Sluggish growth is no mystery: No one has any money
July 11, 2011 10:21 AM Subscribe
The housing bubble was the last chance most middle-class families saw for grasping the brass ring. Working hard didn’t pay off. Investing in the stock market was a sucker’s bet. But the housing bubble allowed middle-class families to dream again and more importantly to keep spending as if they were getting a big fat raise every year. - How the Bubble Destroyed the Middle Class
@The World Famous
Rightly or wrongly, a lot of people believed that they were going to accumulate wealth by buying property.
posted by a small part of the world at 10:32 AM on July 11, 2011 [5 favorites]
Rightly or wrongly, a lot of people believed that they were going to accumulate wealth by buying property.
posted by a small part of the world at 10:32 AM on July 11, 2011 [5 favorites]
Well, I'd rather accumulate wealth but I have to spend money on clothes, food, a little bit of gasoline, electricity, etc. I can't remember the last time I took my wife out for dinner, but it may have been around the last time I got a raise (5 years ago). But hey, at least I'm working, right?
posted by Mister_A at 10:32 AM on July 11, 2011 [7 favorites]
posted by Mister_A at 10:32 AM on July 11, 2011 [7 favorites]
And if the middle class didn't spend, there would be no jobs, and the cycle would repeat. If everyone "accumulated wealth", nobody would accumulate wealth.
It's called The paradox of thrift...
there's a lot more i want to say but i'm lazy today.
posted by symbioid at 10:32 AM on July 11, 2011 [16 favorites]
It's called The paradox of thrift...
there's a lot more i want to say but i'm lazy today.
posted by symbioid at 10:32 AM on July 11, 2011 [16 favorites]
Krugman: No, We Can’t? Or Won’t?
Our failure to create jobs is a choice, not a necessity — a choice rationalized by an ever-shifting set of excuses.
posted by KokuRyu at 10:35 AM on July 11, 2011 [14 favorites]
Our failure to create jobs is a choice, not a necessity — a choice rationalized by an ever-shifting set of excuses.
posted by KokuRyu at 10:35 AM on July 11, 2011 [14 favorites]
I'm still trying to wrap my head around how the middle class "destroys itself," as if their behavior is somehow responsible for economic iniquities.
posted by incessant at 10:35 AM on July 11, 2011 [17 favorites]
posted by incessant at 10:35 AM on July 11, 2011 [17 favorites]
The World Famous : The "brass ring" is not about spending. It's about accumulating wealth. The middle class destroys itself all the time because it would rather spend money than accumulate wealth.
We want to accumulate wealth so we can spend it. If we could just find a way to make the wealthy would spend faster (and make no mistake, I in no way mean to imply they want for anything material), we wouldn't have the present situation where half the planet rots in abject poverty while 0.1% has more wealth than their next three waste-of-flesh generations can possibly piss away.
posted by pla at 10:36 AM on July 11, 2011 [2 favorites]
We want to accumulate wealth so we can spend it. If we could just find a way to make the wealthy would spend faster (and make no mistake, I in no way mean to imply they want for anything material), we wouldn't have the present situation where half the planet rots in abject poverty while 0.1% has more wealth than their next three waste-of-flesh generations can possibly piss away.
posted by pla at 10:36 AM on July 11, 2011 [2 favorites]
People believe that they NEED a lot of things that they don't really need, but that is part of the society that we live in. My wife was a social worker for a while and she had clients that didn't have money to feed their kids but paid $150 a month on cable TV and another $150 for cell phones. When she suggested that they didn't need those things they would look at her like she was from some other planet.
posted by jefeweiss at 10:37 AM on July 11, 2011 [11 favorites]
posted by jefeweiss at 10:37 AM on July 11, 2011 [11 favorites]
If you have zero disposable income after paying for only the necessities*, you are NOT middle class.
* I mean the true necessities (necessary for sustaining life), not the "wants".
posted by blue_beetle at 10:38 AM on July 11, 2011 [10 favorites]
* I mean the true necessities (necessary for sustaining life), not the "wants".
posted by blue_beetle at 10:38 AM on July 11, 2011 [10 favorites]
If we could just find a way to make the wealthy would spend faster
Or if we could somehow require that if they accumulate more than a given amount of money in a given amount of time, that money will be somehow put back into the economy. In the interest of economic fairness.
Of course some sort of huge regulatory agency would be necessary to keep track of how much money they made, and make sure that the money they returned would be equitably reinserted into the economy at large, and spread over many, many different sectors. It would also have to make sure that the money was spent in ways that supported the nation itself as a whole, too, given the huge amounts of money we're now talking about. Jeez, that agency would need to be almost as big as the IRS!
Hey, wait ...
posted by penduluum at 10:40 AM on July 11, 2011 [69 favorites]
Or if we could somehow require that if they accumulate more than a given amount of money in a given amount of time, that money will be somehow put back into the economy. In the interest of economic fairness.
Of course some sort of huge regulatory agency would be necessary to keep track of how much money they made, and make sure that the money they returned would be equitably reinserted into the economy at large, and spread over many, many different sectors. It would also have to make sure that the money was spent in ways that supported the nation itself as a whole, too, given the huge amounts of money we're now talking about. Jeez, that agency would need to be almost as big as the IRS!
Hey, wait ...
posted by penduluum at 10:40 AM on July 11, 2011 [69 favorites]
Thank God they got rid of the "death tax", and kept the capital gains tax rate at a ludicrously low rate, because that shit has created LITERALLY BILLIONS OF AWESOME JOBS RIGHT HERE IN THE U.S.A.!!!!
posted by Mister_A at 10:46 AM on July 11, 2011 [55 favorites]
posted by Mister_A at 10:46 AM on July 11, 2011 [55 favorites]
The housing bubble is only the most obvious manifestation of what destroyed the middle class - the deregulation of consumer credit.
posted by JPD at 10:48 AM on July 11, 2011 [15 favorites]
posted by JPD at 10:48 AM on July 11, 2011 [15 favorites]
And if the middle class didn't spend, there would be no jobs, and the cycle would repeat. If everyone "accumulated wealth", nobody would accumulate wealth.
It's called The paradox of thrift...
There is no paradox. When you save, you keep money for yourself. When you spend, you distribute money to other people. Once the money is out there, it can circulate and multiply according to the speed of its travel.
When you spend everyone gets slightly richer, but you get much poorer. It's a prisoner's dilemma kind of situation. When everyone spends, the motion of the money means that everyone gets richer than they would have if they had all saved. But this depends on many, many people spending, and spending might be good for everyone but it's bad for you, because you need money for food, to get health care, to keep up your automobile, to pay rent and utilities. If you have little money left after doing these things, it is only prudent to keep the money as a hedge against disaster and to make progress towards the next bill.
This is because the consequences for not paying these things are dire. You can't give up on food, health care, your car, your rent, your power bill. If there was a social safety net that lessened the blow a bit, like by providing a certain minimum in some of these categories, then people could maybe afford to splurge more often, which would fuel the economy, which would give people more money in the first place.
That is exactly the thing that won't happen in our political climate.
posted by JHarris at 10:49 AM on July 11, 2011 [17 favorites]
It's called The paradox of thrift...
There is no paradox. When you save, you keep money for yourself. When you spend, you distribute money to other people. Once the money is out there, it can circulate and multiply according to the speed of its travel.
When you spend everyone gets slightly richer, but you get much poorer. It's a prisoner's dilemma kind of situation. When everyone spends, the motion of the money means that everyone gets richer than they would have if they had all saved. But this depends on many, many people spending, and spending might be good for everyone but it's bad for you, because you need money for food, to get health care, to keep up your automobile, to pay rent and utilities. If you have little money left after doing these things, it is only prudent to keep the money as a hedge against disaster and to make progress towards the next bill.
This is because the consequences for not paying these things are dire. You can't give up on food, health care, your car, your rent, your power bill. If there was a social safety net that lessened the blow a bit, like by providing a certain minimum in some of these categories, then people could maybe afford to splurge more often, which would fuel the economy, which would give people more money in the first place.
That is exactly the thing that won't happen in our political climate.
posted by JHarris at 10:49 AM on July 11, 2011 [17 favorites]
Sustaining a large Middle Class in America has required decades of false growth - bubbles. The bubbling has been the only thing giving most Americans the illusion that they were becoming better-off over the last 30+ years. And even a miniscule 'Middle Class' in China will more than make up in consumption and production for the Lost American Middle Class.
posted by oneswellfoop at 10:49 AM on July 11, 2011 [3 favorites]
posted by oneswellfoop at 10:49 AM on July 11, 2011 [3 favorites]
What in the world is the point of throwing out another retread of this story? Is there anything about this particular version that stands out in any way? Because it read to me as simplistic, hyperbolic, unoriginal and poorly written. The article closes with "let them eat cake," for crying out loud. There should be someone handing out writing restraining orders for that sort of clunker.
Sincere question: what does this add? What does this say that hasn't been said over and over (and that I can frankly read five times a day if I want to hang around over at Reddit)? What is the point of this discussion?
posted by nanojath at 10:50 AM on July 11, 2011 [13 favorites]
Sincere question: what does this add? What does this say that hasn't been said over and over (and that I can frankly read five times a day if I want to hang around over at Reddit)? What is the point of this discussion?
posted by nanojath at 10:50 AM on July 11, 2011 [13 favorites]
You're right, nanojath; this is an extremely mediocre single link post on a subject that has been done to death.
posted by mek at 10:55 AM on July 11, 2011
posted by mek at 10:55 AM on July 11, 2011
What in the world is the point of throwing out another retread of this story? Is there anything about this particular version that stands out in any way? Because it read to me as simplistic, hyperbolic, unoriginal and poorly written. The article closes with "let them eat cake," for crying out loud. There should be someone handing out writing restraining orders for that sort of clunker.
Sincere question: what does this add? What does this say that hasn't been said over and over (and that I can frankly read five times a day if I want to hang around over at Reddit)? What is the point of this discussion?
Quoting, just because it's so true. This article says absolutely nothing that hasn't been said before, and does so in a way that is not novel, or sheds new light on the situation.
posted by 2N2222 at 10:55 AM on July 11, 2011 [1 favorite]
Sincere question: what does this add? What does this say that hasn't been said over and over (and that I can frankly read five times a day if I want to hang around over at Reddit)? What is the point of this discussion?
Quoting, just because it's so true. This article says absolutely nothing that hasn't been said before, and does so in a way that is not novel, or sheds new light on the situation.
posted by 2N2222 at 10:55 AM on July 11, 2011 [1 favorite]
The housing bubble was the last chance most middle-class families saw for grasping the brass ring. Working hard didn’t pay off. Investing in the stock market was a sucker’s bet. But the housing bubble allowed middle-class families to dream again and more importantly to keep spending as if they were getting a big fat raise every year.
This sounds like part of a speech given by Mayor Quimby.
posted by RobotVoodooPower at 10:56 AM on July 11, 2011 [2 favorites]
This sounds like part of a speech given by Mayor Quimby.
posted by RobotVoodooPower at 10:56 AM on July 11, 2011 [2 favorites]
The housing bubble is only the most obvious manifestation of what destroyed the middle class - the deregulation of consumer credit.
i don't think the historic failure (over 30 yrs) of wages to keep pace with productivity in the US has much to do with the availability of consumer credit.
the frog in the pot is just now starting to jump...
posted by ennui.bz at 10:57 AM on July 11, 2011 [4 favorites]
i don't think the historic failure (over 30 yrs) of wages to keep pace with productivity in the US has much to do with the availability of consumer credit.
the frog in the pot is just now starting to jump...
posted by ennui.bz at 10:57 AM on July 11, 2011 [4 favorites]
My wife was a social worker for a while and she had clients that didn't have money to feed their kids but paid $150 a month on cable TV and another $150 for cell phones. When she suggested that they didn't need those things they would look at her like she was from some other planet.
Oh Jesus...you and your wife do know, right you can't get jobs or do anything without a phone? Cell phones=not luxuries.
And if you live in a shitty neighborhood you can't afford to leave, what else are you going to do but watch TV? It's not like you can get much TV to watch without cable, especially in an urban area. Can't send your kids out to play because they might get shot at or beat up, but maybe you can turn on Cartoon Network for them.
I like how we can never never feel any sympathy for poor people until they are so poor that any and all amenities are denied them. Where is that line exactly? When they are living in cardboard boxes? Actually starving and eating out of trash cans? Because you can be really really poor for a long time before you get to that point.
posted by emjaybee at 10:58 AM on July 11, 2011 [101 favorites]
Oh Jesus...you and your wife do know, right you can't get jobs or do anything without a phone? Cell phones=not luxuries.
And if you live in a shitty neighborhood you can't afford to leave, what else are you going to do but watch TV? It's not like you can get much TV to watch without cable, especially in an urban area. Can't send your kids out to play because they might get shot at or beat up, but maybe you can turn on Cartoon Network for them.
I like how we can never never feel any sympathy for poor people until they are so poor that any and all amenities are denied them. Where is that line exactly? When they are living in cardboard boxes? Actually starving and eating out of trash cans? Because you can be really really poor for a long time before you get to that point.
posted by emjaybee at 10:58 AM on July 11, 2011 [101 favorites]
When she suggested that they didn't need those things they would look at her like she was from some other planet.
One social worker telling you don't need those things vs. an entire society seemingly engineered to convince you that you actually do really really need those things. That's a losing battle every time.
Plus social workers can be overwhelmingly (if unintentionally) condescending with that shit. There's a whole host of circumstances that send a person through the front doors of that office, and cable tv very low on that list.
posted by billyfleetwood at 11:03 AM on July 11, 2011 [16 favorites]
One social worker telling you don't need those things vs. an entire society seemingly engineered to convince you that you actually do really really need those things. That's a losing battle every time.
Plus social workers can be overwhelmingly (if unintentionally) condescending with that shit. There's a whole host of circumstances that send a person through the front doors of that office, and cable tv very low on that list.
posted by billyfleetwood at 11:03 AM on July 11, 2011 [16 favorites]
i don't think the historic failure (over 30 yrs) of wages to keep pace with productivity in the US has much to do with the availability of consumer credit.
hah that was my second sentence that I decided to delete- the increased availability of credit permitted a rising standard of living and the illusion of increased wealth despite 30 years of nil real wage growth. Politicians liked this because when people think they are getting richer, the vote for incumbents, and let the banks fund the "american dream" was a whole lot easier then trying to figure out how to create real wage growh.
posted by JPD at 11:05 AM on July 11, 2011 [4 favorites]
hah that was my second sentence that I decided to delete- the increased availability of credit permitted a rising standard of living and the illusion of increased wealth despite 30 years of nil real wage growth. Politicians liked this because when people think they are getting richer, the vote for incumbents, and let the banks fund the "american dream" was a whole lot easier then trying to figure out how to create real wage growh.
posted by JPD at 11:05 AM on July 11, 2011 [4 favorites]
The housing bubble may have been the latest nail in the coffin, but 30 years of corporatist economic policies is what put the middle class into that coffin. Used to be, a moderately decent blue-collar job put you in the middle class, home ownership and all.
posted by Kirth Gerson at 11:05 AM on July 11, 2011 [6 favorites]
posted by Kirth Gerson at 11:05 AM on July 11, 2011 [6 favorites]
Our failure to create jobs is a choice, not a necessity — a choice rationalized by an ever-shifting set of excuses.
Yeah, I continue to not get why the WPA hasn't been resurrected. We have millions out of work. We are willing to spend billions, if not trillions, on useless missions overseas. We have crumbling infrastructure. ...do the math, people.
posted by DU at 11:06 AM on July 11, 2011 [24 favorites]
Yeah, I continue to not get why the WPA hasn't been resurrected. We have millions out of work. We are willing to spend billions, if not trillions, on useless missions overseas. We have crumbling infrastructure. ...do the math, people.
posted by DU at 11:06 AM on July 11, 2011 [24 favorites]
Look at the numbers, emjaybee. $150 a month is not basic cable and it's not a basic voice plan. People spending food money on non-essentials is a serious problem with a very workable solution. Attitudes like yours can actually hurt families that need help making spending decisions.
posted by rocket88 at 11:06 AM on July 11, 2011 [20 favorites]
posted by rocket88 at 11:06 AM on July 11, 2011 [20 favorites]
I like how we can never never feel any sympathy for poor people until they are so poor that any and all amenities are denied them
I'm not just going to hand over my hard-earned sympathy to those welfare queens. If they can get all their sympathy from handouts, why would they ever work for it?
posted by Hoopo at 11:07 AM on July 11, 2011 [3 favorites]
I'm not just going to hand over my hard-earned sympathy to those welfare queens. If they can get all their sympathy from handouts, why would they ever work for it?
posted by Hoopo at 11:07 AM on July 11, 2011 [3 favorites]
I've never understood how one's house counts toward usable assets. Do most people cash out of their suburban residence and but an incredibly small, cheap abode and then live off the remaining difference? I live in an area that is by no means upper class but not poor by any stretch. dozens of couples we knew, who we also knew were making at or below 100K combined, were living way beyond their means between 2000 and 2006.. It was weird. Sometimes we would ask ourselves what we were doing that we weren't remodeling the house or heading off on some exotic vacation. If that behavior was the underpinning of our economic growth (and it was, clearly), then really, what was ever the point. Those people have no one to blame but themselves because they were educated, and greedy.
posted by docpops at 11:07 AM on July 11, 2011 [2 favorites]
posted by docpops at 11:07 AM on July 11, 2011 [2 favorites]
emjaybee: I see what you're saying and agree in principle, but it's fairly safe to say that the woman who voluntarily took a job as a social worker feels some level of sympathy for poor people, yeah? This is one of those things where there's very clearly a part-of-the-problem team and a part-of-the-solution team, and pointing out where somebody stands in the hierarchy of part-of-the-solution is maybe less constructive than it could be.
posted by penduluum at 11:07 AM on July 11, 2011
posted by penduluum at 11:07 AM on July 11, 2011
People spending food money on non-essentials is a serious problem with a very workable solution. Attitudes like yours can actually hurt families that need help making spending decisions.
No, it's not a serious problem and it does not have a workable solution. You can't just nag the economy back into shape by crowing about personal responsibility. That's absurd and will fail to achieve anything.
posted by mek at 11:08 AM on July 11, 2011 [9 favorites]
No, it's not a serious problem and it does not have a workable solution. You can't just nag the economy back into shape by crowing about personal responsibility. That's absurd and will fail to achieve anything.
posted by mek at 11:08 AM on July 11, 2011 [9 favorites]
emjaybee : Oh Jesus...you and your wife do know, right you can't get jobs or do anything without a phone? Cell phones=not luxuries.
Does answering the phone for a job offer require a $150/mo smartphone with data plan?
And if you live in a shitty neighborhood you can't afford to leave, what else are you going to do but watch TV?
Read? Surf the internet ($19.95 DSL costs a hell of a lot less than $150)?
And on that point, I can personally state flatly that no one "needs" it to get by (since I don't even have a broadcast TV receiver, nevermind cable or satellite).
posted by pla at 11:08 AM on July 11, 2011 [3 favorites]
Does answering the phone for a job offer require a $150/mo smartphone with data plan?
And if you live in a shitty neighborhood you can't afford to leave, what else are you going to do but watch TV?
Read? Surf the internet ($19.95 DSL costs a hell of a lot less than $150)?
And on that point, I can personally state flatly that no one "needs" it to get by (since I don't even have a broadcast TV receiver, nevermind cable or satellite).
posted by pla at 11:08 AM on July 11, 2011 [3 favorites]
i don't think the historic failure (over 30 yrs) of wages to keep pace with productivity in the US has much to do with the availability of consumer credit.
ennui.bz: I think it kind of does. Easy consumer credit has helped mask the immediate term social consequences of wage stagnation. Because people kept having access to more credit, and since credit now flows as freely as real capital, most of us have been able to feel as if we were still getting ahead over time. Now we've got a big screen TV, and an iPhone, etc., so things are still getting better all the time, only they really aren't. It just feels like they are because we've got this artificially inflated spending power due to easy access to credit. But that's been enough to keep us from noticing the wage stagnation (while also creating bubbles all throughout the economy). Until now.
posted by saulgoodman at 11:10 AM on July 11, 2011 [9 favorites]
ennui.bz: I think it kind of does. Easy consumer credit has helped mask the immediate term social consequences of wage stagnation. Because people kept having access to more credit, and since credit now flows as freely as real capital, most of us have been able to feel as if we were still getting ahead over time. Now we've got a big screen TV, and an iPhone, etc., so things are still getting better all the time, only they really aren't. It just feels like they are because we've got this artificially inflated spending power due to easy access to credit. But that's been enough to keep us from noticing the wage stagnation (while also creating bubbles all throughout the economy). Until now.
posted by saulgoodman at 11:10 AM on July 11, 2011 [9 favorites]
2N2222: "nanojath: What in the world is the point of throwing out another retread of this story? Is there anything about this particular version that stands out in any way? Because it read to me as simplistic, hyperbolic, unoriginal and poorly written. The article closes with "let them eat cake," for crying out loud. There should be someone handing out writing restraining orders for that sort of clunker.
Sincere question: what does this add? What does this say that hasn't been said over and over (and that I can frankly read five times a day if I want to hang around over at Reddit)? What is the point of this discussion?
Quoting, just because it's so true. This article says absolutely nothing that hasn't been said before, and does so in a way that is not novel, or sheds new light on the situation."
mek: You're right, nanojath; this is an extremely mediocre single link post on a subject that has been done to death.
I mean really - this article. I swear I've heard it all before. It says nothing original. I just don't even get the point of retreading the same ground over and over. It's not even written well.
posted by symbioid at 11:10 AM on July 11, 2011 [1 favorite]
Sincere question: what does this add? What does this say that hasn't been said over and over (and that I can frankly read five times a day if I want to hang around over at Reddit)? What is the point of this discussion?
Quoting, just because it's so true. This article says absolutely nothing that hasn't been said before, and does so in a way that is not novel, or sheds new light on the situation."
mek: You're right, nanojath; this is an extremely mediocre single link post on a subject that has been done to death.
I mean really - this article. I swear I've heard it all before. It says nothing original. I just don't even get the point of retreading the same ground over and over. It's not even written well.
posted by symbioid at 11:10 AM on July 11, 2011 [1 favorite]
Also the poor should only wear thrift-store clothing, buy only store-brand food at the discount supermarket and god forbid they ever use salt because really, that's a luxury they can't afford.
posted by griphus at 11:10 AM on July 11, 2011 [22 favorites]
posted by griphus at 11:10 AM on July 11, 2011 [22 favorites]
Let's not forget that we had an regulatory framework in effect until 1998 that helped stave off such a ridiculous outcome (Glass-Steagal). I believe the "riding bubbles" is right, and I fear that that's all we've got. Bubbles of "financial innovation".
posted by symbioid at 11:12 AM on July 11, 2011 [1 favorite]
posted by symbioid at 11:12 AM on July 11, 2011 [1 favorite]
rocket88 - I don't have the data in front of me, but its out there. Actual poor people spending too much money on cable and other "luxuries" wasn't the problem. If there were groups that were overspending on luxury is was the 80k a year escalade driver usingmortgage equity withdrawal to fund their lifestyle.
It wasn't the poor who borrowed themselves into financial issues by living an unsustainable lifestyle - it was the middle class who thought they had a right to live like the upper class, and found banks happy to facilitate that.
If you look at what actually causes most bankruptcies amongst the bottom half of the income distribution it is overwhelmingly health care costs - not unsecured credit and the like.
posted by JPD at 11:13 AM on July 11, 2011 [7 favorites]
It wasn't the poor who borrowed themselves into financial issues by living an unsustainable lifestyle - it was the middle class who thought they had a right to live like the upper class, and found banks happy to facilitate that.
If you look at what actually causes most bankruptcies amongst the bottom half of the income distribution it is overwhelmingly health care costs - not unsecured credit and the like.
posted by JPD at 11:13 AM on July 11, 2011 [7 favorites]
This is one of the most idiotic things I've ever read.
The premise of the article is, and I quote,
The argument defeats itself.
How? Because he's talking about a bubble, the whole point of which is that the spike in prices was unnatural and illusory. And the reason this is bad for the author is that the only reason the middle class even had the income growth it did is entirely because of the bubble. The historic Good Old Days when the income "grew richer each year"? That was an illusion. We weren't really getting richer, we just thought we were. Like saulgoodman, who is in particularly Austrian form today, says, easy access to credit has caused the illusion of wealth and commodity bubbles, but hasn't actually made anyone better off.
In other words, the middle class was screwed before the bubble started, in that its income hasn't really done anything for decades. All the bubble did was hide this fact and make its revelation startling and difficult. But ruin the middle class it did not. The underlying causes of the middle class's "ruin" have been there as long or longer than most MeFites have been alive.
posted by valkyryn at 11:15 AM on July 11, 2011 [21 favorites]
The premise of the article is, and I quote,
Once, the middle class grew richer each year, grew more comfortable, enjoyed a higher living standard. It was real progress in material terms.From there, he concludes that the bursting of the bubble, which "destroyed" a Really Big Number of "wealth," has doomed the "middle class," because pretty much all of their assets were in real estate, which has depreciated pretty massively in the past few years.
The argument defeats itself.
How? Because he's talking about a bubble, the whole point of which is that the spike in prices was unnatural and illusory. And the reason this is bad for the author is that the only reason the middle class even had the income growth it did is entirely because of the bubble. The historic Good Old Days when the income "grew richer each year"? That was an illusion. We weren't really getting richer, we just thought we were. Like saulgoodman, who is in particularly Austrian form today, says, easy access to credit has caused the illusion of wealth and commodity bubbles, but hasn't actually made anyone better off.
In other words, the middle class was screwed before the bubble started, in that its income hasn't really done anything for decades. All the bubble did was hide this fact and make its revelation startling and difficult. But ruin the middle class it did not. The underlying causes of the middle class's "ruin" have been there as long or longer than most MeFites have been alive.
posted by valkyryn at 11:15 AM on July 11, 2011 [21 favorites]
When I first moved here and started working, my wife and I lived in a small rental across the street from a family of four girls whose mom stayed at home, and he supported all of them as a postal worker. All four girls are college educated and solidly grounded. On weekends he hung out and worked around the house, they took short vacations around the state occasionally, drove the same econoline van for fifteen years. No one that knew them would say they were deprived. Granted, he had health care, which is the huge X factor in these types of situations, but there were few other eventualities they couldn't cover if they came up.
There has to be a middle ground between vilifying people that argue for living more simply and those who argue that cell service and cable TV and free access to all the same foods as the rest of society are basic human needs and rights. If my income were cut 50% tomorrow we'd slice that shit to the bone, because the idea of being on the edge financially is a terror worse than any so-called "deprivation".
posted by docpops at 11:16 AM on July 11, 2011 [8 favorites]
There has to be a middle ground between vilifying people that argue for living more simply and those who argue that cell service and cable TV and free access to all the same foods as the rest of society are basic human needs and rights. If my income were cut 50% tomorrow we'd slice that shit to the bone, because the idea of being on the edge financially is a terror worse than any so-called "deprivation".
posted by docpops at 11:16 AM on July 11, 2011 [8 favorites]
Let's not forget that we had an regulatory framework in effect until 1998 that helped stave off such a ridiculous outcome (Glass-Steagal). I believe the "riding bubbles" is right, and I fear that that's all we've got. Bubbles of "financial innovation".
no. people like to point at G-S as the moment the system broke - in reality there were lots of reforms in the 80's that paid a larger role in the creation of the credit bubble.
posted by JPD at 11:18 AM on July 11, 2011
no. people like to point at G-S as the moment the system broke - in reality there were lots of reforms in the 80's that paid a larger role in the creation of the credit bubble.
posted by JPD at 11:18 AM on July 11, 2011
You know, I understand both the poor person, and the social worker. I think we can talk about poor financial planning - which happens among the poor just as often as among others - while still understanding that overall inequality is a structural problem.
