U.S. personal income posts first drop in over three years
reuters.com
reuters.com
TFA omits this context, and glaringly doubles down on the omission when they state;
“The report from the Commerce Department on Friday also showed inflation pressures remaining tame, which together with slowing domestic and global economic growth gave more credence to the Federal Reserve’s “patient” stance towards raising interest rates further this year.”
The Fed caused tremendous damage at the end of Q4 with their breakneck rate hikes in the face of record-low inflation. They sucked over a trillion dollars out of the economy which is why the numbers are down.
To write that this gives credence to the Fed’s “patient” stance is wallpapering over the real story, and it smells politically motivated.
Plus tariffs are voluntary taxes drawing from funds from importers. The economy will slow down as it adjusts to re-industrialization with higher prices paid out as wages to USA workers.
Fiscal hamfist refuses to acknowledge the monetary hand.
Of course, that 17% can sort of be returned to the American consumers via reduced taxes or increased federal spending. The jobs are nice too.
You can put it off for a while, but not indefinitely. After all the justification given for the tariffs was to make less efficient local production more viable. Higher consumer prices are an explicit part of that calculation.
I'm very skeptical that even without retaliation, tariffs on China will lead to much USA manufacturing jobs (as opposed to automated US manufacturing, or manufacturing shifting from China to Vietnam, Thailand etc.
Of course certain industries will be big winners or losers though.
Real wages and real purchasing power must keep going up. And for that to happen the upper 1% are going to have to take a nice hit for the economy to truly correct. Both effectively need to happen at the same time. The FED is essentially signalling to policy makers that the time to up minimum wage is... was, yesterday.
I want to challenge you to really dive into your perspective and defend why you think the fed miscalculated here, and why you think leaving interest rates low isn't going to have extremely negative effects if we don't start changing course now. If not now, when?
Yes and yes - but how? The interest rate is only monetary policy, not fiscal. Traditionally, low rates were expansionary. Maybe we need lower rates?
Maybe if there was a way to band together and seek a unified compensation policy on a company/industry basis.
Outside of technology workers are still looked at as replaceable and expendable. I’m not sure what is going to break the ceiling in this climate.
I know HN users tend to have 'high horse' syndrome, but this is incredibly naiive. There are plenty of skilled jobs where workers are not easily replaced/expended. Physicians, RNs, higher education teachers/professors, many jobs related to architecture design, construction, etc.
> I’m not sure what is going to break the ceiling in this climate.
There's been recent success in the old school technique of 'striking'.
All of those skilled jobs you speak of are full of people who don't understand what good a union does. Literally complaining that a union is worthless while reaping the benefits and job stability that only a union can provide. I don't know if it's a matter of education or if people are really just going to have to experience for themselves how horrible the working world is/will become when there are no unions to protect them...
This is a ridiculously juvenile view of how the world works. You need not look further than insert fortune 500 company who lays off highly paid sr. technical staff and replace them with jr. Claiming they provide no value to the company is asinine.
My past experience is from working in farming, then manual labor, then skilled labor, then engineering, then hospitality, then technology. In none of the fields other than technology did I feel that myself or my colleagues were viewed as anything other than a source of costs by management. Even when our contributions were praised by customers as the reason why they continued their business with the company, we were barely rewarded with more than a pat on the back. Perfection was assumed as the standard, however it was not rewarded as such.
It was not until I taught myself to program, with the help of a great number of people, and jumped over to working in the tech industry that my managers looked at me as a source of value in the company, as the reason why the company made money, and as less than disposable.
That is not to say that my experience is everyone's experience, and I didn't mean to imply such an extreme position as "only in technology can you be valued as a worker". If you work in healthcare, or law, or the sciences, or manufacturing, or construction, or education and your organization values you then I applaud you and efforts.
With that said I still feel that it's a tough road ahead to get the compensation you deserve. Even when the economy is strong, it is hard to get a raise, and people have been waiting on those raises for a long time. I sure hope they can get them.
I don't think the problem is that people haven't considered unionizing, nor because of constraints put on union due collection.
Productivity up, population up. That will have an impact on wages for sure.
There's no more effective way for labor to throw its weight around than collectivizing in bite-sized (i.e. company-sized) bargaining units; history tells us this is so and evidence gives us no reason to think it won't work again.
They're not perfect (no democratic organization is), but the only thing more corrupt than a union is management.
Taft-Hartley banned wildcat strikes, but I think if we saw more of those (despite their present-day illegality) we'd see a ton more actions favorable to workers taking place.
Of course, we should roll back the labor-hostile parts of Taft-Hartley (like the bans on wildcat strikes and the restrictions on speech surrounding union organizing), but that'll take more time.
That might have worked 15 years ago, but I think it's going to take unions and government, working along near-parallel vectors, to bring the economy back into a sustainable power-balance among its various institutions.
Corporate management and moneyed elites have erected a nice little fortress full of positive feedback loops for themselves, and have been steadily plugging the holes in it for 40 solid years now. They're working on mindless, robotic slave labor in an effort to defeat the labor unions forever, but they're also still relatively open to attack by government, as buying it off with corruption has so far been sufficient to keep it at bay.
