American Economics Thread

plawolf

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Speaking of billionaires and the poor, this should not be a surprise about any economy:
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That makes perfect sense and is something I have been saying for years, glad someone finally managed to model it, since economists generally would not accept the world is round unless you can present them with a model to 'prove' it. :rolleyes:

It should be noted that that is only just the start and the tip of the iceberg, since that only measures basic free flow models of transaction.

It should be noted that especially in the west, wealth and power goes hand in hand. As people accumulate wealth, after a certain point, they also start to accumulate political influence and power in the form of campaign contributions that gives them access if not influence of key politicians, the membership and backing of powerful lobby groups and maybe even the ability to influence or outright manipulate the media itself.

Western politics is increasingly a rich man's game, where millionaires (most of whom inherited rather than earned their wealth) become leaders, who heap all the blame on 'lazy' poor people, who's lives they have zero real life experience with, while at the same time giving themselves and their rich buddies massive tax breaks, lucrative government contracts and/or sell off government assets to their rich buddies at outrageously low prices.

The very laws of most western countries are very skewed against the poor in favour of the rich. Never mind the clearly two-tier system of those who can afford top notch private lawyers and those who have to rely on public legal aid (which is also ruthlessly cut), the very laws themselves are two-tiered.

Take debt and bankruptcy as an example. As a normal individual, being declared bankrupt will follow up for the rest of your life and close all sorts of doors to you.

But anyone wealthy enough to set up a company can effectively ringfence any losses, and pretty much declare corporate bankruptcy as many times as they want and have no lasting repercussions beyond loosing whatever capital they initially injected (which they could easily have clawed back with some clever accounting and tax trickery - again, an option effectively exclusively available to the rich, who can employ top accountants to ensure they pay almost no tax while the average person gets thrown in jail for such antics).

I think this is the primary problem with western, especially American economic theory and policy.

The free market model only works when everyone is equal and fighting as hard as they can to maximise their own benefits.

That model just falls flat on its face when corporations and/or individuals acquire such wealth and influence as to be able to tilt the playing field massively in their favour.

In my view, one of the primary jobs of governments should be to watch out for such game-breaking abuses and manipulate and put a stop to it as soon as it looks like any person or entity is trying to do anything like that.

That's why anti-monopoly and anti-trust laws were written for.

The problem is that those laws only apply to companies, and are increasingly dated and irrelevant as companies evolve to acquire the power and influence of monopolies and act as monopolies without making any of the well documented moves that would trigger an anti-trust investigation.

When you start having individuals who are worth more than most countries' GDPs, you really need laws to regulate how those people behave in the market, since the normal market rules at best just doesn't really apply to people with so much wealth and power, or at worst, can be easily manipulated and co-opted to do their bidding.

Just as there is a clear and fundamental wall between religion and government, I think there should also be a similar wall between wealth and political power.

Wealth, if earned, can be an approximate indication of ability (or dumb luck), but if inherited, it is only a measuring of blind chance. Any system where you can acquire great power from inherited wealth even if you are woefully unqualified is a system asking for trouble.

The Americans should change that system quickly, on their own terms, rather than have that changed forced upon them by calamity.
 

tphuang

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in every country, people that have wealth also have power. And when they have power, they also have wealth. That's just how it works. There is a reason why politicians are the most hated people around.

how has alternative to american economic model worked?

Europe is a disaster that's veering into negative interest rates, a lot of social problems, weakened currency and heavy debt. Britain has exited EU, because this entire system has not just failed a lot of countries, especially the ones in Southern Europe.

A lot of Asian and Arab countries like UAE and Singapore operate like a corporation where the top level government are the CEOs with citizens as employees operating to maintain max profitability for the enterprise while also hiring migrant labors to do construction, house work and other stuff that citizens don't want to do.

And then there are the countries like Brazil and South Africa with high racial diversity experiencing high level of wealth gap between racial groups.

And there are developing countries like China and India with high level of pollution, corruption and wealth gap between the haves and have nots.

America is a country with vast racial diversity, large geography with many region and social conditions. It's always going to have more wealth gap than small homogenous countries like Finland or Denmark. It's more comparable to the whole EU rather than just any single country in EU.

There are problems, but also allows upward mobility that few countries could dream off.
 