But this really has nothing to do with the middle class and their problems. The reason that inequality is increasing is because average wages have stagnated, just as wages at the upper end have increased. In 1970 in Toronto, the plurality of people used to have a median wage. Now the largest group is 20% below median wage, with another, smaller bump at 40% above median wage.
The housing bubble has exascerbated problems in the US, but the root of the problem is anti-unionism and the constant pressure downwards on lower wages in the name of efficiency and frugality.
Just like Air Canada eliminating decent pensions for lower-paid workers while the executives keep their defined benefit - and much more expensive - pensions.
Sometimes, I'm thinking we really do need to start a (non-violent) class war.
posted by jb at 11:18 AM on July 11, 2011 [15 favorites]
But this really has nothing to do with the middle class and their problems. The reason that inequality is increasing is because average wages have stagnated, just as wages at the upper end have increased. In 1970 in Toronto, the plurality of people used to have a median wage. Now the largest group is 20% below median wage, with another, smaller bump at 40% above median wage.
The housing bubble has exascerbated problems in the US, but the root of the problem is anti-unionism and the constant pressure downwards on lower wages in the name of efficiency and frugality.
Just like Air Canada eliminating decent pensions for lower-paid workers while the executives keep their defined benefit - and much more expensive - pensions.
Sometimes, I'm thinking we really do need to start a (non-violent) class war.
posted by jb at 11:18 AM on July 11, 2011 [15 favorites]
Sometimes, I'm thinking we really do need to start a (non-violent) class war.
Surely you mean "fight back"?
posted by Jehan at 11:21 AM on July 11, 2011 [18 favorites]
Surely you mean "fight back"?
posted by Jehan at 11:21 AM on July 11, 2011 [18 favorites]
Sometimes, I'm thinking we really do need to start a (non-violent) class war.
"Political power grows out of the barrel of a gun."
- Chapter 5, The Little Red Book
posted by Mister Fabulous at 11:21 AM on July 11, 2011 [4 favorites]
"Political power grows out of the barrel of a gun."
- Chapter 5, The Little Red Book
posted by Mister Fabulous at 11:21 AM on July 11, 2011 [4 favorites]
Oh jeez, I took one look at the graph in that story and knew this was that damn fallacy again. Looking at the market as a whole, no money was lost in the housing crash. The bubble burst and prices returned to pre-bubble levels. Just because you didn't make money you expected to, doesn't mean you lost money. Sure some individuals lost money while some made money by cashing out at the peak. But nobody ever guaranteed you an income off property.
This subject really rankles me. My dad got wiped out in the S&L crisis in the 80s. Before that, he used to say that real estate is the only solid investment because they're not making more of it so it can't be deflated by a market glut, and nobody can destroy it. He stopped singing that tune after the RTC liquidated all the S&L holdings and his real estate became worthless. If only he had kept his solid properties, instead of overleveraging himself to buy up distressed properties to develop, he wouldn't have suffered at all. But he used his solid investments to prop up sketchy investments and lost it all in the crash. I would have thought he'd know better, after suffering through the Depression in his childhood.
posted by charlie don't surf at 11:22 AM on July 11, 2011 [3 favorites]
This subject really rankles me. My dad got wiped out in the S&L crisis in the 80s. Before that, he used to say that real estate is the only solid investment because they're not making more of it so it can't be deflated by a market glut, and nobody can destroy it. He stopped singing that tune after the RTC liquidated all the S&L holdings and his real estate became worthless. If only he had kept his solid properties, instead of overleveraging himself to buy up distressed properties to develop, he wouldn't have suffered at all. But he used his solid investments to prop up sketchy investments and lost it all in the crash. I would have thought he'd know better, after suffering through the Depression in his childhood.
posted by charlie don't surf at 11:22 AM on July 11, 2011 [3 favorites]
JPD: "Let's not forget that we had an regulatory framework in effect until 1998 that helped stave off such a ridiculous outcome (Glass-Steagal). I believe the "riding bubbles" is right, and I fear that that's all we've got. Bubbles of "financial innovation".
no. people like to point at G-S as the moment the system broke - in reality there were lots of reforms in the 80's that paid a larger role in the creation of the credit bubble."
Let's put it like this "The straw that broke the camel's back" The fact is - the past 30 years has been nothing but Reaganomic ideology write large, including both parties in on the game. Obama putting in Larry Summers and Geithner (SUMMERS? GEITHNER?) as some of his key players should be a tip off that nothing on this boat is getting turned around.
You're correct - the 80s had tons of deregulation and different aspects (S&L) got hit differently at different times. The current bubble was predicated upon G&S being downturned, but if there were other regulatory things involved that could have prevented it, then perhaps, yes, it isn't just "Glass-Steagal"... So the system is complex, and it got torn down bit by bit, and the same people who idealize St. Reagan are continuing to push this fucker as far as it will go.
I suppose they figure better to be lord of hell or something.
posted by symbioid at 11:22 AM on July 11, 2011 [2 favorites]
no. people like to point at G-S as the moment the system broke - in reality there were lots of reforms in the 80's that paid a larger role in the creation of the credit bubble."
Let's put it like this "The straw that broke the camel's back" The fact is - the past 30 years has been nothing but Reaganomic ideology write large, including both parties in on the game. Obama putting in Larry Summers and Geithner (SUMMERS? GEITHNER?) as some of his key players should be a tip off that nothing on this boat is getting turned around.
You're correct - the 80s had tons of deregulation and different aspects (S&L) got hit differently at different times. The current bubble was predicated upon G&S being downturned, but if there were other regulatory things involved that could have prevented it, then perhaps, yes, it isn't just "Glass-Steagal"... So the system is complex, and it got torn down bit by bit, and the same people who idealize St. Reagan are continuing to push this fucker as far as it will go.
I suppose they figure better to be lord of hell or something.
posted by symbioid at 11:22 AM on July 11, 2011 [2 favorites]
There's a lot of FUD here. Do people think that the money the rich have isn't being spent?
It doesn't go into a giant underground bunker. Any money you put in the bank is lent out and invested whether you're rich or poor.
posted by blue_beetle at 11:23 AM on July 11, 2011 [3 favorites]
It doesn't go into a giant underground bunker. Any money you put in the bank is lent out and invested whether you're rich or poor.
posted by blue_beetle at 11:23 AM on July 11, 2011 [3 favorites]
When I say "this has nothing to do with the overall problem" - I mean the personal spending problems. But I also know someone who continued to pay cable when she didn't even own a working tv. She was working so many hours - 12-14 hours a day, with her commute - that she didn't have time to call and argue with the cable company to get it cancelled. She also had a $100+ phone bill because her son had added all sorts of services when he was living with her and paying for part of it -- and again, she didn't have time to get it cancelled. She also doesn't have time to buy cheap raw foods, becauce she has no time to cook and it's easier to give her granddaughter kid - whom she has sole custody of - take out.
She actually has a worse standard of living as a working mother earning $60k per year than she did as a single mother on welfare with $12-18k/year.
A hell of a lot of poor people also have a poverty of time, as well as money.
posted by jb at 11:23 AM on July 11, 2011 [7 favorites]
She actually has a worse standard of living as a working mother earning $60k per year than she did as a single mother on welfare with $12-18k/year.
A hell of a lot of poor people also have a poverty of time, as well as money.
posted by jb at 11:23 AM on July 11, 2011 [7 favorites]
I'd say that it's "ironic" that people keep picking on a state-endorsed monopoly as a luxury good the poor can ill afford, but I'm going to go ahead and say it's stupid instead. Consumer patterns are not coincidental to the market, and the market is not coincidental to government policy. Anyway, on to another windmill.
Do people think that the money the rich have isn't being spent?
A comment like this betrays a near-total ignorance of the issue of market confidence, which is surprising, considering the governments the world over are currently obsessed with it. Yes, that is what people think, because it is currently the case. Investment is not equivalent to spending. In fact the entire fucking problem is that we have just recently discovered that the class of investments previously known as "financial innovation" are frequently wealth-destroying (hello all those local governments at the wrong end of a Goldman Sachs deal, oh and hello to you too Greece), but government currently doesn't care to regulate it.
posted by mek at 11:35 AM on July 11, 2011 [4 favorites]
Do people think that the money the rich have isn't being spent?
A comment like this betrays a near-total ignorance of the issue of market confidence, which is surprising, considering the governments the world over are currently obsessed with it. Yes, that is what people think, because it is currently the case. Investment is not equivalent to spending. In fact the entire fucking problem is that we have just recently discovered that the class of investments previously known as "financial innovation" are frequently wealth-destroying (hello all those local governments at the wrong end of a Goldman Sachs deal, oh and hello to you too Greece), but government currently doesn't care to regulate it.
posted by mek at 11:35 AM on July 11, 2011 [4 favorites]
If the only way to 'have' a middle class was through the illusions of the speculatory housing market, did we actually have a middle class in the decade or two before the crash? Does middle class relate to wealth alone or to social and physcial mobility, because if it has anything to do with the last two all we've had for two decades is the illusion of the poor with borrowed money.
posted by Slackermagee at 11:37 AM on July 11, 2011 [1 favorite]
posted by Slackermagee at 11:37 AM on July 11, 2011 [1 favorite]
blue_beetle - investment doesn't keep the economy going; consumption does. This is the basics of Demand-Side economics, which so far has been shown to be a much more accurate model than Supply-side economics.
It's not about the rich consuming or not - they always have, since time immemorial. Medieval kings didn't live in barren castles.
But a robust economy just can't get by on the consumption of the rich - it needs the consumption of the majority of the population. Particularly since we no longer employ 80-90% of our population in agriculture, as we did in the middle ages and the beginning of the early modern period.
What made it possible for first the Netherlands, and then Britain, to transition to having more like 40-60% (and then more) people employed in manufacturing and services were wages and living conditions which were high enough so that average people could afford to buy them. So it wasn't just a shoe-maker making shoes for a few rich people, while the rest went barefoot; it was 20 shoemakers making shoes for the whole town. People no longer owned so few clothes that they mentioned a shirt in a will/inventory, but many clothes -- I've seen labourers with several changes of clothing in the 17th century.
The production of textiles, dishes, pottery, glass -- all these things fed the first stages of the industrial revolution, and all of these things were intended for mass consumption. Well, it seems like the Netherlands began off their manufacturing revolution with low wages, like China today, but then by the 17th century they had higher wages than elsewhere and their economy really took off with mass consumption.
Henry Ford knew this too - his secret to making the automobile more than just a niche, luxury object was not just to reduce the price of the cars, but also to raise the wages of his workers to the point where they could possibly purchase one. (I don't know if they could, but I do know that he was paying them some 2-3 times more than any other manufacturer).
posted by jb at 11:37 AM on July 11, 2011 [6 favorites]
It's not about the rich consuming or not - they always have, since time immemorial. Medieval kings didn't live in barren castles.
But a robust economy just can't get by on the consumption of the rich - it needs the consumption of the majority of the population. Particularly since we no longer employ 80-90% of our population in agriculture, as we did in the middle ages and the beginning of the early modern period.
What made it possible for first the Netherlands, and then Britain, to transition to having more like 40-60% (and then more) people employed in manufacturing and services were wages and living conditions which were high enough so that average people could afford to buy them. So it wasn't just a shoe-maker making shoes for a few rich people, while the rest went barefoot; it was 20 shoemakers making shoes for the whole town. People no longer owned so few clothes that they mentioned a shirt in a will/inventory, but many clothes -- I've seen labourers with several changes of clothing in the 17th century.
The production of textiles, dishes, pottery, glass -- all these things fed the first stages of the industrial revolution, and all of these things were intended for mass consumption. Well, it seems like the Netherlands began off their manufacturing revolution with low wages, like China today, but then by the 17th century they had higher wages than elsewhere and their economy really took off with mass consumption.
Henry Ford knew this too - his secret to making the automobile more than just a niche, luxury object was not just to reduce the price of the cars, but also to raise the wages of his workers to the point where they could possibly purchase one. (I don't know if they could, but I do know that he was paying them some 2-3 times more than any other manufacturer).
posted by jb at 11:37 AM on July 11, 2011 [6 favorites]
Political power grows out of the barrel of a gun."
- Chapter 5, The Little Red Book
posted by Mister Fabulous at 2:21 PM on July 11 [1 favorite +] [!]
Yeah, but Mao was 30% wrong (the killing people was the 30%, the women "hold up half the sky" was his correct 70%).
Ghandi and MLK had better ideas about how to wage war.
posted by jb at 11:39 AM on July 11, 2011 [1 favorite]
- Chapter 5, The Little Red Book
posted by Mister Fabulous at 2:21 PM on July 11 [1 favorite +] [!]
Yeah, but Mao was 30% wrong (the killing people was the 30%, the women "hold up half the sky" was his correct 70%).
Ghandi and MLK had better ideas about how to wage war.
posted by jb at 11:39 AM on July 11, 2011 [1 favorite]
blue_beetle : There's a lot of FUD here. Do people think that the money the rich have isn't being spent?
Ummm... Yes?
It doesn't go into a giant underground bunker. Any money you put in the bank is lent out and invested whether you're rich or poor.
Ah, here we reach the point at which communication broke down.
"Lending" money does not equal "spending" money.
When you lend money, you get more of it back (at some small risk of not getting it back) than you started with. You increase your own holdings and make others "indebted" to you in more ways than one.
When you spend money, you no longer have either that money, or any expectation of getting any of it back. A car. Supper.
posted by pla at 11:40 AM on July 11, 2011 [8 favorites]
Ummm... Yes?
It doesn't go into a giant underground bunker. Any money you put in the bank is lent out and invested whether you're rich or poor.
Ah, here we reach the point at which communication broke down.
"Lending" money does not equal "spending" money.
When you lend money, you get more of it back (at some small risk of not getting it back) than you started with. You increase your own holdings and make others "indebted" to you in more ways than one.
When you spend money, you no longer have either that money, or any expectation of getting any of it back. A car. Supper.
posted by pla at 11:40 AM on July 11, 2011 [8 favorites]
Do people think that the money the rich have isn't being spent?
No, but rich people actually spend a smaller proportion of their income than middle class and working class families.
A tax cut to the rich person doesn't make them decide to buy the yacht with the solid gold faucet rather than the gold plated one. They generally put their surplus into investments (effectively locking most of it out of the economy, as a matter of fact).
A tax cut to working families will go much more directly into the economy because working and middle class families will spend that at a greater proportion -- mainly on things they have been putting off buying. This is real stimulus, and giving rich people more money doesn't improve jobs, it improves investment.
Our problem isn't that corporations are underinvested. Our problem is that people aren't hiring and people can't afford to spend. Target the money where it will move fastest, not the slowest.
posted by chimaera at 11:40 AM on July 11, 2011 [14 favorites]
No, but rich people actually spend a smaller proportion of their income than middle class and working class families.
A tax cut to the rich person doesn't make them decide to buy the yacht with the solid gold faucet rather than the gold plated one. They generally put their surplus into investments (effectively locking most of it out of the economy, as a matter of fact).
A tax cut to working families will go much more directly into the economy because working and middle class families will spend that at a greater proportion -- mainly on things they have been putting off buying. This is real stimulus, and giving rich people more money doesn't improve jobs, it improves investment.
Our problem isn't that corporations are underinvested. Our problem is that people aren't hiring and people can't afford to spend. Target the money where it will move fastest, not the slowest.
posted by chimaera at 11:40 AM on July 11, 2011 [14 favorites]
Maybe he did it because he cared about the workers; that was the rational behind Robert Owen's reform efforts.
But the knock-on effect is the same - leaving more money with your workers creates more consumption, which supports further expansion of the economy.
And our entire modern economy is based on mass consumption. We don't make 10,000 ipods, we make 10 million.
posted by jb at 11:45 AM on July 11, 2011 [1 favorite]
But the knock-on effect is the same - leaving more money with your workers creates more consumption, which supports further expansion of the economy.
And our entire modern economy is based on mass consumption. We don't make 10,000 ipods, we make 10 million.
posted by jb at 11:45 AM on July 11, 2011 [1 favorite]
the root of the problem is anti-unionism and the constant pressure downwards on lower wages in the name of efficiency and frugality.
Not convinced of that. I think the problem is that almost all of the "productivity" gains in the past few decades went to white collar workers and executives, while the value of manual labor didn't grow much, assuming it didn't actually depreciate. A manual laborer in 2011 is doing, with maybe a few improvements, essentially the same thing he would have been doing in 1950. Or 1650, for that matter. Sure, someone moving product around a warehouse moves more of it around using a forklift than using his back, but it's still basically schlepping stuff around. White collar workers, on the other hand, have gone from painstaking, hand-written documents to the almost unbridled power of the internet. Lawyers, accountants, bankers, doctors, really anyone who primarily works with their minds, has been radically empowered over the past fifty years in ways that people that work with their hands have not.
Take law, for example, which I'll use because I'm familiar with it. Today, using modern legal research systems, I can find every single case that has used a particular phrase or cited a particular case, across all jurisdictions and times, in about fifteen seconds. The same search would have been almost impossible as recently as 1970. Instead, a lawyer would probably have needed to spend a few dozen man hours laboring through an entire stack of law reporters trying to come up with the same result.
As productivity gains have been unequal, it stands to reason that income and wealth gains would be unequal as well. But not as unequal as they have been.
I also think there's a huge problem in that a lot of the "productivity" gains have had as much to do with bubbles as they have with anything else. Despite our general belief that a good or service is worth whatever some idiot is willing to pay for it, value is not entirely arbitrary. Sure, knowledge workers can do more than they used to. They should probably get paid more as a result. But the fact remains that wealth is somehow, in a way that we can't describe mathematically, related to the production and consumption of stuff. A lot of the "wealth" that's been "created" since the 1980s has been abstractions of abstractions of abstractions, not what a classical economist would have recognized as "capital."
The word actually meant something quite different than it does today. Today, we use it to mean money used for investment. But Adam Smith meant something pretty close to physical goods used in production. He considered those who valued gold as wealth to be idiots: you can't do anything with gold. Similarly, you can't do anything with stocks, bonds, or even real estate. Sure, you can get people to pay for them sometimes--Smith wasn't entirely right--but divorce that valuation too far from stuff and you get chaos.
Coming back, jb, the problem really isn't anti-unionism. Working conditions haven't deteriorated all that much, and adding collective bargaining into the mix doesn't change the fact that manual labor is still just manual labor, i.e. only a bit more productive now than it ever was. Saying that unions can arbitrarily raise the value of labor absent any material change in the productivity of labor is buying into exactly the same problem that caused the bubbles, i.e. thinking that we can set prices arbitrarily or as a matter of taste, completely independent of the underlying productivity of a given activity. Ultimately, the classical economists were wrong: there is no "store" of value by which we can set the "true" value for a given good or service. But the neo-classicals are also wrong: just because we can't set "true" values mathematically and scientifically doesn't mean we can just make shit up. The real problem is that we've made an idol out of our concept of wealth and forgotten that we cannot simply make up arbitrary values for things forever.
Ultimately, I think what's been going on here is that the past few decades have seen the creation of a fantastic amount of ultimately illusory wealth--most of which is actually debt--and the "income inequality" so many people are complaining about is the unequal distribution of these illusory gains, against which stronger labor power is no protection.
posted by valkyryn at 11:46 AM on July 11, 2011 [37 favorites]
Not convinced of that. I think the problem is that almost all of the "productivity" gains in the past few decades went to white collar workers and executives, while the value of manual labor didn't grow much, assuming it didn't actually depreciate. A manual laborer in 2011 is doing, with maybe a few improvements, essentially the same thing he would have been doing in 1950. Or 1650, for that matter. Sure, someone moving product around a warehouse moves more of it around using a forklift than using his back, but it's still basically schlepping stuff around. White collar workers, on the other hand, have gone from painstaking, hand-written documents to the almost unbridled power of the internet. Lawyers, accountants, bankers, doctors, really anyone who primarily works with their minds, has been radically empowered over the past fifty years in ways that people that work with their hands have not.
Take law, for example, which I'll use because I'm familiar with it. Today, using modern legal research systems, I can find every single case that has used a particular phrase or cited a particular case, across all jurisdictions and times, in about fifteen seconds. The same search would have been almost impossible as recently as 1970. Instead, a lawyer would probably have needed to spend a few dozen man hours laboring through an entire stack of law reporters trying to come up with the same result.
As productivity gains have been unequal, it stands to reason that income and wealth gains would be unequal as well. But not as unequal as they have been.
I also think there's a huge problem in that a lot of the "productivity" gains have had as much to do with bubbles as they have with anything else. Despite our general belief that a good or service is worth whatever some idiot is willing to pay for it, value is not entirely arbitrary. Sure, knowledge workers can do more than they used to. They should probably get paid more as a result. But the fact remains that wealth is somehow, in a way that we can't describe mathematically, related to the production and consumption of stuff. A lot of the "wealth" that's been "created" since the 1980s has been abstractions of abstractions of abstractions, not what a classical economist would have recognized as "capital."
The word actually meant something quite different than it does today. Today, we use it to mean money used for investment. But Adam Smith meant something pretty close to physical goods used in production. He considered those who valued gold as wealth to be idiots: you can't do anything with gold. Similarly, you can't do anything with stocks, bonds, or even real estate. Sure, you can get people to pay for them sometimes--Smith wasn't entirely right--but divorce that valuation too far from stuff and you get chaos.
Coming back, jb, the problem really isn't anti-unionism. Working conditions haven't deteriorated all that much, and adding collective bargaining into the mix doesn't change the fact that manual labor is still just manual labor, i.e. only a bit more productive now than it ever was. Saying that unions can arbitrarily raise the value of labor absent any material change in the productivity of labor is buying into exactly the same problem that caused the bubbles, i.e. thinking that we can set prices arbitrarily or as a matter of taste, completely independent of the underlying productivity of a given activity. Ultimately, the classical economists were wrong: there is no "store" of value by which we can set the "true" value for a given good or service. But the neo-classicals are also wrong: just because we can't set "true" values mathematically and scientifically doesn't mean we can just make shit up. The real problem is that we've made an idol out of our concept of wealth and forgotten that we cannot simply make up arbitrary values for things forever.
Ultimately, I think what's been going on here is that the past few decades have seen the creation of a fantastic amount of ultimately illusory wealth--most of which is actually debt--and the "income inequality" so many people are complaining about is the unequal distribution of these illusory gains, against which stronger labor power is no protection.
posted by valkyryn at 11:46 AM on July 11, 2011 [37 favorites]
docpops wrote: If my income were cut 50% tomorrow we'd slice that shit to the bone, because the idea of being on the edge financially is a terror worse than any so-called "deprivation".
And when your life is chronically in the shit, financially, and most months you can afford to buy food and pay the cell phone bill and the cable bill, won't you be more inclined to give yourself that small bit of "luxury," given that it's the closest thing to luxury you've had in the last 15 years?
JPD wrote: no. people like to point at G-S as the moment the system broke - in reality there were lots of reforms in the 80's that paid a larger role in the creation of the credit bubble.
Glass-Steagall and the credit bubble are both shitty things, but also unrelated. The credit bubble was largely caused by fraud, plain and simple. Ironically, it was the exact same deregulation, refusal to use what regulation was available by the regulators, and fraud that caused the S&L bust. We simply forgot the lesson because it wasn't a Great Depression scale event.
Glass-Steagall repeal got us into the situation where we had to prop up the fucking investment banks because many the fucking investment banks were also major commercial banks. Combine that with allowing the fucking commercial banks to put their regulatory capital in mortgage backed securities, of all the fucking idiotic things, and we had a clusterfuck on our hands.
Blue_beetle, the money the rich have piddling around is going into commodities speculation, thus driving up the price of everything, and T-Bills, not useful work. And the banks aren't lending out money, as much as you'd like to believe otherwise. They're using it to speculate. They're shuffling money around between themselves and the hedge funds, blowing up more fucking bubbles with it. We'd quite honestly be better off if they would just let it sit in T-Bills or something.
We need to do the following: Eliminate commodities speculation again, so that the price of said commodities won't gyrate like a stereotypical white boy trying to hula hoop. Prosecute the perpetrators of financial fraud. Yes, this means most of the execs at most of our large financial institutions will go to jail. Good. Install people who actually believe in government's usefulness in government positions. I would almost (but not quite) support a purity test: If you believe in Ayn Rand's nonsense, no government work for you!
This doesn't begin to touch on the things I think we need to do to make the social structure more reasonable, or bring back the middle class, just what we need to do to get our economy back to a point where it at least works half-assed for most people, rather than working only for college educated white people.
To bring back the middle class? Step one is leveling the playing field. No more cheap imports from China unless the workers making the item are paid an equivalent minimum wage (in purchasing power) and the companies making the goods are required to follow environmental regulations at least as stringent as what we have at home. These two things are the primary driver of labor being offshored. If the playing field is level, I can't complain when I get fucked by someone who is a harder worker than me, smarter than me, or whatever. I can, however, complain when we're being taken advantage of by a playing field almost as fucked as the one in high finance. Free trade is only free if everybody plays by the same rules.
Yes, this means tariffs. Yes, it will piss off the Chinese. Fuck 'em. My only qualm here is that it might be wise to wait a few years on this aspect, because if we can re-establish complete dollar hegemony over the world, that will tilt things back in our favor, in a much more insidious, but useful, way.
Oh, one other thing: Lean on the goddamned mortgage servicers a lot harder to modify mortgages rather than foreclosing. And make the fucking Treasury use the sixty billion dollars they were given to facilitate this.
posted by wierdo at 11:49 AM on July 11, 2011 [21 favorites]
And when your life is chronically in the shit, financially, and most months you can afford to buy food and pay the cell phone bill and the cable bill, won't you be more inclined to give yourself that small bit of "luxury," given that it's the closest thing to luxury you've had in the last 15 years?
JPD wrote: no. people like to point at G-S as the moment the system broke - in reality there were lots of reforms in the 80's that paid a larger role in the creation of the credit bubble.
Glass-Steagall and the credit bubble are both shitty things, but also unrelated. The credit bubble was largely caused by fraud, plain and simple. Ironically, it was the exact same deregulation, refusal to use what regulation was available by the regulators, and fraud that caused the S&L bust. We simply forgot the lesson because it wasn't a Great Depression scale event.
Glass-Steagall repeal got us into the situation where we had to prop up the fucking investment banks because many the fucking investment banks were also major commercial banks. Combine that with allowing the fucking commercial banks to put their regulatory capital in mortgage backed securities, of all the fucking idiotic things, and we had a clusterfuck on our hands.
Blue_beetle, the money the rich have piddling around is going into commodities speculation, thus driving up the price of everything, and T-Bills, not useful work. And the banks aren't lending out money, as much as you'd like to believe otherwise. They're using it to speculate. They're shuffling money around between themselves and the hedge funds, blowing up more fucking bubbles with it. We'd quite honestly be better off if they would just let it sit in T-Bills or something.
We need to do the following: Eliminate commodities speculation again, so that the price of said commodities won't gyrate like a stereotypical white boy trying to hula hoop. Prosecute the perpetrators of financial fraud. Yes, this means most of the execs at most of our large financial institutions will go to jail. Good. Install people who actually believe in government's usefulness in government positions. I would almost (but not quite) support a purity test: If you believe in Ayn Rand's nonsense, no government work for you!
This doesn't begin to touch on the things I think we need to do to make the social structure more reasonable, or bring back the middle class, just what we need to do to get our economy back to a point where it at least works half-assed for most people, rather than working only for college educated white people.
