# Who shipwrecked the economy?

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turbo
Gold Member
my apologies, i may have inadverdently wrecked the economy. in 1992, i took a voluntary leave without pay to improve my training at the math institute at berkeley. i walked 6 miles a day round trip to work to save money from bus fare, but occasionally gave cash for gasoline to people who stopped their cars to request it without offering me a ride. this kind of irresponsible bailout to undeserving people earning more than average may have started a trend that has threatened the work ethic of the nation.
I suspected that it was you all along! What a wrecking-ball you are.

DoggerDan
i walked 6 miles a day round trip to work to save money from bus fare, but occasionally gave cash for gasoline to people who stopped their cars to request it without offering me a ride.
Were they all wearing Armani suits and Gucci loafers?

Probably, but such statistics can be skewed, so it depends. Regarding wealthy people and their share of wealth, remember that there isn't a fixed pie, you create wealth. Businesses and industries however, run by said wealthy people, have been known to lobby to have regulations and taxes passed that allow them to dominate an industry more, but that requires government.
Ok, but the sort of regulation that I'm talking about is regulation that reduces fraud and abuse. Not regulation that maximizes big corporations' already inordinate advantages.

For example, under Reagan, many of the big banks resisted the Reagan deregulation because banking, being so regulated, was a protected industry to a good degree. Deregulating introduced new competitors, which the big firms didn't want. Recently, the appliance manufacturers lobbied to have the energy efficiency regulations raised for consumer appliances (such as washing machine), so as to outlaw the cheaper appliances and force people to buy the more expensive ones (as people preferred to buy the cheaper, less-efficient ones). The same is also being done regarding light bulbs.
Again, the goal is to reduce the advantages inherent in bigness, as well as reducing fraud. If certain regulations give an inordinate advantage to certain corporations then I would consider those to be bad regulations. And, yes, I agree that industries should be unregulated wrt those sorts of regulations.

But I would also argue that it might be the case, wrt some significant factors contributing to the downturn in the economy, that certain sectors, like banking and investment, weren't sufficiently regulated wrt fraud and abuse. Obviously, it seems to me, we can't afford to allow the development of institutions that are too big to fail, thus creating a situation where, if they do fail, then government must bail them out.

Yes, but the people using this statistic fall for the fixed-pie fallacy and use it to promote the claim that a fixed aristocracy at the top are hogging more and more of the wealth for themselves, leaving less available for the rest of society. That's not how it works. What happens is during periods of massive wealth creation, which we saw during the late 19th and early 20th century, and since the 1980s up until 2007, you get a whole slew of new wealthy people created, which creates a concentration of wealth at the top. But most all of this wealth is newly created wealth, and it is created by providing products and services (i.e. wealth) to the masses that improve their lives in various ways.
Most of the wealth is concentrated in the top .1%. It's that percentage that has realized the biggest gains. It's that percentage that controls your government to a large extent, imo. And, it's that percentage that, by design, is most able to exploit tax loopholes and, via monetary and other influence, to determine the scope and depth, ie., the power, the limitations of regulatory agencies. Deregulation from Reagan through Bush has had the net effect of increasing the possibility of non-accountability and fraud wrt large corporations. Did they intend what eventually happened to happen? I don't know. But it seems to me pretty hard to argue that, since they were in control, that they didn't intend for things to turn out in such a way that the financial sector, in general, profited greatly while the rest of America suffered.

The statistic also I think wrongly measures what wealth is. It goes by financial assets, but financial assets aren't the sole form of wealth. One can look at wealth by what goods and services does the average person have access to (as the production of goods and services is the wealth a society creates) and in that sense, people are far more wealthy today then before, and closer to wealthy people than before as goods, services, forms of healthcare, etc...that previously were solely the purvey of the wealthy now become available to the masses. That's how all that wealth forms at the top---entrepreneurs creating goods and services that allow us to have such a rich society.
Yes, America is wealthy, and the average standard of living is much higher than in much of the rest of the world. But this thread is concerned with a percieved downturn, a negative trend, wrt the American economy. Is this a permanent, lasting, thing? Or just a temporary negative blip in an otherwise inexorably upward trend? I don't know. But from what I've read and what I see things don't look all that promising.

Imagine waking up 100 years from now and finding out that trillionaires exist and people talking about the immense "wealth gap," how the wealth disparity is like that of the 19th century...only to your early 21st century eyes, these people have goods and services available that rich people do not have access to today, goods and services you cannot even fathom!
I think that, more realistically, the US of 100 years from now will have at least 100 million more people living in relative poverty. I think it will be a predominantly Spanish speaking country, basically an extension of Mexico, and Central and South America. I think that this is inevitable. And with the influx and proliferation of a more or less unskilled labor base, then America is on a track to be more like the China (Southeast Asia, India, South America) of today than the America of yesterday.

I agree that there will be goods and services available 100 years from now that maybe we can't fathom today. And I think that the vast majority of Americans will not be able to afford those goods and services. Much like the situation today, but with a more extreme disparity of wealth.