That's not true at all. There is no dataset that supports this position. And we have data against it. Mainly every time we've forcefully increased the minimum wage.
Interest is the ultimate rent seeking activity. The fed funds rate is a form of price fixing for banks whereby they collectively decide how much interest they can extract from the economy without killing it. Why must this be the case, the economy should be allowed to run much hotter for much longer.
Inflation is less of a risk now because of technology + globalization, right now we are experiencing significant deflationary pressure as products and labor converge towards global pricing/wages.
Our economy and government will be in very serious trouble if we have to pay higher interest on our significant national debt, so the government has a big interest (pun intended) in keeping rates low to protect its own financial solvency.
Finally, high interest rates imply money is scarce and that's far from the case now. Having large sums of money is not what it used to be, you're competing against a lot of other people and organizations seeking to deploy that money productively for a return. This generates downward pressure on market interest rates as evidenced by European Central banks going below zero to negative rates.
Because that violates a big part of the dual mandate of the federal reserve. Lowering interest rates indefinitely makes borrowing money super easy, and you essentially cause a credit cascade. At certain levels, borrowing money means the fed is able to print more money. But if no one can really pay that money back, that bubble pops. And if you keep lowering interest rates to correct for that you'll get inflation. Lots of inflation. To the point where the money becomes useless.
>Inflation is less of a risk now because of technology + globalization
I have quite literally never heard this thought before, and at face value it doesn't make a lick of sense. you can't just vaguely pay lipservice to two very broad terms and act like it's going to make inflation irrelevant? What?
>Finally, high interest rates imply money is scarce and that's far from the case now.
No it means that the economy shouldn't/isn't/can't really borrow more. The first one tends to be the primary reason for increasing interest rates. You can't just keep borrowing indefinitely. Because again, that makes money useless.
We're already in a bit of a pickle at the moment. And we're seeing signs that the economy is starting to slip -- but we can still reverse and put an end to these signs. Consumer and corporate credit is at an all time high. Just last quarter, the number of people that are delinquent on their car loans spiked. Car payments are something people typically let slip during a financial squeeze, because it's hard for the bank to recoup it in a timely manner. But not paying your credit card or electric bill, those kind of services get shut off immediately.
Lower interest rates allowed the current credit spike we're seeing. But at some point it has to be paid back. But if people don't have the real wages to pay back those loans AND keep spending money, you're going to see a squeeze on the service sector. And that's not going to be good for the American economy.
I don't mean this to sound harsh, but then you haven't been listening.
Its a well known established fact that technology causes 'good' deflation. The number one cited example of this is the printing press, but honestly the internet has probably been a bigger effect.
globalization has also been very commonly cited as a source of lower inflation / deflation. you may disagree with it, but you should have heard about it.
I'm just going to be nice and tell you that you are severely conflating multiple issues here. Technological advancements have played literally no part in the monetary policy of the last decade. Monetary policies have largely been focused on making sure cash flow is first and foremost, present, and secondly consistent.
if monetary policy is implemented by a magic 8 ball, that remains true.
The motivations and effects of monetary policy? To sit there and say that a fiat system isn't subject to inflationary pressures, or even are less burdened by them, brought about changes in interest rates because of technological advancements is a hilariously misplaced idea and thing to bring up.
I feel like I want to call this economic bike shedding? The tiniest detail has no sway on anything when you're talking about policies actively affecting trillions of dollars of cash and credit. We're talking in a time scale of a year, not half a century.
Certainly it can be done, but if 2008 proved anything it was the theory that lowering interest rates would provide Keynesian stimulus and mitigate the impact of a recession. One of the perks of controlling the interest rate is that you can use it to apply counterpressure to the business cycle, pushing down bubbles and pulling out of recessions. If the interest rate is stuck near 0, you can't really do that, so it's in the interest of economic stability to bring it back up again.
My favorite piece about this issue was from This American Life and NPR News: https://www.thisamericanlife.org/355/the-giant-pool-of-money
The fed and other banks didn't just help the credit market grow (via lowering interest rates), they quite literally bought it to keep money flow up. There was a substantial credit freeze, and many parts of the financial system were on death's door. So governments and banks quite literally just went "take this huge wad of cash, please stay in business." And by huge wad of cash, we're talking about $12 trillion dollars of bailouts, stimulus packages, debt bonds, etc. Twelve. Trillion. In one year. The entire GDP of the U.S in 2017 was about $20 trillion.
Wages at the time were too low (oh, imagine that) to mitigate any kind of credit stasis on the monetary system. It would have had a compounding effect. No credit, no consumption, no consumption, no economy.
We "fixed" two of those. But we did it in a manner that requires us to pay for it at some point. So here we are.
Bring wages up. Allow the credit to be repaid. And not just consumer credit, corporate credit as well. Allow the federal reserve to finally increase interest rates. Make the economy truly robust again, instead of just "letting the good times roll" and creating another crisis.
Companies have to start paying workers more for us to get out of this mess.
We have socialized risks and privatized profits.
Source? Typically this doesn't actually happen. In fact there is very little evidence for tax cuts "injecting" (whatever this actually means) cash into the economy.