To bring back the middle class? Step one is leveling the playing field. No more cheap imports from China unless the workers making the item are paid an equivalent minimum wage (in purchasing power) and the companies making the goods are required to follow environmental regulations at least as stringent as what we have at home. These two things are the primary driver of labor being offshored. If the playing field is level, I can't complain when I get fucked by someone who is a harder worker than me, smarter than me, or whatever. I can, however, complain when we're being taken advantage of by a playing field almost as fucked as the one in high finance. Free trade is only free if everybody plays by the same rules.
Yes, this means tariffs. Yes, it will piss off the Chinese. Fuck 'em. My only qualm here is that it might be wise to wait a few years on this aspect, because if we can re-establish complete dollar hegemony over the world, that will tilt things back in our favor, in a much more insidious, but useful, way.
Oh, one other thing: Lean on the goddamned mortgage servicers a lot harder to modify mortgages rather than foreclosing. And make the fucking Treasury use the sixty billion dollars they were given to facilitate this.
posted by wierdo at 11:49 AM on July 11, 2011 [21 favorites]
valkyryn, I don't always agree with your posts here on the Blue, but that was one solid comment.
posted by Aizkolari at 11:50 AM on July 11, 2011 [2 favorites]
posted by Aizkolari at 11:50 AM on July 11, 2011 [2 favorites]
We have been in a class war for quite some time, and the rich have been winning.
Its always been about producing economic advantages to the wealthy via means of tax cuts/incentives/trade agreements. Using political clout that the average man(woman) has no chance of ever obtaining (can you cut a $500 check to a politician? What about $2500?, because I know those who do).
Its sad because in this process they've been able to pin middle class against itself. Meanwhile no one even considers the poor and impoverished. As long as you have some middle manager position, pulling in $50k a year, its anyones else damn fault they are poor.
America the Great is soon to be an outdated saying.
posted by handbanana at 11:53 AM on July 11, 2011 [1 favorite]
Its always been about producing economic advantages to the wealthy via means of tax cuts/incentives/trade agreements. Using political clout that the average man(woman) has no chance of ever obtaining (can you cut a $500 check to a politician? What about $2500?, because I know those who do).
Its sad because in this process they've been able to pin middle class against itself. Meanwhile no one even considers the poor and impoverished. As long as you have some middle manager position, pulling in $50k a year, its anyones else damn fault they are poor.
America the Great is soon to be an outdated saying.
posted by handbanana at 11:53 AM on July 11, 2011 [1 favorite]
docpops:When I first moved here and started working, my wife and I lived in a small rental across the street from a family of four girls whose mom stayed at home, and he supported all of them as a postal worker.
As a postal worker, he was probably unionized, from whence flowed his health benefits, job security, and by extension, perhaps an optimism about the future and a sense of loyalty to community.
posted by Rumple at 11:56 AM on July 11, 2011 [9 favorites]
As a postal worker, he was probably unionized, from whence flowed his health benefits, job security, and by extension, perhaps an optimism about the future and a sense of loyalty to community.
posted by Rumple at 11:56 AM on July 11, 2011 [9 favorites]
Valkyryn - look at the BLS' data on maufacturing worker productivity - its grown at a faster rate than overall business productivity. The problem is that industrial production hasn't grown at a similar rate = fewer hourse worked/worker, slacker labor market. Topped off with the general slow deneutering of organzied labor since ww2. Allows more of the returns to accrue to capital rather than labor. Doubly damaging because more capital gets reinvested at lower rates of return.
Its not because productivity gains are overwhelmingly accruing to white collar folks, its actually that the productivity gains of labor are accruing to the capital holders, who then do a poor job reinvesting.
posted by JPD at 11:57 AM on July 11, 2011 [4 favorites]
Its not because productivity gains are overwhelmingly accruing to white collar folks, its actually that the productivity gains of labor are accruing to the capital holders, who then do a poor job reinvesting.
posted by JPD at 11:57 AM on July 11, 2011 [4 favorites]
@emjaybee:...what else are you going to do but watch TV?
R! E! A! D! A! B! O! O! K!
posted by fivebells at 11:58 AM on July 11, 2011 [2 favorites]
R! E! A! D! A! B! O! O! K!
posted by fivebells at 11:58 AM on July 11, 2011 [2 favorites]
I agree with Valkyrn on a lot of these points, though we don't always agree; but I strongly disagree on the claim that better labor American unions wouldn't have made a difference. It seems to me that there's plenty of evidence from the rest of the world that labor movements can be effective in counteracting wage stagnation and the other kinds of systemic problems that have led us to this crisis point. In fact, I find it hard to imagine a more natural or rational mechanism than organized labor for fulfilling many of the key consumer and labor protective functions we desperately need our economic system to keep in a reasonable balance. Labor in the US just needs to be less focused on the interests of their particular shop and more focused on the broader problems and political issues common to all workers. Otherwise, the unions themselves just end up becoming more raw material for wedge issue political plays.
posted by saulgoodman at 11:59 AM on July 11, 2011 [9 favorites]
posted by saulgoodman at 11:59 AM on July 11, 2011 [9 favorites]
"Lawyers, accountants, bankers, doctors, really anyone who primarily works with their minds, has been radically empowered over the past fifty years in ways that people that work with their hands have not. "
Technology has empowered productivity gains among those groups as well, it's just not as noticeable to those outside of blue-collar fields.
At the most basic levels agriculture and resource exploitation have been substantially changed by increased automation and improved efficiency. It's just that economies of scale have improved to the point where you need to be a massive corporation to effectively compete in these fields.
Construction, manufacturing, etc have also seen significant productivity improvements due to improved technology. Homes, offices, widgets are being built faster, with less defects all the time. Just on-time-manufacturing has allowed companies to spend less money warehousing huge stockpiles of manufactured goods, etc. That means you can do more with less people.
The problem is that even with productivity increases among US workers it is often cheaper and thus a company can achieve greater profits to locate various businesses and factories off-shore. This has created a massive drag on the amount of money blue collar (and even white collar) workers can demand for their services.
So overall just about any average worker in any industry have made significant productivity gains in the last 30 years they just haven't been compensated accordingly.
posted by vuron at 12:07 PM on July 11, 2011 [3 favorites]
The productivity gains of the 18-19th centuries also went primarily to the upper classes, leading to the Guilded Age. A manual worker in London ate no better in 1910 than he would have in 1710 (and worse than rural workers in 1710). Things didn't change until unions got going strong; manufacturing workers only became middle class with unions.
I'm a historian; do to our inability to run experiments (still waiting for the time machines), we have to rely on correlations. And historically, productivity gains primarily went to the upper classes -- except when we had strong unions. Lower class wages went up as unions grew; they have fallen as unions shrink. States which have strong anti-union cultures continue to have lower wages and lower living standards. Anti-unionism is correlated with inequality.
As for who has been the "source" of productivity gain: yes, there has been a great deal of technological innovation. Entire professions - such as programmers - have been created where none existed before. But the overall growth of the economy is a collective effort. A society is like a body: the brain may think it's important, but it has a very hard time getting anything done if the lungs stop working. But we're starving the lungs - and the legs - and the fingers - while overfeeding our brains, and wondering why our economy is in poor heath.
posted by jb at 12:07 PM on July 11, 2011 [34 favorites]
I'm a historian; do to our inability to run experiments (still waiting for the time machines), we have to rely on correlations. And historically, productivity gains primarily went to the upper classes -- except when we had strong unions. Lower class wages went up as unions grew; they have fallen as unions shrink. States which have strong anti-union cultures continue to have lower wages and lower living standards. Anti-unionism is correlated with inequality.
As for who has been the "source" of productivity gain: yes, there has been a great deal of technological innovation. Entire professions - such as programmers - have been created where none existed before. But the overall growth of the economy is a collective effort. A society is like a body: the brain may think it's important, but it has a very hard time getting anything done if the lungs stop working. But we're starving the lungs - and the legs - and the fingers - while overfeeding our brains, and wondering why our economy is in poor heath.
posted by jb at 12:07 PM on July 11, 2011 [34 favorites]
That would be the "Gilded Age."
posted by Mental Wimp at 12:20 PM on July 11, 2011
posted by Mental Wimp at 12:20 PM on July 11, 2011
Still, given his point about unions, Guilded Age does make a lovely pun.
posted by BigHeartedGuy at 12:24 PM on July 11, 2011 [5 favorites]
posted by BigHeartedGuy at 12:24 PM on July 11, 2011 [5 favorites]
jb: "Ghandi and MLK had better ideas about how to wage war."
And both Ghandi and MLK had other groups ostensibly on the same side that were more militant and armed as a backdrop against which to "compromise" with the more pacifist groups out of fear of the armed factions.
See Pacifism as Pathology that discusses this a little more in detail.
That said, my days of radical revolution-cheering are over. I'm too old, and too much of the belief that any violent struggle will both fail in that it won't be "my" side that wins (teabaggers are the ones who hold the most guns in the US), and if "my" side "won" in the end just another bunch of dickhead authoritarians would end up taking control.
posted by symbioid at 12:34 PM on July 11, 2011
And both Ghandi and MLK had other groups ostensibly on the same side that were more militant and armed as a backdrop against which to "compromise" with the more pacifist groups out of fear of the armed factions.
See Pacifism as Pathology that discusses this a little more in detail.
That said, my days of radical revolution-cheering are over. I'm too old, and too much of the belief that any violent struggle will both fail in that it won't be "my" side that wins (teabaggers are the ones who hold the most guns in the US), and if "my" side "won" in the end just another bunch of dickhead authoritarians would end up taking control.
posted by symbioid at 12:34 PM on July 11, 2011
I wouldn't mind paying $80 for a pair of (ordinary, non-designer) jeans if they were made well and if my household income were going up at the same time. One of the pleasures of earning a little more money is being able to spend it on something that has value.
posted by epersonae at 12:44 PM on July 11, 2011 [5 favorites]
posted by epersonae at 12:44 PM on July 11, 2011 [5 favorites]
Aww, are the western middle classes suffering again? I really must remember to cancel my subscription to Oxfam this weekend.
posted by Decani at 12:48 PM on July 11, 2011
posted by Decani at 12:48 PM on July 11, 2011
Y'know, if arbitrage was available for the consumer as well as the corporations, it'd at least be a more interesting field.
Fuck you, Big Pharma, I'm importing that drug from Ireland (where it's made anyways.)
Fuck you, Old Navy, I can get that shirt at half off from your supplier in China/India/Malaysia.
Let's see how much they're all about free trade when EVERYONE can compete.
posted by ChurchHatesTucker at 12:52 PM on July 11, 2011 [16 favorites]
Fuck you, Big Pharma, I'm importing that drug from Ireland (where it's made anyways.)
Fuck you, Old Navy, I can get that shirt at half off from your supplier in China/India/Malaysia.
Let's see how much they're all about free trade when EVERYONE can compete.
posted by ChurchHatesTucker at 12:52 PM on July 11, 2011 [16 favorites]
People believe that they NEED a lot of things that they don't really need, but that is part of the society that we live in. My wife was a social worker for a while and she had clients that didn't have money to feed their kids but paid $150 a month on cable TV and another $150 for cell phones. When she suggested that they didn't need those things they would look at her like she was from some other planet.
posted by jefeweiss
Can we also test them for drugs? I hear poor people waste a lot of money on drugs.
Might as well take all their pride while we're at it.
posted by justgary at 12:52 PM on July 11, 2011 [8 favorites]
posted by jefeweiss
Can we also test them for drugs? I hear poor people waste a lot of money on drugs.
Might as well take all their pride while we're at it.
posted by justgary at 12:52 PM on July 11, 2011 [8 favorites]
Political power grows out of the barrel of a gun.
Note: Mao didn't win because he fought. He won because he hid, letting everyone else fight.
Still an odious man though.
posted by FJT at 12:55 PM on July 11, 2011 [1 favorite]
Note: Mao didn't win because he fought. He won because he hid, letting everyone else fight.
Still an odious man though.
posted by FJT at 12:55 PM on July 11, 2011 [1 favorite]
Taxes need to start at $100000 income and up. It should be progressive, to counter the exponential growth of investment income. It should cover every asset and all income: a percentage of one's gross wealth. K.I.S.S. No loopholes.
Corporate income should be taxed. It's the country's infrastructure and society that make those transactions possible. If a corporation is a person, it better be paying income and wealth taxes.
Most of the taxation income should go toward social programs and infrastructure. We're trying to have a country here. Which, y'know, is what lets one become well-paid and wealthy in the first place.
The $100K figure is arbitrary. Average income, or median value, or bottom quartile, whatever. Whatever works out as "starting to get wealthy."
We need a culture of "when you've got it made, start paying it forward". We should strive to that goal: get wealthy to help others by paying fair taxes and investing in my community/nation.
posted by five fresh fish at 12:56 PM on July 11, 2011 [3 favorites]
Corporate income should be taxed. It's the country's infrastructure and society that make those transactions possible. If a corporation is a person, it better be paying income and wealth taxes.
Most of the taxation income should go toward social programs and infrastructure. We're trying to have a country here. Which, y'know, is what lets one become well-paid and wealthy in the first place.
The $100K figure is arbitrary. Average income, or median value, or bottom quartile, whatever. Whatever works out as "starting to get wealthy."
We need a culture of "when you've got it made, start paying it forward". We should strive to that goal: get wealthy to help others by paying fair taxes and investing in my community/nation.
posted by five fresh fish at 12:56 PM on July 11, 2011 [3 favorites]
People believe that they NEED a lot of things that they don't really need, but that is part of the society that we live in. My wife was a social worker for a while and she had clients that didn't have money to feed their kids but paid $150 a month on cable TV and another $150 for cell phones. When she suggested that they didn't need those things they would look at her like she was from some other planet.
I have no doubt there are a few people like this. To characterize most poor people as being like this is the core of the problem. It is used by those who don't wish to see taxes used to provide the poor a way out of poverty. It is the meanness of anecdote writ large.
posted by Mental Wimp at 12:56 PM on July 11, 2011 [7 favorites]
I have no doubt there are a few people like this. To characterize most poor people as being like this is the core of the problem. It is used by those who don't wish to see taxes used to provide the poor a way out of poverty. It is the meanness of anecdote writ large.
posted by Mental Wimp at 12:56 PM on July 11, 2011 [7 favorites]
C/my/one's/ &c.
posted by five fresh fish at 12:57 PM on July 11, 2011
posted by five fresh fish at 12:57 PM on July 11, 2011
That would be the "Gilded Age."
*blushes*
Of course I meant Gilded Age, as in gilded with gold. Transcribing 17th century manuscripts has destroyed my once excellent spelling (I now spell levell with three l's).
posted by jb at 12:57 PM on July 11, 2011
*blushes*
Of course I meant Gilded Age, as in gilded with gold. Transcribing 17th century manuscripts has destroyed my once excellent spelling (I now spell levell with three l's).
posted by jb at 12:57 PM on July 11, 2011
Using political clout that the average man(woman) has no chance of ever obtaining (can you cut a $500 check to a politician? What about $2500?, because I know those who do).
The only thing cutting a $2000 check to a politician gets you is emails for more money (for them, and their party, and so on). At least at the national level. If you're not a PAC or bundling or something you're not getting any actual face time / influence beyond what your money is doing for them.
posted by wildcrdj at 12:58 PM on July 11, 2011 [1 favorite]
The only thing cutting a $2000 check to a politician gets you is emails for more money (for them, and their party, and so on). At least at the national level. If you're not a PAC or bundling or something you're not getting any actual face time / influence beyond what your money is doing for them.
posted by wildcrdj at 12:58 PM on July 11, 2011 [1 favorite]
Just on-time-manufacturing has allowed companies to spend less money warehousing huge stockpiles of manufactured goods, etc. That means you can do more with less people.
If anything, the trends you describe are part of the problem I'm talking about, i.e. the few people who can make use of these productivity-amplifying technologies make out like bandits, while the people who just want to do an honest day's work for an honest day's pay are increasingly finding not only that the pay for that isn't keeping up with cost of living, but that there's less and less demand for unskilled labor.
This, as it turns out, is why we're offshoring. There's just not that much added value in doing the same step of a manufacturing process all day.
Which is why takes like jb's are problematic:
Again, I'm dealing with an explicitly mushy concept of value here, but one that insists upon some at least conceptual tie between prices and the production of stuff. "Just add unions" is not a sufficient reason for labor prices to rise unless doing so somehow makes labor more productive. I don't see any evidence of that.
posted by valkyryn at 12:58 PM on July 11, 2011
If anything, the trends you describe are part of the problem I'm talking about, i.e. the few people who can make use of these productivity-amplifying technologies make out like bandits, while the people who just want to do an honest day's work for an honest day's pay are increasingly finding not only that the pay for that isn't keeping up with cost of living, but that there's less and less demand for unskilled labor.
This, as it turns out, is why we're offshoring. There's just not that much added value in doing the same step of a manufacturing process all day.
Which is why takes like jb's are problematic:
Lower class wages went up as unions grew; they have fallen as unions shrink. States which have strong anti-union cultures continue to have lower wages and lower living standards. Anti-unionism is correlated with inequality.Whether or not that's true--big claims with no numbers are hard to argue against--the position essentially amounts to saying that manual labor should be paid more than the value it produces, and by implication other labor should be paid less... just because? Because it's indispensable? Because it's the Right Thing to Do? I don't exactly know, to be honest. Unionization certainly makes labor more powerful, but what's missing from the argument is any suggestion that unionization actually makes labor more valuable.
Again, I'm dealing with an explicitly mushy concept of value here, but one that insists upon some at least conceptual tie between prices and the production of stuff. "Just add unions" is not a sufficient reason for labor prices to rise unless doing so somehow makes labor more productive. I don't see any evidence of that.
posted by valkyryn at 12:58 PM on July 11, 2011
Of course I meant Gilded Age, as in gilded with gold. Transcribing 17th century manuscripts has destroyed my once excellent spelling (I now spell levell with three l's).
As was mentioned upthread, it makes a wonderfully ironic pun. Were it really the Guilded Age, it wouldn't have been the Gilded age.
posted by Mental Wimp at 12:59 PM on July 11, 2011
As was mentioned upthread, it makes a wonderfully ironic pun. Were it really the Guilded Age, it wouldn't have been the Gilded age.
posted by Mental Wimp at 12:59 PM on July 11, 2011
wierdo: Free trade is only free if everybody plays by the same rules.
We created the rules, now you want to change them? So, why turn the clock back 50 years? Why not another 100? That way, when a country owes us money we send a bunch of cruisers offshore and shell them. And when we don't like what China does, we dump a bunch of narcotics on their shore.
posted by FJT at 1:04 PM on July 11, 2011 [1 favorite]
We created the rules, now you want to change them? So, why turn the clock back 50 years? Why not another 100? That way, when a country owes us money we send a bunch of cruisers offshore and shell them. And when we don't like what China does, we dump a bunch of narcotics on their shore.
posted by FJT at 1:04 PM on July 11, 2011 [1 favorite]
Executive pay went from 30x to 400x worker pay over the past forty years. Worker pay hasn't kept pace with inflation. Executive pay has greatly outpaced it.
posted by five fresh fish at 1:05 PM on July 11, 2011 [1 favorite]
posted by five fresh fish at 1:05 PM on July 11, 2011 [1 favorite]
From Snow Crash: As a result, this country has one of the worst economies in the world. When it gets down to it—talking trade balances here—once we've brain-drained all our technology into other countries, once things have evened out, they're making
cars in Bolivia and microwave ovens in Tadzhikistan and selling them here-once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel-once the Invisible Hand has taken all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity...
We didn't even get the dirigibles.
Unionization certainly makes labor more powerful, but what's missing from the argument is any suggestion that unionization actually makes labor more valuable.
Apply that reasoning to IP law.
posted by ChurchHatesTucker at 1:06 PM on July 11, 2011 [2 favorites]
cars in Bolivia and microwave ovens in Tadzhikistan and selling them here-once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel-once the Invisible Hand has taken all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity...
We didn't even get the dirigibles.
Unionization certainly makes labor more powerful, but what's missing from the argument is any suggestion that unionization actually makes labor more valuable.
Apply that reasoning to IP law.
posted by ChurchHatesTucker at 1:06 PM on July 11, 2011 [2 favorites]
"Just add unions" is not a sufficient reason for labor prices to rise unless doing so somehow makes labor more productive.
It depends on what kind of world you want. If equality makes life better for everyone, generally, and unions make people more equal, generally, and you want to make life better for everyone, generally, then it doesn't matter how "valuable" labor is.
posted by adamdschneider at 1:06 PM on July 11, 2011 [2 favorites]
It depends on what kind of world you want. If equality makes life better for everyone, generally, and unions make people more equal, generally, and you want to make life better for everyone, generally, then it doesn't matter how "valuable" labor is.
posted by adamdschneider at 1:06 PM on July 11, 2011 [2 favorites]
Taxes need to start at $100000 income and up. It should be progressive, to counter the exponential growth of investment income. It should cover every asset and all income: a percentage of one's gross wealth. K.I.S.S. No loopholes.
You really don't understand income distribution or tax revenue then. First of all, the vast majority of Americans earn less than $100k. Like, just under 85%. Right now the top 15% pay the bulk of income taxes, but 40% of federal revenues are from payroll taxes, i.e. the six-odd percent flat tax that everyone pays. Actually, that's not entirely true: the payroll tax is regressive, because parts of it cap out around $80k in income. Eliminate payroll taxes and you gut the Treasury. You cannot fund the government just by taxing rich people. There aren't enough of them, and they don't make enough money.
Second, an across-the-board wealth tax would actually be pretty damaging to the lower classes, especially as most people's home is their biggest asset. You've just added hundreds if not thousands of dollars in annual taxes to even the most modest homeowner. Not cool.
Corporate income should be taxed. It's the country's infrastructure and society that make those transactions possible. If a corporation is a person, it better be paying income and wealth taxes.
Corporate income is taxed. I don't know what you're smoking. Sure, we could do with fewer loopholes, and I'm all for that, but we do, in fact, tax corporations.
Most of the taxation income should go toward social programs and infrastructure. We're trying to have a country here. Which, y'know, is what lets one become well-paid and wealthy in the first place.
It already does. See that big "Other Discretionary" category? That's pretty much entirely social programs and infrastructure. The "Other Mandatory" is things like unemployment insurance and food stamps. Medicare, Medicaid, and Social Security are social programs. All that's really something other than your two categories is defense--which we could admittedly cut, but the numbers still don't work--and interest.
The $100K figure is arbitrary. Average income, or median value, or bottom quartile, whatever. Whatever works out as "starting to get wealthy."
Again, numbers just don't work. For the federal government to provide the kinds of services you want it to provide, the middle class and poor absolutely must pay at least some taxes. There's just no other way of doing it.
We need a culture of "when you've got it made, start paying it forward". We should strive to that goal: get wealthy to help others by paying fair taxes and investing in my community/nation.
That isn't something you can legislate.
posted by valkyryn at 1:10 PM on July 11, 2011 [5 favorites]
You really don't understand income distribution or tax revenue then. First of all, the vast majority of Americans earn less than $100k. Like, just under 85%. Right now the top 15% pay the bulk of income taxes, but 40% of federal revenues are from payroll taxes, i.e. the six-odd percent flat tax that everyone pays. Actually, that's not entirely true: the payroll tax is regressive, because parts of it cap out around $80k in income. Eliminate payroll taxes and you gut the Treasury. You cannot fund the government just by taxing rich people. There aren't enough of them, and they don't make enough money.
Second, an across-the-board wealth tax would actually be pretty damaging to the lower classes, especially as most people's home is their biggest asset. You've just added hundreds if not thousands of dollars in annual taxes to even the most modest homeowner. Not cool.
Corporate income should be taxed. It's the country's infrastructure and society that make those transactions possible. If a corporation is a person, it better be paying income and wealth taxes.
Corporate income is taxed. I don't know what you're smoking. Sure, we could do with fewer loopholes, and I'm all for that, but we do, in fact, tax corporations.
Most of the taxation income should go toward social programs and infrastructure. We're trying to have a country here. Which, y'know, is what lets one become well-paid and wealthy in the first place.
It already does. See that big "Other Discretionary" category? That's pretty much entirely social programs and infrastructure. The "Other Mandatory" is things like unemployment insurance and food stamps. Medicare, Medicaid, and Social Security are social programs. All that's really something other than your two categories is defense--which we could admittedly cut, but the numbers still don't work--and interest.
The $100K figure is arbitrary. Average income, or median value, or bottom quartile, whatever. Whatever works out as "starting to get wealthy."
Again, numbers just don't work. For the federal government to provide the kinds of services you want it to provide, the middle class and poor absolutely must pay at least some taxes. There's just no other way of doing it.
We need a culture of "when you've got it made, start paying it forward". We should strive to that goal: get wealthy to help others by paying fair taxes and investing in my community/nation.
That isn't something you can legislate.
posted by valkyryn at 1:10 PM on July 11, 2011 [5 favorites]
Whether or not that's true--big claims with no numbers are hard to argue against--the position essentially amounts to saying that manual labor should be paid more than the value it produces, and by implication other labor should be paid less... just because? Because it's indispensable? Because it's the Right Thing to Do?
Yes. Because it is the right thing to do.
Because more equal societies has less crime, fewer heath problems and all sorts of other nice things.
And because I dispute the concept that economic value necessarily correlates with actual value. Economic value is the price of a product or service as determined by the market. But the market is just collective action of a lot of people, and people have cultural prejudices. Childcare has a low "economic value", whereas clearly it has a high social value.
Workers have never been fully paid for the value they create. That's how capitalism works: the capitalist owns the means of production - whether that is a factory or it is land - and in exchange they extract part of the profit from the labour. Now, receiving some of the profit makes sense, since they did invest in the said capital -- but how much of the profit they extract -- here we have a social debate to have. In the last four decades, capital and the upper levels of our society have been receiving a greater share of the profit created as a joint effort of everyone involved.
And this has been all over bad for the economy and bad for society. If you spread out the wealth, you can sell more shoes, and you have lower healthcare costs.
posted by jb at 1:13 PM on July 11, 2011 [13 favorites]
Yes. Because it is the right thing to do.
Because more equal societies has less crime, fewer heath problems and all sorts of other nice things.
And because I dispute the concept that economic value necessarily correlates with actual value. Economic value is the price of a product or service as determined by the market. But the market is just collective action of a lot of people, and people have cultural prejudices. Childcare has a low "economic value", whereas clearly it has a high social value.
Workers have never been fully paid for the value they create. That's how capitalism works: the capitalist owns the means of production - whether that is a factory or it is land - and in exchange they extract part of the profit from the labour. Now, receiving some of the profit makes sense, since they did invest in the said capital -- but how much of the profit they extract -- here we have a social debate to have. In the last four decades, capital and the upper levels of our society have been receiving a greater share of the profit created as a joint effort of everyone involved.
