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Ouch. The video is worth your time.
15 Mind-Blowing Facts About Wealth And Inequality In America
I created two of those "mind-blowing" charts shortly after starting this blog. Go figure.
October 23, 2007
Wages and Unemployment
October 30, 2007
US Gini Coefficient Map
That was not a quick chart for me. I colored it by hand. I think it was worth the effort though. One state certainly stands out.
And lastly, this is why I believe that income inequality is so important and why Bernanke was so blindsided by the subprime crisis.
November 16, 2009
Why Income Inequality Really Matters
Most economists base much of their understanding of the economy on average and median income, savings, and debt data. Our very own Ben Bernanke looks to this type of data as seen in the Federal Reserve's Flow of Funds reports. There's just so much data to look at and the only way it seems even remotely manageable is to average it and summarize it.
I am now going to point out how this type of data can effectively hide problems within the economy and thereby confuse and shock mainstream economists as things fall apart. This is especially true when the problems start in subprime loans and are expected to remain there. The average person doesn't even have a subprime loan, right?
Consider the following two hypothetical economic situations. They are based on an economy with just three workers (which I have named "A", "B", and "C").
As seen through the eyes of "average" and "median" data, both situations are 100% identical. I would ask you these questions though.
1. Which situation is more unstable?
2. Which situation would be hurt most by rising oil prices?
3. Which situation would see payday loan stores become a growth industry?
I would argue that the economy as a whole is in far worse shape under situation #1 than it is under situation #2.
9 comments:
Gerald Celente's been busy today.
America Won the Cold War But Now Is Turning Into the USSR, Gerald Celente Says
Do not go Celente into that good night.
dearieme,
"We're out of cocktail olives, it's a tragedy of historic proportions, but we're coping because we're Americans. " - Dean Koontz
You could test your hypothesis by comparing state data. Note that Nevada is slammed by the housing crisis but looks better than the Gini for New York....
Also, I would argue this crisis is not about sub-prime but housing prices in general. They were too high in many areas of the country. I am not sure what Bernanke could have done to pop that bubble softly - maybe Greenspan could have.
Finally, when they look at the statistics, they may remove outliers like Bill Gates, etc. which could really skew the gini numbers.
Question: what would you do as the government to improve the Gini, and in this economic situation? The one thing I can think of would be the payroll tax. Cut it or eliminate it. Its regressive and it makes hiring more expensive. Of course its no fun for politicians who want to control the money and give it out as favors.
I would suggest the GOP or Dems run on a platform of matching cuts to payroll and corporate tax rates - "help the workingman and the people who hire them." Not sure how to pay for that - it should have been the stimulus not spending on random projects (5% infrastructure spending) and paying state workers.
I'd also reform the entire tax system to make it much simpler and remove any incentives that exist to move US jobs offshore.
Maybe means testing ss and medicare could help as well, but good luck touching those.
Coba
Oh, and I think the problem in your example is not the income inequality, but who in the hell lent that dude 60,000 when his income was only 20,000.
That bank who did that should probably go out of business...LOL.
Coba,
They don't remove outliers in the Gini index. A reading of 1.0 means maximum inequality. In other words, one person has it all and the rest have nothing.
If I was the government I'll tell you exactly what I'd do. Panic, lol. Sigh. I don't have solutions for what ails us. I'm fortunate enough to just spot some of the problems.
"...but who in the hell lent that dude 60,000 when his income was only 20,000."
Good point. That's way too much income and not nearly enough loan, lol. Sigh.
No Income No Asset
A Ninja Loanis a type of subprime loan. It was described as No Income, No Job, (and) no Assetsloan because only things applicant had to show was his/her credit rating.
"Also, I would argue this crisis is not about sub-prime but housing prices in general."
Yeah, subprime was just the weakest link in the rusty chain.
Calculated Risk had an ongoing joke.
"We're all subprime now!"
Mark, I think you are too kind to Bernie... I think he was well aware of the subprime issue. these guys up top have many briefings with hired economists who track such information all day long (like housing prices).
Bernie knew and misled the public.
on a side note, Bernie is a messenger so it's nothing personal....
remy,
I am shocked. Shocked I tell you!
October 27, 2005
Bernanke: There's No Housing Bubble to Go Bust
Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.
He had a choice! He could have said...
"Since interest rates were kept so low, the Fed has done this country and the world a grave injustice. A massive housing bubble was created under President Bush's watch and I plan to clean up its aftermath once that fool nominates me."
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