What will happen is as society becomes wealthier and wealthier, there will get to be fewer and fewer things that can distinguish being "wealthy" from being "poor."
What distinguishes being wealthy from being poor now? I don't think that's going to change much in the next 100 years. Just that there will be proportionately more poor people. At least if we continue evolve according to the current global model.

For example, give it enough years, and even a poor person will have a refrigerator better than the finest Internet-connected computerized refrigerators available now.
I doubt that. But even if so, what good is an internet connected computerized refrigerator if one can't afford to stock it with sufficient food to feed one's family?

We will always have wealthy and poor, but we are unequally wealthy as a society. A "poor" person in America right now is rich by Third World standards.
No argument there. But might this not be part of the problem? Don't we want Americans to be more civic minded, more civically active? Has America's abundance and high standard of living created a general attitude of complacency, even apathy?

Wal-Mart operates on a thin profit margin (3.77% - LINK)) so they are vigilant about keeping people shopping at their stores. Also, would a higher minimum wage really impact the buying power of their customers?
Sure. Even an increase of just, say, $2/hour means$80/week, $320/month, and almost$4000/year. That's a LOT of money to somebody making the minimum wage. Is there any doubt that almost all of that money would be spent in the general economy? A certain portion of it, maybe a significant portion of it, at the very businesses that gave those workers higher wages?

Wouldn't the other retailers likely support such a policy if that was the case, as it would help them to? I'd imagine a higher minimum wage for an individual isn't that much money to make them change their buying much, but for a small business with multiple employees, it could be a significant amount of money to pay.
I can't think of any small or large businesses that would be significantly affected by an increase in the minimum wage. But, as noted above, it would significantly positively affect the buying power, and therefore the living standards, of at least 5 million American workers.

Keep in mind though, that while its impact has probably been exaggerated, that it was a regulatory requirement for banks to make a certain number of bad loans.
As noted above, these sorts of regulations can be bad regulations. This sort of government pressure isn't what I'm talking about. The goal is to reduce bad loans and reduce fraud and abuse. And this requires regulation and enforcement of a different sort.

The cost of college would decrease as the demand would drop-off, so the colleges would reduce their prices in accordance to try and win back new students.
I doubt it. The cost of college is going to remain high, because there are many more people with the ability to pay current college costs than there are openings for them.

Also the regulation proponents should remember that regulation is just one form of oversight, of which there are other forms to that, and by itself is not a panacea (the BP oil spill for example, it was found that BP was bribing the regulatory agency so it could skirt the regulations; a lot of good the regulations did there).
That's not an argument against regulation. It's an argument against insufficient enforcement of existing regulation.

That's not how it works. What happens is during periods of massive wealth creation, which we saw during the late 19th and early 20th century, and since the 1980s up until 2007, you get a whole slew of new wealthy people created, which creates a concentration of wealth at the top.
The single largest,longest period of wealth creation in the history of the country was post WW2 to the mid 60s or so. During this time period, the income distribution grew much flatter (see Russ Water's link to census data). Therefore, your statement is simply false. It is not something that just happens during periods of growth. Something is different about this more recent period, and we can argue about what that is.

Its also no true that most of the top income earners are necessarily providing new products people want. One of the largest growth sectors in this period was the financial industry- and certainly some of those innovations were somewhat destructive. For instance, Dick Fuld got incredibly rich by destroying one of the largest investment banks in the US. Many of his underlings got rich doing same.

Regarding wealthy people and their share of wealth, remember that there isn't a fixed pie, you create wealth.
Right, but real wages for many wage earners have been flat for at least two decades (again see Russ Water's earlier link to census data), despite a might larger pie. This means that the increase in the pie is all going to the top earners.

One can look at wealth by what goods and services does the average person have access to (as the production of goods and services is the wealth a society creates) and in that sense, people are far more wealthy today then before, and closer to wealthy people than before as goods, services, forms of healthcare, etc...that previously were solely the purvey of the wealthy now become available to the masses.
Sure, we have considerably grown access to ipads. BUT we have diminished access to education and housing. Its hard to compare a family living in a house in the 70s that can afford to send their kids to college to a family living in an apartment today that can't send their kids to college. Sure, the modern day family probably has internet access, but its not obvious who is better off.

Keep in mind though, that while its impact has probably been exaggerated, that it was a regulatory requirement for banks to make a certain number of bad loans.
This statement is just ludicrous. The community reinvestment act required loans to be made to lower-income people, but it did not require they be "bad loans." The February 2008 House Hearing, the Federal Reserve made clear that when it surveyed banks they maintained that their CRA loans were profitable and not overly risky. The Traiger-Hinkley study demonstrated that CRA regulated institutions were less likely to issue sub-prime, their sub-prime loans were generally better structured (lower rates, not option ARM) and CRA institutions were much less likely to resell the loan.

If the CRA had perverse effects, those institutions regulated by it should have had a much higher rate of poor performing loans than those institutions that weren't.

Staff Emeritus
2019 Award
Most of the wealth is concentrated in the top .1%.
That's not mathematically possible. The top 1% hold 34.3% of wealth (. That's less than 50%, so it's impossible that the the 0.1% subset holds more than 50%.

