[jariel]

Quote:

With the global economy slowly getting back on its feet, 2,500 delegates gathered in Davos face a vexing question this week: How to spread the wealth.

As much as any other issue income inequality will tax world leaders in the years ahead.

Aggressive policies from central banks have helped stem the liquidity drain that sent the U.S., Europe, and other countries reeling in the latter part of the last decade. Wall Street banks have come back to life, equity markets have soared and even debt-laden countries like Ireland and Greece are finding their way back into the capital markets.

But the main problem now will be those left behind.

"The kind of people over there (in Davos), other than the professors, are making a great deal of money more than their predecessors were a generation ago," University of Maryland economist Peter Morici said in an interview. "This is a growing embarrassment. The differences in income between Wall Street and the rest of America are astronomical."

Dangers surrounding income inequality are not lost on those attending the World Economic Forum.

In a survey of members, the issue ranked near the top among global economic concerns.

"It raises concerns about the Great Recession and the squeezing effect it had on the middle classes in developed economies, while globalization has brought about a polarization of incomes in emerging and developing economies," the forum said in a statement. "This is true despite the obvious progress in countries such as Brazil and lower levels of poverty in several developing countries in Asia and Africa."

The negative effects of globalization will be especially problematic this week for its advocates, particularly President Barack Obama, for whom one of the key platform tenets in the 2008 election was a pledge to redistribute income.

"In the United Stated, people in the middle and bottom are shrinking and people on the top are rising. That's not what globalization was supposed to do for them," Morici said. "For President Obama , it's very troubling because he's been a big advocate for globalization."

Recent studies have shown American wealth disparity at its highest level since the Great Depression.

Unemployment in the U.S. has been vexing as well. While the headline rate has dropped to 6.7 percent, that's come as the labor force participation rate has hit a 36-year low.

In Europe, youth unemployment in some areas is around 50 percent and about 12 percent overall in the euro zone.

Concerns over inequality "should act as a wake-up call" to Davos attendees, Philip Jennings, general secretary of the labor group UNI Global Union, told media members last week.

Morici, however, said he doesn't expect much to come it, at least at the four-day World Economic Forum.

"This is the biggest problem of our time," said. "We need to have more balanced growth across the globe."

http://finance.yahoo.com/news/richest-ri...19751.html

[eyeroll][/eyeroll]

[soup]

The world is more interconnected than the mega rich would probably want to believe.

[cardguy]

Quote:

The combined wealth of the world's richest 85 people is now equivalent to that owned by half of the world's population – or 3.5 billion of the poorest people – according to a new report from Oxfam.

In a report titled "Working for the Few" released Monday, the global aid and development organization detailed the extent of global economic inequality created by the rapidly increasing wealth of the richest, warning of the major risks it poses to "human progress."

According to the report, 210 people have become billionaires in the past year, joining a select group of 1,426 individuals with a combined net worth of $5.4 trillion.

I am not sure if having such inequalities of wealth is a good or a bad thing. Emotionally it seems to be a bad thing. But - from what I know of economics - every time profit is made, value is generated for others in the marketplace.

Therefore: more profit = more wealth = more value = more happiness in the world.

To give an example. If you make a billion dollars in profit running a business. That means you have created goods and services which the marketplace has valued as being worth 1 billion dollars more than the goods and services you put in to the creation of that business.

It is the ultimate free lunch. You have created value out of nothing simply through the use of hard work, luck and creativity.

And you getting to sit on that pile of wealth is your reward for adding an equal amount of wealth to society.

And strangely it isn't even a fair reward - since after about the first 100 million dollars or so - the marginal utility of money rapidly drops to pretty much zero. So - the 900 million dollars of value you created for society is a gift which you have given and will (in a sense) never receive a reward for.

That is the way my brain processes these stories. Not sure if I am correct or just brainwashed by the evil capitalist overloards.

And to add to the figures above. For most ordinary people - it turns out the marginal utilitiy of money takes a big hit after the first 100 thousand dollars. It doesn't take much in this day and age to have most of your needs and desires met.

[Genghis Khan]

@Cardguy, I don't know if you can necessarily equate profit to value generated. An example is Wall Street. They made huge amounts of profits off of derivatives before the crash of 2007. But was any value really generated?

There's a lot of ways to make profit without benefiting society, or even worse by harming society.

