Comments on: Bad Distribution of Income Led to Great Depression: History Repeats in 2008

By: rjrnab

rjrnab — Mon, 22 Jun 2009 02:23:01 +0000

in response to iceman 15

I am impressed with your accurate quote from 1905. Did we ever share a chairlift in the Poconos in the 80’s? Anyway I’ve no accredited degree, but
Mr. Masaccio picked a good 2003 graph to look at for sure! Remember what happened to all those independant middle class business people in the 80’s?
Who payed the lions share of the taxes in this country? I bet you a dollar to a donut a graph of small business decline would be inversley proportional to the RR era rise in top 20%’s. You had to get big then or semi-retire, and find some niche business, with a load of cash in your pocket.

By: MarkH

MarkH — Mon, 22 Jun 2009 01:13:24 +0000

Those are good points and I can add that the balance of taxation rates between individuals and companies could be such that there would have to be very very good reasons to withdraw money from investments. That kind of balance would push money into investments and drive the economy AND probably reduce a lot of the interest in high CEO pay. The only difficult issue is inheritance of money & paper.

By: ekunin

ekunin — Sun, 21 Jun 2009 22:31:00 +0000

There are two solutions (1) tax the rich and (2) invest the money we now invest in defense in productive infrastructure like mass transit. That’s not going to happen so the question is what will? My guess is very difficult times with maybe a guy on a white horse coming to save the day.

By: masaccio

masaccio — Sun, 21 Jun 2009 19:27:19 +0000

…if you could not explain things in plain english as an economist you weren’t doing your job properly.

That is a good observation. This book reminded me of something Stephen Hawking said:

Someone told me that each equation I included in the book would halve the sales. I therefore resolved not to have any equations at all. In the end, however, I did put in one equation, Einstein’s famous equation, E = mc2. I hope that this will not scare off half of my potential readers.

Galbraith describes in words data on closing averages on the NYSE, and I have to say I would have really loved a chart.

Your comment on the stochastic models Wall Street used to “quantify” risk accords with something I have been thinking about. There is something really convincing about equations, isn’t there, and I think people thought things like the Gaussian Copula (which I love for the name) actually represented something in the real world.

By: iceman15

iceman15 — Sun, 21 Jun 2009 19:01:19 +0000

George Santayana’s famous 1905 quote “Those who cannot remember the past are condemned to repeat it” keeps coming to mind. As a market economist on Wall Street during the October ‘87 crash, when the indices fell 22% in one day, I was called to write a paper the next day projecting the immediate prospects. Needless to say, I read JK’s famous book that night and used his classic text as my main source of wisdom.

One of the main things that made JK so superior to his peers was his firm belief, ALWAYS visible in his works, that if you could not explain things in plain english as an economist you weren’t doing your job properly. The progression in economics in the ’80’s & 90’s to a math/stastical basis directly led to the follies of the stochastic medelling that institutions like AIG, investment banks & hedge funds used to ‘quantify’ risk. These heavily leveraged, arrogant beliefs led to the collapse of Long Term Capital Management in 1998 and its subsequent bailout, an early precursor to the events of 2007/8.

Most of current economists who predicted this fiasco, such as Krugman & Steglitz, continue in JK’s great tradition.

By: rjrnab

rjrnab — Sun, 21 Jun 2009 18:51:41 +0000

You could look at it that the tea-totaling, trust ‘regulator’, imperialist
savoir of the Cuban People, TR, put us up on the world stage too soon. All
that white-man manifest destiny, Kool-Aid Monroe Doctrine, Left-over British Empire Mercantilism-Empire, went to that Hollanders head there in the big run up to the 20th century. 19′00′ - 19′0′9 things had to get done before 1910 rolled around with our ten year oriented calender into the ‘20th’ century. What with Carrie Nation running around, and all the new protestant religons telling people the end of the world was soon! Sound like this past turn of the century? And we still can’t work together as a nation to be any kind of stable example to the world, let alone be determining their affairs. Pull your assets in US, get your head out of the J. P. Morgans’ of the worlds asses.

By: selise

selise — Sun, 21 Jun 2009 18:16:26 +0000

sort of a little bit related: Bleeding-Heart Liberals Proven Right: Too Much Inequality Harms a Society

By: wmd1961

wmd1961 — Sun, 21 Jun 2009 17:39:19 +0000

zed.

The balance of trade data is heading the other direction which rules out #2.

There is a case to be made for super-rich causing speculative ferment in markets world wide. The culpability of the US super-rich is a part of it, but capital flow is international these days to a much greater extent than 80 years ago. What are billionaires doing worldwide, not just the US? Consider that 7 of the 10 richest people aren’t US citizens.

Also kind of mind boggling to think of how sovereign wealth funds play into this.