And this has been all over bad for the economy and bad for society. If you spread out the wealth, you can sell more shoes, and you have lower healthcare costs.
posted by jb at 1:13 PM on July 11, 2011 [13 favorites]
Saying that unions can arbitrarily raise the value of labor absent any material change in the productivity of labor is buying into exactly the same problem that caused the bubbles, i.e. thinking that we can set prices arbitrarily or as a matter of taste, completely independent of the underlying productivity of a given activity.
valkryn:
Pretty cogent points above, but I just can't agree with this statement at all. It's only half truthful - like saying the top 10% pay 80% of the taxes without including that they control 90% of the wealth (numbers are for illustration only). No one is arguing that the value of labor needs to be raised arbitrarily, and to infer that is just wrong. Corporate profits have skyrocketed, executive pay has skyrocketed, productivity has skyrocketed. Middle class wages have not even kept pace with inflation. To witness this and then argue against unions is lunacy. That's exactly the same as holding the shotgun for the bank robbers.
posted by Benny Andajetz at 1:17 PM on July 11, 2011 [5 favorites]
valkryn:
Pretty cogent points above, but I just can't agree with this statement at all. It's only half truthful - like saying the top 10% pay 80% of the taxes without including that they control 90% of the wealth (numbers are for illustration only). No one is arguing that the value of labor needs to be raised arbitrarily, and to infer that is just wrong. Corporate profits have skyrocketed, executive pay has skyrocketed, productivity has skyrocketed. Middle class wages have not even kept pace with inflation. To witness this and then argue against unions is lunacy. That's exactly the same as holding the shotgun for the bank robbers.
posted by Benny Andajetz at 1:17 PM on July 11, 2011 [5 favorites]
oh, for pete's sake
i pay about 100 bucks a month for my internet and my landline phone bill - i buy some of my clothes at thrift stores and others at inexpensive places - i shop at discount food markets - and i make almost 15 bucks an hour
i don't feel entitled to starve my kid to upgrade to a 150 buck cable bill and a 150 buck cell phone bill, why should someone who's obviously poorer than i be doing it?
it's called responsibility and there are a lot of people in this country who should lose their sense of entitlement and get some responsibility instead - including - ESPECIALLY, the bastards at the top who are running this show
a fish rots from the head down
i guess a lot of it might be explained as a culture of consumerism as rebellion - you become a rebel because you buy things that make you look rebellious - you buy things that certify you as cool - you buy things to show the world that you're not worried about square little things like feeding your kids or having a sustainable budget in 5 years unencumbered by crushing debt from credit cards and 2nd mortgages, which is also rebellious and cool and ...
... such pitiful bullshit
someone's getting rich from all of this but it ain't us
you rebel by saying "no", not saying "yes" to every huckster who tries to sell you a dream of yourself as some kind of all-consuming cool god
from the woman who's got cell phone and cable bills that keep her from feeding her kids to the couple who've found themselves underwater on two mortgages on one house and a shitload of credit card bills to the ceo who's taking a private jet and getting multi-million dollar bonuses while his company and his country circles the drain, many of us just aren't plain facing reality
we're not entitled to everything - grow the hell up
posted by pyramid termite at 1:17 PM on July 11, 2011 [4 favorites]
i pay about 100 bucks a month for my internet and my landline phone bill - i buy some of my clothes at thrift stores and others at inexpensive places - i shop at discount food markets - and i make almost 15 bucks an hour
i don't feel entitled to starve my kid to upgrade to a 150 buck cable bill and a 150 buck cell phone bill, why should someone who's obviously poorer than i be doing it?
it's called responsibility and there are a lot of people in this country who should lose their sense of entitlement and get some responsibility instead - including - ESPECIALLY, the bastards at the top who are running this show
a fish rots from the head down
i guess a lot of it might be explained as a culture of consumerism as rebellion - you become a rebel because you buy things that make you look rebellious - you buy things that certify you as cool - you buy things to show the world that you're not worried about square little things like feeding your kids or having a sustainable budget in 5 years unencumbered by crushing debt from credit cards and 2nd mortgages, which is also rebellious and cool and ...
... such pitiful bullshit
someone's getting rich from all of this but it ain't us
you rebel by saying "no", not saying "yes" to every huckster who tries to sell you a dream of yourself as some kind of all-consuming cool god
from the woman who's got cell phone and cable bills that keep her from feeding her kids to the couple who've found themselves underwater on two mortgages on one house and a shitload of credit card bills to the ceo who's taking a private jet and getting multi-million dollar bonuses while his company and his country circles the drain, many of us just aren't plain facing reality
we're not entitled to everything - grow the hell up
posted by pyramid termite at 1:17 PM on July 11, 2011 [4 favorites]
And because I dispute the concept that economic value necessarily correlates with actual value.
Economics does cover this, somewhat. They're called "externalities".
posted by FJT at 1:20 PM on July 11, 2011
Economics does cover this, somewhat. They're called "externalities".
posted by FJT at 1:20 PM on July 11, 2011
Economic value is the price of a product or service as determined by the market.
And I say again, you're running afoul of what I argue is exactly the reason we got into this mess in the first place: we started believing that market prices are "real" prices, and by implication that we can pay people based on preference and taste rather than based on productivity. Up 'til now, we've mostly been arbitrarily paying too much to people who manipulate abstractions. That has to stop. But arbitrarily deciding that no, instead we need to give more money to labor, is a different species of exactly the same problem, i.e. thinking we can set prices based on taste.
Let me be clear about something: I'm not actually opposed to unionization, and think we could probably do with more of it. But I'm under no illusions that lack of unionization is responsible for our current situation or that more unionization is going to fix it. I don't think there was any way that manual labor prices would ever keep pace with knowledge labor prices, unions or no, but I do think that working conditions could be a lot better than they are.
As I think about it, I may actually be arguing that the problem does not admit a solution. I'm not sure about that, but I'm willing to consider it.
posted by valkyryn at 1:20 PM on July 11, 2011
And I say again, you're running afoul of what I argue is exactly the reason we got into this mess in the first place: we started believing that market prices are "real" prices, and by implication that we can pay people based on preference and taste rather than based on productivity. Up 'til now, we've mostly been arbitrarily paying too much to people who manipulate abstractions. That has to stop. But arbitrarily deciding that no, instead we need to give more money to labor, is a different species of exactly the same problem, i.e. thinking we can set prices based on taste.
Let me be clear about something: I'm not actually opposed to unionization, and think we could probably do with more of it. But I'm under no illusions that lack of unionization is responsible for our current situation or that more unionization is going to fix it. I don't think there was any way that manual labor prices would ever keep pace with knowledge labor prices, unions or no, but I do think that working conditions could be a lot better than they are.
As I think about it, I may actually be arguing that the problem does not admit a solution. I'm not sure about that, but I'm willing to consider it.
posted by valkyryn at 1:20 PM on July 11, 2011
People believe that they NEED a lot of things that they don't really need, but that is part of the society that we live in. My wife was a social worker for a while and she had clients that didn't have money to feed their kids but paid $150 a month on cable TV and another $150 for cell phones. When she suggested that they didn't need those things they would look at her like she was from some other planet.
- That society we live in would collapse if people only purchased what they needed.
- The truth is, most poor people are actually relatively thrifty. People who make bad decisions will make bad decisions regardless of whether they are poor or not. I'm not going to make any huge generalization about the kinds of people who see social workers a lot, but there are probably going to be more poor people making bad decisions in that group than in the larger population.
Aww, are the western middle classes suffering again? I really must remember to cancel my subscription to Oxfam this weekend.
No, but there's fewer of them. I agree with the sentiment though. Upthread it was mentioned that "In 1970 in Toronto, the plurality of people used to have a median wage. Now the largest group is 20% below median wage, with another, smaller bump at 40% above median wage." What this says to me, as someone who has not yet reached the Canadian median household income after 15 years in the workforce, is that the median income can be quite comfortable indeed. I live in one of the most expensive cities in the country and my wife and we can afford to eat out, get a cable package with HBO, go on vacation, live downtown, have a gym membership, and still have enough left over to drink a few fancy beers a couple times a week despite having a below-median household income. With kids in the picture we'd absolutely have to cut back on a whole bunch of luxuries, no question, and buying a home is out of the question for us as well (same for people making significantly more than we do, it's Vancouver after all).
Being below median income does not mean you're not middle class; "poor" and "below-median" are different things. Some people are talking about the suffering of the poor here as well, but the discussion is also about the gap opening up between the top and the rest of us.
posted by Hoopo at 1:23 PM on July 11, 2011 [1 favorite]
No, but there's fewer of them. I agree with the sentiment though. Upthread it was mentioned that "In 1970 in Toronto, the plurality of people used to have a median wage. Now the largest group is 20% below median wage, with another, smaller bump at 40% above median wage." What this says to me, as someone who has not yet reached the Canadian median household income after 15 years in the workforce, is that the median income can be quite comfortable indeed. I live in one of the most expensive cities in the country and my wife and we can afford to eat out, get a cable package with HBO, go on vacation, live downtown, have a gym membership, and still have enough left over to drink a few fancy beers a couple times a week despite having a below-median household income. With kids in the picture we'd absolutely have to cut back on a whole bunch of luxuries, no question, and buying a home is out of the question for us as well (same for people making significantly more than we do, it's Vancouver after all).
Being below median income does not mean you're not middle class; "poor" and "below-median" are different things. Some people are talking about the suffering of the poor here as well, but the discussion is also about the gap opening up between the top and the rest of us.
posted by Hoopo at 1:23 PM on July 11, 2011 [1 favorite]
Funny, I don't feel destroyed.
posted by codswallop at 1:24 PM on July 11, 2011 [1 favorite]
posted by codswallop at 1:24 PM on July 11, 2011 [1 favorite]
rentiers gotta rent.
posted by ennui.bz at 1:25 PM on July 11, 2011 [5 favorites]
posted by ennui.bz at 1:25 PM on July 11, 2011 [5 favorites]
The truth is, most poor people are actually relatively thrifty.
this has been my observation, too - i'm beginning to wonder if affluence causes people to be less responsible - it certainly would explain a lot
posted by pyramid termite at 1:25 PM on July 11, 2011
this has been my observation, too - i'm beginning to wonder if affluence causes people to be less responsible - it certainly would explain a lot
posted by pyramid termite at 1:25 PM on July 11, 2011
thinking that we can set prices arbitrarily...
Why are prices set by employers less arbitrary than those set by unions? This thinking seems to imply a level of rationality and assessment not supported by evidence. What is the evidence that employers pay employees on the basis of their "productivity"?
posted by Hypnotic Chick at 1:26 PM on July 11, 2011 [3 favorites]
Why are prices set by employers less arbitrary than those set by unions? This thinking seems to imply a level of rationality and assessment not supported by evidence. What is the evidence that employers pay employees on the basis of their "productivity"?
posted by Hypnotic Chick at 1:26 PM on July 11, 2011 [3 favorites]
The only thing cutting a $2000 check to a politician gets you is emails for more money (for them, and their party, and so on). At least at the national level. If you're not a PAC or bundling or something you're not getting any actual face time / influence beyond what your money is doing for them. posted by wildcrdj at 12:58 PM on 7/11
That is complete and utter bullshit.
You can actually call and talk to your representative, or he'll any representative after spending that amount and sometimes they listen/help with corporate kick backs as in getting infrastructure grants (as my employer does while ironically making fun of 'welfare' and the" they don't work hard ethic" republican bullshit all a while loving the 2mil in infrastructure taxpayer funding).
Call your rep and even try to get a face to face meeting. Dollar to a donut you wont be seated across from him/her anytime soon without a little donation,
posted by handbanana at 1:27 PM on July 11, 2011
That is complete and utter bullshit.
You can actually call and talk to your representative, or he'll any representative after spending that amount and sometimes they listen/help with corporate kick backs as in getting infrastructure grants (as my employer does while ironically making fun of 'welfare' and the" they don't work hard ethic" republican bullshit all a while loving the 2mil in infrastructure taxpayer funding).
Call your rep and even try to get a face to face meeting. Dollar to a donut you wont be seated across from him/her anytime soon without a little donation,
posted by handbanana at 1:27 PM on July 11, 2011
And if the middle class didn't spend, there would be no jobs, and the cycle would repeat. If everyone "accumulated wealth", nobody would accumulate wealth.
It's called The paradox of thrift...
Class is a mental condition, or a cultural attitude. Being upper class does not mean driving an expensive car, and driving an old car doesn't make you middle class.
If you as an individual save (or are thrifty) it would not destroy capitalism or the free markets, it would only undermine consumerism, the underpinning of which is the commodity fetishization that dupes many middle class people into thinking that buying = social mobility.
If everyone were thrifty, people would still need to buy cars, lamps, groceries, tv's etc. But they wouldn't replace them as often, and their marketing would depend more on the quality, reliability, longevity of the products (values attractive to the thrifty) rather than on nebulous Madison Avenue ego-centric sales pitches. Fewer products would be sold, certainly, and they'd be used longer, but they'd also be better products, and would probably cost more.
But it doesn't matter if this isn't true. Your job as the individual is not to worry about what happens if everyone does the smart thing or the sensible thing. They won't. Everyone knows smoking is bad for them, expensive, and stupid. And yet new people start smoking every day.
posted by Pastabagel at 1:27 PM on July 11, 2011 [5 favorites]
> But I'm under no illusions that lack of unionization is responsible for our current situation or that more unionization is going to fix it.
And yet consider how many of the countries who have done comparatively well in the recent financial crisis have strong unions...!
Historically, collective bargaining has allowed workers to make substantial gains in both earnings and working conditions. Just from a common sense perspective, you'd expect a group of workers to be on the average able to make better bargains than an individual could.
So I'm curious as to what your argument might be that the death of the unions and the death of the middle classes are completely unrelated...?
posted by lupus_yonderboy at 1:29 PM on July 11, 2011 [4 favorites]
And yet consider how many of the countries who have done comparatively well in the recent financial crisis have strong unions...!
Historically, collective bargaining has allowed workers to make substantial gains in both earnings and working conditions. Just from a common sense perspective, you'd expect a group of workers to be on the average able to make better bargains than an individual could.
So I'm curious as to what your argument might be that the death of the unions and the death of the middle classes are completely unrelated...?
posted by lupus_yonderboy at 1:29 PM on July 11, 2011 [4 favorites]
Fewer products would be sold, certainly, and they'd be used longer, but they'd also be better products, and would probably cost more.
And the economy would grow much more slowly.
posted by Mental Wimp at 1:31 PM on July 11, 2011
And the economy would grow much more slowly.
posted by Mental Wimp at 1:31 PM on July 11, 2011
When I first moved here and started working, my wife and I lived in a small rental across the street from a family of four girls whose mom stayed at home, and he supported all of them as a postal worker.
This sounds a bit like me. I support four kids and a stay-at-home mom as a software developer. I don't drive an Econoline, but on the days I don't bike I drive a rusting, dented, 25 year old SUV.
Yet, I'd certainly call us among the lucky ones. We're in an area with high cost of living, but clearly it is desirable. We bought a house before the bubble, so it's worth about twice what we paid. I am employed, and we can afford to only have one income as long as we watch what we spend. We could have a much higher standard of living on two incomes, but we prefer the time with the kids. I am grateful to be *able* to make the choice, as many (most?) simply don't have that option (especially in this area).
There certainly are people who are irresponsible, but there are plenty of people who are just plain unlucky. We've been smart (if I say so) with money, but throw in one or more of an ill-timed housing crash, medical emergency, job loss, or the like and we're looking at some real problems.
posted by RikiTikiTavi at 1:34 PM on July 11, 2011 [2 favorites]
This sounds a bit like me. I support four kids and a stay-at-home mom as a software developer. I don't drive an Econoline, but on the days I don't bike I drive a rusting, dented, 25 year old SUV.
Yet, I'd certainly call us among the lucky ones. We're in an area with high cost of living, but clearly it is desirable. We bought a house before the bubble, so it's worth about twice what we paid. I am employed, and we can afford to only have one income as long as we watch what we spend. We could have a much higher standard of living on two incomes, but we prefer the time with the kids. I am grateful to be *able* to make the choice, as many (most?) simply don't have that option (especially in this area).
There certainly are people who are irresponsible, but there are plenty of people who are just plain unlucky. We've been smart (if I say so) with money, but throw in one or more of an ill-timed housing crash, medical emergency, job loss, or the like and we're looking at some real problems.
posted by RikiTikiTavi at 1:34 PM on July 11, 2011 [2 favorites]
Call your rep and even try to get a face to face meeting. Dollar to a donut you wont be seated across from him/her anytime soon without a little donation,
Reminds me of the time I used to be fairly close friends with a family worth well into the 9 figures. They laughed about "supporting one party or the other" as they simplygreased the palms of donated to both party's candidates. As they put it "Why risk having paid only the loser? Pay them both and win every time. It's not like I can't afford it."
posted by Mister Fabulous at 1:38 PM on July 11, 2011 [2 favorites]
Reminds me of the time I used to be fairly close friends with a family worth well into the 9 figures. They laughed about "supporting one party or the other" as they simply
posted by Mister Fabulous at 1:38 PM on July 11, 2011 [2 favorites]
Historically, one of the reasons anti-union forces have worked so hard to neuter unions is because union members are, as a group, less likely to be swayed by non-economic arguments. Union members vote their pocketbooks.
I understand the personal responsibility anger, but I think in the realm of economic decisions, snipping and sniping about what is and isn't personally responsible creates an "us" and "them" mentality that muddies the water and impedes any progress for the majority of us. The fact that 10% of the country is going gangbusters and 90% is bogging down should be plenty to hang an economic argument on.
posted by Benny Andajetz at 1:39 PM on July 11, 2011 [1 favorite]
I understand the personal responsibility anger, but I think in the realm of economic decisions, snipping and sniping about what is and isn't personally responsible creates an "us" and "them" mentality that muddies the water and impedes any progress for the majority of us. The fact that 10% of the country is going gangbusters and 90% is bogging down should be plenty to hang an economic argument on.
posted by Benny Andajetz at 1:39 PM on July 11, 2011 [1 favorite]
At the risk of bringing in stuff like Labor Theory of Value, unions provide a critical check on the power of capital to capture the majority of the surplus value of labor. By using collective bargaining the individual weak but collectively numerous members of the working class are able to force the individually powerful but numerical inferior members of the upper class who generally control the means to production to allocate a larger percentage of that surplus value of labor in the form of wages.
This has been mirrored in our political system through the collective acts of the electorate pushing policies with allocate more of that surplus value of labor to provide public goods and services that benefit all members of society.
In many cases these changes have resulted in increased wealth because social programs and public infrastructure (like health care, social security, public education, highways, etc) all generate positive externalities for society as a whole.
The problem is that for too many people today they don't have any first hand experience with the bad old days and are willing to sacrifice their collective strength because they feel that just given a bit of good luck and a lot of hard work that they will suddenly rise from the ranks of the unwashed masses into the esteemed corridors of wealth and power. It also seems that there are just enough stories of the sort where someone pulls himself up from his bootstraps that people feel like such a result is possible.
It doesn't matter if we collectively would be better off with more equitable redistribution of wealth, because we've been trained to think such measures are down right antithetical to the American way of life.
posted by vuron at 1:39 PM on July 11, 2011 [4 favorites]
This has been mirrored in our political system through the collective acts of the electorate pushing policies with allocate more of that surplus value of labor to provide public goods and services that benefit all members of society.
In many cases these changes have resulted in increased wealth because social programs and public infrastructure (like health care, social security, public education, highways, etc) all generate positive externalities for society as a whole.
The problem is that for too many people today they don't have any first hand experience with the bad old days and are willing to sacrifice their collective strength because they feel that just given a bit of good luck and a lot of hard work that they will suddenly rise from the ranks of the unwashed masses into the esteemed corridors of wealth and power. It also seems that there are just enough stories of the sort where someone pulls himself up from his bootstraps that people feel like such a result is possible.
It doesn't matter if we collectively would be better off with more equitable redistribution of wealth, because we've been trained to think such measures are down right antithetical to the American way of life.
posted by vuron at 1:39 PM on July 11, 2011 [4 favorites]
Class is a mental condition, or a cultural attitude. Being upper class does not mean driving an expensive car, and driving an old car doesn't make you middle class.
That is one intrinsic property of class, certainly. Class has a nefarious extrinsic property, a systemic condition applied upon anyone who decides to participate in society. Being upper class does not mean driving an expensive car, but that status facilitates buying one. Driving an older car does not make you middle class, but being middle class means you are much more likely to be driving one. Being poor can mean you go without a car, at all. The extremes of this vehicular scenario can widen depending on how class is managed in the country you happen to live in.
The extrinsic aspect is in what limitations of choice are forced or compelled upon you. Class is as much about the external, the system that surrounds all of us, as the particular economic characteristics of an individual. You can do the smart or sensible thing and still get screwed over, because a system like class is largely blind to individual wisdom.
posted by Blazecock Pileon at 1:41 PM on July 11, 2011 [4 favorites]
That is one intrinsic property of class, certainly. Class has a nefarious extrinsic property, a systemic condition applied upon anyone who decides to participate in society. Being upper class does not mean driving an expensive car, but that status facilitates buying one. Driving an older car does not make you middle class, but being middle class means you are much more likely to be driving one. Being poor can mean you go without a car, at all. The extremes of this vehicular scenario can widen depending on how class is managed in the country you happen to live in.
The extrinsic aspect is in what limitations of choice are forced or compelled upon you. Class is as much about the external, the system that surrounds all of us, as the particular economic characteristics of an individual. You can do the smart or sensible thing and still get screwed over, because a system like class is largely blind to individual wisdom.
posted by Blazecock Pileon at 1:41 PM on July 11, 2011 [4 favorites]
And the economy would grow much more slowly.
The economy is more than just products being made, though. Remember, GDP is the final market value of goods and services. Services could pick up some of the slack. I'd imagine less stuff, would mean less automation, would mean more jobs.
And yet consider how many of the countries who have done comparatively well in the recent financial crisis have strong unions...!
I would be careful about that. Correlation is not always causation. A lot of these countries could also have great education systems, tough immigration policies, more racially/culturally homogenous populations, nationalized health care...
posted by FJT at 1:47 PM on July 11, 2011
The economy is more than just products being made, though. Remember, GDP is the final market value of goods and services. Services could pick up some of the slack. I'd imagine less stuff, would mean less automation, would mean more jobs.
And yet consider how many of the countries who have done comparatively well in the recent financial crisis have strong unions...!
I would be careful about that. Correlation is not always causation. A lot of these countries could also have great education systems, tough immigration policies, more racially/culturally homogenous populations, nationalized health care...
posted by FJT at 1:47 PM on July 11, 2011
And yet consider how many of the countries who have done comparatively well in the recent financial crisis have strong unions...!
Would these countries also not have endured the housing bubble we did? Much of the US financial crisis was caused by lenders increasingly eager to lend to increasingly high risk borrowers, and then selling the loans to the next guy hoping to make a profit. Lenders used lax regulation and oversight to lure people to buy houses they couldn't afford on the premise that the house would always go up in value. Until those risky borrowers started defaulting, affecting the food chain all the way up. Unionization isn't really a factor here.
posted by 2N2222 at 1:51 PM on July 11, 2011
And yet consider how many of the countries who have done comparatively well in the recent financial crisis have strong unions...!
Consider some that aren't.
Correlation, causation, etc.
posted by valkyryn at 1:56 PM on July 11, 2011
Consider some that aren't.
Correlation, causation, etc.
posted by valkyryn at 1:56 PM on July 11, 2011
The only people paying less taxes these days are the super rich. We should pur the top bracket for millionaires at 60% like under Reagan. I'm sick of these screeching rich fuckers making excuses for not paying their share. Most rich people got that way by luck, birth or stealing. Time for then to pay up.
posted by humanfont at 1:57 PM on July 11, 2011 [1 favorite]
posted by humanfont at 1:57 PM on July 11, 2011 [1 favorite]
While it would be good if people actually maintained some degree of savings and weren't completely encumbered with a ridiculous amount of consumer debt, a lot of our collective wealth as a society is predicated on people spending most of their money on goods and services.
Spending money on goods and services especially on locally produced goods and services generates more collective wealth than storing that money in a bank because the local employer is making money, the workers at the store, restaurant, theater are making money and they are buying goods and services with that money, and so on and so on. Some percentage of that spending goes to pay your salary which allow you to spend more money down the road.
Can saving money have benefits? Sure you can gain the benefits of asset appreciation, you can withstand temporary oscillations in the economy, you can afford big ticket items, etc.
Consumer credit for all it's problems allows people to spend money now with the promise they'll pay back that money later with x amount of interest tacked on. That allows people to get into houses, buy stuff, and pay for unexpected expenses that they don't have savings to cover. This allows for more economic growth because instead of a family buying a washer and dryer 6 months down the road when they have saved up enough to purchase it they can buy it now. It means that money is getting back into the system much faster than it would otherwise.
The problem is that all too many people see consumer credit and it's related products (home equity loans, etc) as real wealth. Combined with the usurious rates associated with consumer lending and this has created a system in which people are willing to pay way to much to get a product that will depreciate rapidly. Because people have no idea what the true value of money is they make irrational decisions.
We all do this. I wonder how many of us felt vaguely sick when post talking about how much a macbook pro (or whatever was the high end laptop model of that time period) invested a decade ago in Apple stock would be worth today. Of course if those people had invested in Apple rather than buying an ipod, iphone, macbook pro Apple wouldn't be worth as much as it currently is.
So while you can make individual gains by acting differently than the rest of the masses you still largely depend on them making the same stupid decisions time and again.
posted by vuron at 2:03 PM on July 11, 2011 [2 favorites]
Spending money on goods and services especially on locally produced goods and services generates more collective wealth than storing that money in a bank because the local employer is making money, the workers at the store, restaurant, theater are making money and they are buying goods and services with that money, and so on and so on. Some percentage of that spending goes to pay your salary which allow you to spend more money down the road.
Can saving money have benefits? Sure you can gain the benefits of asset appreciation, you can withstand temporary oscillations in the economy, you can afford big ticket items, etc.
Consumer credit for all it's problems allows people to spend money now with the promise they'll pay back that money later with x amount of interest tacked on. That allows people to get into houses, buy stuff, and pay for unexpected expenses that they don't have savings to cover. This allows for more economic growth because instead of a family buying a washer and dryer 6 months down the road when they have saved up enough to purchase it they can buy it now. It means that money is getting back into the system much faster than it would otherwise.
The problem is that all too many people see consumer credit and it's related products (home equity loans, etc) as real wealth. Combined with the usurious rates associated with consumer lending and this has created a system in which people are willing to pay way to much to get a product that will depreciate rapidly. Because people have no idea what the true value of money is they make irrational decisions.
We all do this. I wonder how many of us felt vaguely sick when post talking about how much a macbook pro (or whatever was the high end laptop model of that time period) invested a decade ago in Apple stock would be worth today. Of course if those people had invested in Apple rather than buying an ipod, iphone, macbook pro Apple wouldn't be worth as much as it currently is.
So while you can make individual gains by acting differently than the rest of the masses you still largely depend on them making the same stupid decisions time and again.
posted by vuron at 2:03 PM on July 11, 2011 [2 favorites]
At the risk of bringing in stuff like Labor Theory of Value, unions provide a critical check on the power of capital to capture the majority of the surplus value of labor.
The way I see it, labor is part of value, but it isn't value. No one out to pay me for running around in circles all day,* or for just digging a ditch and filling it in again, but both of those involve a lot of labor, and under a pure LTV, those would be "jobs" just as worth of pay as anything else. Talking about the "surplus value of labor" makes more sense if they're the same thing, and less sense if capital and commodities also constitute value, in which case the capitalist winds up contributing more "value" than he would under a pure LTV analysis.
*I'm looking at you, professional athletes!
posted by valkyryn at 2:06 PM on July 11, 2011 [1 favorite]
The way I see it, labor is part of value, but it isn't value. No one out to pay me for running around in circles all day,* or for just digging a ditch and filling it in again, but both of those involve a lot of labor, and under a pure LTV, those would be "jobs" just as worth of pay as anything else. Talking about the "surplus value of labor" makes more sense if they're the same thing, and less sense if capital and commodities also constitute value, in which case the capitalist winds up contributing more "value" than he would under a pure LTV analysis.
