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Today the trend to greater equality of incomes which characterised the postwar period has been reversed. Inequality is now rising rapidly. Contrary to the rising-tide hypothesis, the rising tide has only lifted the large yachts, and many of the smaller boats have been left dashed on the rocks. This is partly because the extraordinary growth in top incomes has coincided with an economic slowdown.
The trickle-down notion— along with its theoretical justification, marginal productivity theory— needs urgent rethinking. That theory attempts both to explain inequality— why it occurs— and to justify it— why it would be beneficial for the economy as a whole. This essay looks critically at both claims. It argues in favour of alternative explanations of inequality, with particular reference to the theory of rent-seeking and to the influence of institutional and political factors, which have shaped labour markets and patterns of remuneration. And it shows that, far from being either necessary or good for economic growth, excessive inequality tends to lead to weaker economic performance. In light of this, it argues for a range of policies that would increase both equity and economic well-being.
Five minutes to midnight, marginal productivity theory "needs urgent rethinking."
[Wikipedia: Joseph Eugene Stiglitz is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences and the John Bates Clark Medal. He is a former senior vice president and chief economist of the World Bank and is a former member and chairman of the Council of Economic Advisers. --Ed.]
(Score: 2) by jmorris on Saturday July 29 2017, @08:31PM (6 children)
So where is the error in what I wrote? Do you support fraud? Or do you simply attack reflexively?
Maturity Transformation is the primary driver of the boom, bust "business cycle" in that it creates a lot of phantom money that causes misallocation of resources leading to a "correction" in the form of a recession, where the excess assets are written down. Is it your position that boom, bust cycles make us wealthier?
As for the gold standard, I'm a lot less absolute on that these days, if banking were fixed there wouldn't be much difference. We wouldn't really need the FED, for example. And right now hard money would be fatal as inflation is the only possible path to "repaying" the debts every Western government has run up trying to maintain a welfare state. People loaned governments money both sides should have realized could never be repaid so both sides are going to end up eating their share of it one way or another. high but short of hyperinflation rates of Inflation is the traditional way that doesn't involve a total collapse and war. No matter how, this is going to hurt but stupid is supposed to hurt so we learn not to be stupid.
(Score: 1) by Zobeid Zuma on Saturday July 29 2017, @08:54PM (5 children)
What I disagree with is your language characterizing the system as a scam, a fraud, and claiming that there's some conspiracy to hide all of this from the public. The basic way that banks work (fractional reserve banking) is no secret to anyone who didn't sleep through their classes in school. The expansion of the money supply through loans is something you can get (and in a lot more depth) from Macro Economics 101.
Throwing around loaded terms like "scam" and "fraud" and "pyramid of doom" is not the same as making a rational argument. It demonstrates that you don't like the system -- yeah, we get that -- but it doesn't tell us when or how you think it's going to fail or how some possible alternative would work out better.
(Score: 2) by jmorris on Saturday July 29 2017, @09:32PM (3 children)
I don't like lies. Loaning money you don't in fact have is a lie. There is no other word that applies, and if anyone who isn't part of the banking industry does it they lock you up for it. Those books you speak of take pains to gloss over that uncomfortable reality.
If you loan money you actually have possession of, it is a good thing and makes everyone better off in the long run. But when a bank loans money it doesn't actually own, it always ends up badly. Adding multiple layers of obfuscation over that basic crime delays the day of reckoning at the expense of making the eventual settling of accounts a greater economic bust.
The fact people often fail to see the problem usually stems from a more basic problem, a failure to understand what money is. This is of course intentional on the part of the Powers That Be, who benefit greatly from the current system.
(Score: 3, Insightful) by aristarchus on Sunday July 30 2017, @11:10AM (2 children)
For someone who doesn't like lies, jmorris, you certainly tell a lot. Or do you think they are not because you actually believe this batshit crazy info-wars stuff?
Loaning money they don't have? Um, are you an idiot? If the Fed says they have it, they have it. That is what money is, you know. It has no, let me repeat this, no intrinsic value. Money is worth nothing, unless it functions in an economy as a means of exchange. So if you have money, and you hoard it like I know you do, it is in fact not your money because it is not really money. You, oh simplistic jmorris, do not understand money. Moldy Goldbug does not understand money.
Are you one of those idiots who thought that Obama could not just order the Mint to create a One Trillion Dollar Platinum coin, and deposit it in the Fed, because there is not a trillion dollars worth of platinum available? Or that such a coin would be too big to move? (Never bothered the Yappese!)
And since you do not understand money, you do not understand economy, you do not understand value, and you do not understand hard work. Good day, jmorris!!
(Score: 0) by Anonymous Coward on Wednesday August 02 2017, @09:19AM (1 child)
loaning money they don't have is the essence of fractional reserve banking
If I want to loan you a 100 dollars I need to have a 100 dollars
If a fractional reserve bank wants to loan you a 100 dollars they only need to have 5 dollars (or whatever % the fractional reserve part is currently mandated at), yet they get to charge interest as if they had a 100 dollars
this is fraud no mather how you spin it
(Score: 2) by aristarchus on Wednesday August 02 2017, @05:00PM
Yes, the concept is rather easy to understand. But evidently you fail to grasp what money is. Money does not exist as a natural object, and thus it cannot be something one simply "has" or not. You are reifying money, and possibly even, one suspects, deifying it.
Money is created by a relationship between humans. Thus is the Fed makes a loan, even on a factional basis, the loan itself creates the relationship that is "money". In economic theory this is sometimes referred to as M1, and further relations based on this loan multiply money, creating what economists call M2, M3, etc.
There is nothing surprising if the first step seems to create money out of "nothing". Unless you are a "conservative" who pines for the gold standard, because you are incapable of abstract thought and think that money has to be a commodity that embodies value intrinsically. But about commodities, um, those only have value relationally, some one has to want to buy your gold, or it too would not exist.
(Score: 1, Insightful) by Anonymous Coward on Saturday July 29 2017, @10:29PM
It's a ponzi scheme. There can never be enough money in circulation to repay the interest on the loans without more deposits (more money creation). How exactly is it not a giant scam?