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02/18/2013

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Oliver

Dave - Apart from all the physical/environmental stresses that bode ill for the future of Americans along with the rest of the global population, how much longer can our society withstand the pressures building through grossly unequal income distribution?

If "From 2009 to 2011 ... Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%" and this pattern continues (c.99.99% certainty), it seems to me that "life" as we know it will fracture and dissipate through violent upheaval way before climate change makes the planet hostile to survival.

Maybe we should roll out the welcome mat for a large meteor to avoid unnecessary prolonged pain.

Dave Cohen

@Oliver

Not every comment on every post I write needs to mention "climate change making the planet hostile to life", and all the rest.

Great income & wealth disparity is the normal condition in complex human societies. There is thus no reason to expect American society will far apart as a result of it.

Straightforwardly, this post is about economic prospects in the U.S. over the next four years. I assume that Americans have some interest in knowing how their lives are going to go in the medium term. I know I have an interest in how my own life is going to go in the next few years.

That said, and bearing in mind that this mild scolding is not directly solely at you, but at many others as well, it is not necessary or desirable that most comments on this blog, regardless of what I talk about, make reference to the longer term planetary outcome, or large meteors ending our pain, and so on.

I would be happier if the comments here have something to do with the subject I wrote about.

I hope everybody will keep that in mind.

best,

-- Dave

JohnWDB

In a way, Dave, this is the tragedy of the commons warmed over, except the commons in this case is the body of American consumers. In maximizing profits, producers would like to under-compensate employees or saddle them with crippling amounts of debt, and for each individual producer/financier, this makes sense. But the sum of such decisions is to foul up the commons for all. Just as the over-grazed pasture fails to nourish cows, and all farmers suffer, the over-leveraged, under-compensated American consumers can't generate enough demand, and the producers/financiers suffer...or at least they should. Fortunately, our government is making sure they continue to be enriched, even though the sheep has been skinned. We'll see how it all works out.

This interactive graph gives three scenarios:

http://www.washingtonpost.com/wp-srv/business/the-output-gap/index.html

I think the worst scenario is still too optimistic :-/

Jim

Take away either public (spending on the social services) or private debt (or both), and we'll see a very quick fall in consumer demand (growth). Have a significant rise in inflation (could be monetary, but I think far more likely it will come via rises in energy costs), and we'll also have a drop in demand. Economists will think inflation must be battled by rising interest rates - and this will kill (I think collapse) debt spending.

But both continuously rising debt and a slowing of inflation are impossible in the long term.

We've backed ourselves into the corner. The only real solution is a complete reset, but the almost certain path to get there is to first have economic chaos. And this assumes we have verdant conditions for real economic growth (as we did in the Great Depressoin) after the reset. I think those days are in the past - and they probably have been for quite a while.

Brian

Another excellent example of how our society has become increasingly faith-based in virtually all aspects. And, of course, here I am not using "faith" in any religious sense (other than, perhaps, the religion of endless growth and "progress"). Rather, I'm using it in the sense that you describe, the belief in something in spite of a lack of any supporting evidence, or even in the presence of contradictory evidence.

Nice piece.

JohnWDB

@Brian,
"progressivism" and "Keynesianism" are very much religions. They are a set of ideas that gives individuals a common frame of orientation, through which they aspire to shared goals, and worship certain figures deemed to be all-knowing, whose edicts, if adhered to, will save the lot of humanity. Adhering to either requires immense faith, and not just faith but actually delusion, since there is overwhelming evidence to debunk either system.

NoHype

I used to think that the arrogance of top wealth holders would have done them in via insurrection by now. Obviously, I was wrong. Given the efficiency with which OWS was dismantled, there's not much hope for anything much except more of the same for the foreseeable future.

This leaves me wondering if the mass medication of our population has something to do with it. Everything from Xanax to pot. I've also wondered if I'm the fool for not getting high and staying that way.

Class mobility is a huge myth too. But people have this crazy idea that everyone can get into the top 1%! That's like saying all children are above average. You call it a fantasy, Dave. You're very kind.

It's a drug-addled delusion.

Alexander Ač

Great post! If not shocking for most economists! Yesterday, I "shocked" our broader citizenship in Slovakia by claiming that deflation has arrived to Europe and the worst for Europe is NOT over yet.

I was shocked that it was shocking... hear hear!

Alex

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