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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, Troll) by jmorris on Saturday July 29 2017, @10:17PM (4 children)
It's A Wonderful Life is the perfect example. Because it is a movie it all worked out to a happy ending, but the history books are littered with examples where everyone didn't live happily ever after. But at least he was honest in that he wasn't claiming to be a bank. A Savings and Loan explicitly is loaning out people's SAVINGS. They acted like a bank though, which is what lead to the customers thinking they could take their money out when it looked like the thing was about to fail and Jimmy Stewart giving them, and the audience, a civics lesson on how the thing actually works.
The fraud is when you transform the maturity on loans to improperly create phantom money. It is stealing, no matter how many times you get away with it. And sooner or later reality makes you pay for your sins. Bernie Madoff got away with his scheme for a long time, everything was great right up until it wasn't. Our economies do exactly the same thing under fractional reserve, they hum right along right up until they don't. Like clockwork we keep going through boom and bust cycles. We inflate bubbles until they pop. Fake money.
You claim that our economy would collapse without it, these belief sare entirely unfounded. There is demand for home mortgages so there would be mortgages. Look at the current situation, there is literally trillions of dollars chasing around the world looking for a landing spot. Not finding any returns in bonds it is flooding into the stock market, real estate, etc and creating bubbles. Everybody knows it is a bubble being inflated yet we seem powerless to avert the impending disaster. Why? Now imagine a sane banking system. To sell those mortgages they would have to sell bonds/CDs in equal volume paying interest rates sufficient to sell them, which would then set the rate the home buyers paid at a point or two higher. Suddenly the market would rebalance to accept a crapload of money moving from the bubbles into bonds and CDs Of course on one level we already have this process running, we call them mortgage backed securities.
Without fractional reserve, all loans would have to be matched with an investment of money on the same maturity scale to pass auditor muster. The accounts would have to balance across time. That is the scam, they are unbalancing the books on the time axis with no mechanism to keep it from spiraling out of control except the inevitable bank crisis. Since a little cheating is so good, they keep going until it explodes because why wouldn't they? What do you think drives the derivatives market? Trying to leverage ever higher returns out of the same exploit. BOOM! Sooner or later, BOOM and the longer it gets pushed back the bigger the BOOM! Because eventually math wins. Math always wins.
Why? It is a financial instrument. It can be sold for whatever the market will bear, happens every day in the bond markets. The price is driven by the future payout value and the risk of the issuer actually delivering on the promise.
Your example of oversubscribed ISPs is making MY case, you are just too blind to see it. It is the same class of lie. If they were honest and sold a line as 100mps max speed with a base charge plus a x/GB usage rate and a given reliability rating it would be honest. But both sides seem to prefer the lie because they are convinced they can get the government to give them all of the good parts and prevent them from suffering the negative consequences. The providers like being able to call it "unlimited" safe in the knowledge MOST customers won't hit the cap and advertising a per GB charge scares customers, while avoiding building out the massive network that would be required to deliver the promised performance. Better to just drive off the few super pigs who threaten the network's viability. Customers want to run Netflix in HD on every screen in their home 24/7 or run bittorrent without paying what that sort of bandwidth should cost. Eventually the inherent conflict between the two groups will explode into chaos and reality will have to win.
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @12:43AM (2 children)
Say goodbye to homeloans then. Nobody would lock their savings away for 30 years just so someone else can borrow it for a mortgage. Credit would come to a grinding halt. You think that's a good thing, but think again when no business can expand, no new idea can be capitalised. I suppose you will tell us insurance is a lie too.
How will ISP's build out their solid gold networks so that every little old lady checking her email can have the same data pipes as the household streaming hd netflicks 24/7 just in case. Evren though it will never be used. How totally ineficient, doubly so when there is no credit and the ISP can only expand via profits, as if there will be any of those left either.
You need banks to manage the different time horizons between buyers and sellers of money. Set a safe margin of reserves and away you go. It's only a problem if the banks get too greedy and bribe politicians into reducing those margins so they can make even more money. That's why we had a big crash. Risk need to be priced correctly, but that price isn't infinity like your claiming.
(Score: 2) by deimtee on Sunday July 30 2017, @01:58AM (1 child)
Back about 40 years ago, the price of an average house and land was about 3 to 5 times the annual average income. People took out 25 year mortgages, but many saved, worked hard and paid them off in 10 or less. You can actually make realistic 10 year plans.
Now a house costs 10 to 15 times the avarage income, it's worse than that even because inequality has increased and the 'average income' is skewed high.
So now it's take out a 30 year mortgage and work really hard and struggle to maybe pay it off in 25. Why is that better? Do you like having all the peasants in debt slavery?
And who can make realistic 30 year plans? When you were 20 did you have your life planned all the way out to 50, with no surprises?
If you cough while drinking cheap red wine it really cleans out your sinuses.
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @03:11AM
Yes back about 40 years ago, we had fractional reserve banking, and people took out 25 year mortgages even though nobody took out 25 year savings accounts in order to loan them the money. Who is going to build all the new houses if no one can borrow any money to pay for them? Rent seeking and double incomes becoming more common is the reasons for the increase, not fractional reserve banking.
If the rent seeking capitalists who buy up all the properties and pay less tax via capital gains were taxed the same as workers earning wages, they would find somewhere more productive to park their money. People who wanted to live in houses could buy them instead.
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @11:16AM
"Daddy, Ms. Knickerbocker says that every time a bell rings, jmorris gets his wings ripped off, again."
"That's right, Zuzu, that's right."
FIN