Sure, we have considerably grown access to ipads. BUT we have diminished access to education and housing. Its hard to compare a family living in a house in the 70s that can afford to send their kids to college to a family living in an apartment today that can't send their kids to college. Sure, the modern day family probably has internet access, but its not obvious who is better off.
Are you certain "we have diminished access to education and housing"? Everyday, I drive past brand new low income/subsidized housing that replaced 1940's era projects.

On the other hand, if your talking about the family of four earning $51,000 per year - you might be correct? That's not mathematically possible. The top 1% hold 34.3% of wealth (. That's less than 50%, so it's impossible that the the 0.1% subset holds more than 50%. Yes, I should have phrased it that the largest relative concentration of wealth is with the top .1%, and that the wealth of that group has increased at a higher rate than any other group, afaik. CAC1001 said: We will always have wealthy and poor, but we are unequally wealthy as a society. A "poor" person in America right now is rich by Third World standards. ThomasT said: No argument there. But might this not be part of the problem? Don't we want Americans to be more civic minded, more civically active? Has America's abundance and high standard of living created a general attitude of complacency, even apathy? I'm going to retract this statement of mine. I agree with your statement. Obviously, Americans' high(er) standard of living isn't a problem. russ_watters Mentor Right, but real wages for many wage earners have been flat for at least two decades (again see Russ Water's earlier link to census data), despite a might larger pie. This means that the increase in the pie is all going to the top earners. As far as I can tell, all of that is false. Please provide the data to substantiate your claim.  For data over the past 20 years, it is probably possible to spin that in a way as to make it sorta true by cherry-picking a timeframe from the top of a cycle to today, which is the bottom of a cycle. For example, there is a big difference between using 1990 and 1993 as your starting point, since the lower 20% of incomes dropped by 6% in that time. And, since the current downturn is a pretty deep one, spinmeisters try to make a long term trend out of something that actually has only happened in the past 5 years. Sure, we have considerably grown access to ipads. BUT we have diminished access to education and housing. Its hard to compare a family living in a house in the 70s that can afford to send their kids to college to a family living in an apartment today that can't send their kids to college. Sure, the modern day family probably has internet access, but its not obvious who is better off. Please provide the data to support your claim that both home ownership and college attendance rates are down since the 70s. I suspect both are false. Last edited: Please provide the data to support your claim that both home ownership and college attendance rates are down since the 70s. I suspect both are false. Your suspicions may be well founded. Here is a site that claims home ownership was 62.9% in 1970 http://www.census.gov/hhes/www/housing/census/historic/owner.html And here's one that says it was 66.9% in 2010. http://www.danter.com/statistics/homeown.htm Here's a site that shows college attendance at something under 60% in 1970 and at 70% in 2009. http://economix.blogs.nytimes.com/2010/04/28/college-enrollment-rate-at-record-high/ CAC1001 The single largest,longest period of wealth creation in the history of the country was post WW2 to the mid 60s or so. During this time period, the income distribution grew much flatter (see Russ Water's link to census data). Therefore, your statement is simply false. It is not something that just happens during periods of growth. Something is different about this more recent period, and we can argue about what that is. The largest period of wealth creation was from the 1980 to 2008. The GDP grew from about half a trillion to one trillion during the period post WW2 to the mid-60s. That's a doubling in size. It was about$3 trillion in 1980 and grew to $14 trillion by 2010. That's more than a quadrupling in GDP. Its also no true that most of the top income earners are necessarily providing new products people want. One of the largest growth sectors in this period was the financial industry- and certainly some of those innovations were somewhat destructive. For instance, Dick Fuld got incredibly rich by destroying one of the largest investment banks in the US. Many of his underlings got rich doing same. Yes, there are always crooks, liars, and thieves in capitalism, but in general, in order to get rich, a person must be providing a product or service that other people value. Also, the financial industry can be an area in which people provide legitimate products and services. It is innovation in the financial industry allowing risk to be spread out wide that allows for capital to become more accessible to the poorer people. The problem is when the financial people create something so complex that they "think" it is spreading risk, when it really isn't. Right, but real wages for many wage earners have been flat for at least two decades (again see Russ Water's earlier link to census data), despite a might larger pie. This means that the increase in the pie is all going to the top earners. Two things though: 1) Wages are not incomes. Incomes per capita have been increasing year after year (LINK - input for nominal and real GDP per capita from 1940 to 2010), with the exception of stalling during recessions. Wages are part of incomes, and it isn't surprising if they are stalled or even declining in certain industries because of the skyrocketing costs of healthcare, which is ultimately part of a person's income from their employer. 