>It occurs to me that the tight labor market is forcing wages higher naturally.
It's a well understood fact that labor markets actually don't equalize in a supply/demand fashion. I want to know why you think this is the case?
Where does that $500 go? One or two places. You either 1) spend it on something or 2) invest it in something (which will result in that getting spent by the entity "borrowing" it).
> I want to know why you think this is the case?
I have had to raise the wages paid by my business to retain employees due to other businesses in my industry raising their wages.
No research needed for these two thoughts. Direct observation and application of logic.
And with debt now is better than later.
2ndly, interest rates were not very effective in these last recessions, the common metaphor is that its like pushing rope. So maybe its better for the fed to fight recessions with QE (or something else) and leave interest rates to 'fight' inflation.
I very much agree on this.
To me, it seems like the Fed left rates too low for too long coming out of the recession in 2000, which set up the bubble of 2008. They don't want to do it again.
And when 2008 hit, they wound up against the "zero bound" of interest rates, where they couldn't lower any further, and they don't want to do that again, either. If they want some distance away from the zero bound, they have to raise rates sometime.
"But we can't raise them now! The economy is too fragile!" Yeah, we've been hearing that for a decade. And, as the parent said, we can't sit there and leave interest rates low forever.
If you keep inflating the balloon, it's going to bulge out somewhere. And last time was bad.
Maybe low interest rates are the new normal, they've been on an overall downward path for decades so it's not entirely a recent thing.
I don't really get raising interest rates to have more ammunition in a recession either. Sure, you have more room to cut later, but raising interest rates itself slows the economy down. Unless the stimulating power you get from cutting is more than slowing effect from raising, it doesn't seem like it gets you anywhere, since you're just digging a deeper hole that you need to get out of.
It's another thing if it's in conjunction with fiscal policy (looser fiscal policy, which then leads to raising rates, after which there's more room to cut in a recession). But then I think that's mainly an argument for having different fiscal policy and not just about raising rates.
Central bankers seem to be aware that not being able to lower interest rates is going to be problematic in the next recession (along with diminished QE effectiveness etc.). They aren't completely out of options to fight deflation (there's always helicopter money etc.) but we do seem to be in uncharted territory.
Well, then can sit there for as long as we aren't seeing the negative effects of low interest rates. IE, inflation. Which we aren't seeing.
> If not now, when?
When inflation starts happening. That's when. But that is not happening now, so we are good.
It's really that simple. The whole point of raising inflation rates is to prevent high inflation. But if there isn't any high inflation then there isn't any problem!
Like, rates in the 70s used to be around 20%. And now, the fed doesn’t have the balls to raise it 500 bips. It’s ridiculous.
I don't think there is any evidence at all that the Fed raising (or not raising) the interest rates is an attempt to dictate the minimum wage level. The Fed's mandate from Congress is to aim for three goals: "...maximum sustainable employment, stable prices, and moderate long-term interest rates."
https://www.federalreserve.gov/faqs/what-economic-goals-does...
Let's not use Fed policy in trying to achieve their mandates as a pretext for some other policy someone wants to promote.
Does the FED really control the economy? The money supply per the FRED graph at the Saint Louis FED is nearly double what it was in 2009 yet spending is down.
"...CreditCards.com releases the national average APR, which is made up of 100 of the most popular credit cards in the country. According to their June 21, 2017, release, the national average credit card rate across all types of cards was 15.96 percent. — Jan 2, 2019"
https://www.creditcards.com/credit-card-news/interest-rate-r...
Doing more research I found this which states it has jumped to 17.64%:
https://www.creditcards.com/credit-card-news/rate-report.php
We've been in a low interest rate environment for all of my adult life, at some point the crows will come to roost and these companies will need to pay the price for their strategy of taking on debt + share buybacks and come back to earth. I'm extremely dissapointed that the Fed was spooked out of performing their duty by Wall St.
When the government sells bonds or lowers rates or prints money, the bathtub gets filled up. When the government buys bonds or increases rates, the water line lowers. The size of the bathtub increases along with real growth in the economy. Inflation is when the water rises faster than the size of the bathtub, deflation when the water isn’t rising fast enough.
I think you have that backwards. The common consensus is that the Fed selling bonds has the opposite effect:
>...f the Fed buys bonds in the open market, it increases the money supply in the economy by swapping out bonds in exchange for cash to the general public. Conversely, if the Fed sells bonds, it decreases the money supply by removing cash from the economy in exchange for bonds. Therefore, OMO has a direct effect on money supply. OMO also affects interest rates because if the Fed buys bonds, prices are pushed higher and interest rates decrease; if the Fed sells bonds, it pushes prices down and rates increase.
https://www.investopedia.com/articles/economics/08/monetary-...
Thanks for pointing that out! I deserve downvotes for the original comment if anyone wants to give me one!
> the Fed badly miscalculating their rate hike policy
There is a mis-frame in politics that the current status quo is always good and should be preserved. I strongly disagree with that, and think we would get much better results if market leaders weer replaced when it is evident that they don't understand how to create real wealth. The idea that allowing the market to fall is 'miscalculation' is in itself a political topic.
