What worries me in an unrestricted capitalist system is the fact that aside from your selected skills or knowledge, one now must also become a banker, become an investor in the stock market (what an odd term), and in general become focused only on making money (another odd term). One cannot just make a living from his chosen vocation anymore, everyone is required to become an expert in finance.
If we are going to life in such a society, we need to change the school curricula. In addition to reading writing and arithmatic, we need to add a basic class in finance and the stockmarket.
When your job is taken by someone in China, the only option left is to invest in the company that has outsourced your job to begin with. But if one is on unemployment, how to get a hold of the finances to invest? The whole system is upside down. The poor are forced to invest in the companies that shipped their jobs overseas.
And who came up with the idea that dividends and “passive” income should be taxed at a lower rate than on the salary you earn, investing your blood and sweat and tears? Why should a guy, sitting in his comfy chair, smoking a cigar and getting paid for doing nothing, have to pay less on his income than anyone else? If we turned that system around in favor of the laborer, we’d probably have no financial hardship at all.
Also instruction on how to figure out medical insurance, I have been going crazy for a week thrying to figure out the “best” medical insuance for my situation.
Yes, The promise of “choice” is a little hollow, when one can’t figure out what choices are best for you, unless you get a degree in medicine and contract law.
Well, I’ll stick with my forecast Kkwan. This is all so well known that the market is practically unshockable.
Expect equities to be a lot higher at some point next year.
I am more circumspect on that.
Despite the recent rally in the stock markets (which is running out of steam this week), it is unduly premature to expect equities to soar higher next year. Where are the economic fundamentals?
The markets are vulnerable to economic/financial/political shocks.
Sovereign debt in the US and the euro zone and how they are managed is the main issue stifling growth and creating social/political unrest because austerity will aggravate joblessness and economic inequality. This is the rationale behind OWS and the protests in Europe.
All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of ... higher rates.
An impending European financial crisis could make the events of 2008 look like minor leagues
The reason for all of these sudden extraordinary measures is the fear that an impending European financial crisis could make the events of 2008 look like minor leagues. It is a justified fear. If financial panic spreads and speculators go for blood, it will be almost impossible to stop the chaos.
Austerity on the citizens:
Observers often get all high and mighty in blaming countries for borrowing too much. They can’t wait to impose austerity measures on the citizens of those countries. Banks, however, are certainly NOT being asked to accept austerity measures for their role in this- we can’t push money at them fast enough.
The bailouts promised by Germany on behalf of Europe would allow the Greeks to stabilize their financial system and repay at least some of their loans to Europe. This would leave the Greek elite generally intact. The price to Greece would be austerity, but the Greek elite would not pay that price. Members of the broader public — who would lose jobs, pensions, salaries and careers — would.
Similarly for Italy, Spain and Portugal?
Crisis of sovereignty:
The European crisis is one of sovereignty, cultural identity and the legitimacy of the elite. The financial crisis has several outcomes, all bad. Regardless of which is chosen, the impact on the political system will be dramatic.
That profits are privatized, whereas losses are socialized is neither democracy nor capitalism. It’s fascism, according to the writer of this article HERE
Elitist economic policy:
The Nobel Laureate, former chief economist for the World Bank, and current Columbia university economics professor understands fully that US economic policy is designed to benefit an elite-class of financial market “traders.”
It’s fascism:
What Mr. Stiglitz may not fully grasp is that the economic system of collusion between political and corporate leaders has a definition of its own: fascism.
The relevent fundamentals are good, which is why Warren Buffet is buying, it’s like “buying on sale” as he says.
The other factor is the technicals, which are also good. Technically everybody is positioned for bad news, which means there is likely to be more demand than supply when it happens, pushing stocks up.
What you want to see is better economic prospects, but when you see that it will already be too late, the market will be 30% higher.
Basically what I think is you’re getting this back to front, the market is low when everything looks bleak and everybody knows it. And high when everything looks good and everybody knows it.
The markets are vulnerable to economic/financial/political shocks.
I know expected shocks is a bit of an oxymoron but that is the case, you expect shocks, I expect shocks, the market expects shocks the public expects shocks.
And that’s why the market is much less vunerable than usual to shocks.
The relevent fundamentals are good, which is why Warren Buffet is buying, it’s like “buying on sale” as he says.
The fundamentals of the selected companies like IBM, Intel etc. are good and that is why he is buying them. But, that does not mean the overall economic fundamentals of the US economy are so.
The other factor is the technicals, which are also good. Technically everybody is positioned for bad news, which means there is likely to be more demand than supply when it happens, pushing stocks up.