2) Remember, wealth is the goods and services available to people in society. People, communities, countries, that produce more goods and services that are valued on the global market, are wealthier. For example, Facebook is a service people have access to. It is something that has enhanced and changed people's lives. Because of how the masses value it, it has made its creator, Zuckerberg, a billionaire. So who is wealthier? Zuckerberg created a whole lot of wealth. That wealth for himself manifests itself in the form of the value of the company because of the money it makes via providing its service, but the wealth for the general populace is the Facebook service itself. Sure, we have considerably grown access to ipads. BUT we have diminished access to education and housing. Its hard to compare a family living in a house in the 70s that can afford to send their kids to college to a family living in an apartment today that can't send their kids to college. Sure, the modern day family probably has internet access, but its not obvious who is better off. Yes, but college and housing are more a result of bad governmental policy, not a failure of the market. Housing shot up in cost. So as a response, the market developed a bunch of additional housing. The bubble then burst and the value of housing has since been coming back down to Earth. The problem was in the tying of the financial system to the housing industry in the thinking that a national housing bubble could never develop. College has been driven up in price due to the government subsidizing it. If student loans are a bubble that pop (as there are studen loan backed securities), then the price of college will probably decline, but this might be affected if the government keeps subsidizing it heavily. This statement is just ludicrous. The community reinvestment act required loans to be made to lower-income people, but it did not require they be "bad loans." The February 2008 House Hearing, the Federal Reserve made clear that when it surveyed banks they maintained that their CRA loans were profitable and not overly risky. The Traiger-Hinkley study demonstrated that CRA regulated institutions were less likely to issue sub-prime, their sub-prime loans were generally better structured (lower rates, not option ARM) and CRA institutions were much less likely to resell the loan. My reasoning was that they were required to make a certain number of loans to people who would not be as likely to pay back the loans. The government doesn't need to make a requirement for banks to loan to low-income people unless those people are more risky from the start, as otherwise the bank will loan them money without any pushing from the government. However, you make some good points on the issue that I didn't know. CAC1001 Ok, but the sort of regulation that I'm talking about is regulation that reduces fraud and abuse. Not regulation that maximizes big corporations' already inordinate advantages. The problem is that, in the attempt to do as you say, businesses often end up exploiting the process in their favor through lobbying. The other problem is people don't pay attention. You have a whole alphabet soup of government regulatory agencies. Most of them, nobody has even heard of. And even the big ones (FDA, EPA, SEC, etc...) people don't really pay much attention to). But each industry regulated by these agencies takes a keen interest in them, and will lobby them for regulations favorable to the industry and for people favorable to the industry to head the regulatory agencies. Again, the goal is to reduce the advantages inherent in bigness, as well as reducing fraud. If certain regulations give an inordinate advantage to certain corporations then I would consider those to be bad regulations. And, yes, I agree that industries should be unregulated wrt those sorts of regulations. But I would also argue that it might be the case, wrt some significant factors contributing to the downturn in the economy, that certain sectors, like banking and investment, weren't sufficiently regulated wrt fraud and abuse. Obviously, it seems to me, we can't afford to allow the development of institutions that are too big to fail, thus creating a situation where, if they do fail, then government must bail them out. An interesting conundrum is how to allow institutions large enough to service the needs of America's largest businesses while at the same time preventing such institutions from becoming literally too big to fail. If you limit their size, you could make it where America's largest companies go to overseas financial firms. One suggestion might be to more lightly regulate the financial institutions up until they reach a certain size, upon which they become too big to fail. As too big to fail institutions, they operate with the guarantee of a bailout if they mess up, but the price to pay for this is a heavy degree of regulation that only they are subjected to. The idea of this heavier regulation is to prevent them from ever making a mistake that makes them require a bailout. The smaller firms are more free to make a mistake, but if they do, they fail. Most of the wealth is concentrated in the top .1%. It's that percentage that has realized the biggest gains. It's that percentage that controls your government to a large extent, imo. And, it's that percentage that, by design, is most able to exploit tax loopholes and, via monetary and other influence, to determine the scope and depth, ie., the power, the limitations of regulatory agencies. Deregulation from Reagan through Bush has had the net effect of increasing the possibility of non-accountability and fraud wrt large corporations. Did they intend what eventually happened to happen? I don't know. But it seems to me pretty hard to argue that, since they were in control, that they didn't intend for things to turn out in such a way that the financial sector, in general, profited greatly while the rest of America suffered. Remember that "the top .1%" isn't a class, it's just a statistic. Also, Bush increased regulations, at least over finance. He did not decrease them. The financial sector profited greatly while America profited, and when America was hit by the housing bubble popping, the financial sector took a major blow and almost collapsed. The unfair part was that the financial sector had grown too big to fail, so some of the institutions got a bailout. I think that, more realistically, the US of 100 years from now will have at least 100 million more people living in relative poverty. I think it will be a predominantly Spanish speaking country, basically an extension of Mexico, and Central and South America. I think that this is inevitable. And with the influx and proliferation of a more or less unskilled labor base, then America is on a track to be more like the China (Southeast Asia, India, South America) of today than the America of yesterday. Maybe, but this is like trying to project America in the year 2012 back in 1912. All the children of those Mexican immigrants might learn to speak English and immigrate into society, or the immigration may stop a great deal due to the recession, etc...other things could happen, who knows. I agree that there will be goods and services available 100 years from now that maybe we can't fathom today. And I think that the vast majority of Americans