Personally, after the evidence of something like 2008, it seems a reasonable theory that the current leaders in the US economic system - particularly bankers and money managers - are mismanaging (potentially even reducing) real wealth and America simply started from a very strong position so taking a long time for that to become obvious and unchangeable. I havn't heard good reports about the infrastructure situation in the States, and they are starting to lose military dominance to the Chinese.
This sounds like cause for average people to celebrate. Wonder why the headline is focused on the negative aspect...
If wages are up and investment income is down, money is being transferred from the 1% to the 99% for a change.
Further, that money is being transferred voluntarily. People buy things like iPhones because they think it enriches their life more than having the $600 it costs. Hundreds of millions of people believe this, so Apple has a ton of money. There were no victims in the transactions.
Correcting income and wealth inequality will help ensure the long term health of the economy, and once that's done, we can have another debt-financed consumption binge, but the current binge can't last forever without consequences.
"Fixing" wealth inequality by decreasing the productivity of the wealthy is madness.
"Inequality" is a feature of exchange and production, it cant be "fixed". The lives of those who suffer most can be improved by helping them be more productive. Not by hobbling everyone else. That fails to improve anything.
EDIT: To clarify, the inequality is in what you can do with your total current assets: including time/effort, but CURRENT WEALTH.
Yes, Jeff Bezos can do more with $100B than you can with $100. And yes, you with 100$ can do more than a person with 1$.
People in poor countries produce things at a rate and with such general demand that their current assets (including their time/effort) arent very productive.
Bezos can make another billion without taking it from anyone, just by deploying his assets better than you cna.
Also I’m pretty sure Bezos doesn’t collect much salary. His wealth is tied to how much Amazon is worth. He’s essentially taking nothing from his workers because his net worth is based pretty much entirely on how much someone else is willing to pay for his shares.
To use a metaphor, a slave owner having the "vision" for a palaestra including all its designs does not mean that he does not exploit the slaves (who, remember, wouldn't have a job if it weren't for him, nor would the palaestra exist). In the philosophy of exploitation, exploitation can occur even in mutually beneficial relationships.
Also your metaphor sucks. If you think that wage workers are on par with slaves, I suggest you look a bit more into what slavery actually is.
You metaphor still sucks because it doesn’t say anything useful. It’s purely an emotional appeal. You could apply your metaphor to literally any employment relationship and it’s no different. The CEO is (over)compensated for vision and so everyone else is exploited, from the Executive Vice Presidents down to the receptionists.
The argument is not that employees are exploited because the CEO is over-compensated for vision, but rather that it follows naturally for such relationships to work at scale. Nevertheless, it's useful as a thought experiment, since it ought to make people consider the nature of modern work and life in capitalism. Indeed, some philosophers do apply this to all employment relationships[0], the most extreme argue that they are exploitative, the less extreme only inquire to the nature of our desires in the employment relationship[1].
If that's where the argument leads then that's where it goes.
[0] John Roemer, Yoshihara and Veneziani, Marx
[1] Frederic Lordon's Spinozist anthropology
I'm a bit confused by your statement that "it [exploitation] follows naturally for such relationships to work at scale". If this is how it naturally works, then is there a viable alternative? I also don't agree that this is (necessarily) exploitative. Perhaps we have differing opinions of what "exploitation" means. If we have a business partnership that is mutually beneficial, but you profit from it more than me, is that exploitative?
I think that exploitation can, in general, be defined as when A exploits B, A takes "unfair" advantage of B. In order for this to be the case, there must be some mechanism by which A has the ability to exploit B, which I see as defined by the distribution of productive assets necessary to live. It gets more complex speaking of how we define productive assets, and whether exploitation exists as a matter of class (neo-Marxian sense) or as a matter of profit (the Marxian sense).
More people have become millionaires by being Microsoft employees than by any other mechanism. Via stock options, Microsoft very much shared the gains with their employees.
Instead, he kept all those shares and has more money than he could ever spend and many warehouse workers have worked incredibly hard and been unable to build any wealth over the years.
It's not true. He uses his money to fund space flight initiatives, and many other things besides.
Billionaires use their billions to make more billions. If it was wasted on unproductive spending, the future would be poorer than the present.
The board of directors can allocate stock to warehouse workers and/or pay them more. For that matter, you could send your money to these warehouse workers and yet you don't. This idea that Bezos should personally give up his fortune to increase warehouse worker compensation is a bit absurd. Amazon isn't a charity and its employees are not a registered 503c, either.
For profit companies can pay their workers better and still prosper. No one is suggesting Amazon should have been a non-profit. The suggestion is just that their CEO could have shared the wealth more with his workers. Workers who helped him build his fortune.
Jeff Bezos takes a salary and his income isn't tied to stock.
Net worth is a terrible measure of anything. You have a networth 100s times a person in a developing country but you're not "100x" anything.
Jeff Bezos can invest the rewards of his lifetime effort, yes, billions of times better than you can.
Elon musk invested his paypal-productivity into making space/car/etc. companies. His actions here eclipse yours.
