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Discussion: (8 comments)

  1. So what explains the stagnant economy? The easy gains from the microprocessor revolution are no longer there. It has happened before. Such as the time when the easy gains from the metallurgical revolution evaporated.

    What is next? Biology. But we haven’t crossed the knee of that curve yet.

  2. Bill Lumberg

    I have opinions on what I think of this authors arguments but instead I’ll just state the obvious.
    1. As a proportion of income wealthy people spend less than middle and lower class people do because poorer people have to spend on their families to survive. If you design policies to increase inequality poorer people have less money to spend. Over time this will cause spending to slow because people can’t spend money they don’t have unless its 2006 all over again.
    2. Money is power and so when power becomes more concentrated those individuals have greater political influence. When greater influence is achieved those groups tend to ask for deregulation as a way to save money in business. This is most evident in the financial sector where finance as a proportion of the economy are at an all time high. This lighter regulation allows for greater leverage which eventually blows up an economy.

    Lets not forget, the 2008 real estate collapse happened primarily because incomes weren’t rising fast enough to keep pace with housing values. If housing rises at 6-8% a year and incomes are flat then its only a matter of time before that equation will collapse. Why have wages been flat? Because wealthy people have been getting a greater and greater share of income. This is really simple stuff.

    1. Slappy McFee

      How do people with stagnant incomes drive the price of housing up?

      A lot of really rich people out there buying houses?

      How do you hold these contrary views?

      1. Oh you mustn’t have been around during the housing crisis; prices increased due to too few banking regulations. The banks were able to give out loans without any regard to income.

        He holds these views because they are based in fact.

        1. mesaeconoguy

          Except that is entirely untrue.

          Banks/mortgage lenders drove prices up because homebuyers didn’t have enough cash?

          That makes zero sense. Banks do not independently and unilaterally determine lending risk.

          Mortgage lenders were incentivized by government via various programs to offer increasingly risky loans to unfit buyers, and those loans became integrated within the financial circulatory system with inaccurate risk ratings (thanks to the government ratings cartel), causing valuation distortions and bank capital erosion (further incentivized by Basel II).

          You are laughably stupid.

  3. Jim Breed

    Is S&P still rating the CDO’s as investment grade? Looks like they will say anything to please the government now that they are facing fraud charges over their ratings. Is this a case of working the refs?

  4. mesaeconoguy

    S&Ps “analysis” is a crap political and non-economic statement.

  5. Peter May

    “… it may not be to a good liberal’s taste, but demand for chauffeurs and butlers creates employment …” Ashok must have been very excited to have his insightful analysis quoted in your article! He seems very Ayn Rand-ian but I guess that is when one reads Rand, as a college freshman.

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