will not be able to afford those goods and services. Much like the situation today, but with a more extreme disparity of wealth. Why wouldn't they be able to afford them? Rich people will always have access to goods and services the regular folk do not, but as the years go by, those goods and services are made from luxuries into commodities. People today can afford lots of good and services that people just a few decades ago couldn't fathom. I think that the wealth disparity will only continue to shrink. If you judge the wealth dispairty by the financial assets, then during any period of great wealth creation, of lots of new goods and services being introduced, then there will always be large wealth disparity during prosperous times. But if you judge it by what goods and services are available to people, then I think the wealth gap will only continue to shrink. What distinguishes being wealthy from being poor now? I don't think that's going to change much in the next 100 years. Just that there will be proportionately more poor people. At least if we continue evolve according to the current global model. The thing is that what's poor today was wealthy in many ways decades before. What's poor in a few decades will be what is middle-income or wealthy today. Some things the wealthy will always have access to that ordinary folk won't, such as mansions, yachts, private jets, etc...simply due to the limitations in the resources. I doubt that. But even if so, what good is an internet connected computerized refrigerator if one can't afford to stock it with sufficient food to feed one's family? Why do you doubt it? Computers are getting so cheap, that computerized refrigerators will probably be the norm eventually, sort of like how cellphones used to be a luxury of wealthier people, but now are ubiquitous. The technology gets commoditized. Also, why wouldn't people be able to stock it with food? That would only occur if food goes way up in price or incomes go way down. A commodity shock (major oil shortage) or if healthcare costs are not brought under control, could maybe create problems here, but otherwise, I do not see why prosperity should not continue to improve. Sure. Even an increase of just, say,$2/hour means $80/week,$320/month, and almost $4000/year. That's a LOT of money to somebody making the minimum wage. Is there any doubt that almost all of that money would be spent in the general economy? A certain portion of it, maybe a significant portion of it, at the very businesses that gave those workers higher wages? Meeting the cost of the minimum wage would be harder on small businesses versus an entity like Wal-Mart though. Also, I don't know if such an increase really makes that large a difference in the person's buying power, maybe it would though. I can't think of any small or large businesses that would be significantly affected by an increase in the minimum wage. But, as noted above, it would significantly positively affect the buying power, and therefore the living standards, of at least 5 million American workers. How do you know it wouldn't significantly affect any small businesses? Also, while it might increase the buying power of the people receiving the wage, it also decreases the buying power of the businesses paying the wage, as it's a transfer of money. And if it raises the unemployment rate, it helps one group of people at the expense of others. I doubt it. The cost of college is going to remain high, because there are many more people with the ability to pay current college costs than there are openings for them. Without government subsidies, the market, via supply and demand, would ultimately determine the cost of college. If there aren't enough people willing to pay the current price that the universities want, then the price would go down. That's not an argument against regulation. It's an argument against insufficient enforcement of existing regulation. Yup, that's one reason why regulation isn't a panacea. It does not good if it isn't enforced. It's one form of oversight, and a flawed form of oversight at that, although it's needed. CAC1001 Please provide the data to support your claim that both home ownership and college attendance rates are down since the 70s. I suspect both are false. I don't think ParticleGrl was saying the attendance rates are down so much as the costs for both have shot up so much, making it much harder on people to afford them. I don't think ParticleGrl was saying the attendance rates are down so much as the costs for both have shot up so much, making it much harder on people to afford them. Does access mean cost increases? Her actual quote was "BUT we have diminished access to education and housing" - perhaps we should wait until she clarifies and supports? my bold OmCheeto Gold Member Your suspicions may be well founded. Here is a site that claims home ownership was 62.9% in 1970 http://www.census.gov/hhes/www/housing/census/historic/owner.html And here's one that says it was 66.9% in 2010. http://www.danter.com/statistics/homeown.htm Here's a site that shows college attendance at something under 60% in 1970 and at 70% in 2009. http://economix.blogs.nytimes.com/2010/04/28/college-enrollment-rate-at-record-high/ I thought it was just me. A couple of weeks ago I read that some Texan was responsible for the demolition of the World economy. Who Wrecked the Economy? Then I read here[and there] that a former president was responsible for the demolition of the World economy. [CFMA or something] Then I read that weeks after leaving congress, the senator went to work for UBS, a Swiss bank. Then I saw the house vote on the bill the former president signed that branded him as the perp: Dem's 157 yea, 9 nay. [Rep's also voted yea, as a majority] hmmm... If I had 3 weeks left before retirement, and 157 out of 166 of my friends said "go for it", I'd have not read the 262 pages of legalese nonsense which couldn't make it through the government except as a freakin' last minute rider insert by a certain senator from Texas, who's wife sat on the Enron board, whom that certain senator put a provision in the 262 page rider for..... and then I fell asleep...... :zzz: russ_watters Mentor I don't think ParticleGrl was saying the attendance rates are down so much as the costs for both have shot up so much, making it much harder on people to afford them. It is the next sentences that makes it pretty clear to me: Its hard to compare a family living in a house in the 70s that can afford to send their kids to college to a family living in an apartment today that can't send their kids to college. Sure, the modern day family probably