The only way to save our democracy is by putting in policies that will harm the wealthy aristocracy of the US. The other alternative is war and death that impacts the wealthy, as history has shown time and again. Blood or money, it's their choice.
Those who earned more than $50k a year were more likely to vote for Trump[1].
There's also this[2]:
> During the primaries, Trump supporters were mostly affluent people.
> Trump voters weren’t majority working class in the general election, either.
[1] https://www.statista.com/statistics/631244/voter-turnout-of-...
[2] https://www.washingtonpost.com/news/monkey-cage/wp/2017/06/0...
This is a more in depth look at the numbers:
http://www.people-press.org/2018/08/09/an-examination-of-the...
This is one of the arguments people make against unpaid internships in media and fashion industries. Only rich kids can live in NY for peanuts so these internships effectively filter out poor people (as they were designed to do).
Proportional voting or a move to a parliamentary type of electorate would help these issues and allow for more voices to be heard. There's also the fact that more populous states have less representation in the House than do less populous states due to the limits imposed on the number of Representatives due to space requirements. This is problematic. Add to that the Citizen's United verdict that lifted campaign contribution limits on corporations while still enforcing them on individuals and I think I've made my point that our Democracy is in trouble without even touching the malfeasance by the actual political actors of either party.
The real problem though is that the middle class, the foundational aspect of a functional democratic process is being hollowed out.
When you look at the fact that money is considered speech and the top .001 of the US makes as much every year as the bottom 80% of the country there is no way that even the amalgamated voices of the bottom 80% could hope to have the same political sway as those with money and this divide is only getting worse.
Education is a poor classification of Americans, except for the fact that it generally correlates that the higher education you achieve the more likely you are to have higher income. Obviously your position of negative value degrees are the exception, however I'd be less likely to think that the wealthy are getting these poor degrees as are the poor. The wealthy can just write/ghost write their books and have them immediately be New York Times bestsellers without a single person other than themselves buying the book.In fact this is a common trick. The poor are generally less educated than the wealthy and this leads to an information imbalance that would prevent people from going into poor degrees instead of fields in demand like nursing, math, computer science, etc.
I'm sure many people on this board know someone stuck in a poorly paid IT helpdesk job because they got a Bachelors in IT or something else that didn't lead to money.
We do have this. Have you ever tried to raise money or interacted with VCs? Or dealt with the CEO of a large company? There is definitely a class divide. Look at all of the high end liberal arts students that monopolize the media industries. These aren't people from the trailer park.
"When you look at the fact that money is considered speech and the top .001 of the US makes as much every year as the bottom 80% of the country there is no way that even the amalgamated voices of the bottom 80% could hope to have the same political sway as those with money and this divide is only getting worse"
Except they were able to do this as per my example with Trump. Your theory sounds very valid, but the reality of it was the upper classes and all of their media empires couldn't stop someone from being elected. I think we can thank the internet for giving voice to those who historically wouldn't have it.
Dealing with VCs/CEOs typically involves having the money in the first place. You have numerous cases of people without degrees at all getting VC money and building platforms. I deal with CEOs of large companies on a fairly regular basis. While the Alma Mater matters it's typically a stand in for economic class. People who can afford to not work for a few years to go the HBS aren't typically in the lower echelons. Also workplaces are more conducive to taking time out of your regular schedule for educational advancement the higher up you go, especially since you're usually always working. So the degrees come back to money.
Of the people who voted for President Trump almost all of that lies with white, male voters and that was regardless of whether they were college educate or not, and most of that was in the South. Take from that what you will as neither candidate was a PoC so race wouldn't apply as a divisor. What might have had an impact was the border security discussion. The President's election was as much a fluke as a response to disaffected Sanders voters as a weak Democratic candidate.
I've never understood the claim that higher productivity somehow entitles workers to the surplus. The key component of actually being substantially responsible for productivity gains is missing.
Really? Because the system itself is fixed guaranteeing Capital of the rich is much more productive than wages of the poor, through taxation. That is an employee of Company abc has their wages taxed to a much greater extent than the company owners profits are taxed.
It’s definately not “hobbling” everyone else if we “fixed” the system such that workers wages were taxed less than the capital profits of business owners. In fact the current system is so unfairly weighted only a small percentage benefit from capital gains taxes whereas the masses of the working class are hobbled by greater taxes on their wages making up the difference. Ever wonder why it’s pretty easy to find CEO’s taking a $1 salary (it’s because they take the rest in capital so they are taxed less than their own workers).
Those who suffer the most don’t need to be more productive, they working class is already more productive than anytime through history it’s time their wages reflect that fact and for good measure it’s time wages become more productive by flipping the wage/capital tax paradigm.
You are advocating getting the state out of the way of its citizens productivity by redressing the ways by which most people are taxed.
That's exactly the sort of thing i'm talking about.
If you want people in the developing world to improve their lot, get rid of authoritarian gov.s holding them back.
People wish to do things for other people, and wish to provide for themselves. It is institutions, and esp. states, which almost-everywhere and almost-everywhen have got in the way of that.
Fixing institutions is exactly the sort of thing which will help people who suffer needlessly.