*I'm looking at you, professional athletes!
posted by valkyryn at 2:06 PM on July 11, 2011 [1 favorite]
Does everyone understand that banks don't lend out your deposits?
In the US, banks create money when they make loans to people. Does everyone understand this?
posted by wuwei at 2:08 PM on July 11, 2011
In the US, banks create money when they make loans to people. Does everyone understand this?
posted by wuwei at 2:08 PM on July 11, 2011
Also, if unions raise wages, they therefore raise the economic value of labour, since economic value is just what people are willing to pay for something.
posted by jb at 2:10 PM on July 11, 2011 [1 favorite]
posted by jb at 2:10 PM on July 11, 2011 [1 favorite]
No, I'm pretty sure they put my $20 back into circulation. I can tell. I drew a picture on it.
posted by mazola at 2:11 PM on July 11, 2011 [2 favorites]
posted by mazola at 2:11 PM on July 11, 2011 [2 favorites]
In the US, banks create money when they make loans to people.
Actually, they only create SOME money when making loans. They actually do lend out deposits. They're allowed to lend out more money than that have in deposits, yes: that IMO is the true genius of fractional reserve banking (which IMO, in combination with consumer credit are the 2 most genius ideas ever in economics). So strictly speaking, they can only create money as a linear function of the amount of deposits (assets) that are in the bank.
posted by chimaera at 2:12 PM on July 11, 2011
Actually, they only create SOME money when making loans. They actually do lend out deposits. They're allowed to lend out more money than that have in deposits, yes: that IMO is the true genius of fractional reserve banking (which IMO, in combination with consumer credit are the 2 most genius ideas ever in economics). So strictly speaking, they can only create money as a linear function of the amount of deposits (assets) that are in the bank.
posted by chimaera at 2:12 PM on July 11, 2011
Class is a mental condition, or a cultural attitude.
Class is your relationship to the means of production.
posted by Stagger Lee at 2:17 PM on July 11, 2011 [5 favorites]
Planet Money is terrific. But they only talk to economists, and economists have only certain ways that they model economies and societies. They rarely deal with such issues as power or culture or psychology (until recently, with behavioural economics -- and Planet Money does talk to those guys), and how these influence market relations.
Now, I'd never claim to be an expert on 20th century economics. But I do have a master's degree with a focus on social and economic history c1500-1800 - and Planet Money gets that period so very, very wrong every time they talk about it.
posted by jb at 2:20 PM on July 11, 2011 [5 favorites]
Now, I'd never claim to be an expert on 20th century economics. But I do have a master's degree with a focus on social and economic history c1500-1800 - and Planet Money gets that period so very, very wrong every time they talk about it.
posted by jb at 2:20 PM on July 11, 2011 [5 favorites]
"The way I see it, labor is part of value, but it isn't value. No one out to pay me for running around in circles all day,* or for just digging a ditch and filling it in again, but both of those involve a lot of labor, and under a pure LTV, those would be "jobs" just as worth of pay as anything else. Talking about the "surplus value of labor" makes more sense if they're the same thing, and less sense if capital and commodities also constitute value, in which case the capitalist winds up contributing more "value" than he would under a pure LTV analysis.
*I'm looking at you, professional athletes!"
Labor is the act of transforming an product through some application of work.
A farmer creates value in transforming land and seeds into salable commodities through the application of labor.
A factory worker creates value in transform parts into a salable product.
A barista creates value in taking beans and milk and transforming them into a salable (albeit overpriced) beverage.
A lawyer creates value in using his knowledge of the legal system to provide a needed service with economic value.
A banker generates value by reinvesting monies into various ventures in order to generate shareholder profits.
All of these things generate surplus value for society as a whole. Groups throughout history have been able to garner some portion of that collective surplus value for themselves (and their families). In the past it could've been feudal hierarchies, in modern society it's those members of society that control the means of production. These individuals left unchecked tend to take a greater and greater percentage of the collective wealth.
Labor unions and democracies tend to act as a brake on that tendency to centralize wealth in the hands of the privileged elite. Interesting enough though when the benefits of wealth are shared in a more equitable manner there are a lot beneficial effects to the privileged elite as well because they have a more skilled more productive healthier workforce.
posted by vuron at 2:20 PM on July 11, 2011 [2 favorites]
*I'm looking at you, professional athletes!"
Labor is the act of transforming an product through some application of work.
A farmer creates value in transforming land and seeds into salable commodities through the application of labor.
A factory worker creates value in transform parts into a salable product.
A barista creates value in taking beans and milk and transforming them into a salable (albeit overpriced) beverage.
A lawyer creates value in using his knowledge of the legal system to provide a needed service with economic value.
A banker generates value by reinvesting monies into various ventures in order to generate shareholder profits.
All of these things generate surplus value for society as a whole. Groups throughout history have been able to garner some portion of that collective surplus value for themselves (and their families). In the past it could've been feudal hierarchies, in modern society it's those members of society that control the means of production. These individuals left unchecked tend to take a greater and greater percentage of the collective wealth.
Labor unions and democracies tend to act as a brake on that tendency to centralize wealth in the hands of the privileged elite. Interesting enough though when the benefits of wealth are shared in a more equitable manner there are a lot beneficial effects to the privileged elite as well because they have a more skilled more productive healthier workforce.
posted by vuron at 2:20 PM on July 11, 2011 [2 favorites]
Planet Money? I don't think so. How about
this instead? Planet Money is good at churning out feckless, status quo supporting commentary. Actual understanding? Not so much.
posted by wuwei at 2:25 PM on July 11, 2011 [1 favorite]
this instead? Planet Money is good at churning out feckless, status quo supporting commentary. Actual understanding? Not so much.
posted by wuwei at 2:25 PM on July 11, 2011 [1 favorite]
Class is your relationship to the means of production.
posted by Stagger Lee at 5:17 PM on July 11 [+] [!]
That's a Marxist definition of class - and interesting, never had a place for the people who were known as "middling sorts" in the 17th & 18th centuries - who were craftspeople and farmers and merchants - basically anyone who wasn't a labourer or an aristocrat (or pseudo-aristocrat, like richer clergy or lawyers).
Indeed, by that definition, the majority of society are working class, since we trade our labour for wages, and don't own the means of production.
But that's now how class functions in everyday life -- class, like race, is a social phenomenon (though income inequality is an economic phenomenon). In Britain, class is a function of both the nature of your employment and your income; middle class people seem to be defined strongly by their living standards and consumption habits, but people who work in "blue-collar" jobs are much more likely to define themselves as working class even if they have the same income as a white-collar person. Whereas in Anglo-North-America, class appears to be a much more lifestyle/income oriented thing: a white-collar worker who makes a low income and cannot afford to buy a home is lower class, while a blue-collar worker with a good income who can afford to buy a home is perceived as middle class.
posted by jb at 2:26 PM on July 11, 2011
posted by Stagger Lee at 5:17 PM on July 11 [+] [!]
That's a Marxist definition of class - and interesting, never had a place for the people who were known as "middling sorts" in the 17th & 18th centuries - who were craftspeople and farmers and merchants - basically anyone who wasn't a labourer or an aristocrat (or pseudo-aristocrat, like richer clergy or lawyers).
Indeed, by that definition, the majority of society are working class, since we trade our labour for wages, and don't own the means of production.
But that's now how class functions in everyday life -- class, like race, is a social phenomenon (though income inequality is an economic phenomenon). In Britain, class is a function of both the nature of your employment and your income; middle class people seem to be defined strongly by their living standards and consumption habits, but people who work in "blue-collar" jobs are much more likely to define themselves as working class even if they have the same income as a white-collar person. Whereas in Anglo-North-America, class appears to be a much more lifestyle/income oriented thing: a white-collar worker who makes a low income and cannot afford to buy a home is lower class, while a blue-collar worker with a good income who can afford to buy a home is perceived as middle class.
posted by jb at 2:26 PM on July 11, 2011
vuron : A banker generates value by reinvesting monies into various ventures in order to generate shareholder profits.
"One of these things is not like the others..."
Key difference... The banker doesn't create anything. He shuffles numbers around to make it somewhat easier for other people to actually create. He merely "fixes" a shortage of liquidity that he and his kind caused in the first place.
posted by pla at 2:33 PM on July 11, 2011
"One of these things is not like the others..."
Key difference... The banker doesn't create anything. He shuffles numbers around to make it somewhat easier for other people to actually create. He merely "fixes" a shortage of liquidity that he and his kind caused in the first place.
posted by pla at 2:33 PM on July 11, 2011
I haven't listened to Planet Money in a long time partly because of this, but I listened regularly for about two years and can't remember them ever having an indepth interview with a historian (as opposed to a historical economist) or a sociologist or any of the many other academics who study economies and societies.
Not all academics who study economies and societies are economists. Economics is a particular discipline which has certain ways of modeling and studying things, and like all academic study it has things to teach us. But a historical economist has a very different methodology and background than an economic historian -- I'm the latter, and I have attended seminars and lectures by the former. We have a different way of approaching the same data and questions, just as historians and historical sociologists do things differently.
For one, economic historians don't ever forget that the market doesn't exist except as an accumulation of human actions -- and the emergent phenomenon that is "the market" isn't working for the betterment of society, but produces various effects which may or may not benefit human society. And that markets are never free of cultural and social factors, that influence how much the market values something like "labour" -- women's labour, for example, was valued as less than men's labour for centuries. This had nothing to do with how much these women produced (a woman silk-thrower in the 17th century produced as much as a man, but was paid less), but to do with the culture and society in which the labour took place.
posted by jb at 2:36 PM on July 11, 2011 [13 favorites]
Not all academics who study economies and societies are economists. Economics is a particular discipline which has certain ways of modeling and studying things, and like all academic study it has things to teach us. But a historical economist has a very different methodology and background than an economic historian -- I'm the latter, and I have attended seminars and lectures by the former. We have a different way of approaching the same data and questions, just as historians and historical sociologists do things differently.
For one, economic historians don't ever forget that the market doesn't exist except as an accumulation of human actions -- and the emergent phenomenon that is "the market" isn't working for the betterment of society, but produces various effects which may or may not benefit human society. And that markets are never free of cultural and social factors, that influence how much the market values something like "labour" -- women's labour, for example, was valued as less than men's labour for centuries. This had nothing to do with how much these women produced (a woman silk-thrower in the 17th century produced as much as a man, but was paid less), but to do with the culture and society in which the labour took place.
posted by jb at 2:36 PM on July 11, 2011 [13 favorites]
Sigh, does this crap sack dystopia at least have good street drugs?
posted by The Whelk at 2:37 PM on July 11, 2011 [5 favorites]
posted by The Whelk at 2:37 PM on July 11, 2011 [5 favorites]
economic value is just what people are willing to pay for something.
Again, this is what I am disputing. I think that's an "idol," i.e. a simplistic model we've convinced ourselves is true but which isn't.
posted by valkyryn at 2:37 PM on July 11, 2011
Again, this is what I am disputing. I think that's an "idol," i.e. a simplistic model we've convinced ourselves is true but which isn't.
posted by valkyryn at 2:37 PM on July 11, 2011
Maybe we can get some good high speed pizza delivery going in the states too!
posted by wuwei at 2:40 PM on July 11, 2011
posted by wuwei at 2:40 PM on July 11, 2011
valkyryn - that's the definition of "economic value."
I, too, dispute that economic value has a necessary correlation with that fussy concept of value which is real value (contribution to the well-being of society at large).
I'm not really sure what we are arguing about here.
But it is "economic value" which is said to set wages, prices, etc -- not real value. And since economic value is defined by wages and prices, it seems to a very tautological concept to me.
posted by jb at 2:42 PM on July 11, 2011 [1 favorite]
I, too, dispute that economic value has a necessary correlation with that fussy concept of value which is real value (contribution to the well-being of society at large).
I'm not really sure what we are arguing about here.
But it is "economic value" which is said to set wages, prices, etc -- not real value. And since economic value is defined by wages and prices, it seems to a very tautological concept to me.
posted by jb at 2:42 PM on July 11, 2011 [1 favorite]
That is complete and utter bullshit.
You can actually call and talk to your representative, or he'll any representative after spending that amount and sometimes they listen/help with corporate kick backs as in getting infrastructure grants (as my employer does while ironically making fun of 'welfare' and the" they don't work hard ethic" republican bullshit all a while loving the 2mil in infrastructure taxpayer funding).
Call your rep and even try to get a face to face meeting. Dollar to a donut you wont be seated across from him/her anytime soon without a little donation
OK, so I do make those kind of donations and have never been contacted personally. Of course, it's true that I haven't made a ton of effort to contact them, and the only 2 I've done so with recently are slightly more busy than a rep (Obama and Boxer).
Apparently I should found a corporation and get me some kickbacks.
posted by wildcrdj at 2:47 PM on July 11, 2011
You can actually call and talk to your representative, or he'll any representative after spending that amount and sometimes they listen/help with corporate kick backs as in getting infrastructure grants (as my employer does while ironically making fun of 'welfare' and the" they don't work hard ethic" republican bullshit all a while loving the 2mil in infrastructure taxpayer funding).
Call your rep and even try to get a face to face meeting. Dollar to a donut you wont be seated across from him/her anytime soon without a little donation
OK, so I do make those kind of donations and have never been contacted personally. Of course, it's true that I haven't made a ton of effort to contact them, and the only 2 I've done so with recently are slightly more busy than a rep (Obama and Boxer).
Apparently I should found a corporation and get me some kickbacks.
posted by wildcrdj at 2:47 PM on July 11, 2011
""One of these things is not like the others..."
Key difference... The banker doesn't create anything. He shuffles numbers around to make it somewhat easier for other people to actually create. He merely "fixes" a shortage of liquidity that he and his kind caused in the first place."
Value can definitely come as the result of a financial transaction. Bankers facilitate these transactions in return for a cut of the action. This is pretty damned useful in any society.
For example, let's say I'm a farmer but my previous harvesting season was pretty disasteriffic and my tractor is broken down and I don't have the savings necessary to cover planting costs and repair/replacement of my farm equipment.
In the absence of a loan I'm pretty much screwed, I could possibly sell my land but that is my primary source of income. If it just stays fallow I could maybe get a job in town and save up some money for a later season but in the meantime my farm is generating no economic value.
Going to a bank allows the farmer to retain his farm and keep it in a productive state provided he pays for the cost of the loan + interest. Most of the interest collected is used to pay shareholders/depositers and pay salaries of bank employees, some might be reinvested, etc.
Despite the rhetoric to the contrary banking can produce value, and bankers aren't just leeches sucking on the lifeblood of the economy. The problem is that in the attempt to maximize shareholder profit banks have encouraged more and more risky investments. If those investments pay off everyone benefits, if they turn out not so well then collectively we all suffer.
That's were government officials charged with financial regulatory authority need to provide value in making sure that in the quest to maximize corporate profits the risk to investors and the economy as whole is not too high.
posted by vuron at 2:51 PM on July 11, 2011 [3 favorites]
Key difference... The banker doesn't create anything. He shuffles numbers around to make it somewhat easier for other people to actually create. He merely "fixes" a shortage of liquidity that he and his kind caused in the first place."
Value can definitely come as the result of a financial transaction. Bankers facilitate these transactions in return for a cut of the action. This is pretty damned useful in any society.
For example, let's say I'm a farmer but my previous harvesting season was pretty disasteriffic and my tractor is broken down and I don't have the savings necessary to cover planting costs and repair/replacement of my farm equipment.
In the absence of a loan I'm pretty much screwed, I could possibly sell my land but that is my primary source of income. If it just stays fallow I could maybe get a job in town and save up some money for a later season but in the meantime my farm is generating no economic value.
Going to a bank allows the farmer to retain his farm and keep it in a productive state provided he pays for the cost of the loan + interest. Most of the interest collected is used to pay shareholders/depositers and pay salaries of bank employees, some might be reinvested, etc.
Despite the rhetoric to the contrary banking can produce value, and bankers aren't just leeches sucking on the lifeblood of the economy. The problem is that in the attempt to maximize shareholder profit banks have encouraged more and more risky investments. If those investments pay off everyone benefits, if they turn out not so well then collectively we all suffer.
That's were government officials charged with financial regulatory authority need to provide value in making sure that in the quest to maximize corporate profits the risk to investors and the economy as whole is not too high.
posted by vuron at 2:51 PM on July 11, 2011 [3 favorites]
Indeed, by that definition, the majority of society are working class, since we trade our labour for wages, and don't own the means of production.
Indeed, and as Utah Phillips in his role as Wobbly agitator would say, we should be damn proud of it - regardless of the color of our collars.
But that's now how class functions in everyday life -- class, like race, is a social phenomenon (though income inequality is an economic phenomenon). In Britain, class is a function of both the nature of your employment and your income; middle class people seem to be defined strongly by their living standards and consumption habits, but people who work in "blue-collar" jobs are much more likely to define themselves as working class even if they have the same income as a white-collar person. Whereas in Anglo-North-America, class appears to be a much more lifestyle/income oriented thing: a white-collar worker who makes a low income and cannot afford to buy a home is lower class, while a blue-collar worker with a good income who can afford to buy a home is perceived as middle class.
Marx's definition has it's use though; he was trying to group people by common interests, and felt that relationship to the means of production was the determining factor. He justifies this with the labor theory of value, but I'm not sure you need to buy into that to glean something from the idea (I think the so-called "analytical marxists" wrote about this, but I haven't looked into it).
The use of the term class as you describe it, the use popular in America, serves the interests of the employing class by dividing workers, and it's hard for me to believe this is incidental. Probably the clearest example of this pitting of the working class against itself is the union system here, which is organized by trade rather than industry (the now sadly marginal IWW excluded).
This of course all assumes the class analysis makes sense in the first place. It's a tricky thing to justify.
posted by elektrotechnicus at 2:57 PM on July 11, 2011 [4 favorites]
Indeed, and as Utah Phillips in his role as Wobbly agitator would say, we should be damn proud of it - regardless of the color of our collars.
But that's now how class functions in everyday life -- class, like race, is a social phenomenon (though income inequality is an economic phenomenon). In Britain, class is a function of both the nature of your employment and your income; middle class people seem to be defined strongly by their living standards and consumption habits, but people who work in "blue-collar" jobs are much more likely to define themselves as working class even if they have the same income as a white-collar person. Whereas in Anglo-North-America, class appears to be a much more lifestyle/income oriented thing: a white-collar worker who makes a low income and cannot afford to buy a home is lower class, while a blue-collar worker with a good income who can afford to buy a home is perceived as middle class.
Marx's definition has it's use though; he was trying to group people by common interests, and felt that relationship to the means of production was the determining factor. He justifies this with the labor theory of value, but I'm not sure you need to buy into that to glean something from the idea (I think the so-called "analytical marxists" wrote about this, but I haven't looked into it).
The use of the term class as you describe it, the use popular in America, serves the interests of the employing class by dividing workers, and it's hard for me to believe this is incidental. Probably the clearest example of this pitting of the working class against itself is the union system here, which is organized by trade rather than industry (the now sadly marginal IWW excluded).
This of course all assumes the class analysis makes sense in the first place. It's a tricky thing to justify.
posted by elektrotechnicus at 2:57 PM on July 11, 2011 [4 favorites]
> We bought a house before the bubble, so it's worth about twice what we paid.
Which bubble? "We're in an area with high cost of living"-- if you're talking about the SF Bay Area, or a place like it, housing went through two bubbles: the late 90's as well as the mid-to-late oughts. The dot com crash didn't hammer real estate back as far as it could have/should have and we still aren't back to 1995 prices, but I fear we'll get there, just not in a "crash," but a slow grind of false starts/hopes and eventual recapitulation
Remember that the Great Depression wasn't just Black Tuesday which was only a 13% drop. "The market embarked on a steady slide in April 1931 that did not end until 1932 when the Dow closed at an all-time low of 41.22 on July 8, concluding a shattering 89% decline from the peak."
posted by morganw at 3:11 PM on July 11, 2011
Which bubble? "We're in an area with high cost of living"-- if you're talking about the SF Bay Area, or a place like it, housing went through two bubbles: the late 90's as well as the mid-to-late oughts. The dot com crash didn't hammer real estate back as far as it could have/should have and we still aren't back to 1995 prices, but I fear we'll get there, just not in a "crash," but a slow grind of false starts/hopes and eventual recapitulation
Remember that the Great Depression wasn't just Black Tuesday which was only a 13% drop. "The market embarked on a steady slide in April 1931 that did not end until 1932 when the Dow closed at an all-time low of 41.22 on July 8, concluding a shattering 89% decline from the peak."
posted by morganw at 3:11 PM on July 11, 2011
FJT wrote: We created the rules, now you want to change them? So, why turn the clock back 50 years? Why not another 100? That way, when a country owes us money we send a bunch of cruisers offshore and shell them. And when we don't like what China does, we dump a bunch of narcotics on their shore.
No, the morons in high finance created the rules and paid for our politicians to implement them. Again, it's not free trade if the playing field isn't level. Yammering on about happy horseshit our ruling classes did a hundred years ago doesn't change that fact one whit.
If the Chinese or whoever really are a better source of labor, surely they'll be able to compete if they operate under the similar rules a US worker does. Free markets aren't free if the market is rigged.
posted by wierdo at 3:12 PM on July 11, 2011
No, the morons in high finance created the rules and paid for our politicians to implement them. Again, it's not free trade if the playing field isn't level. Yammering on about happy horseshit our ruling classes did a hundred years ago doesn't change that fact one whit.
If the Chinese or whoever really are a better source of labor, surely they'll be able to compete if they operate under the similar rules a US worker does. Free markets aren't free if the market is rigged.
posted by wierdo at 3:12 PM on July 11, 2011
god forbid they ever use salt because really, that's a luxury they can't afford.
have you ever looked at the price of salt? It's basically the cheapest food there is. The poor should have to live on nothing but salt.
posted by madcaptenor at 3:21 PM on July 11, 2011
have you ever looked at the price of salt? It's basically the cheapest food there is. The poor should have to live on nothing but salt.
posted by madcaptenor at 3:21 PM on July 11, 2011
I am a college educated white male in my 30s. I grew up in the suburbs. my family is always what i would have considered middle class. and in the past i myself worked a series of well-paying 'knowledge worker' jobs. essentially following the path to 'success' laid out by previous generations.
as a direct result of that, i have personally (meaning, me, not just someone I know) experienced severe consequences resulting from the housing crash, the credit crunch, and prolonged unemployment.
after a certain point, you just decide that the world is just no longer functioning properly. the markets seem to be funneling wealth upwards only. endlessly buying 'stuff' just siphons your personal wealth off to somewhere else. leaving you with more debt, meaning more of your wealth is siphoned off to banks. and then you're just left with a bunch of outdated stuff. and a negative credit score. which means money now costs you more. and then if no one buys 'stuff', no one else has jobs.
i no longer have a lawn to tell anyone to get off of, but it doesn't seem that it was always this way. my parents worked, saved, built up modest wealth in property, and can now retire somewhat comfortably. i was young, but I know it was not always this way in past 'downturns'. my dad was briefly unemployed during the early Reagan era, and my mom didn't really work for a while either. but we never had to panic, never had to starve, always were able to use our cars and live in our house. we don't MAKE anything here. we don't employ people to create products that people purchase. yes, we do indirectly, as some have mentioned regarding china. but the people making those products most likely can't even afford to purchase them. most of the money involved in those transactions is going into the corporations involved in their creation. check the labels for most of the stuff you own or have purchased recently (and if you bought it at walmart, you should already know the answer), and it probably says Made in China. not all, but a lot of that stuff used to be made here. i was walking through a sporting goods store yesterday, and was looking at golf clubs. without fail, from the cheapies up through the really nice carbon-fiber $300 drivers, every one of them was at least 75% chinese-made (a select few listed parts made in china and then assembled in the US).
even though investing has always been where the big banks make their money, with HFT it makes it almost impossible for the 'middle-class' to play along. because of the way the flow of information and knowledge have changed, i believe that many once-viable jobs have now been vaporized. think about how many commerce-related jobs are no longer even necessary because all you have to do is visit a website and whatever it is you wanted shows up a few days later. sure, that employs the guys with the trucks.. but the guy at the store (and then everyone involved in that store) aren't involved in any way in that transaction. shit, the store is probably just gone now.
and so where does a white college educated American male, a segment of the world population which has generally been the most advantaged in the past, go to make his money when real estate, investing, and well-paid jobs aren't even keeping pace? and i don't invoke that as a personal statement. i'm saying that if that segment isn't making it, how is it going to be any easier for anyone else?
and we're not even covering what's going to be the biggest economic dividers going forward. access to clean water and energy. without those two things, life just isn't going to be possible. food price (food production consumes both at high rates) explosions are just one example of where this is going. and then throw in a global population that will continue to heavily divide and therefore drive up prices for access to these 2 things.
i once heard that the "lottery was a tax on people with poor math skills". now i play the lottery because the odds suddenly seem favorable when compared to the alternatives. even for the generation that did have everything, working until they're 65 and retiring isn't working out. how's it gonna go for the rest of us?
posted by ninjew at 3:27 PM on July 11, 2011 [9 favorites]
as a direct result of that, i have personally (meaning, me, not just someone I know) experienced severe consequences resulting from the housing crash, the credit crunch, and prolonged unemployment.
after a certain point, you just decide that the world is just no longer functioning properly. the markets seem to be funneling wealth upwards only. endlessly buying 'stuff' just siphons your personal wealth off to somewhere else. leaving you with more debt, meaning more of your wealth is siphoned off to banks. and then you're just left with a bunch of outdated stuff. and a negative credit score. which means money now costs you more. and then if no one buys 'stuff', no one else has jobs.
i no longer have a lawn to tell anyone to get off of, but it doesn't seem that it was always this way. my parents worked, saved, built up modest wealth in property, and can now retire somewhat comfortably. i was young, but I know it was not always this way in past 'downturns'. my dad was briefly unemployed during the early Reagan era, and my mom didn't really work for a while either. but we never had to panic, never had to starve, always were able to use our cars and live in our house. we don't MAKE anything here. we don't employ people to create products that people purchase. yes, we do indirectly, as some have mentioned regarding china. but the people making those products most likely can't even afford to purchase them. most of the money involved in those transactions is going into the corporations involved in their creation. check the labels for most of the stuff you own or have purchased recently (and if you bought it at walmart, you should already know the answer), and it probably says Made in China. not all, but a lot of that stuff used to be made here. i was walking through a sporting goods store yesterday, and was looking at golf clubs. without fail, from the cheapies up through the really nice carbon-fiber $300 drivers, every one of them was at least 75% chinese-made (a select few listed parts made in china and then assembled in the US).
even though investing has always been where the big banks make their money, with HFT it makes it almost impossible for the 'middle-class' to play along. because of the way the flow of information and knowledge have changed, i believe that many once-viable jobs have now been vaporized. think about how many commerce-related jobs are no longer even necessary because all you have to do is visit a website and whatever it is you wanted shows up a few days later. sure, that employs the guys with the trucks.. but the guy at the store (and then everyone involved in that store) aren't involved in any way in that transaction. shit, the store is probably just gone now.
and so where does a white college educated American male, a segment of the world population which has generally been the most advantaged in the past, go to make his money when real estate, investing, and well-paid jobs aren't even keeping pace? and i don't invoke that as a personal statement. i'm saying that if that segment isn't making it, how is it going to be any easier for anyone else?
and we're not even covering what's going to be the biggest economic dividers going forward. access to clean water and energy. without those two things, life just isn't going to be possible. food price (food production consumes both at high rates) explosions are just one example of where this is going. and then throw in a global population that will continue to heavily divide and therefore drive up prices for access to these 2 things.
i once heard that the "lottery was a tax on people with poor math skills". now i play the lottery because the odds suddenly seem favorable when compared to the alternatives. even for the generation that did have everything, working until they're 65 and retiring isn't working out. how's it gonna go for the rest of us?
posted by ninjew at 3:27 PM on July 11, 2011 [9 favorites]
Hoopo: What this says to me, as someone who has not yet reached the Canadian median household income after 15 years in the workforce, is that the median income can be quite comfortable indeed. I live in one of the most expensive cities in the country and my wife and I can afford to eat out, get a cable package with HBO, go on vacation, live downtown, have a gym membership, and still have enough left over to drink a few fancy beers a couple times a week despite having a below-median household income.
