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ning challenge of our time that s a meaningless trope but klein takes the phrase from a speech by president obama and turns it into a question in order to knock inequality down a few pegs from the economic priority list he does a very dishonest job of it a dishonest job wow srw quotes ezra klein economist jared bernstein has been worrying about inequality since way before worrying about inequality was cool srw doesn t like that but i m sympathetic inequality has become a cool topic lately see my opening line what fascinates me most about all of this is the rapidity with which inequality moved from side issue to center stage oh it ll last a month or two i expect then fade away again in a footnote his update history srw adds added context that the phrase defining challenge of our time comes from president obama s speech and reworked that sentence i finished the read and went to empty the dishwasher with that footnote still in my head decided that the attribution needs to be clarified here s what president obama said on 4 december so the basic bargain at the heart of our economy has frayed in fact this trend towards growing inequality is not unique to america s market economy across the developed world inequality has increased some some of you may have seen just last week the pope himself spoke about this at eloquent length important to get the etymology right the pope made inequality a pop topic to be sure srw does put pope francis and concern about inequality together in the same sentence in his earlier post at the very bottom of the all downhill thing we have the following james pethokoukis at aeideas study no economy in the world rewards smart skilled workers more than america s a new study adds another interesting wrinkle to the debate about income inequality in the united states pethokoukis writes i find particularly interesting the finding that a the return to skills is highest in america and lowest in nordic land and b returns are higher in economies with more open private sector based labor markets wouldn t this seem to argue that higher us inequality based on pre tax pre transfer market incomes reflects 21st century market forces rewarding ability rather than some sort of breakdown in social norms man does he really think our exaggerated income inequality is just reward for ability but then it wouldn t be the first time some asshole said people are poor because they deserve to be poor pardon my french what offends me most in all of that is that pethokoukis ignores the growing extremes of income inequality which come to think of it mirror the growing extremes of political polarization in this country today the second bottom of the barrel post on income inequality comes from don boudreaux at cafe hayek a barrier to reducing income inequality bourdeaux quotes from an ap story fully 20 percent of u s adults become rich for parts of their lives wielding outsized influence on america s economy and politics the new rich have household income of 250 000 or more at some point during their working lives putting them if sometimes temporarily in the top 2 percent of earners the new research suggests that affluent americans are more numerous than government data depict encompassing 21 percent of working age adults for at least a year by the time they turn 60 that proportion has more than doubled since 1979 mmm more than doubled since 1979 that s a result of supply side economics and he tries to make it sound good but it s just increasing income polarization you know inequality boudreaux writes if i m reading this report correctly and if the reporter has interpreted the data correctly fully 20 percent of americans are for at least some portion of their working lives in the top two percent of income earners in america these people the new rich are themselves each and everyone of them personally working at and succeeding at reducing income inequality yeah no increasing the extremes of income disparity is not the same as reducing income inequality unbelievably boudreaux adds if the middle class in america is disappearing it s chiefly because more and more americans are becoming rich yeah yeah this is just complete idiocy and wouldn t you know it boudreaux links that particular excerpt to the inimitably bad mark j perry at the link which you won t get from me perry shows this graph the graph shows percent of population grouped within some arbitrary divisions if instead of showing population it showed the amounts of money received by those arbitrary populations the dark blue segment on the right would extend increasingly far to the right as the decades go by but of course perry fails to show that graph bottom of the barrel bud posted by the arthurian at 4 00 am 4 comments monday december 30 2013 i probably shouldn t but i will reading ellen brown s amend the fed we need a central bank that serves main street as noted yesterday i don t usually read ellen brown and i ll tell you why i probably shouldn t but i will she irritates me when she says things like this the federal reserve act was drafted by bankers to create a banker s bank that would serve their interests it is their own private club and its legal structure keeps all non members out a century after the fed s creation a sober look at its history leads to the conclusion that it is a privately controlled institution whose corporate owners use it to direct our entire economy for their own ends that s not economics it s just political trash talk a clit tingler i know i know it probably helps boost her readership i don t care it s still garbage i have to say the facts do not lead me to ellen brown s conclusion and i m sober at least half the time the trash didn t turn up till the next to last paragraph so i did read almost the whole article and so you know it s not the trash talk that inspires this post it s something good that brown wrote some economics she wrote before she got to the trash she wrote a helicopter drop that missed its target all this is far from the helicopter drop proposed by ben bernanke in 2002 as a quick fix for deflation he told the japanese the u s government has a technology called a printing press or today its electronic equivalent that allows it to produce as many u s dollars as it wishes at essentially no cost later in the speech he discussed a money financed tax cut which he said was essentially equivalent to milton friedman s famous helicopter drop of money deflation could be cured said professor friedman simply by dropping money from helicopters but there has been no cloudburst of money raining down on the people the money has gotten only into the reserve accounts of banks john lounsbury writing in econintersect observes that friedman s idea of a helicopter drop involved debt free money printed by the government and landing in people s bank accounts he foresaw the money entering the economy through bank deposits not through bank reserves the ideas that underlie my thinking are 1 there s too little circulating money relative to gdp and 2 there s too much total debt relative to circulating money the solution to the problem as i see it is to increase the quantity of debt free money in people s bank accounts so i have to say ellen brown has this exactly right quoting or possibly paraphrasing lounsbury further brown writes the helicopters dropped all the money into a hole in the ground excess reserve accounts and very little made its way into the economy yeah that s