Not the right direction for upward mobility but still time to change course:
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Housing|Thu Mar 24, 2016 5:36am EDT
Related:
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Homeownership increasingly difficult for average Americans: report
NEW YORK

Home prices are rising faster than wages in most of the United States, making homeownership increasingly difficult for average Americans in some of the most populous areas of the country, according to a report released on Thursday.

The report found that home price growth exceeded wage growth in nearly two thirds of the nation's housing markets so far this year, with urban centers like San Francisco and New York City among the least affordable.

Home prices in 9 percent of the U.S. housing market are now less affordable than their historic norms, the report by RealtyTrac found. Home buyers need to spend more of their incomes on housing, leaving less money for other purchases.

"While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets," said Daren Blomquist, senior vice president at RealtyTrac, which monitors housing market trends.

RealtyTrac parsed homes sales and income data in 456 U.S. counties with a combined population of 221 million.

The report comes after data showing house flipping, buying and selling a house to make a quick profit in a hot housing market, had risen to record levels in some markets, generating concerns of a price bubble.

While the latest report could fuel those concerns, prices are still far more affordable than during the peak of the housing bubble in 2006. In the first quarter of this year the average wage earner needed to spend a third of their income on monthly mortgage payments compared to more than half in 2006.

In addition, RealtyTrac's affordability measure, which compares house prices to wages, was above historic norms in 99 percent of housing markets in 2006. After the housing bubble burst that fell to a low of 2 percent in 2012 before rising to its current 9 percent.

Still, prices in highly sought after housing markets leave average wage earners far behind, RealtyTrac said.

For example, to buy a median priced home in various areas of New York City, Brooklyn and Manhattan especially, or in the San Francisco metro area, a buyer needs to spend between 120 percent and 95 percent of the average wage on mortgage payments.

Among populous areas where the growth in house prices outstripped wage growth were Los Angles, Phoenix, and San Diego.

(Reporting by Edward Krudy; Editing by Daniel Bases and Tom Brown)
 

Equation

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Not the right direction for upward mobility but still time to change course:
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I am not surprise after that 2008 Fannie Mae and Freddie Mack home loan disaster, more stringent requirements are needed to weed out the low credit and income buyers from purchasing homes beyond their means. Is it the creditors fault or the borrowers? I say both, more so to the lenders for providing such easy access to large amounts of credit, that's deregulation for ya.
 

Blackstone

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Not the right direction for upward mobility but still time to change course:
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It depends on where in the US you live. Housing prices here in the San Francisco Bay Area are ridiculous high and reflects high demand. However, housing in other California locations are still affordable by the average 2-income family. It comes down to the old adage location, location, location.
 

Equation

Lieutenant General
It depends on where in the US you live. Housing prices here in the San Francisco Bay Area are ridiculous high and reflects high demand. However, housing in other California locations are still affordable by the average 2-income family. It comes down to the old adage location, location, location.

Well, one can always move to the East Bay in Oakland, still got great views of the Bay Area if you're willing to rough it a bit.;)
 

SamuraiBlue

Captain
Not the right direction for upward mobility but still time to change course:
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As the article reports it basically a price bubble.

The report comes after data showing house flipping, buying and selling a house to make a quick profit in a hot housing market, had risen to record levels in some markets, generating concerns of a price bubble.

Probably the money to drive commodities are moving to real estate generating this bubble.
 

tphuang

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Article is very misleading. New York and San francisco are expensive for obvious reasons. Other major cities also have areas that are very highly priced. But there are still large part of america where housing is very affordable.

home ownership is getting more difficult for a variety of reasons. It's harder for college graduate to get the right jobs with a college degree because everyone has one now. At the same time, it's hard to purchase home when a lot of people accumulate huge debts. If you collect 6 figure debt from going to a teaching school that's accumulating 6% interest rate and don't know any better to get it refinanced, then how do you expect to pay down the debt let alone look for housing. And believe, there are plenty of those people around with huge debt and not the job prospect to pay for them. So people are living with their parents more than ever. And then there are those who make 200k a year and spend it out and collect more debts. You are not going to have a very vibrant housing market when new buyers have huge debts.
 

Equation

Lieutenant General
As the article reports it basically a price bubble.



Probably the money to drive commodities are moving to real estate generating this bubble.