It's worth noting that having public health insurance makes a big difference (I live in Vancouver as well). About.com summarizes an October 2009 report by a health insurance trade group on the cost of health insurance in the US:
posted by russilwvong at 3:37 PM on July 11, 2011
It's worth noting that having public health insurance makes a big difference (I live in Vancouver as well). About.com summarizes an October 2009 report by a health insurance trade group on the cost of health insurance in the US:
- On average, the annual premium was $2,985 for a single person and $6,328 for a family.
- The annual premium differed from state to state. For example, the premium for a family health plan in New York was $13,296, while a similar plan in Iowa was $5,609.
- The annual premiums for health plans were also different depending if the annual deductible was high or low. For example, family plans with no deductible had an average premium of $12,686 each year, while plans with an annual deductible of $10,000 had an average premium of $5,380 each year.
posted by russilwvong at 3:37 PM on July 11, 2011
have you ever looked at the price of salt? It's basically the cheapest food there is.
Unless you buy it in "electrolytes" form. Then you get to pay 426x for it.
posted by morganw at 3:47 PM on July 11, 2011
Unless you buy it in "electrolytes" form. Then you get to pay 426x for it.
posted by morganw at 3:47 PM on July 11, 2011
I started to get really depressed reading all this, wondering when the common people were going to rise up and demand a fair system, until I realized it just doesn't matter.
posted by ob1quixote at 3:53 PM on July 11, 2011
posted by ob1quixote at 3:53 PM on July 11, 2011
Oh, one other thing: Lean on the goddamned mortgage servicers a lot harder to modify mortgages rather than foreclosing.
Why? Why should people that were over-extended and who made bad decisions get rewarded with mortgages while those that scrimped, saved, and rented, who understood their means and lived within them, and who are now fully capable of paying a mortgage be penalized? Because that's what happens when you continue to prop up artificial value: you penalize the rest of us.
There's a shit-ton of property available, but I am still waiting for all the foreclosures. Still waiting, checkbook in hand, ready, willing, and able to buy property. But not for 2006 prices. Because those are made-up bubble numbers, and anyone that gets a "deal" to keep those inflated values on the balance sheets of the banks merely promulgates the myth.
Let the foreclosures come washing over us. Let the prices of the piece-of-shit vinyl-siding homes fall like rocks down a well. It's only when the prices fall that the middle class will be able to afford them once again. I'm waiting, and I've been waiting for two years now, ever since this woe-and-doom crisis started. Where are the deals? I'll tell you where: nowhere. Because it's in the bank's best interest to keep the "values" artificially high, and it's in the best interest of the home-owners to keep the numbers high because they (still) mistakenly treat homes as financial investments instead of places to sleep and want to prop up their imaginary bottom line because of the fear of a dwindling bank account. Fuck that.
posted by Civil_Disobedient at 4:59 PM on July 11, 2011 [15 favorites]
Why? Why should people that were over-extended and who made bad decisions get rewarded with mortgages while those that scrimped, saved, and rented, who understood their means and lived within them, and who are now fully capable of paying a mortgage be penalized? Because that's what happens when you continue to prop up artificial value: you penalize the rest of us.
There's a shit-ton of property available, but I am still waiting for all the foreclosures. Still waiting, checkbook in hand, ready, willing, and able to buy property. But not for 2006 prices. Because those are made-up bubble numbers, and anyone that gets a "deal" to keep those inflated values on the balance sheets of the banks merely promulgates the myth.
Let the foreclosures come washing over us. Let the prices of the piece-of-shit vinyl-siding homes fall like rocks down a well. It's only when the prices fall that the middle class will be able to afford them once again. I'm waiting, and I've been waiting for two years now, ever since this woe-and-doom crisis started. Where are the deals? I'll tell you where: nowhere. Because it's in the bank's best interest to keep the "values" artificially high, and it's in the best interest of the home-owners to keep the numbers high because they (still) mistakenly treat homes as financial investments instead of places to sleep and want to prop up their imaginary bottom line because of the fear of a dwindling bank account. Fuck that.
posted by Civil_Disobedient at 4:59 PM on July 11, 2011 [15 favorites]
Good grief mefites. 130+ comments in.
PLUTOCRACY
posted by notreally at 5:04 PM on July 11, 2011 [2 favorites]
PLUTOCRACY
posted by notreally at 5:04 PM on July 11, 2011 [2 favorites]
FINISH HIM
posted by The Whelk at 5:10 PM on July 11, 2011 [1 favorite]
posted by The Whelk at 5:10 PM on July 11, 2011 [1 favorite]
No, the morons in high finance created the rules and paid for our politicians to implement them. Again, it's not free trade if the playing field isn't level.
Those morons and politicians are American or work for American corporations. They are Americans. Thus, Americans crafted the rules. The way most of the world will see it is, America asked them to play ball. Heck, sometimes it didn't even ask. But they played under the US rules. And now that they're playing better, America is going to change the rules? But that's not my whole point. Rules changing by itself is fine.
If the Chinese or whoever really are a better source of labor, surely they'll be able to compete if they operate under the similar rules a US worker does. Free markets aren't free if the market is rigged.
Why does the world have to operate under these new US rules? If the old rules were shit, why is the same guy writing the rule book? The reason why I mentioned how it was 100 years ago, was because the situation you described where the Bretton Woods system flies high and the days where the US dictated trade rules was in the past. Now, to get the rules changed requires international consensus. To me, it's kind of daft to villify the very people you're trying to get to agree to new rules.
posted by FJT at 5:54 PM on July 11, 2011
Those morons and politicians are American or work for American corporations. They are Americans. Thus, Americans crafted the rules. The way most of the world will see it is, America asked them to play ball. Heck, sometimes it didn't even ask. But they played under the US rules. And now that they're playing better, America is going to change the rules? But that's not my whole point. Rules changing by itself is fine.
If the Chinese or whoever really are a better source of labor, surely they'll be able to compete if they operate under the similar rules a US worker does. Free markets aren't free if the market is rigged.
Why does the world have to operate under these new US rules? If the old rules were shit, why is the same guy writing the rule book? The reason why I mentioned how it was 100 years ago, was because the situation you described where the Bretton Woods system flies high and the days where the US dictated trade rules was in the past. Now, to get the rules changed requires international consensus. To me, it's kind of daft to villify the very people you're trying to get to agree to new rules.
posted by FJT at 5:54 PM on July 11, 2011
we don't MAKE anything here. we don't employ people to create products that people purchase.
People say this a lot, but it doesn't seem to be true. According to recent statistics, the U.S. still produces more manufacturing output than any other country. Substantially more than China.
People say this a lot, but it doesn't seem to be true. According to recent statistics, the U.S. still produces more manufacturing output than any other country. Substantially more than China.
So why do so many Americans fear that the Chinese are eating our lunch?posted by grouse at 6:11 PM on July 11, 2011 [1 favorite]
Part of the reason is that fewer Americans work in factories. Millions of industrial jobs have vanished in recent decades, and there is no denying the hardship and stress that has meant for many families. But factory employment has declined because factory productivity has so dramatically skyrocketed: Revolutions in technology enable an American worker today to produce far more than his counterpart did a generation ago. Consequently, even as America’s manufacturing sector out-produces every other country on earth, millions of young Americans can aspire to become not factory hands or assembly workers, but doctors and lawyers, architects and engineers.
Perceptions also feed the gloom and doom. In its story on Americans’ economic anxiety, National Journal quotes a Florida teacher who says, “It seems like everything I pick up says ‘Made in China’ on it.’’ To someone shopping for toys, shoes, or sporting equipment, it often can seem that way. But that’s because Chinese factories tend to specialize in low-tech, labor-intensive goods — items that typically don’t require the more advanced and sophisticated manufacturing capabilities of modern American plants.
we don't MAKE anything here. we don't employ people to create products that people purchase.
People say this a lot, but it doesn't seem to be true. According to recent statistics, the U.S. still produces more manufacturing output than any other country. Substantially more than China.
The accent is in the wrong word, grouse. WEdon't make anything here. If you're running out of unemployment benefits, what the hell does it matter that the robot you were replaced with has 10x output? Can't eat efficiency, and we don't need 100 million doctors...
posted by c13 at 6:24 PM on July 11, 2011 [3 favorites]
People say this a lot, but it doesn't seem to be true. According to recent statistics, the U.S. still produces more manufacturing output than any other country. Substantially more than China.
The accent is in the wrong word, grouse. WEdon't make anything here. If you're running out of unemployment benefits, what the hell does it matter that the robot you were replaced with has 10x output? Can't eat efficiency, and we don't need 100 million doctors...
posted by c13 at 6:24 PM on July 11, 2011 [3 favorites]
Civil_Disobedient,
You overlook the cost of foreclosures to the surrounding community, in terms of dislocation of the population. But carry on regardless.
posted by wuwei at 6:46 PM on July 11, 2011
You overlook the cost of foreclosures to the surrounding community, in terms of dislocation of the population. But carry on regardless.
posted by wuwei at 6:46 PM on July 11, 2011
Yes, that is a the real problem.
To someone shopping for toys, shoes, or sporting equipment, it often can seem that way. But that’s because Chinese factories tend to specialize in low-tech, labor-intensive goods — items that typically don’t require the more advanced and sophisticated manufacturing capabilities of modern American plants.
I'd say that that statement is only partially true. Let's take golf equipment as an example - the whole industry has moved to Asian production in the last ten years. First, American companies have invested heavily in Asia to get those factories tooled up - they weren't sitting there with some innate ability to build golf clubs to American engineering standards. There is some pretty advanced metallurgy and fabrication techniques used in golf clubs nowadays. Second, if you tell me that an American company couldn't make a $500 retail driver profitably with American workers, I'd have to say you're nuts. They couldn't do it for the insane markup they get from using Asian labor, but that's the whole point isn't it?
posted by Benny Andajetz at 7:22 PM on July 11, 2011
To someone shopping for toys, shoes, or sporting equipment, it often can seem that way. But that’s because Chinese factories tend to specialize in low-tech, labor-intensive goods — items that typically don’t require the more advanced and sophisticated manufacturing capabilities of modern American plants.
I'd say that that statement is only partially true. Let's take golf equipment as an example - the whole industry has moved to Asian production in the last ten years. First, American companies have invested heavily in Asia to get those factories tooled up - they weren't sitting there with some innate ability to build golf clubs to American engineering standards. There is some pretty advanced metallurgy and fabrication techniques used in golf clubs nowadays. Second, if you tell me that an American company couldn't make a $500 retail driver profitably with American workers, I'd have to say you're nuts. They couldn't do it for the insane markup they get from using Asian labor, but that's the whole point isn't it?
posted by Benny Andajetz at 7:22 PM on July 11, 2011
If those places were auctioned off in anything resembling a timely manner there wouldn't be any effect to the community except getting a few more empty houses sold and filled with families that can afford them.
posted by Civil_Disobedient at 7:23 PM on July 11, 2011 [1 favorite]
posted by Civil_Disobedient at 7:23 PM on July 11, 2011 [1 favorite]
But do carry on with your middle-class home-owner fear mongering.
posted by Civil_Disobedient at 7:25 PM on July 11, 2011 [1 favorite]
posted by Civil_Disobedient at 7:25 PM on July 11, 2011 [1 favorite]
Civil_Disobedient makes a good point. It takes two to tango and this mess has two willing partners: buyers who knew they really couldn't afford the mortgage but took it anyway, and, lenders who knew they shouldn't extend the credit, but did anyway.
At the end of the day, however, one has to make a determination of who holds the ultimate responsibility, and I would argue strongly that it is the lenders who should bear the majority of the blame and the burden. At the end of the day it is the lender, who should be properly licensed, educated and regulated, who makes the final determination of who does and does not get the loan. It is the lender who knew the true appraisals, the true debt to income ratio of the buyer, the true future danger of the adjustable rate mortgage.
That all said, I can tell you without a shadow of a doubt that this bust is going to drag us down for many years to come. It has trapped many friends in homes they will never be able to sell for anywhere near the purchase price (or current payoff, for that matter), and all of those were truly responsible buyers with 20% down and good debt to income figures on standard 30 year notes.
This is going to suck for EVERYONE and NOBODY will be happy with the outcome. If you think there's a silver lining or a happy ending, knock that shit out of your head right now - because the solutions will piss just about everyone off. The only solution available is a general "debt jubilee" that wipes out a significant portion of the overall debt held by all Americans - student loans, mortgages, credit cards...you name it.
How would that happen? Hell if I know, but at this stage of the game we are collectively so sunk in a pit of debt there really is no other way out of it apart from writing a good chunk of it off as bad debt and then structuring the regulatory bodies to ensure it doesn't happen again.
posted by tgrundke at 7:29 PM on July 11, 2011
At the end of the day, however, one has to make a determination of who holds the ultimate responsibility, and I would argue strongly that it is the lenders who should bear the majority of the blame and the burden. At the end of the day it is the lender, who should be properly licensed, educated and regulated, who makes the final determination of who does and does not get the loan. It is the lender who knew the true appraisals, the true debt to income ratio of the buyer, the true future danger of the adjustable rate mortgage.
That all said, I can tell you without a shadow of a doubt that this bust is going to drag us down for many years to come. It has trapped many friends in homes they will never be able to sell for anywhere near the purchase price (or current payoff, for that matter), and all of those were truly responsible buyers with 20% down and good debt to income figures on standard 30 year notes.
This is going to suck for EVERYONE and NOBODY will be happy with the outcome. If you think there's a silver lining or a happy ending, knock that shit out of your head right now - because the solutions will piss just about everyone off. The only solution available is a general "debt jubilee" that wipes out a significant portion of the overall debt held by all Americans - student loans, mortgages, credit cards...you name it.
How would that happen? Hell if I know, but at this stage of the game we are collectively so sunk in a pit of debt there really is no other way out of it apart from writing a good chunk of it off as bad debt and then structuring the regulatory bodies to ensure it doesn't happen again.
posted by tgrundke at 7:29 PM on July 11, 2011
It has trapped many friends in homes they will never be able to sell for anywhere near the purchase price (or current payoff, for that matter), and all of those were truly responsible buyers with 20% down and good debt to income figures on standard 30 year notes.
I try not to make these things personal, but I bought my current house at the top of the market. It was my fourth house, I was well-employed, I had good credit, and (thinking I was being responsible) put down 50% on a 30 yr fixed. My deposit was a serious chunk of change.
The market tanked. I lost my job. 3 years later, I am still essentially unemployed. I am almost broke. My house is worth 40% less. The bank could give a fuck, because it's essentially all my skin in the game.
So, contrary to what the naysayers keep crowing about with regards to irresponsible buyers, plenty of honest, responsible buyers have been well and truly fucked here. But keep believing what you believe.
posted by Benny Andajetz at 7:37 PM on July 11, 2011
I try not to make these things personal, but I bought my current house at the top of the market. It was my fourth house, I was well-employed, I had good credit, and (thinking I was being responsible) put down 50% on a 30 yr fixed. My deposit was a serious chunk of change.
The market tanked. I lost my job. 3 years later, I am still essentially unemployed. I am almost broke. My house is worth 40% less. The bank could give a fuck, because it's essentially all my skin in the game.
So, contrary to what the naysayers keep crowing about with regards to irresponsible buyers, plenty of honest, responsible buyers have been well and truly fucked here. But keep believing what you believe.
posted by Benny Andajetz at 7:37 PM on July 11, 2011
So, contrary to what the naysayers keep crowing about with regards to irresponsible buyers, plenty of honest, responsible buyers have been well and truly fucked here. But keep believing what you believe.
I believe many responsible buyers were hurt through no fault of their own. Maybe just as many as those who were hurt because they were irresponsible. Keeping home prices artificially high to alleviate their pain, though, would hurt responsible potential homeowners like Civil_Disobedient, and he has a right to be annoyed by that.
posted by Thoughtcrime at 7:45 PM on July 11, 2011 [2 favorites]
I believe many responsible buyers were hurt through no fault of their own. Maybe just as many as those who were hurt because they were irresponsible. Keeping home prices artificially high to alleviate their pain, though, would hurt responsible potential homeowners like Civil_Disobedient, and he has a right to be annoyed by that.
posted by Thoughtcrime at 7:45 PM on July 11, 2011 [2 favorites]
I try not to make these things personal, but I bought my current house at the top of the market. It was my fourth house, I was well-employed, I had good credit, and (thinking I was being responsible) put down 50% on a 30 yr fixed. My deposit was a serious chunk of change. The market tanked. I lost my job. 3 years later, I am still essentially unemployed. I am almost broke. My house is worth 40% less.
That sucks, but if it was your 4th house you should have been experienced enough to know that prices were in an inflationary bubble. I got burned that one in my early 20s for a relatively small amount of money, and got out from under it after a few years. I I am only now willing to buy in again, and still think the prices are a bit too high where I live. Why didn't you buy mortgage insurance, or keep your third house and use it for rental income/collateral?
I mean, it's bad that you're almost broke. But anyone buying or selling a house who couldn't see that the housing market was enormously overheated a few years ago was just sleepwalking. you're old enough to have seen various recessions and busts both in the US and abroad. Since you often speak of capitalism as if it were some sort of roulette wheel, surely you should have been aware that your streak of good luck would potentially end at some point.
posted by anigbrowl at 8:22 PM on July 11, 2011 [2 favorites]
That sucks, but if it was your 4th house you should have been experienced enough to know that prices were in an inflationary bubble. I got burned that one in my early 20s for a relatively small amount of money, and got out from under it after a few years. I I am only now willing to buy in again, and still think the prices are a bit too high where I live. Why didn't you buy mortgage insurance, or keep your third house and use it for rental income/collateral?
I mean, it's bad that you're almost broke. But anyone buying or selling a house who couldn't see that the housing market was enormously overheated a few years ago was just sleepwalking. you're old enough to have seen various recessions and busts both in the US and abroad. Since you often speak of capitalism as if it were some sort of roulette wheel, surely you should have been aware that your streak of good luck would potentially end at some point.
posted by anigbrowl at 8:22 PM on July 11, 2011 [2 favorites]
I'm openly in the "eat the rich" crowd, but a lot of the $ amount throwing out really needs more context.
A rental house in a 2k population town in Iowa costs $400 a month. A 1 bedroom apartment in downtown LA is, what, $4k a month?
I'm pretty sure cable, cell phones, and food also have differential costs. That's my personal problem with federal graduate student funding guidelines/funding agencies in Canada; sure, 18k is enough to live on in Saskatchewan (and might even be considered generous), but in Toronto, ON or Vancouver, BC? Same with "national poverty level" cutoffs. 18k in Red Deer, AB goes a lot further than 18k does in Calgary, AB - not to even refer to Toronto or Vancouver.
Nationwide average stats don't work well when considering geographical location.
posted by porpoise at 9:35 PM on July 11, 2011
A rental house in a 2k population town in Iowa costs $400 a month. A 1 bedroom apartment in downtown LA is, what, $4k a month?
I'm pretty sure cable, cell phones, and food also have differential costs. That's my personal problem with federal graduate student funding guidelines/funding agencies in Canada; sure, 18k is enough to live on in Saskatchewan (and might even be considered generous), but in Toronto, ON or Vancouver, BC? Same with "national poverty level" cutoffs. 18k in Red Deer, AB goes a lot further than 18k does in Calgary, AB - not to even refer to Toronto or Vancouver.
Nationwide average stats don't work well when considering geographical location.
posted by porpoise at 9:35 PM on July 11, 2011
Civil_Disobedient wrote: Why? Why should people that were over-extended and who made bad decisions get rewarded with mortgages while those that scrimped, saved, and rented, who understood their means and lived within them, and who are now fully capable of paying a mortgage be penalized? Because that's what happens when you continue to prop up artificial value: you penalize the rest of us.
First, many of the people having trouble with their mortgage are unemployed through no fault of their own. They're unemployed because of the assholes who blew up a gigantic real estate bubble for the lulz. They're in a shitty mortgage because their scum sucking mortgage broker switched the deal on them at the last minute or told them they only qualified for a subprime loan even though they qualified for a prime loan and/or completely made up numbers to get approvals. The scum sucking mortgage broker did that because the company they work for doesn't give a shit, they just pass the mortgages along, possibly keeping the servicing rights. They can pass such obviously shitty mortgages along because the fucking investment banks don't give a shit, they get their cut no matter how shitty the deal turns out to be. The hedge funds don't give a shit because the yields on shitty mortgages are sky high and they bought a CDS from AIG, so they get paid either way.
And then the fucking investment banks collude with the assholes at the ratings agencies to get 70% of a group of the most worthless mortgages imaginable rated triple A so they can sell them to mutual funds, pension funds, banks, who were allowed to hold their capital in MBS, and the like. And nobody gives a fuck, because there's twelve metric assloads of money to be made, since you're selling off the shit to unsuspecting fools all while claiming you're giving them a gold mine.
The bankers are the experts, not the borrowers.
And even if you buy that the crisis was caused primarily by irresponsible homeowners, keeping people in their houses is a net societal good. I wouldn't get jack shit from it, but I can still see that having a bunch of foreclosures in my neighborhood isn't necessarily the best thing for me. Unoccupied houses attract crime.
Modifying mortgages preserves value all around the chain. The only people it hurts are the fucking servicers who get more fees if they foreclose than if they modify. The people holding the bonds are certainly better off with a modification than a foreclosure that nets 10 cents on the dollar. Hell, they probably bought the damn security for a song in the height of the crisis.
And pray tell, how is it penalizing me if some piece of shit at a hedge fund has to take a fucking haircut on his toxic waste? What, I don't get treated as nicely? So fucking what.
(Yeah, I'm pissed..I'm tired of seeing this bullshit, when it's perfectly clear that the rampant fraud was the primary cause of our recent and continuing troubles and that the fraud is going mostly unprosecuted)
FJT wrote:
Why does the world have to operate under these new US rules? If the old rules were shit, why is the same guy writing the rule book? The reason why I mentioned how it was 100 years ago, was because the situation you described where the Bretton Woods system flies high and the days where the US dictated trade rules was in the past. Now, to get the rules changed requires international consensus. To me, it's kind of daft to villify the very people you're trying to get to agree to new rules.
They can operate under whatever rules they like, but if they choose to skimp on environmental regulations, the government should place a tariff to account for that missing cost. Doing otherwise drives capital to the most lax environment possible. There are a lot of other people in the world they can sell to if they like.
posted by wierdo at 9:39 PM on July 11, 2011 [2 favorites]
First, many of the people having trouble with their mortgage are unemployed through no fault of their own. They're unemployed because of the assholes who blew up a gigantic real estate bubble for the lulz. They're in a shitty mortgage because their scum sucking mortgage broker switched the deal on them at the last minute or told them they only qualified for a subprime loan even though they qualified for a prime loan and/or completely made up numbers to get approvals. The scum sucking mortgage broker did that because the company they work for doesn't give a shit, they just pass the mortgages along, possibly keeping the servicing rights. They can pass such obviously shitty mortgages along because the fucking investment banks don't give a shit, they get their cut no matter how shitty the deal turns out to be. The hedge funds don't give a shit because the yields on shitty mortgages are sky high and they bought a CDS from AIG, so they get paid either way.
And then the fucking investment banks collude with the assholes at the ratings agencies to get 70% of a group of the most worthless mortgages imaginable rated triple A so they can sell them to mutual funds, pension funds, banks, who were allowed to hold their capital in MBS, and the like. And nobody gives a fuck, because there's twelve metric assloads of money to be made, since you're selling off the shit to unsuspecting fools all while claiming you're giving them a gold mine.
The bankers are the experts, not the borrowers.
And even if you buy that the crisis was caused primarily by irresponsible homeowners, keeping people in their houses is a net societal good. I wouldn't get jack shit from it, but I can still see that having a bunch of foreclosures in my neighborhood isn't necessarily the best thing for me. Unoccupied houses attract crime.
Modifying mortgages preserves value all around the chain. The only people it hurts are the fucking servicers who get more fees if they foreclose than if they modify. The people holding the bonds are certainly better off with a modification than a foreclosure that nets 10 cents on the dollar. Hell, they probably bought the damn security for a song in the height of the crisis.
And pray tell, how is it penalizing me if some piece of shit at a hedge fund has to take a fucking haircut on his toxic waste? What, I don't get treated as nicely? So fucking what.
(Yeah, I'm pissed..I'm tired of seeing this bullshit, when it's perfectly clear that the rampant fraud was the primary cause of our recent and continuing troubles and that the fraud is going mostly unprosecuted)
FJT wrote:
Why does the world have to operate under these new US rules? If the old rules were shit, why is the same guy writing the rule book? The reason why I mentioned how it was 100 years ago, was because the situation you described where the Bretton Woods system flies high and the days where the US dictated trade rules was in the past. Now, to get the rules changed requires international consensus. To me, it's kind of daft to villify the very people you're trying to get to agree to new rules.
They can operate under whatever rules they like, but if they choose to skimp on environmental regulations, the government should place a tariff to account for that missing cost. Doing otherwise drives capital to the most lax environment possible. There are a lot of other people in the world they can sell to if they like.
posted by wierdo at 9:39 PM on July 11, 2011 [2 favorites]
I should note that I find it interesting how many people are so invested in blaming the victim out of some sense of fairness to themselves. So you didn't get fucked. You should be happy for it, not pissed off that some other people are getting somewhat less fucked.
posted by wierdo at 9:43 PM on July 11, 2011 [1 favorite]
posted by wierdo at 9:43 PM on July 11, 2011 [1 favorite]
Differentials between real estate markets were part of what kept the shell game rolling. Sell your house in a totally overheated market and move to somewhere the price inflation isn't as bad. Newcomers moving in around here kept the prices climbing until the credit was cut off by the banks. It was still nuts here through 2009 even though all new construction totally dried up.
I'm waiting for the realtors to form an underground terrorist movement to torch the foreclosed properties and blame it on the ELF, thereby keeping prices high in a down market. I'm sure the FBI would play along. The insurance companies will pay off the banks and recover their costs and making a profit by raising everybody's homeowner insurance 15%, just like they raised mine this spring.
posted by warbaby at 9:44 PM on July 11, 2011 [1 favorite]
I'm waiting for the realtors to form an underground terrorist movement to torch the foreclosed properties and blame it on the ELF, thereby keeping prices high in a down market. I'm sure the FBI would play along. The insurance companies will pay off the banks and recover their costs and making a profit by raising everybody's homeowner insurance 15%, just like they raised mine this spring.
posted by warbaby at 9:44 PM on July 11, 2011 [1 favorite]
A 1 bedroom apartment in downtown LA is, what, $4k a month?
Just to be clear: Downtown, probably about $2k for a Very Nice Place, Burbank (a perfectly respectable place to live and near downtown) about $1k for a decent spot, other areas (Hollywood, Venice, Los Feliz, "Beverly Hills Adjacent," the lesser portions of the west side like Palms) between $1100 and $1500.
$4K rent would get you a three bedroom house in Hollywood tomorrow. Just for clarity's sake!