has internet access, but its not obvious who is better off. If families that would have been living in houses and sending their kids to college in the 70s are living in apartments and not sending their kids to college today, then the rates of both must be dropping. She's saying the standard of living based on those two issues is lower because of the [untrue] fact that rates for both have dropped. The problem is that, in the attempt to do as you say, businesses often end up exploiting the process in their favor through lobbying. Of course, but I don't think that's a reason not to regulate against fraud and abuse. The other problem is people don't pay attention. You have a whole alphabet soup of government regulatory agencies. Most of them, nobody has even heard of. And even the big ones (FDA, EPA, SEC, etc...) people don't really pay much attention to). But each industry regulated by these agencies takes a keen interest in them, and will lobby them for regulations favorable to the industry and for people favorable to the industry to head the regulatory agencies. Again, I agree. But I'm not sure what you're proposing as an alternative. Just not regulate against fraud and abuse? Or what? An interesting conundrum is how to allow institutions large enough to service the needs of America's largest businesses while at the same time preventing such institutions from becoming literally too big to fail. If you limit their size, you could make it where America's largest companies go to overseas financial firms. Is that a problem? If so, why? One suggestion might be to more lightly regulate the financial institutions up until they reach a certain size, upon which they become too big to fail. As too big to fail institutions, they operate with the guarantee of a bailout if they mess up, but the price to pay for this is a heavy degree of regulation that only they are subjected to. The idea of this heavier regulation is to prevent them from ever making a mistake that makes them require a bailout. The smaller firms are more free to make a mistake, but if they do, they fail. That seems ok on first glance, but what do you mean by "more lightly regulate"? Didn't the recent financial crisis begin with smaller institutions making bad loans? Remember that "the top .1%" isn't a class, it's just a statistic. Also, Bush increased regulations, at least over finance. He did not decrease them. From what I read the Bush administration pulled hundreds of auditors/investigators from the oversight (ie., regulatory enforcement) of the bundling and sale/insurance of potentially toxic investments. Also, there were warnings given of a potential financial catastrophe, and the people doing the warning were marginalized (ie., discredited) by the Bush administration. The financial sector profited greatly while America profited, and when America was hit by the housing bubble popping, the financial sector took a major blow and almost collapsed. The unfair part was that the financial sector had grown too big to fail, so some of the institutions got a bailout. The financial sector is still profiting. Afaik, it represents the largest growth sector in the American economy. From what I've read the US GDP and GNP are skewed because of the inordinate gains in the financial sector. Maybe, but this is like trying to project America in the year 2012 back in 1912. All the children of those Mexican immigrants might learn to speak English and immigrate into society, or the immigration may stop a great deal due to the recession, etc...other things could happen, who knows. Yes, maybe I was being too pessimistic. 100 years is a long time from now. And maybe the American economy isn't really shipwrecked. Eg., it seems ok where I am. I think that the wealth disparity will only continue to shrink. But, apparently, it's not shrinking. It's growing. If you judge the wealth dispairty by the financial assets ... Yes, I think that's how we have to objectively judge wealth, and therefore wealth disparity. ... if you judge [wealth disparity] by what goods and services are available to people, then I think the wealth gap will only continue to shrink. This is, imo, a less objective measure of wealth disparity than referring to financial assets. I don't know if you were around in the 60's, but I was. Ok, there are computers and cell phones now which didn't even exist then. But, just from my personal experience (and I realize that this differs from region to region), one could live better on a basic wage than one can now. Iow, the cost of goods and services is proportionately greater now than it was in the 60's (with some upscale blips in the picture). So, as far as I can tell, the general trend is downward, wrt the majority of Americans. And again, my view might just be a bit unwarrentedly pessimistic. The thing is that what's poor today was wealthy in many ways decades before. I don't know how you're guaging that. For example, when I was a mid-teenager in a rather large metropolitan area the minimum wage allowed me to rent an apartment in a nice area, make payments on a car, and eat out a few times a week, as well as covering all the other essentials. I don't think that's possible today ... anywhere. What's poor in a few decades will be what is middle-income or wealthy today. In terms of just incomes, maybe. But this has to be related to prices. Historically, what was poor 50 years ago, in terms of buying power, is essentially what's poor today. ... why wouldn't people be able to stock it with food? That would only occur if food goes way up in price or incomes go way down. The trend is, afaik, that food prices continue to rise proportionately faster than wages and salaries. A commodity shock (major oil shortage) ... This doesn't have to happen. If it does it will simply be due to an artificial manipulation of the market, as in the early 70's when prices on lots of stuff went way up. Meeting the cost of the minimum wage would be harder on small businesses versus an entity like Wal-Mart though. Only if the small business is paying it's employees at around the minimum wage rate. Afaik, most small businesses either pay their employees at (significantly) above that rate, or they have an "off the books" labor force. Also, I don't know if such an increase really makes that large a difference in the person's buying power, maybe it would though. Of course it would. Just look at the numbers. How do you know it wouldn't significantly affect any small businesses? I don't know. I'm just guessing. Lowering or raising the federal minimum wage to, say,$6/hour or $12/hour would be an experiment, either way. But can there be any doubt