If Europe goes bad, there will be less demand and too much supply. Stocks will go down rather than up.
What you want to see is better economic prospects, but when you see that it will already be too late, the market will be 30% higher.
As it is now, there is no solid evidence of better economic prospects. The stock market tends to react preemptively because bullish investors do not want to miss the opportunity to buy in.
Basically what I think is you’re getting this back to front, the market is low when everything looks bleak and everybody knows it. And high when everything looks good and everybody knows it.
Not really. The market is not that low now. If the euro zone financial problems escalates and the contagion spreads to the US and the rest of the world, the market could go much lower.
I know expected shocks is a bit of an oxymoron but that is the case, you expect shocks, I expect shocks, the market expects shocks the public expects shocks.
And that’s why the market is much less vunerable than usual to shocks.
Expectation of shocks do not make the shocks less painful when they come. Also, the severity of the shocks are not known and hence the market is vulnerable.
2) growth in population: In the last decade, the US population increased by some 28 million, and in spite of all these new customers asking for water, food, energy, health care, education, etc. we had zero growth (as reported by Krugman several months ago). Zero growth, despite all the billions poured to stimulate the economy. The only non-zero growth -as usual- is national debt.
I think the reality, whether dealing with millions of people or 3 people is the same.
Each person, needs to, on average, put in more than they take out of the system, or at least the same, for everything to be hunky dory.
I think economists are nuts.
Stephen
The economists pretend that a lot of the leakage from the system does not happen. There were 200,000,000 cars in 1995. Do economists need to be told that cars depreciate? As far as our economic theory goes only CAPITAL GOODS depreciate. This is something that goes back to the 1930s or even 20s in terms of how a TECHNOLOGICAL economy works.
The economists pretend that a lot of the leakage from the system does not happen. There were 200,000,000 cars in 1995. Do economists need to be told that cars depreciate? As far as our economic theory goes only CAPITAL GOODS depreciate. This is something that goes back to the 1930s or even 20s in terms of how a TECHNOLOGICAL economy works.
psik
Surely this is a simple factual matter, in which case the economists will have cars depreciating in their models.
Well, the foundation of economic growth as always are (1) greater efficiencies in production, and (2) growth in population.
But I can’t see a quick solution to this slump. The last one had huge deficit spending in WWII. This one, not enough political will.
I’ve come back to this Doug, just to use it to make a point that I believe is important and is at least part of what psikeyhakr talks about.
We focus on efficiency of production, which is great, but forget about efficiency of getting the product to the consumer.
Economists actually seem to think that the more inefficient we make it the better it is.
So economists seem to think it’s good that the apple I eat comes from New Zealand, when I’m surronded by local apples. And that we export our apples.
This behaviour gets the GDP up, creates jobs for the people moving the stuff about, and those providing the means for them to move it about, and is wholly a good thing.
Of course this idea is just stupid, what it really does is make us work much harder than we need to to do the same job.
And this working much harder than we need to, due to daft ideas, is really making life tougher.
We focus on efficiency of production, which is great, but forget about efficiency of getting the product to the consumer.
Economists actually seem to think that the more inefficient we make it the better it is.
So economists seem to think it’s good that the apple I eat comes from New Zealand, when I’m surronded by local apples. And that we export our apples.
This behaviour gets the GDP up, creates jobs for the people moving the stuff about, and those providing the means for them to move it about, and is wholly a good thing.
Of course this idea is just stupid, what it really does is make us work much harder than we need to to do the same job.
And this working much harder than we need to, due to daft ideas, is really making life tougher.
This makes no sense, and has nothing to do with what economists think about trade. Globalization is due precisely to immense overall efficiencies (which include the cost of trade): the comparative advantages certain places have for production over others. For more on this see the Wiki on comparative advantage.
The locavore notion is very ‘in’ nowadays. Certainly there are benefits to eating food that is produced locally; I do enjoy buying farmer’s market produce when I can. It tastes better than most of the stuff in supermarkets and supports local folks. But the notion that eating local is always more beneficial than not (in whatever sense of “beneficial” one might mean) is a myth.
This makes no sense, and has nothing to do with what economists think about trade. Globalization is due precisely to immense overall efficiencies (which include the cost of trade): the comparative advantages certain places have for production over others. For more on this see the Wiki on comparative advantage.
The locavore notion is very ‘in’ nowadays. Certainly there are benefits to eating food that is produced locally; I do enjoy buying farmer’s market produce when I can. It tastes better than most of the stuff in supermarkets and supports local folks. But the notion that eating local is always more beneficial than not (in whatever sense of “beneficial” one might mean) is a myth.
