : rich people invest, create job, etc. Savings is never an economic problem in this scenario - it is quite the opposite, a bless for the economy (always linked with a moral point of view : saving is also a force of character, it is the ability of someone to control his desire for a time).
For Keynes, altho he tailored the idea of economic circuit, the situation is way more complex.
He put into light the idea of the consumption function (that you referred to) - the idea that the richest you are the more you consume, but that your marginal increase in consumption is declining (basically a poor guy consume 99% of his revenu, a rich consume more than the poor, but only 70% and thus save 30%). Then he asked what are the reason for savings, and showed that there are many. Out of those many type of savings, one in particular (hoarding) is seen as a flow of money that gets out of the circuit - savings in this situation can be bad (I'm simplifying a lot), the worst situation being the paradox of thrift (if everyone tries to save more money during times of economic recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth).
Since the rich save more, they create an economic problem.
I'm simplifying a lot, because those two point of view are vastly more complex and different : for exemple, the neo classical or classical point of view is never wrong in the long run (and if you put aside the fact that human are not computer and that reality is not perfect and pure) but for Keynes long run is uninteresting ("in the long run we're all dead") so there is a different point of view on time (but also on the "sociology" of the actor/ economic agent, on the idea of aggregation, etc.).
For modern economy, inequality create also problems that were not discussed by keynes or the classical and neoclassical economists, such as creating instability in the economic system, so the discussion is different today.
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On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern?
I'm not always so good at parsing the arguments of an opposing camp, but I don't think it'd be disingenuous to chalk up much of that thinking as an extension of "trickle down" economic arguments.
Edit: Just listen to WhiteDog 
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On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern?
For one thing consumer spending has consistently been strong. Even during the weak recovery consumer spending has kept up well. For the last few years the big laggards have been government spending and private investment, particularly in real estate.
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On August 06 2014 09:27 WhiteDog wrote:
all savings are investment (S = I, note that it is always right in the long run)
Sorry, I don't get why it is always right in the long run, can you explain?
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On August 06 2014 10:14 JonnyBNoHo wrote:Show nested quote +On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern? For one thing consumer spending has consistently been strong. Even during the weak recovery consumer spending has kept up well. For the last few years the big laggards have been government spending and private investment, particularly in real estate.
I would have thought that discretionary consumer spending (not food and other necessities) would have gone down quite a bit after 2008. I would also have thought that it would remain lower since consumers still aren't confident due to factors such as low job security.
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On August 06 2014 10:26 SnipedSoul wrote:Show nested quote +On August 06 2014 10:14 JonnyBNoHo wrote:On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern? For one thing consumer spending has consistently been strong. Even during the weak recovery consumer spending has kept up well. For the last few years the big laggards have been government spending and private investment, particularly in real estate. I would have thought that discretionary consumer spending (not food and other necessities) would have gone down quite a bit after 2008. I would also have thought that it would remain lower since consumers still aren't confident due to factors such as low job security.
It went down during the recession 08-12 and has gone up now. http://research.stlouisfed.org/fred2/series/PCEC96/
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Since Rep. Mo Brooks (R-AL) claimed on Monday that Democrats have launched a "war on whites," he has continued to explain how he thinks Democrats inject race into political issues.
Brooks initially made the remarks on Laura Ingraham's radio show.
"This is a part of the war on whites that’s being launched by the Democratic Party. And the way in which they’re launching this war is by claiming that whites hate everybody else," he told Ingraham, referring specifically to the crisis at the border.
Brooks stood by his characterization and told AL.com Monday that Democrats have been "attacking whites based on skin color."
"The Democrats routinely make appeals based on race and they get away with it. It's repugnant to ever make an appeal based on race," he said.
On Tuesday, Brooks told USA Today that "if you look at current federal law, there is only one skin color that you can lawfully discriminate against. That’s Caucasians — whites."
And in an interview on NewsmaxTV's "The Steve Malzberg Show" on Tuesday, the congressman made a similar comment.
“Embedded in federal statutes, what is the one race that can be discriminated against? As a matter of law. What is it?” he asked, according to a clip recorded by Mediaite.
“White males?” Steve Malzberg asked in response.
“Not just white males, but all whites," Brooks then responded.