But yes, EAT THE FUCKING RICH.
posted by incessant at 11:38 PM on July 11, 2011 [1 favorite]
Just to be clear: Downtown, probably about $2k for a Very Nice Place, Burbank (a perfectly respectable place to live and near downtown) about $1k for a decent spot, other areas (Hollywood, Venice, Los Feliz, "Beverly Hills Adjacent," the lesser portions of the west side like Palms) between $1100 and $1500.
$4K rent would get you a three bedroom house in Hollywood tomorrow. Just for clarity's sake!
But yes, EAT THE FUCKING RICH.
posted by incessant at 11:38 PM on July 11, 2011 [1 favorite]
People say this a lot, but it doesn't seem to be true. According to recent statistics, the U.S. still produces more manufacturing output than any other country. Substantially more than China.
There is a lot wrong with that statistic, starting with the sort of people peddling it:
The idea that 'the conventional wisdom that manufacturing in the US has huge problems' is counterfactual, is tendentious.
posted by ennui.bz at 11:58 PM on July 11, 2011
There is a lot wrong with that statistic, starting with the sort of people peddling it:
“The decline, demise, and death of America’s manufacturing sector has been greatly exaggerated,’’ says economist Mark Perry, a visiting scholar at the *American Enterprise Institute* in Washington. “America still makes a ton of stuff, and we make more of it now than ever before in history.’’But the statistic doesn't say we make more, it just says the total value of what has been produced is higher. But I think the problems are best illustrated by noting that Aircraft (i.e. Boeing) and Pharamceuticals are the two biggest components of that manufacturing number (both heavily subsidized by the federal government).
The idea that 'the conventional wisdom that manufacturing in the US has huge problems' is counterfactual, is tendentious.
posted by ennui.bz at 11:58 PM on July 11, 2011
For what it's worth (ho ho), although I agree with Valkyryn that the fundamental value of a commodity is not necessarily something entirely determined by the market, I also think that how that commodity is valued in society clearly owes a lot to factors other than its inherent value.
We do not soberly and judiciously consider how to price things. We take what we can get. And in the case of the pricing of labour power, there are vested interests and power relationships at work on both sides.
More important than value is, perhaps, the power relationship. Where is the power and is it being used justly? (e.g. employers constantly, subtly, use their influence to extract more effort, more unpaid time, from their workforce - almost everyone who has ever had a job of any kind has experienced this at some point - "oh, just stay late to get this one project done; oh, you aren't really working harder than last year - not really; oh, we would never ask you to work longer than your contracted hours [but you need to in order to get the job done and we will give you a bad review if you don't get the job done] etc. etc. etc.).
posted by lucien_reeve at 1:55 AM on July 12, 2011
We do not soberly and judiciously consider how to price things. We take what we can get. And in the case of the pricing of labour power, there are vested interests and power relationships at work on both sides.
More important than value is, perhaps, the power relationship. Where is the power and is it being used justly? (e.g. employers constantly, subtly, use their influence to extract more effort, more unpaid time, from their workforce - almost everyone who has ever had a job of any kind has experienced this at some point - "oh, just stay late to get this one project done; oh, you aren't really working harder than last year - not really; oh, we would never ask you to work longer than your contracted hours [but you need to in order to get the job done and we will give you a bad review if you don't get the job done] etc. etc. etc.).
posted by lucien_reeve at 1:55 AM on July 12, 2011
There should be a "rich apologist's bingo" game as well. Get points - or drink yourself into oblivion - when you hear the following:
1) "But the poor are not doing absolutely everything right! If they are not perfectly virtuous and at the same time perfectly canny about their economic chances, then things are not as bad as all that and they deserve it! I knew a poor person once and he wasn't very clever, so clearly everything is fine."
2) "People who are concerned about exploitation or an unjust power relationship between the rich and the poor - or employers and employees - are just jealous! Jealous jealous jealousy pants, that's what they are. Sitting there, stewing in their jealous, jealous pants. Hah! They just want all that money for themselves, which is wrong because only the people who already have money deserve to have it. They don't. I will, though, someday."
3) "You don't understand economics properly. I do. Economics says that rich people should continue to have things their way. If they don't, a great evil will befall the land. As we know, economics is an exact science with enormous predictive force. Have a look at this study from the American Enterprise Institute, this book by the Chicago Professor of Corporate Hagiography or this press release from Free American Citizens Freely United for the Freedom to Enjoy Liberty, Adam Smith and More Freedom. It clearly proves my point."
4) "I am a small business owner. If things are not arranged precisely to suit my needs, my business will fail. Apocalypse will follow shortly. You do not understand this because you have never dealt with the realities of life. You are a fantasist and probably currently smoking some variety of drug. Also, you are only trying to take my money, which you cannot have because regardless of how I made it is it is mine now, mine, mine all mine."
Straw men? Hah!
posted by lucien_reeve at 2:12 AM on July 12, 2011 [10 favorites]
1) "But the poor are not doing absolutely everything right! If they are not perfectly virtuous and at the same time perfectly canny about their economic chances, then things are not as bad as all that and they deserve it! I knew a poor person once and he wasn't very clever, so clearly everything is fine."
2) "People who are concerned about exploitation or an unjust power relationship between the rich and the poor - or employers and employees - are just jealous! Jealous jealous jealousy pants, that's what they are. Sitting there, stewing in their jealous, jealous pants. Hah! They just want all that money for themselves, which is wrong because only the people who already have money deserve to have it. They don't. I will, though, someday."
3) "You don't understand economics properly. I do. Economics says that rich people should continue to have things their way. If they don't, a great evil will befall the land. As we know, economics is an exact science with enormous predictive force. Have a look at this study from the American Enterprise Institute, this book by the Chicago Professor of Corporate Hagiography or this press release from Free American Citizens Freely United for the Freedom to Enjoy Liberty, Adam Smith and More Freedom. It clearly proves my point."
4) "I am a small business owner. If things are not arranged precisely to suit my needs, my business will fail. Apocalypse will follow shortly. You do not understand this because you have never dealt with the realities of life. You are a fantasist and probably currently smoking some variety of drug. Also, you are only trying to take my money, which you cannot have because regardless of how I made it is it is mine now, mine, mine all mine."
Straw men? Hah!
posted by lucien_reeve at 2:12 AM on July 12, 2011 [10 favorites]
First, many of the people having trouble with their mortgage are unemployed through no fault of their own.
Irrelevant.
They're unemployed because of the assholes who blew up a gigantic real estate bubble for the lulz.
Irrelevant.
Unoccupied houses attract crime.
Scare-mongering. How can the homes stay unoccupied when they go up for auction? Answer: they never go up for auction, ergo they stay unoccupied.
posted by Civil_Disobedient at 3:18 AM on July 12, 2011 [1 favorite]
Irrelevant.
They're unemployed because of the assholes who blew up a gigantic real estate bubble for the lulz.
Irrelevant.
Unoccupied houses attract crime.
Scare-mongering. How can the homes stay unoccupied when they go up for auction? Answer: they never go up for auction, ergo they stay unoccupied.
posted by Civil_Disobedient at 3:18 AM on July 12, 2011 [1 favorite]
wierdo -
I agree that modifying mortgages would be the best way to help the system in general, but it's a political non-starter. I can only address my own behavior, not that of others, and I would be angry if I were not part of some mortgage forgiveness scheme.
Look, I feel bad for the people who are unemployed or who have a major issue that puts them in a bad spot - these are the people who deserve our help. But I don't think we're talking about those people in this thread. We're talking about the millions who willingly participated and hoisted this fraud upon the rest of us.
You start modifying mortgages and you're going to have millions of very decent, very fiscally conservative Americans out in the streets demanding their pound of flesh. It's the ultimate slap in the face to them for the government to essentially say, "we know you've skimped and saved and been prudent, and to reward that good behavior we're going to modify millions of mortgages (not yours of course, you're up to date and in good standing) to stem this foreclosure tide."
That's what I mean by: there are no good solutions here. I sincerely think that any major plan to modify mortgages en masse or type of debt jubilee runs a seriously high risk of courting civil disobedience around the country. I'm not arguing it's a bad idea to do mods/forgiveness, just that it is going to really shake the foundations of this country much more than it already has been.
posted by tgrundke at 5:12 AM on July 12, 2011
I agree that modifying mortgages would be the best way to help the system in general, but it's a political non-starter. I can only address my own behavior, not that of others, and I would be angry if I were not part of some mortgage forgiveness scheme.
Look, I feel bad for the people who are unemployed or who have a major issue that puts them in a bad spot - these are the people who deserve our help. But I don't think we're talking about those people in this thread. We're talking about the millions who willingly participated and hoisted this fraud upon the rest of us.
You start modifying mortgages and you're going to have millions of very decent, very fiscally conservative Americans out in the streets demanding their pound of flesh. It's the ultimate slap in the face to them for the government to essentially say, "we know you've skimped and saved and been prudent, and to reward that good behavior we're going to modify millions of mortgages (not yours of course, you're up to date and in good standing) to stem this foreclosure tide."
That's what I mean by: there are no good solutions here. I sincerely think that any major plan to modify mortgages en masse or type of debt jubilee runs a seriously high risk of courting civil disobedience around the country. I'm not arguing it's a bad idea to do mods/forgiveness, just that it is going to really shake the foundations of this country much more than it already has been.
posted by tgrundke at 5:12 AM on July 12, 2011
I'm going to follow up on my comment above: put yourselves into the shoes of a large part of homeowning Americans today. You got screwed by the financial sector, you got screwed for saving prudently in CDs and Treasuries (no interest), you don't qualify for any government benefits, you don't qualify for a mortgage modification, or if you've paid off your mortgage you get nothing, either. No, instead you're told you need to do this to help everyone else.
Sure, some people will get it, but I think that's just enough of a bitter pill for enough people that itwill really, really, really piss them off. I know it would me.
posted by tgrundke at 5:15 AM on July 12, 2011
Sure, some people will get it, but I think that's just enough of a bitter pill for enough people that itwill really, really, really piss them off. I know it would me.
posted by tgrundke at 5:15 AM on July 12, 2011
But anyone buying or selling a house who couldn't see that the housing market was enormously overheated a few years ago was just sleepwalking. you're old enough to have seen various recessions and busts both in the US and abroad. Since you often speak of capitalism as if it were some sort of roulette wheel, surely you should have been aware that your streak of good luck would potentially end at some point.
I moved for my job and bought at the wrong time.
Don't get me wrong - I'm a big boy and I wouldn't normally mind taking a haircut on my house. I knew that the market was high, but I didn't see total economic meltdown around the corner. A bubble bursting is one thing, but this was wrapped so deep and in so many crevices of the economy that it not only slammed the value of my house - it has hampered my ability to be employed, or even borrow against the value that I do have in the house.
This was a large-scale scam by a lot of lenders, and they are not being held responsible.
posted by Benny Andajetz at 5:17 AM on July 12, 2011 [2 favorites]
I moved for my job and bought at the wrong time.
Don't get me wrong - I'm a big boy and I wouldn't normally mind taking a haircut on my house. I knew that the market was high, but I didn't see total economic meltdown around the corner. A bubble bursting is one thing, but this was wrapped so deep and in so many crevices of the economy that it not only slammed the value of my house - it has hampered my ability to be employed, or even borrow against the value that I do have in the house.
This was a large-scale scam by a lot of lenders, and they are not being held responsible.
posted by Benny Andajetz at 5:17 AM on July 12, 2011 [2 favorites]
...what the hell does it matter that the robot you were replaced with has 10x output? Can't eat efficiency, and we don't need 100 million doctors...
Why not? Until those robots are also doctoring on a large scale, it seems that having many, many more doctors would be one of the best possible outcomes of increased productivity in manufacturing. It seems it would improve the public well-being in just about every possible way? (Assuming 100 million doctors is a slight exaggeration)
posted by romanb at 5:27 AM on July 12, 2011 [1 favorite]
Why not? Until those robots are also doctoring on a large scale, it seems that having many, many more doctors would be one of the best possible outcomes of increased productivity in manufacturing. It seems it would improve the public well-being in just about every possible way? (Assuming 100 million doctors is a slight exaggeration)
posted by romanb at 5:27 AM on July 12, 2011 [1 favorite]
But seems to me that there's plenty of evidence from the rest of the world that labor movements can be effective in counteracting wage stagnation and the other kinds of systemic problems that have led us to this crisis point.
That's as may be. My contention is that wage stagnation isn't one of the "systemic problems that [has] led us to this crisis point." I don't see any inherent connection between wage stagnation--which is admittedly bad!--and the asset bubble. "Not getting richer" is kind of sucky, but does not cause acute financial pain in the way that nosediving real estate prices seems to be doing.
So would increased unions have made a difference? Maybe, but not in a way that would have prevented the housing crisis, which is the focus of the article.
posted by valkyryn at 6:41 AM on July 12, 2011
That's as may be. My contention is that wage stagnation isn't one of the "systemic problems that [has] led us to this crisis point." I don't see any inherent connection between wage stagnation--which is admittedly bad!--and the asset bubble. "Not getting richer" is kind of sucky, but does not cause acute financial pain in the way that nosediving real estate prices seems to be doing.
So would increased unions have made a difference? Maybe, but not in a way that would have prevented the housing crisis, which is the focus of the article.
posted by valkyryn at 6:41 AM on July 12, 2011
Nobody's mentioned that the reason why someone might pay for cable rather than reading a book is, well....low literacy is pretty common amongst poorer families. More so for first-generation immigrants who may not be able to read English well yet, or at all if they accompany someone who does.
posted by mippy at 6:46 AM on July 12, 2011 [1 favorite]
posted by mippy at 6:46 AM on July 12, 2011 [1 favorite]
How much of unemployment today is structural? How many people just aren't useful to the plutocrats? Technological advance means that those who own a vastly disproportionate share of capital have no use for the skills of Joe Everyman circa 1950 (or 1970, for that matter). Think of how many valets and butlers a smartphone displaces.
posted by elektrotechnicus at 8:01 AM on July 12, 2011
posted by elektrotechnicus at 8:01 AM on July 12, 2011
So would increased unions have made a difference? Maybe, but not in a way that would have prevented the housing crisis, which is the focus of the article.
Worker unions and credit unions go hand in hand, and could have undercut the power of commercial banks.
posted by elektrotechnicus at 8:02 AM on July 12, 2011 [2 favorites]
Worker unions and credit unions go hand in hand, and could have undercut the power of commercial banks.
posted by elektrotechnicus at 8:02 AM on July 12, 2011 [2 favorites]
valkyrn: I have to say, I really appreciate the even-handed tone of your contributions in this thread. I can see there's legitimate room for honest disagreement on a lot of these issues.
My own take, however, remains that wage stagnation + cheap credit = a machine for creating wealth disparity. It just stands to reason: if more capital is getting passed along to executives, investors and owners than ever before, and if those executives, investors and owners, instead of passing on their gains to workers in the form of wage increases, are making that capital available for easy rent on the market (which doesn't increase the net wealth in the economy, after all, but only transfers more of the remaining wealth in the system from the middle and lower classes to the top of the economic heap in the form of interest payments), then the net result will be concentration of more wealth in fewer hands. When more wealth is concentrated in fewer hands, the result is a less robust, less resilient economy and civil society.
posted by saulgoodman at 8:50 AM on July 12, 2011 [4 favorites]
My own take, however, remains that wage stagnation + cheap credit = a machine for creating wealth disparity. It just stands to reason: if more capital is getting passed along to executives, investors and owners than ever before, and if those executives, investors and owners, instead of passing on their gains to workers in the form of wage increases, are making that capital available for easy rent on the market (which doesn't increase the net wealth in the economy, after all, but only transfers more of the remaining wealth in the system from the middle and lower classes to the top of the economic heap in the form of interest payments), then the net result will be concentration of more wealth in fewer hands. When more wealth is concentrated in fewer hands, the result is a less robust, less resilient economy and civil society.
posted by saulgoodman at 8:50 AM on July 12, 2011 [4 favorites]
Why not? Until those robots are also doctoring on a large scale, it seems that having many, many more doctors would be one of the best possible outcomes of increased productivity in manufacturing. It seems it would improve the public well-being in just about every possible way? (Assuming 100 million doctors is a slight exaggeration)
Because the doctors wouldn't be able to make a livable wage? Really, with one doctor per ~3 people (most of whom are perfectly healthy at any given time), the supply of doctors would far outstrip demand. Also, because while almost anyone could work on an assembly line, most people would not be able to become good doctors no matter how hard they try.
posted by Thoughtcrime at 9:02 AM on July 12, 2011
Because the doctors wouldn't be able to make a livable wage? Really, with one doctor per ~3 people (most of whom are perfectly healthy at any given time), the supply of doctors would far outstrip demand. Also, because while almost anyone could work on an assembly line, most people would not be able to become good doctors no matter how hard they try.
posted by Thoughtcrime at 9:02 AM on July 12, 2011
yeah, I pretty much agree with that, but I also think cheap credit kept middle class voters fat and happy while their actual relative earnings power was decreasing. Politicians were then happy to do what ever needed to be done to keep that going- even if it was economically rational.
Path dependency is an incredibly powerful part of the intersection of politics and economics. Pretty much everything this country fucks up is because of that.
posted by JPD at 9:03 AM on July 12, 2011 [2 favorites]
Path dependency is an incredibly powerful part of the intersection of politics and economics. Pretty much everything this country fucks up is because of that.
posted by JPD at 9:03 AM on July 12, 2011 [2 favorites]
Also, on cable TV versus reading books: books are cheap compared to a lot of forms of entertainment, but compared to cable, they're expensive. (Okay, so maybe I read too fast.)
posted by madcaptenor at 9:24 AM on July 12, 2011 [1 favorite]
posted by madcaptenor at 9:24 AM on July 12, 2011 [1 favorite]
Sure, some people will get it, but I think that's just enough of a bitter pill for enough people that it will really, really, really piss them off. I know it would me.
Do you feel this same bitterness and anger about the irrational sums corporate executives and investment bankers pay themselves? How about the subsidies farm owners or oil companies receive? Do you feel the same about a man who loses his legs and gets disability, or a woman who goes blind? How about the healthcare insurance a poverty-stricken family with children gets? I need to understand when helping someone else pisses you off.
posted by Mental Wimp at 9:49 AM on July 12, 2011
Do you feel this same bitterness and anger about the irrational sums corporate executives and investment bankers pay themselves? How about the subsidies farm owners or oil companies receive? Do you feel the same about a man who loses his legs and gets disability, or a woman who goes blind? How about the healthcare insurance a poverty-stricken family with children gets? I need to understand when helping someone else pisses you off.
posted by Mental Wimp at 9:49 AM on July 12, 2011
Because the doctors wouldn't be able to make a livable wage?
Okay, this is kind of the entire problem of productivity gains in a nutshell. Productivity gains don't go to jobs (because companies are specific in their intent) and they don't go to wages (because profits are hierarchically distributed, barring collective bargaining). As a thought experiment, take that 10x more efficient robot and replace every job in the world with one of those robots. We now have two career options left for you: robot manufacturing and robot repair. Let's go ahead and replace those with robots too. You now have everything automated and can live a life of total leisure, philosophizing in the agora a la Socrates. That is, assuming the robots are maintaining some sort of social safety net which provides for your basic needs. Otherwise, how will you make a livable wage? Your only individual human asset, your labor, has been devalued by technological progress, and without a system of government that recognizes the inherent value of human life, you are no longer worth the calories it takes to continue to animate you. For Skynet, it's a simple arithmetic problem.
I'm kidding, somewhat, but capitalism really isn't a moral system, for the above reasons. As a system, capitalism requires scarcity, and fails when it that longer exists. Some light reading. The question is not if we are post-scarcity, the question is what is the point of technologically overcoming scarcity if we simply squander the excess wealth and then some?
posted by mek at 10:06 AM on July 12, 2011 [6 favorites]
Okay, this is kind of the entire problem of productivity gains in a nutshell. Productivity gains don't go to jobs (because companies are specific in their intent) and they don't go to wages (because profits are hierarchically distributed, barring collective bargaining). As a thought experiment, take that 10x more efficient robot and replace every job in the world with one of those robots. We now have two career options left for you: robot manufacturing and robot repair. Let's go ahead and replace those with robots too. You now have everything automated and can live a life of total leisure, philosophizing in the agora a la Socrates. That is, assuming the robots are maintaining some sort of social safety net which provides for your basic needs. Otherwise, how will you make a livable wage? Your only individual human asset, your labor, has been devalued by technological progress, and without a system of government that recognizes the inherent value of human life, you are no longer worth the calories it takes to continue to animate you. For Skynet, it's a simple arithmetic problem.
I'm kidding, somewhat, but capitalism really isn't a moral system, for the above reasons. As a system, capitalism requires scarcity, and fails when it that longer exists. Some light reading. The question is not if we are post-scarcity, the question is what is the point of technologically overcoming scarcity if we simply squander the excess wealth and then some?
posted by mek at 10:06 AM on July 12, 2011 [6 favorites]
Do you feel this same bitterness and anger about the irrational sums corporate executives and investment bankers pay themselves? How about the subsidies farm owners or oil companies receive? Do you feel the same about a man who loses his legs and gets disability, or a woman who goes blind? How about the healthcare insurance a poverty-stricken family with children gets? I need to understand when helping someone else pisses you off.
I guess I'm not really bitter and angry about the idea of loan modification, but I can see why Civil_Disobedient thinks it is unfair. It is another example of privatizing profits and socializing losses, albeit applied to individuals instead of large corporations. This is a phenomenon I am generally opposed to.
Replacing "bitterness and anger" with "unhappiness," my answers to your questions would be yes, yes, no, no, and no. Again, it's not about helping people, it's about letting people take the full profit from, or even subsidizing, their risk-taking investments, while protecting them against the losses.
posted by grouse at 10:06 AM on July 12, 2011 [1 favorite]
I guess I'm not really bitter and angry about the idea of loan modification, but I can see why Civil_Disobedient thinks it is unfair. It is another example of privatizing profits and socializing losses, albeit applied to individuals instead of large corporations. This is a phenomenon I am generally opposed to.
Replacing "bitterness and anger" with "unhappiness," my answers to your questions would be yes, yes, no, no, and no. Again, it's not about helping people, it's about letting people take the full profit from, or even subsidizing, their risk-taking investments, while protecting them against the losses.
posted by grouse at 10:06 AM on July 12, 2011 [1 favorite]
Also, on cable TV versus reading books: books are cheap compared to a lot of forms of entertainment, but compared to cable, they're expensive. (Okay, so maybe I read too fast.)
Get a library card. Not only can you read for free (pretty much any book, through inter-library loans if your local branch doesn't have it), but many libraries have cable TV shows on DVD, also for free. Don't know if that's true in poorer neighborhoods, though, and libraries are losing their funding because they're too socialist or something....
posted by Thoughtcrime at 10:08 AM on July 12, 2011
Get a library card. Not only can you read for free (pretty much any book, through inter-library loans if your local branch doesn't have it), but many libraries have cable TV shows on DVD, also for free. Don't know if that's true in poorer neighborhoods, though, and libraries are losing their funding because they're too socialist or something....
posted by Thoughtcrime at 10:08 AM on July 12, 2011
Mental Wimp -
I think you've taken my comment wildly out of context. Please do not try and frame the discussion such that "helping people pisses tgrundke off". That isn't the case one bit.
The problem is that we have privatized profit and socialized the risk. I'm tired of paying for everyone elses' malinvestment, ESPECIALLY Wall Street and any other well connected lobbying group that has succeeded.
This has nothing to do with those in poverty or in need of healthcare - it has everything to do with those who have willingly gamed the system, and that happened on both sides of the negotiating table. As I stated earlier, at the end of the day it is the financial and lending industries who should be responsible because they know better. That doesn't absolve those who made bad financial decisions, however.
posted by tgrundke at 10:17 AM on July 12, 2011
I think you've taken my comment wildly out of context. Please do not try and frame the discussion such that "helping people pisses tgrundke off". That isn't the case one bit.
The problem is that we have privatized profit and socialized the risk. I'm tired of paying for everyone elses' malinvestment, ESPECIALLY Wall Street and any other well connected lobbying group that has succeeded.
This has nothing to do with those in poverty or in need of healthcare - it has everything to do with those who have willingly gamed the system, and that happened on both sides of the negotiating table. As I stated earlier, at the end of the day it is the financial and lending industries who should be responsible because they know better. That doesn't absolve those who made bad financial decisions, however.
posted by tgrundke at 10:17 AM on July 12, 2011
Get a library card.
In the last couple of years, my formerly great neighborhood library went from operating seven days a week, mostly mornings through evenings, to being closed entirely on Friday and Sunday, opening 11–6 Wednesday, Thursday, and Saturday, and 1–8 Monday, Tuesday. Yeah, it's still possible to get there even if you work full-time, but it's certainly not easy like it used to be. Making it more difficult for people to educate themselves doesn't seem like a great policy choice, but there we are.
posted by grouse at 10:23 AM on July 12, 2011 [2 favorites]
In the last couple of years, my formerly great neighborhood library went from operating seven days a week, mostly mornings through evenings, to being closed entirely on Friday and Sunday, opening 11–6 Wednesday, Thursday, and Saturday, and 1–8 Monday, Tuesday. Yeah, it's still possible to get there even if you work full-time, but it's certainly not easy like it used to be. Making it more difficult for people to educate themselves doesn't seem like a great policy choice, but there we are.
posted by grouse at 10:23 AM on July 12, 2011 [2 favorites]
Why not? Until those robots are also doctoring on a large scale, it seems that having many, many more doctors would be one of the best possible outcomes of increased productivity in manufacturing. It seems it would improve the public well-being in just about every possible way?
How destroying yet another high paying career option will improve the public well-being? Why do you think becoming a doctor (or a layer, or an architect, or whatever else people trot out every time as an example of a successful career) would be a smart option if you live in a town full of doctors? Why would other doctors come to you to be treated when they can do it themselves most of the time? How much will you get paid for your services?
Besides, when you say that adults with high school education should become doctors when they are replaced by robots, do you realize what's involved? Are all those millions of people smart and rich enough to go to college, followed by med school, followed by residency? All to get a minimum wage once they get out? Surely you don't expect the salaries to stay what they are now when there are as many doctors as there are factory workers...
Oh, and you expect medicine, historically one of the best organized professions willingly go along with that and self destruct?
The whole notion is idiotic on so many levels, it's hard to stop writing about it, but I have to, because it misses the point. The point is, the vast majority of humans in this world have only their labor (however skilled) to trade for income (of whatever kind). Therefore any process that decreases the worth of that labor (increases in supply, efficiency, productivity, being replaced by robots, etc) is inherently detrimental to them, it reduced their worth and their income.
The only ones who benefit are the corporations and owners of capital. What I find fascinating is the number of people in US that deluded to think they belong to those latter.
Whoo-hooo, there is a new butcherbot being developed that can debone chickens ten times as fast as a human. How overjoyed those mexicans must be to finally be able to switch their careers and become orthopedic surgeons!
(Assuming 100 million doctors is a slight exaggeration)
Why do you assume that? How many people in the US were employed in manufacturing before they started to be replaced by robots or chinese? Take that number, account for population growth and extrapolate to the time when they all are replaced by robots.
posted by c13 at 12:48 PM on July 12, 2011 [3 favorites]
How destroying yet another high paying career option will improve the public well-being? Why do you think becoming a doctor (or a layer, or an architect, or whatever else people trot out every time as an example of a successful career) would be a smart option if you live in a town full of doctors? Why would other doctors come to you to be treated when they can do it themselves most of the time? How much will you get paid for your services?