[Saladin]

(01-21-2014 06:23 PM)Genghis Khan Wrote:  

@Cardguy, I don't know if you can necessarily equate profit to value generated. An example is Wall Street. They made huge amounts of profits off of derivatives before the crash of 2007. But was any value really generated?

There's a lot of ways to make profit without benefiting society, or even worse by harming society.

Exactly, seems a lot of the rise in income inequality has to do with what Wall Street has been doing.

Aka not creating any real value, but instead leaching off from everyone else.

[WestIndianArchie]

(01-21-2014 04:20 PM)jariel Wrote:  

Quote:

With the global economy slowly getting back on its feet, 2,500 delegates gathered in Davos face a vexing question this week: How to spread the wealth.

As much as any other issue income inequality will tax world leaders in the years ahead.

Aggressive policies from central banks have helped stem the liquidity drain that sent the U.S., Europe, and other countries reeling in the latter part of the last decade. Wall Street banks have come back to life, equity markets have soared and even debt-laden countries like Ireland and Greece are finding their way back into the capital markets.

But the main problem now will be those left behind.

"The kind of people over there (in Davos), other than the professors, are making a great deal of money more than their predecessors were a generation ago," University of Maryland economist Peter Morici said in an interview. "This is a growing embarrassment. The differences in income between Wall Street and the rest of America are astronomical."

Dangers surrounding income inequality are not lost on those attending the World Economic Forum.

In a survey of members, the issue ranked near the top among global economic concerns.

"It raises concerns about the Great Recession and the squeezing effect it had on the middle classes in developed economies, while globalization has brought about a polarization of incomes in emerging and developing economies," the forum said in a statement. "This is true despite the obvious progress in countries such as Brazil and lower levels of poverty in several developing countries in Asia and Africa."

The negative effects of globalization will be especially problematic this week for its advocates, particularly President Barack Obama, for whom one of the key platform tenets in the 2008 election was a pledge to redistribute income.

"In the United Stated, people in the middle and bottom are shrinking and people on the top are rising. That's not what globalization was supposed to do for them," Morici said. "For President Obama , it's very troubling because he's been a big advocate for globalization."

Recent studies have shown American wealth disparity at its highest level since the Great Depression.

Unemployment in the U.S. has been vexing as well. While the headline rate has dropped to 6.7 percent, that's come as the labor force participation rate has hit a 36-year low.

In Europe, youth unemployment in some areas is around 50 percent and about 12 percent overall in the euro zone.

Concerns over inequality "should act as a wake-up call" to Davos attendees, Philip Jennings, general secretary of the labor group UNI Global Union, told media members last week.

Morici, however, said he doesn't expect much to come it, at least at the four-day World Economic Forum.

"This is the biggest problem of our time," said. "We need to have more balanced growth across the globe."

http://finance.yahoo.com/news/richest-ri...19751.html

[eyeroll][/eyeroll]

the word choice is telling
- income equality
- youth unemployment

They're probably worried about getting Cairo'd or Libya'd.

WIA

[Ensam]

(01-21-2014 06:53 PM)WestIndianArchie Wrote:  

the word choice is telling
- income equality
- youth unemployment

They're probably worried about getting Cairo'd or Libya'd.

WIA

Exactly. Social welfare programs aren't about helping the poor, they're about keeping the poor placated enough that they don't revolt. They're literally about keeping society secure. People (particularly young men) tend to get restless when they see things get too out of whack even when the current system is probably benefiting them overall.

[MHaes]

Yeah, I think by this point everyone can pretty much admit that QE had some very bad unintended consequences. It severely hurt the "savers" while being a boom to "investors". The poor and the middle class save much more than they invest, so QE resulted in a huge transfer of wealth - to the (already) incredibly wealthy.

[Agent 47]

The gap between the Rich and Working grows more every day. It is NOT in the Elites interest to have a strong educated working middle class, lest they catch them what they're really doing.

Globalization is just PC talk for One World Order. Our fellow Americans need to be shown that our so called leaders don't give a shit about them.

End of the day, unless we put a stop to the rich, their pockets will grow and we will struggle.

[cardguy]

I agree that Wall Street leaches off society and doesn't create value.

Yet - I am sure some pointy headed free-market economists would argue they do. So I am not sure if I am capable of answering for definite either way.

[DVY]

The easiest way to level the field would be to lower barriers/costs for business to enter markets

IE- my father started his dental office by spending 3-4hr at city hall w/the contractor to sign off all the paperwork 20-30 years ago. Total fee- 400 dollars. Nowadays, 4 months plus countless forms and 10s of thousands of dollars. There is a noticeable dis-incentive to start a new business w/large capital costs.