Source
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On August 06 2014 10:26 SnipedSoul wrote:Show nested quote +On August 06 2014 10:14 JonnyBNoHo wrote:On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern? For one thing consumer spending has consistently been strong. Even during the weak recovery consumer spending has kept up well. For the last few years the big laggards have been government spending and private investment, particularly in real estate. I would have thought that discretionary consumer spending (not food and other necessities) would have gone down quite a bit after 2008. I would also have thought that it would remain lower since consumers still aren't confident due to factors such as low job security.
What is or isn't a necessity is irrelevant as far as the macro economy is concerned. Spending is spending. During the recession ofc it went down, but it since recovered. Not quite at the same pace as pre-crisis, but those boom years were, in part, characterized by unsustainable spending rates (ex. low savings rate, high trade deficit).
![[image loading]](http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=H3c)
You can certainly argue that consumer spending could be stronger, but I don't think the difference between what is and could be is a dramatic as with government and private investment. Moreover if we had more employment from those two categories consumer spending would likely be higher as a knock-on result.
Government expenditures:
+ Show Spoiler +
Residential investment:
+ Show Spoiler +
Edit: also note those last two charts aren't adjusted for inflation!
Edit 2: IIRC the 'government expenditures' category does not include transfer payments (ex. social security).
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On August 06 2014 10:45 JonnyBNoHo wrote:Show nested quote +On August 06 2014 10:26 SnipedSoul wrote:On August 06 2014 10:14 JonnyBNoHo wrote:On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern? For one thing consumer spending has consistently been strong. Even during the weak recovery consumer spending has kept up well. For the last few years the big laggards have been government spending and private investment, particularly in real estate. I would have thought that discretionary consumer spending (not food and other necessities) would have gone down quite a bit after 2008. I would also have thought that it would remain lower since consumers still aren't confident due to factors such as low job security. What is or isn't a necessity is irrelevant as far as the macro economy is concerned. Spending is spending. During the recession ofc it went down, but it since recovered. Not quite at the same pace as pre-crisis, but those boom years were, in part, characterized by unsustainable spending rates (ex. low savings rate, high trade deficit). + Show Spoiler +You can certainly argue that consumer spending could be stronger, but I don't think the difference between what is and could be is a dramatic as with government and private investment. Moreover if we had more employment from those two categories consumer spending would likely be higher as a knock-on result. Government expenditures: + Show Spoiler +Residential investment: + Show Spoiler +Edit: also note those last two charts aren't adjusted for inflation! Edit 2: IIRC the 'government expenditures' category does not include transfer payments (ex. social security).
Per capita is probably a better way to look at it, from a "have consumers recovered?" standpoint.
![[image loading]](http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=H7s)
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On August 06 2014 11:40 aksfjh wrote:Show nested quote +On August 06 2014 10:45 JonnyBNoHo wrote:On August 06 2014 10:26 SnipedSoul wrote:On August 06 2014 10:14 JonnyBNoHo wrote:On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern? For one thing consumer spending has consistently been strong. Even during the weak recovery consumer spending has kept up well. For the last few years the big laggards have been government spending and private investment, particularly in real estate. I would have thought that discretionary consumer spending (not food and other necessities) would have gone down quite a bit after 2008. I would also have thought that it would remain lower since consumers still aren't confident due to factors such as low job security. What is or isn't a necessity is irrelevant as far as the macro economy is concerned. Spending is spending. During the recession ofc it went down, but it since recovered. Not quite at the same pace as pre-crisis, but those boom years were, in part, characterized by unsustainable spending rates (ex. low savings rate, high trade deficit). + Show Spoiler +You can certainly argue that consumer spending could be stronger, but I don't think the difference between what is and could be is a dramatic as with government and private investment. Moreover if we had more employment from those two categories consumer spending would likely be higher as a knock-on result. Government expenditures: + Show Spoiler +Residential investment: + Show Spoiler +Edit: also note those last two charts aren't adjusted for inflation! Edit 2: IIRC the 'government expenditures' category does not include transfer payments (ex. social security). Per capita is probably a better way to look at it, from a "have consumers recovered?" standpoint. + Show Spoiler +
Sure, but that's not really the question I'm trying to answer. Also, if you look at per capita government expenditures or per capita residential investment those numbers will look less robust as well.