But it won't change inequality: the distribution of productivity is necessarily unequal by the nature of productivity (those a little better off now will be able to multiply faster, exponentially).
No, it's not.
Income inequality would be, in an idealized state where you both had a perfect market (with all the ideal rational choice theory attributes like perfect information and perfect utility maximization) andp erfectly equal initial distribution of wealth. Or, at least, the instantaneous income differential at the first moment would be, as well as the resulting wealth inequality; once you are past that you have wealth inequality which means that differences in market clearing price even in a perfect market no longer perfectly reflect differences in utility produced, because the interests of the wealthier participants are favored, so neither income inequality nor it's resulting wealth inequality reflect productivity, and with mortality and inheritances wealth inequality is even farther from a reflection of income inequality after the first generation.
Being born a Trump—or even a member of the first world middle class—puts you pretty high on the world distribution of wealth from day one, and your personal productivity has no contribution to that.
If we assume it is causal and the trend continues, you can expect belts to start tightening. I don't know if you've ever worked at a company that wasn't turning a profit (and isn't living on the borrowed time of VC money), but I have, and it sucks. Hiring freezes, wage freezes, wage reductions, staffing reductions. All kinds of fun.
Wealth isn't something that be quantified objectively, so at some point you need to put hard parameters on what qualifies wealth or thresholds of wealth. At some level, "money" (which is the representation of wealth) is at any given point finite. This makes it inherently a zero sum game.
The "any given point" allows us to avoid arguments about fiat and monetary policy. At any given point if I get $1, that value comes from someone else (or elses) down the chain.
I was trying specifically to not do so; I was expressing money as the point-in-time measurement of wealth.
I know this makes it a pain in the ass for you to make / explain your point, because there's no unit of measurement for wealth (hence why you used money at any given point in time). It just doesn't work that way though.
Even money is not zero sum. Anytime someone creates credit, new money is created and the money supply is expanded. And money is not representation of wealth. It is a unit of account and transfer.
Edit: by extension, all the consumers are likely in the same position. Employees are all exploited by their employers, who steal most of the value created which they had little to no hand in.
I'm sorry, but this is bog-standard communist clap-trap. Even if you don't like the current arrangement, the use of the word steal is absurd. Individual wealth, regardless of which income quintile you're in, has risen exponentially since the industrial revolution. There's lots of room for criticism of the world as it stands (crony capitalism and printing a sea of money being favorites of mine), but words like exploit and steal are crazy. And to say that an employer had little hand in the value of the products created is just silly. Even if we ignore everything else, you can't just disregard the massive capital expenses that go into building the infrastructure to make an iPhone. Somebody had to come up with that money to even make the company possible, long before the profits started rolling in.
I've had the dubious pleasure of working for companies that were posting little or no profit vs others that were making lots of money. Personally, I'd be happy to be 'exploited' by the wages Apple pays.
In Apple's case, the "massive capital expenses" have been paid for many times over in profit; when does the compensation shift back to the people creating the day-to-day value? Never, I guess?
And by the way, I'm not talking about the $300k engineers in Cupertino. I'm talking about the people who were throwing themselves of factory roofs until they set up nets to take even that measure of freedom away.
Didn't that turn out to be bullshit? Like, years ago. Pretty sure that guy made the story up. Also, those people weren't employees of Apple.
And I'll take crony capitalism and wealth inequality over gulags and the tens of millions of people who have been killed by their communist overlords (who were also hoarding all the wealth).
Please support that claim.
|will continue to kill millions and millions as the effects of climate change worsen
Communist countries, past and present, hardly have a sterling reputation when it comes to environmental considerations.
Edit: Oh, and you ignored that the Foxconn thing was manufactured. Unless that's what you're calling clap-trap, but I assume not.
Why should we risk it? You might say that previous attempts were "not real communism", but that is what we end up with when we try. We've killed 160 million people trying to implement communism, or at least following leaders who tell us they will implement communism. It doesn't seem wise to try again, does it? Why would things go down differently? It's awfully risky to take the gamble, don't you think?
What motivation would there be for start-up founders? If that just isn't needed because the state owns all business, how do we ensure that unproductive business doesn't uselessly stay funded while productive business is never initiated?
If there is no legitimate way to obtain great wealth, don't you think people might turn to methods that are not legitimate, such as the corruption? History shows that communism quickly turns the culture toward corruption, and that this dissipates very slowly once communism is removed.
That's the fairy tale they sell to suckers.
In real life, it can be very much zero sum, and that's regardless of whether the slice is "growing or not".
Everything I've read suggests real wages have been stagnant since the 70's.
The question stands, because the article doesn't specify whether it is talking about wages or wages in real terms.
Someone mind explaining what these downvotes are for? All I asked was a question.