that raising it would benefit minimum wage earners? Also, while it might increase the buying power of the people receiving the wage, it also decreases the buying power of the businesses paying the wage ... Yes, that's a given. But my guess is that it would benefit the people receiving the wage, and the general economy, more than it would hurt the businesses paying the wage. As I mentioned in a previous post. Economists are split on this. It's an empirical question. So, we can either raise or lower the minimum wage and see what happens. But one thing we can know will happen is that that the buying power and living standard of millions of current minimum wage earners will decrease if the minimum wage is decreased. Without government subsidies, the market, via supply and demand, would ultimately determine the cost of college. If there aren't enough people willing to pay the current price that the universities want, then the price would go down. My guess is that there will be. So a discontinuance of government subsidies would have the net effect of decreasing the number of relatively poor applicants from attending college. Which is fine with big business and candidates like Romney who see this as an opening for the importation of more and more foreign born workers who can be retained for far lower salaries and wages than their American born competitors. Yup, that's one reason why regulation isn't a panacea. It does not good if it isn't enforced. It's one form of oversight, and a flawed form of oversight at that, although it's needed. What do you mean "it's one form of oversight". Afaik, it's the only form of oversight. Do you not regulate against fraud and abuse because of past corruption, or do you focus on cleaning up the corruption? Last edited: Yup, that's one reason why regulation isn't a panacea. It does not good if it isn't enforced. It's one form of oversight, and a flawed form of oversight at that, although it's needed. If it's not enforced, then why call it regulation? Without enforcing the rules, it's simply telling-people-what-they-should-do. CAC1001 Of course, but I don't think that's a reason not to regulate against fraud and abuse. I agree, it just points out some of the limitations of regulations. Again, I agree. But I'm not sure what you're proposing as an alternative. Just not regulate against fraud and abuse? Or what? I don't think there is any real solution. One can find numerous examples of where companies were extremely corrupt and cheated people because there were either no or too few regulations, and examples of where companies were extremely corrupt and cheated people through exploiting the regulations (even pushing for them for such reasons). As I've said, try to do light and efficient regulation for each industry, although some industries will need to be more regulated than others. Don't over-regulate any industry as that can limit competition. Is that a problem? If so, why? Why would we want American companies to take their business to other countries? I'd prefer American businesses do business with American financial institutions, not say the Chinese or Europeans. Plus over the longer term, such a thing could cause another country to become the financial center of the world. That seems ok on first glance, but what do you mean by "more lightly regulate"? Didn't the recent financial crisis begin with smaller institutions making bad loans? You can regulate all of them moreso than currently if needed, but leave the smaller institutions that are allowed to fail less regulated than the big institutions that would get a bailout. From what I read the Bush administration pulled hundreds of auditors/investigators from the oversight (ie., regulatory enforcement) of the bundling and sale/insurance of potentially toxic investments. Also, there were warnings given of a potential financial catastrophe, and the people doing the warning were marginalized (ie., discredited) by the Bush administration. Haven't read that, but I do not know of any significant deregulation of the financial system that occurred under President Bush. The financial sector is still profiting. Afaik, it represents the largest growth sector in the American economy. From what I've read the US GDP and GNP are skewed because of the inordinate gains in the financial sector. Sure it's profiting now, but it almost got taken out by the crisis. I do not see how it could skew the GDP because it is a section of the economy that has grown. But, apparently, it's not shrinking. It's growing. Only if one looks at the statistics in a way to suit an agenda. Again remember, income quintiles do not represent fixed classes and wealth is the goods and services of society. As long as the regular folk continue to get access to more and more goods and services that they previously did not have access to, they are going to be wealthier. One could look at say the 1950s and 1960s and say that the wealth disparity was small, but yet, during that period of time, being wealthy gave one access to goods and services that an ordinary person could only dream about. In that sense, there was an enormous disparity. In modern times, a whole lot of goods/services that were previously available to the wealthy are now available to everyone, so in that sense, the wealth gap has closed. Wake up 100 years from now and provided no major wars have destroyed Western civilization or anything, and the average person will have access to a whole bunch of goods and services that right now are only available to the wealthy, and a whole slew of additional goods and services that aren't available to anyone yet because they haven't even been created. The type of Internet they'll have, appliances, cars, healthcare available, etc...Now imagine someone then comes and says to you, "So you're from 100 years ago? Well not a whole lot has changed, the wealth gap is worse than ever now!" You'd reason, "Well by the standards of my time, you're extremely wealthy. It's just that society is unequally wealthy." I believe society will eventually reach a point where the amount of goods and services available to the average person is so advanced that the differences in the quality of things like food, technology, healthcare, etc...available to a wealthy person versus an ordinary person, will be very minor. For example, at some point, they'll probably get where they can grow you a new organ or body part if you need one. But it will cost a whole lot and only be available to those with serious$. Give it enough time however and the technology will advance to where everyone can have a new bodypart grown if they need it. Things like that.