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As residents of Toledo, Ohio, and the surrounding region recover from a weekend without access to usable tap water — the fault of a toxic algae bloom in Lake Erie — the crisis has set off new calls for stricter rules on the use the fertilizers that help contribute to the blooms.
The algae bloom set off alarms on Saturday, causing authorities to impose a ban on the use of the city’s tap water, which comes from Lake Erie, affecting more than 400,000 people in Toledo and surrounding areas in Ohio and southeastern Michigan. On Monday morning officials lifted the ban after new tests came back clean. But before the weekend was over, 69 people visited local hospitals fearing they had fallen ill, The Columbus Dispatch reported.
The type of algae found in the lake releases a toxin called microcystin, which can damage the liver and cause diarrhea, vomiting, dizziness and even nerve damage.
“It’s not good to drink,” said Christine Mayer, a professor of environmental science at the University of Toledo.
Mayer said these algae blooms have become more common. And the city’s water treatment plant, she added, wasn’t designed to handle the load. The chief culprit is fertilizer runoff from farms that flows into the Maumee River, which empties into Lake Erie.
For now, federal regulators don’t have a standard for acceptable levels of microcystin. So Toledo officials had to use the World Health Organization’s rule, which states that levels of the toxin should not exceed a minuscule amount.
“EPA has not established a standard for microcystin in drinking water. However, the agency has been evaluating this and other contaminants associated with algal blooms,” said Julia Ortiz, a spokeswoman for the Environmental Protection Agency, adding that it is “continuing to gather information to inform a determination whether to regulate these contaminants.”
Source
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On August 06 2014 10:37 {CC}StealthBlue wrote:Show nested quote +Since Rep. Mo Brooks (R-AL) claimed on Monday that Democrats have launched a "war on whites," he has continued to explain how he thinks Democrats inject race into political issues.
Brooks initially made the remarks on Laura Ingraham's radio show.
"This is a part of the war on whites that’s being launched by the Democratic Party. And the way in which they’re launching this war is by claiming that whites hate everybody else," he told Ingraham, referring specifically to the crisis at the border.
Brooks stood by his characterization and told AL.com Monday that Democrats have been "attacking whites based on skin color."
"The Democrats routinely make appeals based on race and they get away with it. It's repugnant to ever make an appeal based on race," he said.
On Tuesday, Brooks told USA Today that "if you look at current federal law, there is only one skin color that you can lawfully discriminate against. That’s Caucasians — whites."
And in an interview on NewsmaxTV's "The Steve Malzberg Show" on Tuesday, the congressman made a similar comment.
“Embedded in federal statutes, what is the one race that can be discriminated against? As a matter of law. What is it?” he asked, according to a clip recorded by Mediaite.
“White males?” Steve Malzberg asked in response.
“Not just white males, but all whites," Brooks then responded. Source
If I'm a democrat and a white male, does this mean I'm in a civil war with myself?
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We're a party of race traitors now, didn't you know?
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Not class traitors though. The democrats know where they get their money.
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On August 06 2014 10:45 JonnyBNoHo wrote:Show nested quote +On August 06 2014 10:26 SnipedSoul wrote:On August 06 2014 10:14 JonnyBNoHo wrote:On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern? For one thing consumer spending has consistently been strong. Even during the weak recovery consumer spending has kept up well. For the last few years the big laggards have been government spending and private investment, particularly in real estate. I would have thought that discretionary consumer spending (not food and other necessities) would have gone down quite a bit after 2008. I would also have thought that it would remain lower since consumers still aren't confident due to factors such as low job security. What is or isn't a necessity is irrelevant as far as the macro economy is concerned. Spending is spending. During the recession ofc it went down, but it since recovered. Not quite at the same pace as pre-crisis, but those boom years were, in part, characterized by unsustainable spending rates (ex. low savings rate, high trade deficit). You can certainly argue that consumer spending could be stronger, but I don't think the difference between what is and could be is a dramatic as with government and private investment. Moreover if we had more employment from those two categories consumer spending would likely be higher as a knock-on result. Government expenditures: + Show Spoiler +Residential investment: + Show Spoiler +Edit: also note those last two charts aren't adjusted for inflation! Edit 2: IIRC the 'government expenditures' category does not include transfer payments (ex. social security).