Easy solution -- removing 3/4 of bureacracy in 1st world countries .

This will never happen because the populace will revolt. We have to been sold a bag of goods that "big government is good".

Don't be surprised if we clutch that hope till this shit blows up in our faces.

[tomtud]

Its easy, pay their employees better.

[cardguy]

Marginal Revolution post on Tim Harford's latest book. The post links to a talk he gave recently:

Quote:

You may have heard recently that the richest 85 people in the world have more wealth than the bottom 3.5 billion. Tim began by pointing out that his 2 year old also has more wealth than the bottom 2 billion since his 2-year old has no debt.

http://marginalrevolution.com/marginalre...omics.html

I recently read the book and it is very good (as is everything Tim Harford writes). The book also includes an interesting take down and critique of the hysteria promoted by the following YouTube video which has gotten alot of hits, and has been mentioned here on the forum.

http://www.youtube.com/watch?v=umFnrvcS6AQ (the lecture is called 'The Most Important Video You'll Ever See')

[Bushido]

The big irony for me is how bankers usually favour right-wing, free market policies for everyone but themselves. The bailout was a huge transfer of wealth to the already rich. Same goes for QE. I am pretty libertarian myself but these guys only sing that tune when it suits them and then later go cap in hand to governments when they inevitably fuck up again. Our generation pay for it in the form of massive national debts.

[randomForest]

(01-22-2014 12:05 PM)cardguy Wrote:  

I agree that Wall Street leaches off society and doesn't create value.

Yet - I am sure some pointy headed free-market economists would argue they do. So I am not sure if I am capable of answering for definite either way.

I'm not one of those pointy heads---but I work in finance as a research analyst. In my view, Wall Street is definitely capable of creating value--if it doesn't become too large as a sector of the economy (among other things). The whole point of finance is to direct capital to areas of the real economy that need it and are best able to make productive use of said capital. When I say the real economy, I mean the industries that make actual physical products and their support industries. When the financial companies are focused primarily on providing capital to the real economy thats when they create value. But when they are too focused on speculation in capital markets or the financial sector of the economy becomes too large relative to the real sector (at one point the finance sector itself was nearly 40 percent of the total economic output, if you can believe that) that becomes a dangerous situation. And when they become too large, too focused on capital speculation/appreciation AND they are able to directly buy/sell politicians in the federal gov't with the aim of relaxing regulations to enable the engineering of risk-transfer derivative instruments then you have a truly explosive situation on your hands (I guess I'm a bit of a hypocrite---I work a lot with these complex instruments and derivatives).

So, yes, Wall Street can create value but the incentives & checks/balances aren't really in place to ensure that this happening in the way the broader economy needs it to happen. Too many elites stand to benefit from the current status quo so it'll probably stay that way...until it can't.

[cardguy]

[speakeasy]

(01-22-2014 05:22 PM)tomtud Wrote:  

Its easy, pay their employees better.

Totally agree, I think the solution to income inequality isn't government redistribution, it's wage growth for the poor and middle class. Adjusted for inflation, wages have not changed for the average person in a generation, even given spectacular productivity gains. The benefits of economic growth are going only to the top 10%.

What's telling is that government jobs in America are now considered the coveted jobs as far as stability, benefits, vacation time, pension and difficulty of getting fired.

[RexImperator]

Quote:

What's telling is that government jobs in America are now considered the coveted jobs as far as stability, benefits, vacation time, pension and difficulty of getting fired.

^^^This really says a lot. The other thing they are good for: building up contacts so when you become a private contractor you can cash in.

[Bushido]

(01-22-2014 05:22 PM)tomtud Wrote:  

Its easy, pay their employees better.

Lol this isn't 1950. Like it or not, companies compete globally now. Creating value comes first. Only then can the wage increases follow.

[kdolo]

1. eliminate at least half of all government jobs. they suck vital resource and capital away from the private sector.

2. Eliminate the income tax. It punishes people who work and save trying to accrue capital to start and grow businesses and privileges those who already have capital or access to it.

3. reduce the so called "social safety net" by 1/2. The Great Society programs have weakened the family structure. The main unit for wealth creation in most societies is the family: where they are tight knit - wealth can accrue - were they are weak - it is difficult.

4. End/reduce feminism - (see 3 )