So that is what I mean by the wealth gap will only continue to close. Financial assets-wise, we will always have "rich" and "poor."

Yes, I think that's how we have to objectively judge wealth, and therefore wealth disparity.
I think trying to judge wealth disparity by financial assets can be very misleading, because it can give the impression that people are doing worse now than before, which is not necessarilly the case. It also can mistake that the "richest X% of society" is a class, as opposed to just a statistic. Wealth disparity in terms of financial assets will always exist in a free society because there are always people who will take the risk to build companies and create new products and services. In some periods this happens more then others.

This is, imo, a less objective measure of wealth disparity than referring to financial assets.

I don't know if you were around in the 60's, but I was. Ok, there are computers and cell phones now which didn't even exist then. But, just from my personal experience (and I realize that this differs from region to region), one could live better on a basic wage than one can now. Iow, the cost of goods and services is proportionately greater now than it was in the 60's (with some upscale blips in the picture). So, as far as I can tell, the general trend is downward, wrt the majority of Americans. And again, my view might just be a bit unwarrentedly pessimistic.
It depends. For certain goods and services, the prices have come down, as they are a lot more available to the masses now then they were before. For other good and services, their prices have increased some, but so have incomes per capita. What is hurting people right now are of course the recession and gas prices, and healthcare and education costs. Healthcare in particular eats into wages.

I don't know how you're guaging that. For example, when I was a mid-teenager in a rather large metropolitan area the minimum wage allowed me to rent an apartment in a nice area, make payments on a car, and eat out a few times a week, as well as covering all the other essentials. I don't think that's possible today ... anywhere.
Many of the goods and services available to the wealthy back in the 1950s and 1960s are virtually all available to the middle-income and even the poor today, minus a few exceptions in terms of things that exist in such a limited supply that they could never be mass-produced (yachts, private jets, mansions, certain jewels, gold, etc...).

Compare the difference in the standard of living of the average person versus a wealthy person in the 19th century to today. We still have "wealth disparity," but the goods/services available to the average person today have really closed up the actual disparity a good deal. A whole lot of stuff that one used to need to be rich to get access to, one now can get easily. Just as we see the massive difference in standard of living between a regular and wealthy 19th century person, a gap that is now very narrowed, 100 years from now, people will look back at the gap in standard of living between a regular and wealthy person of the 20th and 21st centuries and see that the gap has been closed even further. Also, one isn't supposed to live off of minimum wage.

In terms of just incomes, maybe. But this has to be related to prices. Historically, what was poor 50 years ago, in terms of buying power, is essentially what's poor today.
But thanks to market capitalism, a whole slew of goods and services that used to cost a lot are now cheap and widely-available, so even a poor person today can buy all sorts of stuff that a poor person fifty years ago could not.

The trend is, afaik, that food prices continue to rise proportionately faster than wages and salaries.
Food prices are partially-influenced by the government, as it pays farmers not to grow certain foods, part of the corn crop goes to ethanol, and also things like oil prices will drive up the price of groceries. Add to this wages that are stagnant or declining due to increasing healthcare costs.

Only if the small business is paying it's employees at around the minimum wage rate. Afaik, most small businesses either pay their employees at (significantly) above that rate, or they have an "off the books" labor force.
If they hire teenagers who are part-time workers though, they will pay them at minimum wage.

Of course it would. Just look at the numbers.
What I mean is let's say you get paid $1 per hour. So then you get a 100% increase to$2 per hour. Percentage-wise, you got a pretty huge increase, but in terms of the actual money, it doesn't really pay you enough to significantly change your buying power at this point.

I don't know. I'm just guessing. Lowering or raising the federal minimum wage to, say, $6/hour or$12/hour would be an experiment, either way. But can there be any doubt that raising it would benefit minimum wage earners?
It would at the expense of a bunch of additional unemployed people if you raised it too high.

Yes, that's a given. But my guess is that it would benefit the people receiving the wage, and the general economy, more than it would hurt the businesses paying the wage. As I mentioned in a previous post. Economists are split on this. It's an empirical question. So, we can either raise or lower the minimum wage and see what happens. But one thing we can know will happen is that that the buying power and living standard of millions of current minimum wage earners will decrease if the minimum wage is decreased.
Yes, but the buying power will be made up elsewhere through businesses having more money or more workers being employed.

My guess is that there will be. So a discontinuance of government subsidies would have the net effect of decreasing the number of relatively poor applicants from attending college.
If the price came down, then it should not decrease the number of poor applicants from attending.

What do you mean "it's one form of oversight". Afaik, it's the only form of oversight. Do you not regulate against fraud and abuse because of past corruption, or do you focus on cleaning up the corruption?
Regulation is one form of oversight. Other forms of oversight are consumer watchdog groups, ratings agencies (which failed in their duty), the press, etc...

DrClapeyron
October 13, 2005 Congress passed bankruptcy legislation affecting repurchase agreements (repos). The legislation stated that mortgage-backed securities would become sole possesion of lenders in a repo in which the borrower defaulted on payment of the loan. Legislation similar to that which affected the repo market.

November 10, 2005 the Federal Reserve announced that on March 26, 2006 they would no longer publish data on the M3 money supply...which includes data on what was then a rapidly growing repo market. Dun dun dun! Conspiracy? Did this lack of transparency in a shadow banking market lead to a collapse of the economy and did the Fed regret/know it?

Sources:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1525120
http://www.federalreserve.gov/releases/h6/discm3.htm
http://money.cnn.com/2005/10/17/pf/debt/bankruptcy_law/index.htm
http://www.newyorkfed.org/research/epr/06v12n1/0605garb.html
http://www.newyorkfed.org/research/epr/forthcoming/1102morg.html