pretty much exactly the right criticism of monetary policy since the crisis brown goes on to talk of the legal options and how things need to change so that what needs to be done is legal i don t know about any of that i presume she s right that s fine but it s not my focus i focus on what s wrong with the economy and what in the economy must change to fix the problem and i have to say that in this article ellen brown has it exactly right posted by the arthurian at 4 00 am 2 comments sunday december 29 2013 delayed response in comments on mine of 16 november i wrote using credit boosts the economy but it also creates debt and debt tends to undermine the boost using credit to counteract the drag from debt can work but it means an ever bigger new use of credit is required to obtain a boost for the past five years the central objective of the federal reserve has been to get people borrowing again because using credit boosts the economy they seem not to realize that the longer they postpone the payback the bigger the payback must be jim responded what the fed has done is maintain the growth of bank deposits in spite of the fact that there has been no growth in bank loans apparently bank loans are not the only way to create deposits it also appears to me that the fed s influence on interest is not the only influence it has on bank lending the fed has considerable regulatory powers to ensure banks make safe and sound loans i m not seeing any evidence of loose policy in this area all that makes me wonder how you came up with the notion that the fed s entire focus has been to get people borrowing again well the above comes to mind because i m reading ellen brown s amend the fed we need a central bank that serves main street brown writes at an imf conference on november 8 2013 former treasury secretary larry summers suggested that since near zero interest rates were not adequately promoting people to borrow and spend it might now be necessary to set interest at below zero this idea was lauded and expanded upon by other ivory tower inside the box thinkers including paul krugman i don t care about negative interest rates and ivory towers i don t care about paul krugman and larry summers and ellen brown i just want to answer the question how did you come up with the notion that the fed s entire focus has been to get people borrowing again my answer is that people important people say things like near zero interest rates are not adequately promoting people to borrow and spend see posted by the arthurian at 4 00 am 5 comments saturday december 28 2013 potential growth is real we just don t know the number at the case for concerted action ramanan quotes from wage led growth by marc lavoie and engelbert stockhammer a standard objection to the consideration of the underconsumption thesis or the consideration of problems related to the lack of effective demand is that long run growth the trend rate of growth also called the potential growth or the natural rate of growth is ultimately determined by supply side factors yet since the advent of the global financial crisis government agencies and central banks in many industrialized countries have lowered their forecasts of long run real growth thus demonstrating clearly that weak aggregate demand does have an impact on potential growth but a forecast of long run real growth is not the same as potential growth the lowering of forecasts does not demonstrate that weak aggregate demand has an impact on potential growth it only demonstrates that forecasters are willing to contradict their own theories in order to push their predictions down where the actual numbers turn out to be posted by the arthurian at 4 00 am 1 comments friday december 27 2013 i don t so much like the wealth income disparity is the cause of our troubles argument i don t so much like the wealth income disparity is the cause of our troubles argument bring it up and somebody is bound to accuse you of stirring up class warfare you re not of course or i don t know maybe you are i do know that i can make the disparity argument without a trace of class concern so you can too i m sure but it doesn t matter if our motives are pure it only matters if our motives have been impugned bring up the disparity argument and your motives are sure to be impugned so i don t like the argument i avoid the argument for me though it doesn t matter so much how other people respond what matters is how the argument holds up in my own mind here again though i avoid the argument for i am not certain i can separate the economics of the disparity argument from the social aspects of that argument and economics my economics has no social aspects at the businomics blog bill conerly asks should economists talk about redistribution an economist has as much right to express statements about value as anyone else does however the economist is not doing so from a position of professional expertise rebecca blank being an expert on poverty does not mean that she is an expert on the morality of using force to solve social problems in fact i doubt that we should grant anyone expert status on such philosophical positions i like that a lot but this next quote i can disagree with economic policy cannot derive strictly from economics economics is a set of if then statements if this occurs then that happens it s a collection of statements about the way the world works or at least a world of people there is nothing within the body of economic thought that by itself dictates what policy is best i don t know if it s within the body of economic thought but clearly the policy that s best is the one that sustains life as we know it or life as we knew it before things started going bad let too few people accumulate too much wealth and they come to have a new vision of the world a vision in which nation states are no longer necessary posted by the arthurian at 4 00 am 0 comments labels cycle of civilization thursday december 26 2013 a simple subtraction subtract consumer debt from gdp graph 1 gdp less consumer debt i know it s a flow minus a stock a flow minus a stock but i m not drawing any conclusions here except it s a surprising picture same graph but log of values graph 2 natural log of gdp less consumer debt how straight those trends are posted by the arthurian at 4 00 am 0 comments wednesday december 25 2013 speaking of models via bill c at twenty cent paradigms the reserve bank of new zealand has a neat animation of bill phillips famous hydraulic computer which illustrates the stocks and flows of national income with tubes tanks and gurgling noises go there scroll down and click turn it on give it a moment an image of the moniac will appear click turn it on you can hover over parts of the machine and descriptions will pop up find options buttons in the upper right corner merry christmas posted by the arthurian at 4 00 am 5 comments tuesday december 24 2013 dirk ehnts and the holodeck dirk ehnts in models as abstractions of the real world are useful a student explaining why abstract models are useful makes a very nice analogy if you want to go from one campus of the berlin school of economics to the other by car or public transport then you need not a description of the world as it is but a description of the world in an abstract form that allows you to get there a map you need a map ehnts gets to the point the same goes for macroeconomics it is not necessary to understand and know how every entity behaves you can use abstractions and you ...