I'm just curious what you think the government should/could be spending more on?
Don't hear people outside of the liberal circles often arguing that the government should/could be spending more, so I'm a bit curious on what/how you would imagine it should be happening?
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On August 06 2014 12:59 GreenHorizons wrote:Show nested quote +On August 06 2014 10:45 JonnyBNoHo wrote:On August 06 2014 10:26 SnipedSoul wrote:On August 06 2014 10:14 JonnyBNoHo wrote:On August 06 2014 09:16 SnipedSoul wrote:
I'm not anything approaching an economist and income inequality being detrimental to economic growth is the most obvious thing in the world to me. Especially when you consider that the US economy is something like 70% consumer driven.
What the heck was the thinking behind it being of minor concern? For one thing consumer spending has consistently been strong. Even during the weak recovery consumer spending has kept up well. For the last few years the big laggards have been government spending and private investment, particularly in real estate. I would have thought that discretionary consumer spending (not food and other necessities) would have gone down quite a bit after 2008. I would also have thought that it would remain lower since consumers still aren't confident due to factors such as low job security. What is or isn't a necessity is irrelevant as far as the macro economy is concerned. Spending is spending. During the recession ofc it went down, but it since recovered. Not quite at the same pace as pre-crisis, but those boom years were, in part, characterized by unsustainable spending rates (ex. low savings rate, high trade deficit). You can certainly argue that consumer spending could be stronger, but I don't think the difference between what is and could be is a dramatic as with government and private investment. Moreover if we had more employment from those two categories consumer spending would likely be higher as a knock-on result. Government expenditures: + Show Spoiler +Residential investment: + Show Spoiler +Edit: also note those last two charts aren't adjusted for inflation! Edit 2: IIRC the 'government expenditures' category does not include transfer payments (ex. social security). I'm just curious what you think the government should/could be spending more on? Don't hear people outside of the liberal circles often arguing that the government should/could be spending more, so I'm a bit curious on what/how you would imagine it should be happening?
As it relates to the conversation it doesn't matter what the money is spent on or if the money is spent by the Feds, the States or local governments. 'Government expenditures' is also a subset of government spending, so it's not simply a matter of 'spending more' or 'spending less'.
That said, generally I think there's room to spend more on infrastructure and R&D.
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On August 06 2014 10:16 bookwyrm wrote:Show nested quote +On August 06 2014 09:27 WhiteDog wrote:
all savings are investment (S = I, note that it is always right in the long run) Sorry, I don't get why it is always right in the long run, can you explain?
It is right because we die more or less. So the money change hand one day or another. But the real theorical justification for this idea is that economists back then considered that people are "rational agents", so people save money to buy something : what's the point of saving money for itself ? Don't you save for something tomorrow ?
It is a poor theorical point of view, that consider two things criticized since then :
- all people are strong enough in math to evaluate the risk - which suppose that all risks are evaluable (economists gently considered that most economic phenomena follow a normal law since a guy, I believe called Blanchard, said it in early XXth century, there are no knightian uncertainty - uncertainty that you can't predict -, or tail risks - specific risks with a strong change in the value, like the price of an asset going from 1 to 100 in a day - which basically mean that you can accurately predict all risks), so agents don't need savings "in case something happen".
- money in itself has no value and no interests for an agent, it is only an intermediary in exchange (which is why most economic model do not include money in their modelization - think about that a little, that's absurd). You're supposed to acquire money to buy something, so agents don't put money in savings "for itself".
You know full well that the curve has no value jonny because that spending was artificially high thanks to the banking system - and you go back to Piketty's point on inequality and capital. Before the crisis the bottom 50% in the income hierarchy spent 110 % of their income : it s debt. The US spending prevented a crisis, but it doesn t mean that agregate demand was OK.
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Ah. So if you get some gold coins and bury them in the ground and then you die and they get left there, it's not true, right?
i'm just asking so i understand the idea
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On August 06 2014 16:20 bookwyrm wrote:
Ah. So if you get some gold coins and bury them in the ground and then you die and they get left there, it's not true, right?
i'm just asking so i understand the idea
Yes, but economists would say that such irrationnal event is statistically irrelevant at the scale of a society.
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EPT![[image loading]](http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=H1u)
![[image loading]](http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=GPz)