This place is becoming like Stack Overflow.
a.) Fed raising interest rates to a normal level. Government bonds are now earning close to some of the faster developing countries, without the risks.
b.) Brexit impacting the growth of EU. Germany narrowly avoids recession....for now. But grew only 1.5% in 2018. There's still the matter of a possible US tariff on EU automobiles. And Italy/Greece/Spain debts are still a thing.
c.) Chinese economy is crumbling. GM dropped crashed 15% in China in 2018. Ford dropped 36%. iPhone sales dropped 13%. Louis Vuitton dropped 20%. Overall car sales dropped 13%. Stock market dropped 22%. Real estate sales in January 2019 dropped 44%.
d.) Asian countries impacted by China's fall. South Korea's export to China dropped 14% in 2018. Japan dropped 8%. Taiwan dropped 10%. Singapore dropped 8%.
e.) Uncertainties and high debt ratio in developing countries, prompting money to seek safe harbor. Tariff and protectionism impacts.
f.) lastly, US is growing at a healthy 3% in 2018
I mean okay, money flows into US "saving accounts", but due to higher interest rate a lot of investments will be put on hold, no?
The Fed raised the target federal funds rate, which is the rate of the interbank overnight repo market, which is basically the "back office" clearing house between the accounts of creditors and debtors. And all of this means that the NY Fed's trading desk does a lot of open market transactions to reach that goal. (It converts cash in banks' reserve accounts into US Treasury bonds, thus forcing banks to increase their reserves - to meet requirements, hence forcing banks to loan reserves from other banks, which pushes up the overnight repo rate.)
How does this effect the US Treasury bond auction rate? (In theory banks [and other primary dealers that participate in the auction] just use loans (excess reserve) to buy bonds, so if excess reserve is less, then fewer banks are able/willing to buy bonds, so yes, that pushes up rates, but the target-FFR increase only affected US banks, and US T-bills are bought by a lot of foreign entities.)
also the whole trope about 'China owning most of US T-bills' is actually false, there is apparently T-bills that are specifically sold to foreign nations, and then there are the real T-bills that not many countries own. The other one is an IOU and may not be honored, say during wartime.
The single largest holder of government debt is the Social Security Trust Fund.
> also the whole trope about 'China owning most of US T-bills' is actually false,
They are just the largest foreign holder, and it was noteworthy because of the rapid rise in the distribution of foreign debt holders.
Anyway, my thought process was that even if the US money supply drops, it should not influence T-bill auctions, because the whole world likes it (due to being the least risky investment). But it's very likely that the T-rate was low because banks and other investors exploited the low FFR. Now that's gone, the system settled in a higher equilibrium (as foreign and other investors had no real reason to change their behavior).
Money flows into US treasury bonds, directly. People and corporations literally have direct accounts with the treasury.
The US has large fiscal deficits and needs to borrow dollars. The FED set a good interest rate. It's causing owners of dollars to lend money to US Govt in hopes of safe interest gains.
This large deficit happened because of large tax cuts in the first place. Which means, citizens have more dollars in their hands (at the expense of future interest payments). This is driving up spending and thus investment to satisfy that spending.
The yield curve is flattening because of this as more and more people think that long term, the interest payments on today's spending will weigh on economy. Thus, it will ultimately cause FED to lower interest rates. Get in on risk free money while you can.
All of the above is domestic US. Internationally, the dollars that could've helped other countries came back to US in the form of lending. So those countries don't have dollars to invest, causing drops in asset prices and deflation and debt overhang.
Tax cuts can't directly cause deficits, only spending can. Spending money you don't have offsetting revenue for causes the deficit. Cutting taxes without cutting spending is a problem. Tax revenue is not down, even with the tax cuts, but spending is growing much more quickly.
That's a political debate. Economically, an entity needs to have equal inflow and outflow of money to be balanced. The govt needs enough revenue to offset its expenses (a lot of which is interest on debt taken years before, military and entitlements.)
If you think about it, generations before partied hard on the credit card with low taxes && still getting social security, medicare etc. Today's generation gets to pick either low taxes or social security/medicare. Tomorrow's generation might not even have the choice.
This is a very tortured use of the word cause that the rest of the world disagrees with.
> Tax revenue is not down
We're only now doing taxes for 2018 which was the first year affected by the Tax Act, of course it hasn't changed tax revenue yet.
1.) made in 2025 was announced in 2015. Crash happened last year in a sudden fashion across all luxury goods
2.) brand loyalty doesn’t work like an immediate switch easily levered by a government.
3.) average Chinese citizens prefer foreign brands still, due to food and vaccine poisoning cases from local firms
>1.) made in 2025 was announced in 2015. Crash happened last year in a sudden fashion across all luxury goods
Which is neither here nor there. Something can be announced in 2015 and be put in effect "last year", or have some significant component on it put in effect last year, or see the first major results of the overall thing a few years later.
>2.) brand loyalty doesn’t work like an immediate switch easily levered by a government.
Extra tariffs and support for local made products ("buy patriotic"), however does.
>3.) average Chinese citizens prefer foreign brands still, due to food and vaccine poisoning cases from local firms
Which is irrelevant to things that are not foods.
That’s why instagram is full of travel pictures not of “I bought a house/car/etc” pictures. Us millenials don’t see possessions as a status symbol anymore but almost as a liability.
also the "stuff we never use" is probably mostly just parents fed up with their kids breaking stuff just by looking at it and they'd like to emerge from parenthood with at least some sentimental items still intact. (source: a parent with 7 and 2 y/o energetic, clumsy boys who I'd very much love to share my own personal memories with lest they be destroyed on contact with one of the whirlwinds of destruction...)
