CBS has a self-promotional TV commercial they play during the Army football game. The theme is adversity. They make it sound like losing a football game is the height of adversity.
That's not it. That's a bad day. Adversity is more like this:
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2 comments:
Really interesting data but completely disagree with the conclusion. I believe it's the disproportionate share of the finance sector on GDP that is sucking the rest of the economy dry. Collectively we don't need to tighten our belts to chip down on private debt. We need to stop accepting as fact that a barely taxed finance sector should keep the lion's share of all profits.
https://tinyurl.com/StiglitzInequality
Edgar,
Thanks for the Stiglitz paper. Some interesting stats in there. I see Stiglitz says "the extraordinary growth in top incomes has been going along with an economic slowdown." Yes! That slowdown is my main concern.
By the way: We don't need to "tighten our belts" to reduce private debt. We have to change our economic policy. We don't have all that debt because we're all living the high life. We have that debt because it is policy to make credit readily available, and because it is policy to encourage credit use. Basically, it is policy to encourage the growth of the financial sector. Those financial sector profits didn't get that high just by chance!
The graph linked below shows that interest paid by nonfinancial corporate business (red) is higher than financial corporate business profit (blue) for almost all years. And the interest on household debt (green) is higher yet:
https://fred.stlouisfed.org/graph/?g=J9EL
I count the cost of interest as a form of rent. Not all interest, but excessive interest, where "excessive" means harmful to macroeconomic performance. Interest is the payment for debt, and excessive interest is the payment for excessive debt.
Debt and interest are powerful devices for increasing inequality of wealth and income. I see the reduction of private debt as a way to reduce the main source of revenue going to the financial sector, and at the same time to reduce a growing cost to labor and to capital in the nonfinancial sector.
Art
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