Besides, when you say that adults with high school education should become doctors when they are replaced by robots, do you realize what's involved? Are all those millions of people smart and rich enough to go to college, followed by med school, followed by residency? All to get a minimum wage once they get out? Surely you don't expect the salaries to stay what they are now when there are as many doctors as there are factory workers...
Oh, and you expect medicine, historically one of the best organized professions willingly go along with that and self destruct?
The whole notion is idiotic on so many levels, it's hard to stop writing about it, but I have to, because it misses the point. The point is, the vast majority of humans in this world have only their labor (however skilled) to trade for income (of whatever kind). Therefore any process that decreases the worth of that labor (increases in supply, efficiency, productivity, being replaced by robots, etc) is inherently detrimental to them, it reduced their worth and their income.
The only ones who benefit are the corporations and owners of capital. What I find fascinating is the number of people in US that deluded to think they belong to those latter.
Whoo-hooo, there is a new butcherbot being developed that can debone chickens ten times as fast as a human. How overjoyed those mexicans must be to finally be able to switch their careers and become orthopedic surgeons!
(Assuming 100 million doctors is a slight exaggeration)
Why do you assume that? How many people in the US were employed in manufacturing before they started to be replaced by robots or chinese? Take that number, account for population growth and extrapolate to the time when they all are replaced by robots.
posted by c13 at 12:48 PM on July 12, 2011 [3 favorites]
I knew that the market was high, but I didn't see total economic meltdown around the corner. A bubble bursting is one thing, but this was wrapped so deep and in so many crevices of the economy that it not only slammed the value of my house - it has hampered my ability to be employed, or even borrow against the value that I do have in the house.
Well, I'm sorry to hear it - but I just can't understand how you would miss that. The bubble was in housing, housing is a fundamental economic good (as opposed to a discretionary investment like stocks), and a 30 year mortgage is both the largest and most-long-term investment most people ever make. I stayed out of the real estate market precisely because if it crashed it seemed obvious that it would take the rest of the economy down with it.
posted by anigbrowl at 12:52 PM on July 12, 2011
Well, I'm sorry to hear it - but I just can't understand how you would miss that. The bubble was in housing, housing is a fundamental economic good (as opposed to a discretionary investment like stocks), and a 30 year mortgage is both the largest and most-long-term investment most people ever make. I stayed out of the real estate market precisely because if it crashed it seemed obvious that it would take the rest of the economy down with it.
posted by anigbrowl at 12:52 PM on July 12, 2011
30 year mortgage is both the largest and most-long-term investment most people ever make.
It's as much an "investment" as the pants you wear or the food you eat. Treating one of your most fundamental needs as an investment is what got us into this whole mess.
(A second house is an investment though..)
posted by c13 at 1:03 PM on July 12, 2011
It's as much an "investment" as the pants you wear or the food you eat. Treating one of your most fundamental needs as an investment is what got us into this whole mess.
(A second house is an investment though..)
posted by c13 at 1:03 PM on July 12, 2011
tgrundke wrote: I agree that modifying mortgages would be the best way to help the system in general, but it's a political non-starter. I can only address my own behavior, not that of others, and I would be angry if I were not part of some mortgage forgiveness scheme.
Should I be angry that because I bought my house two weeks too early, I only got a $7500 loan from the government instead of an $8000 gift?
The homeowners were by and large the victims, not the perpetrators. Most people are short of time and short of expertise when it comes to finance. They trust that their mortgage broker is going to do what they were asked. They trust that the bank won't give them a loan that the bank knows will blow up in their face. This was a reasonable expectation, as it is how mortgages worked for the vast majority of the 20th century.
Maybe most people are stupid, but most people rely on the assertions of the experts rather than reading and understanding every word in a contract, especially when there are a bunch of people sitting around the table waiting on them.
Maybe it's politically untenable to see the people with the money as the perpetrators of mass fraud, but that's a problem with the American psyche, not a problem with the facts.
And socializing the losses? No, mortgage modification is not socializing the losses. The 60 billion dollars is not to cover the value of the write downs. It's there to cover the fees that the fucking mortgage servicers will lose out on if they modify a mortgage instead of foreclose, hence their refusal to do anything more than half hearted. Their behavior is fucking the average homeowner and the owners of the MBS (and the CDS built on those MBS and on down the line), who would almost certainly get a better recovery in a modification scenario than with a foreclosure, especially now that we're not throwing thousands of dollars at people to entice them to buy houses.
The people taking the losses in a modification are precisely those who deserve to take losses, the owners of the mortgage. We just have these obstinate assholes standing in between refusing to modify instead of foreclose because they don't make as much money as quickly that way. Smaller bonuses, you know.
posted by wierdo at 1:08 PM on July 12, 2011 [2 favorites]
Should I be angry that because I bought my house two weeks too early, I only got a $7500 loan from the government instead of an $8000 gift?
The homeowners were by and large the victims, not the perpetrators. Most people are short of time and short of expertise when it comes to finance. They trust that their mortgage broker is going to do what they were asked. They trust that the bank won't give them a loan that the bank knows will blow up in their face. This was a reasonable expectation, as it is how mortgages worked for the vast majority of the 20th century.
Maybe most people are stupid, but most people rely on the assertions of the experts rather than reading and understanding every word in a contract, especially when there are a bunch of people sitting around the table waiting on them.
Maybe it's politically untenable to see the people with the money as the perpetrators of mass fraud, but that's a problem with the American psyche, not a problem with the facts.
And socializing the losses? No, mortgage modification is not socializing the losses. The 60 billion dollars is not to cover the value of the write downs. It's there to cover the fees that the fucking mortgage servicers will lose out on if they modify a mortgage instead of foreclose, hence their refusal to do anything more than half hearted. Their behavior is fucking the average homeowner and the owners of the MBS (and the CDS built on those MBS and on down the line), who would almost certainly get a better recovery in a modification scenario than with a foreclosure, especially now that we're not throwing thousands of dollars at people to entice them to buy houses.
The people taking the losses in a modification are precisely those who deserve to take losses, the owners of the mortgage. We just have these obstinate assholes standing in between refusing to modify instead of foreclose because they don't make as much money as quickly that way. Smaller bonuses, you know.
posted by wierdo at 1:08 PM on July 12, 2011 [2 favorites]
Oh, and regarding structural unemployment, is there something that miraculously changed in 2007 and 2008 that rendered 6% of our workforce superfluous?
posted by wierdo at 1:20 PM on July 12, 2011 [1 favorite]
posted by wierdo at 1:20 PM on July 12, 2011 [1 favorite]
c13 : It's as much an "investment" as the pants you wear or the food you eat. Treating one of your most fundamental needs as an investment is what got us into this whole mess. (A second house is an investment though..)
I see your point, and very much agree with you in spirit, but have to disagree from the practical reality perspective.
I bought a house because I need to live somewhere, simple as that. I didn't buy it hoping to flip it, or even necessarily hoping to sell it and downsize as part of my retirement planning.
I did, however, choose to buy rather than rent because I see it as an investment in the sense that I now pay "rent" only to myself. Any improvements I make, not only do I not need to ask someone for permission, but those improvements benefit me on the long-term rather than my landlord.
Granted, between the mortgage and property tax and regular maintenance, I pay more per year than I did while renting, but in another twelve-someodd years, the biggest part of that goes away
posted by pla at 1:57 PM on July 12, 2011
I see your point, and very much agree with you in spirit, but have to disagree from the practical reality perspective.
I bought a house because I need to live somewhere, simple as that. I didn't buy it hoping to flip it, or even necessarily hoping to sell it and downsize as part of my retirement planning.
I did, however, choose to buy rather than rent because I see it as an investment in the sense that I now pay "rent" only to myself. Any improvements I make, not only do I not need to ask someone for permission, but those improvements benefit me on the long-term rather than my landlord.
Granted, between the mortgage and property tax and regular maintenance, I pay more per year than I did while renting, but in another twelve-someodd years, the biggest part of that goes away
posted by pla at 1:57 PM on July 12, 2011
Well, they don't need so many people to build houses - I've heard the building trade (big business in some parts of the US) is doing very badly. Cities were devastated by losses in projected property taxes, and they laid off people.
Also, many other busineses which were hit by the side-effects of the crash went and laid people off. So with fewer people buying widgets, because they lost their job/the morgage has jumped up in interest/whatever, the widget factories lay people off -- and then there are fewer people who have money to buy gidgets, so the gidget sellers cut back on hours, and then there are less taxes on gidgets, so the state government lays off a bunch of people, who now can't afford widgets or gidgets, so more cutbacks there.
consumption really does make the economy turn. And when consumption is hit, then everything is hit.
Basic Keynsianism is the idea that when the private sector fails to employ people, you can staunch the bleeding by employing them in public works, etc, and thus keep their consumption up (at least somewhat). Then they still buy widgets and gidgets and food and stuff, and fewer other people are laid off in the private sector.
You definitely DON'T cut government spending, because that's like trying to treat a cut in your arm by slicing a bigger cut open above it.
posted by jb at 2:00 PM on July 12, 2011 [2 favorites]
Also, many other busineses which were hit by the side-effects of the crash went and laid people off. So with fewer people buying widgets, because they lost their job/the morgage has jumped up in interest/whatever, the widget factories lay people off -- and then there are fewer people who have money to buy gidgets, so the gidget sellers cut back on hours, and then there are less taxes on gidgets, so the state government lays off a bunch of people, who now can't afford widgets or gidgets, so more cutbacks there.
consumption really does make the economy turn. And when consumption is hit, then everything is hit.
Basic Keynsianism is the idea that when the private sector fails to employ people, you can staunch the bleeding by employing them in public works, etc, and thus keep their consumption up (at least somewhat). Then they still buy widgets and gidgets and food and stuff, and fewer other people are laid off in the private sector.
You definitely DON'T cut government spending, because that's like trying to treat a cut in your arm by slicing a bigger cut open above it.
posted by jb at 2:00 PM on July 12, 2011 [2 favorites]
One could wonder how much employment before the crash was itself being fed by the housing bubble - building trades, real estate agents, morgage brokers. And all this money being made went out into the economy and fed other businesses - so when all the real estate agents lose their shirts, so do the people who clean their offices.
I know that when the car manufacturers ran into trouble, it was dire for car parts manufacturers.
posted by jb at 2:02 PM on July 12, 2011 [2 favorites]
I know that when the car manufacturers ran into trouble, it was dire for car parts manufacturers.
posted by jb at 2:02 PM on July 12, 2011 [2 favorites]
Mental Wimp -
I think you've taken my comment wildly out of context.
Sorry, but that's how it came across to me. I think the overwhelming majority of these defaults were victims who didn't think they were doing anything wrong and were following the advice of the professionals with whom they were dealing. You can argue they shouldn't have, or that they were naive, etc. But you can also look at the behavior of someone who is sick or disabled and find some that may have contributed to their lot ("Shouldn't have taken that construction job" or "Well, she did have a family history of diabetes, so she should have watched her diet"). That you are pissed off about the banks taking a hit in order to assist someone who is victimized suggests that it is a little bit more than a concern with "socializing risk and privatizing profits".
posted by Mental Wimp at 2:07 PM on July 12, 2011
I think you've taken my comment wildly out of context.
Sorry, but that's how it came across to me. I think the overwhelming majority of these defaults were victims who didn't think they were doing anything wrong and were following the advice of the professionals with whom they were dealing. You can argue they shouldn't have, or that they were naive, etc. But you can also look at the behavior of someone who is sick or disabled and find some that may have contributed to their lot ("Shouldn't have taken that construction job" or "Well, she did have a family history of diabetes, so she should have watched her diet"). That you are pissed off about the banks taking a hit in order to assist someone who is victimized suggests that it is a little bit more than a concern with "socializing risk and privatizing profits".
posted by Mental Wimp at 2:07 PM on July 12, 2011
jb, you don't have to wonder. National employment in the construction trade is down about 2 million jobs since the peak of the bubble. We're at about the 1995 level right now. We're down about 9 million jobs total since the peak.
FRED is wonderful. Much thanks to Krugman for turning me on to this great resource of economic data.
posted by wierdo at 2:24 PM on July 12, 2011 [1 favorite]
FRED is wonderful. Much thanks to Krugman for turning me on to this great resource of economic data.
posted by wierdo at 2:24 PM on July 12, 2011 [1 favorite]
I did, however, choose to buy rather than rent because I see it as an investment in the sense that I now pay "rent" only to myself. Any improvements I make, not only do I not need to ask someone for permission, but those improvements benefit me on the long-term rather than my landlord.
Did you buy the house outright? Because if you have a mortgage, you are paying rent and you don't own the house. You are paying rent on the money you've borrowed to pay for the house (in my parent's case, had they not forclosed, they would have ended up paying just about twice as much as what the price of the house was).
So right off the bat you're paying the interest, the principle, and the taxes, all of which benefit someone else. Your house meanwhile is slowly deteriorating, and you are forced to pay for repairs, which again benefits someone else, even if you do most of the work yourself. And I won't even go into the fact that recently built houses are not designed or expected to last even the 30 years you need to pay off the mortgage.
As far as not needing to ask anyone's permission to do things to or with "your" house, there is a recent thread on HOAs that you may find very illuminating. Again, I won't go into zoning and eminent domain issues.
How this qualifies as investment, at least as wikipedia defines it (Investment has different meanings in finance and economics. In Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security of principle, as well as security of return, within an expected period of time.[1] In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling.......In finance, investment is the commitment of funds through collateralized lending, or making a deposit into a secured institution......In real estate, investment money is used to purchase property for the purpose of holding, reselling or leasing for income and there is an element of capital risk.), is completely beyond me.
The reality is that under the present economic system, you have to pay to exist. The term "exist" includes a whole bunch of different things, one of which is having a place to exist in. Hence "the cost of living". But paying the cost of living is not investing.
posted by c13 at 2:28 PM on July 12, 2011 [3 favorites]
Did you buy the house outright? Because if you have a mortgage, you are paying rent and you don't own the house. You are paying rent on the money you've borrowed to pay for the house (in my parent's case, had they not forclosed, they would have ended up paying just about twice as much as what the price of the house was).
So right off the bat you're paying the interest, the principle, and the taxes, all of which benefit someone else. Your house meanwhile is slowly deteriorating, and you are forced to pay for repairs, which again benefits someone else, even if you do most of the work yourself. And I won't even go into the fact that recently built houses are not designed or expected to last even the 30 years you need to pay off the mortgage.
As far as not needing to ask anyone's permission to do things to or with "your" house, there is a recent thread on HOAs that you may find very illuminating. Again, I won't go into zoning and eminent domain issues.
How this qualifies as investment, at least as wikipedia defines it (Investment has different meanings in finance and economics. In Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security of principle, as well as security of return, within an expected period of time.[1] In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling.......In finance, investment is the commitment of funds through collateralized lending, or making a deposit into a secured institution......In real estate, investment money is used to purchase property for the purpose of holding, reselling or leasing for income and there is an element of capital risk.), is completely beyond me.
The reality is that under the present economic system, you have to pay to exist. The term "exist" includes a whole bunch of different things, one of which is having a place to exist in. Hence "the cost of living". But paying the cost of living is not investing.
posted by c13 at 2:28 PM on July 12, 2011 [3 favorites]
National employment in the construction trade is down about 2 million jobs since the peak of the bubble.
Heh.. Just to use that bit as an example, according to Dept of labor and statistics, there are, as of 2008, 661400 physicians in the US. What would happen to their income if through some sort of magic, 2 million of roofers, plumbers and carpenters became doctors?
posted by c13 at 2:43 PM on July 12, 2011
Heh.. Just to use that bit as an example, according to Dept of labor and statistics, there are, as of 2008, 661400 physicians in the US. What would happen to their income if through some sort of magic, 2 million of roofers, plumbers and carpenters became doctors?
posted by c13 at 2:43 PM on July 12, 2011
Well, I'm sorry to hear it - but I just can't understand how you would miss that. The bubble was in housing, housing is a fundamental economic good (as opposed to a discretionary investment like stocks), and a 30 year mortgage is both the largest and most-long-term investment most people ever make.
You are still missing my point. If it was just that my house depreciated (even a lot), it wouldn't be nearly as big a deal. My whole job sector disappeared ( I have been in the building supply industry in one way or another for 25 years). I have been through at least 3 major boom-and-busts in construction, BTW, so my head wasn't completely in the sand. And now that I am essentially unemployed I can't get any kind kind of loan to leverage the 200K I have in my house. And the mortgage company has no interest in working out any kind of arrangements because I've got way more on the line than they do. (Translation: I was responsible, and now I'm the patsy.)
All because some greedy fucks with the purse strings wanted to play games with the economy.
posted by Benny Andajetz at 3:06 PM on July 12, 2011
You are still missing my point. If it was just that my house depreciated (even a lot), it wouldn't be nearly as big a deal. My whole job sector disappeared ( I have been in the building supply industry in one way or another for 25 years). I have been through at least 3 major boom-and-busts in construction, BTW, so my head wasn't completely in the sand. And now that I am essentially unemployed I can't get any kind kind of loan to leverage the 200K I have in my house. And the mortgage company has no interest in working out any kind of arrangements because I've got way more on the line than they do. (Translation: I was responsible, and now I'm the patsy.)
All because some greedy fucks with the purse strings wanted to play games with the economy.
posted by Benny Andajetz at 3:06 PM on July 12, 2011
We're down about 9 million jobs total since the peak.
But our productivity is higher than pre-crash.
Talk about arbitrary valuations - business has used this situation as one giant lever to increase productivity, depress wages, and refuse to hire new workers.
posted by Benny Andajetz at 3:11 PM on July 12, 2011 [4 favorites]
But our productivity is higher than pre-crash.
Talk about arbitrary valuations - business has used this situation as one giant lever to increase productivity, depress wages, and refuse to hire new workers.
posted by Benny Andajetz at 3:11 PM on July 12, 2011 [4 favorites]
What would happen to their income if through some sort of magic, 2 million of roofers, plumbers and carpenters became doctors?
Well, if you expand your thought experiment slightly to include nurses and medical technicians, we could easily imagine a stimulus project where medical education was paid by the state and the resulting professionals were employed by a single payer system which became available the tens of millions of Americans who do not currently have health insurance, via an expansion of the Medicare system, we would have created millions of new jobs while reducing overall GDP spending on healthcare. But that would be socialism, so it'll never happen. And yes, it certainly would eat into the profits of the current private system. That would be part of the point.
posted by mek at 3:35 PM on July 12, 2011 [1 favorite]
Well, if you expand your thought experiment slightly to include nurses and medical technicians, we could easily imagine a stimulus project where medical education was paid by the state and the resulting professionals were employed by a single payer system which became available the tens of millions of Americans who do not currently have health insurance, via an expansion of the Medicare system, we would have created millions of new jobs while reducing overall GDP spending on healthcare. But that would be socialism, so it'll never happen. And yes, it certainly would eat into the profits of the current private system. That would be part of the point.
posted by mek at 3:35 PM on July 12, 2011 [1 favorite]
Well, people are talking about factory workers becoming doctors and lawers, not nursing aids. Not that it changes the fact that their wages will become depressed just as likely. That's first. Secondly, things like medical residency are already paid by the government in large part. Thirdly, even if you ignore the huge education expenses associated with becoming a doctor, largely paid by loans, how many people would be willing to invest 12-15 prime years of their lives studying instead of working to come out making less than their grandfather had with just a high school education?
But all this ignores the question why we would be willinng to destroy millions of perfectly good jobs and then create millions of new ones, screwing over and stressing out millions of people in the process. Just so that a tiny percentage of the population can add a few more billion they have no possible use for to their coffers.
posted by c13 at 4:36 PM on July 12, 2011
But all this ignores the question why we would be willinng to destroy millions of perfectly good jobs and then create millions of new ones, screwing over and stressing out millions of people in the process. Just so that a tiny percentage of the population can add a few more billion they have no possible use for to their coffers.
posted by c13 at 4:36 PM on July 12, 2011
c13 : So right off the bat you're paying the interest, the principle, and the taxes, all of which benefit someone else.
The interest, absolutely, no benefit to the buyer whatsoever. Personally, I will end up paying the bank approximately one quarter of the value of the house over the life of the mortgage, in interest. That said, in the US we can deduct that from our income taxes, so it works out to costing less than face value (like never having made it in the first place).
The taxes, I could argue those do benefit the homeowner, but (in my case) with 95% going to a school system I'll never use, I'd consider that argument dishonest on my part. So again, I'll agree to call this "wasted". ;)
The principle, though? You can no more call that paying "rent" than you could say the same of buying stock. It merely converts a liquid assets into an illiquid one.
As far as not needing to ask anyone's permission to do things to or with "your" house, there is a recent thread on HOAs that you may find very illuminating.
I've posted to that thread a few times myself, expressing my distaste for HOAs and how I diligently avoided them in choosing my current house. As for zoning... I need to comply with environmental regs and pay (IIRC) $35 for a must-issue permit from the town for any construction that would change the footprint of my house by more than 100sqft. Do your homework before buying, that about covers it.
How this qualifies as investment, at least as wikipedia defines it
Okay, let me put it this way - I consider it an investment in the sense that, if after paying off the mortgage the owner can sell it for at least the sum of the taxes and interest paid during the mortgage (a figure well under half its current appraised value, in my case), that person will have at least broken even vs renting.
But paying the cost of living is not investing.
As phrased, I agree. Decreasing that cost, however, still means I end up with more money in my pocket down the road, whatever you want to call it.
posted by pla at 5:03 PM on July 12, 2011 [1 favorite]
The interest, absolutely, no benefit to the buyer whatsoever. Personally, I will end up paying the bank approximately one quarter of the value of the house over the life of the mortgage, in interest. That said, in the US we can deduct that from our income taxes, so it works out to costing less than face value (like never having made it in the first place).
The taxes, I could argue those do benefit the homeowner, but (in my case) with 95% going to a school system I'll never use, I'd consider that argument dishonest on my part. So again, I'll agree to call this "wasted". ;)
The principle, though? You can no more call that paying "rent" than you could say the same of buying stock. It merely converts a liquid assets into an illiquid one.
As far as not needing to ask anyone's permission to do things to or with "your" house, there is a recent thread on HOAs that you may find very illuminating.
I've posted to that thread a few times myself, expressing my distaste for HOAs and how I diligently avoided them in choosing my current house. As for zoning... I need to comply with environmental regs and pay (IIRC) $35 for a must-issue permit from the town for any construction that would change the footprint of my house by more than 100sqft. Do your homework before buying, that about covers it.
How this qualifies as investment, at least as wikipedia defines it
Okay, let me put it this way - I consider it an investment in the sense that, if after paying off the mortgage the owner can sell it for at least the sum of the taxes and interest paid during the mortgage (a figure well under half its current appraised value, in my case), that person will have at least broken even vs renting.
But paying the cost of living is not investing.
As phrased, I agree. Decreasing that cost, however, still means I end up with more money in my pocket down the road, whatever you want to call it.
posted by pla at 5:03 PM on July 12, 2011 [1 favorite]
Exactly, "down the road". That's why that is a speculation, not an investment.
And, if "down the road" means when you die (since surely you'll need a place till then), how much money will be left in your pocket is not hugely important.
So far, however, this strategy seems to be misfiring for a lot of people.
posted by c13 at 5:17 PM on July 12, 2011
And, if "down the road" means when you die (since surely you'll need a place till then), how much money will be left in your pocket is not hugely important.
So far, however, this strategy seems to be misfiring for a lot of people.
posted by c13 at 5:17 PM on July 12, 2011
too bad I didn't see this until today. thank you Wall Street Journal. and i'm pretty sure that they were espousing the benefits of home ownership along with our government and every other media outlet right into the collapse.
A Home Is a Lousy Investment
Today's young people would be foolish to imitate their parents and view ownership as the cornerstone of personal finance.
There is also a misconception that paying off a home mortgage is a path to financial or retirement security. The reality is that tapping the equity is expensive: Home-equity loans or lines of credit made with low qualifying incomes often command high interest rates and costs. If an emergency occurs—the loss of a job, or a business setback—it's likely that the same conditions creating the problem will lower the value and impede the marketability of the home and curtail the availability of financing for a buyer. Funds set aside for emergencies should always be liquid assets.
Is it wise for coming generations to continue to view ownership as the cornerstone of personal finance? Young people planning for retirement increasingly face a choice between house payments and contributions to retirement accounts. They simply can't afford both. With the specter of looming cuts in Social Security and other entitlement programs, or even possible systemic insolvency, the challenge for tomorrow's retirees is income self-sufficiency.
posted by ninjew at 9:59 PM on July 12, 2011
A Home Is a Lousy Investment
Today's young people would be foolish to imitate their parents and view ownership as the cornerstone of personal finance.
There is also a misconception that paying off a home mortgage is a path to financial or retirement security. The reality is that tapping the equity is expensive: Home-equity loans or lines of credit made with low qualifying incomes often command high interest rates and costs. If an emergency occurs—the loss of a job, or a business setback—it's likely that the same conditions creating the problem will lower the value and impede the marketability of the home and curtail the availability of financing for a buyer. Funds set aside for emergencies should always be liquid assets.
Is it wise for coming generations to continue to view ownership as the cornerstone of personal finance? Young people planning for retirement increasingly face a choice between house payments and contributions to retirement accounts. They simply can't afford both. With the specter of looming cuts in Social Security and other entitlement programs, or even possible systemic insolvency, the challenge for tomorrow's retirees is income self-sufficiency.
posted by ninjew at 9:59 PM on July 12, 2011
Housing as an investment can also be viewed in the same way we view anything that adds value to our lives. Having just shelled out a bunch of cash to get our house painted, beautifully, I don't think of the money out the door, but rather the peace of mind of living in a dwelling that is safe and sound, and not having to deal with a landlord. Not every investment is about making money. As pla pointed out, someday I'll sell it, and whether I turn a profit or not, someone will enjoy the effort I put into building and maintaining a place that my kids will always think about fondly. That aspect of home ownership won't change in the long term. As well, a lot of builders build cheap, oversized crap. We need well-built homes, in a size that makes sense. The builders that always stuck to this concept are still doing pretty well around here.
posted by docpops at 10:43 AM on July 13, 2011
posted by docpops at 10:43 AM on July 13, 2011
The problem here is that the term "investment" is of course tied to increasing economic value, rather than real value. The real value of a home may have little to do with its economic value - the security of living in one spot for 30 years to raise children is difficult to put a price tag on, but is one obvious benefit over renting with many real-life consequences.
The problem runs deeper. Frequently, increasing economic value may actually destroy some real value. Paying to clearcut a forest is a perfectly sound investment in that it is extremely likely to increase the economic value of the material, from a pristine wilderness to saleable timber. It may even result in a positive externality whereby the owner of the land can then convert it into farmland, generating economic value for him as well. The long term costs to this process are obscured by the economics, rather than revealed. Alberta's oil sands are a prime example of this; an extremely reliable investment which may have an extremely negative real value.
posted by mek at 11:35 AM on July 13, 2011 [3 favorites]
The problem runs deeper. Frequently, increasing economic value may actually destroy some real value. Paying to clearcut a forest is a perfectly sound investment in that it is extremely likely to increase the economic value of the material, from a pristine wilderness to saleable timber. It may even result in a positive externality whereby the owner of the land can then convert it into farmland, generating economic value for him as well. The long term costs to this process are obscured by the economics, rather than revealed. Alberta's oil sands are a prime example of this; an extremely reliable investment which may have an extremely negative real value.
posted by mek at 11:35 AM on July 13, 2011 [3 favorites]
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would ratherhas to spend money than accumulate wealth.FTFY.
posted by Mister Fabulous at 10:31 AM on July 11, 2011 [59 favorites]