I hope it spreads quickly. I think it will help a lot of people who own too much stuff, and find themselves exhausted due to it.
For people who have only known 200k kubernetes remote jobs, you should be prepared for everything to turn on a dime..
When prices dropped from 90$ to 44$ a barrel, I saw candidates do some pretty stupid shit. Nuked the reminder of their savings on a new f150 was a classic drama played out over 2 weeks that my whole team was involved trying to talk him down in. Others had to move in with their parents, take roles in deer Park that were something like 2.5hr commutes one way, drop everything for a Saudi role and move out there... Their freedom of choice was essentially yanked away.
The only one that seemed to be handling it well was a fresh 3 years in engineer. No girlfriend, kids, house, and buckets of savings. He moved to Vietnam and weathered the storm on a beach, taking tiny sips of his savings.
This was a time when rates dropped from 160, 150/hr to 60, sometimes lower. Some people had to take rate cuts to keep their roll (I didn't even know that was a thing. I assumed layoffs was the only tool in the belt-tightening toolkit).
Somehow a big Operator (think shell, Exxon) got a new project out for a refinery once, which resulted in something like 50 different engineering and design rolls, of which my agency locked down iirc 10? We had, in the city alone, 600 applicants, about half a good fit for the job (and the other half decent just not the exact fit).
I don't know if the same thing could happen in my new life as a web dev, but the lesson stuck with me. When I hop on LinkedIn and see 1000 new frontend roles, it seems hopping out here in the bay area. But I also watched hack reactor crank out 60 more kids 6 weeks after my batch, and 60 more 6 weeks after that... So maybe I got lucky, got in while the getting is still hot.
Anyway, save your money.
Doubtful TBH
"Front-end dev" here in the Midwest. Even when the economy tanked in 2008, I barely noticed and I was working as a contractor. I still had recruiters calling for contract work. We had a lot more people come into the industry via the banks and small businesses who went under in the crash, but even then, it wasn't a huge deal.
I'm always hedging my bets the bottom will fall out eventually. Even when people thought our roles would drop off, whoosh suddenly everybody wanted to convert all their stuff to Javascript apps and everything took off again.
Right now, more back-en devs are getting into the JS scene and "full stack" development is back in vogue. I still concentrate heavily on the UI/UX side and have been picking up JS work more and more. There's such a shortage of good JS developers that if you're a mid to senior level JS developer, you're going to have tons of options and a solid future.
If you don't want to do contract work, land a stable role at a large corporation and hunker down for a few years and see which way the wind blows then.
Prediction: the next one will snap back on people looking to turn everything into WASM apps.
Anyone who lived through the dot-com bust in 2000 knows very well that it can happen. Many tech companies went under and almost all had massive layoffs. If you were one of the unfortunate, there were no jobs to be had. Most people I worked with during that time went into a completely different career field because they simply couldn't find work. It was all rainbows and roses until it wasn't.
I didn't really see that, but I wasn't as involved in the community at that time. Of course, the company I work for is in no way tied to the economy of Houston (and outside of that, I've done a lot of remote in my career)
I explained that I’ve mostly lived my life with the theory that “they fire everyone eventually” and so when, not long after graduation in mid-1999, I experienced the dotcom implosion, 9/11, the extreme rise of offshoring (and the endless lies from management that their goals were not, at the time, to offshore all engineering for cost), and so on, the world was living up to my expectations. While I’ve never been fired or laid off, I knew people - very good people - who did and went 6 to 18 months unable to find a new job in a different Silicon Valley - one of layoffs and hiring freezes that didn’t thaw for years, one where startup investment plummeted and the stock gains evaporated. I spent a great deal of time in my pre-CS degree days involved in the rise and crash of Japan in the nineties and the US recession around that time; I’d seen it before and so I lived my life assuming I’d need to weather it.
Wealth, security and opportunity evaporated at once. They are not unrelated.
Co-worker is young. He noted that when he went to a startup some years ago, and people asked him why he would risk it, his answer was he’d just find another job or come back.
I am unafraid because I know in my bones that the world can change on a dime so I’ve always been conservative and prepared; practices (professional and financial), frugality and savings.
He is unafraid because he’s never known the job market that wasn’t hot in the Bay Area. He graduated in 2009.
At least I resolved a mystery for him. In the 2000s when he was in high school, he told his counselor that he wanted to do computers. The counselor said, “Are you crazy? All of that’s going to be done in India.” Until our conversation he didn’t understand that exchange.
All of this is a very long way of saying that yes, the world you know can turn on a dime and the invariants aren’t.
"Could I get your name?" "Bob." "Sorry, I can't help with that!"
I have no education in economics, but does this imply that it is becoming less lucrative to invest money? (Also, later in the article, it says that purchasing dropped sharply in December. How is it that wages are growing, job market is hungry for more labor, but consuming is dropping?)
It hit the people with stocks and money in the bank the most.
Isn't this actually just money trickling up less quickly than before?