Perhaps, but the money still has to come from somebody other than average middle class people. So as a result only the rich and the bankers can afford to keep spending and investing on housing because they have the money. Getting credit and housing loans are today more difficult for the average working Americans plus with the Fed's are raising interests rates making it slightly more expensive to buy a home.
 

AssassinsMace

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Rachel Marsden: Russia and America should unite against Saudi-China alliance

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PARIS -- If the Central Intelligence Agency's role is to discreetly promote the economic and political interests of the United States, then there's one country that ought to be awfully disappointing to the agency right now: Saudi Arabia. In fact, if there's an issue on which America and Russia could potentially agree, it would be the damage Saudi Arabia has recently wrought upon the national and economic security of both nations.

Take Syria, for example. The CIA operation to train Syrian rebels goes by the code name "Timber Sycamore," according to the New York Times. As it turns out, if a Timber Sycamore falls covertly on the president of Syria and no one is supposed to see it, the resulting jihadists still make a sound.


It was supposed to be easy: Let the Saudis arm and fund some independent contractors to take down Syrian President
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. The CIA covers the training. Assad is driven out. A leader who's friendlier to U.S., Saudi and Qatari interests moves in. Russia loses its footing in the region.

Except it didn't work out that way. Instead, Russia had to swoop in and clean up the mess. This gives Russia more influence in the region and grants it significant moral authority in helping to determine future Syrian leadership at the diplomatic bargaining table.

"We believe that the Russian interference in Syria is very dangerous because it exacerbates the conflict," said Saudi Foreign Minister Adel al-Jubeir

Actually, Saudi funding exacerbated the conflict. One could argue that without it, the
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would have sputtered out at the incubation phase.

You know what else exacerbates the conflict? The fact that Saudi Arabian leadership hasn't been nearly as generous as, say, German Chancellor
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in absorbing massive numbers of refugees from the conflict.

Meanwhile, Russia has long been angered by Saudi funding of Chechen terrorists in Russia's North Caucasus. A few months before the 2014 announcement of Chechen terrorist leader Doku Umarov's death in late 2013, a Russian intelligence source confirmed that Umarov had been captured by Russian special forces and was writing out a confession in which he had implicated "certain Persian Gulf nations" in the funding of his terrorist activities. (And of course, let's just ignore the fact that 15 of the 19 terrorists who attacked the U.S. on September 11, 2001, were Saudis.)

The continued butting of heads between Russia and the U.S. over Saudi Arabia stems from the fact that at the height of the Cold War, during the Ronald Reagan administration, the U.S. viewed the Saudis as a means of containing the Soviet threat. Reagan convinced the Saudis to flood the oil market, collapsing the value of Russia's oil exports. At the time, the Soviet Union had no rainy-day sovereign funds from which to draw in case of a crash in oil prices.

The Saudis are now flooding the oil market again. But this time, both Russia and America are suffering as a result, with Russian oil exports and the U.S. shale oil industry taking a hit.

And who's playing the role of Reagan now, convincing the Saudis to boost oil production? China.

Saudi Arabia is enjoying a series of new Chinese investment deals -- including a $2.5 billion deal to host a nuclear facility -- and has moved past Russia to become China's largest oil supplier. Meanwhile, the resulting crash in oil prices is taking a toll on the U.S. and Russia. There have been significant job losses in America's oil and gas sector, and Russia has had to smash the glass on its reserve funds in order to diversify its economy.

This sort of scenario was envisioned in a now-declassified CIA report from January 1999 that emphasized China's interest in Middle Eastern oil and the resulting development of ties that "could create bilateral tensions" and "increasingly challenge U.S. policy in regions in turmoil, such as the Middle East."

The Saudi-China alliance has the potential to undercut Russian and American interests. Saudi Arabia effectively leads OPEC, and its lucrative business dealings with China eliminate the incentive to increase oil prices.

Since China doesn't like to be seen overtly interfering in the domestic affairs of other nations, it's unlikely that the Chinese will be using their newfound leverage to rein in the Saudi terrorist-enabling shenanigans that we've seen with the rise of the Islamic State. But what if China, like the U.S., eventually decides to use Saudi Arabia as a Middle Eastern proxy to serve Chinese interests in the region?

Are the U.S. and Russia really going to sit back and let the Saudi regime's alliance with China fuel troublesome economic and security crises? If there's a single issue on which the U.S. and Russia should urgently cooperate, it's this one.

That's what happens when you brag energy independence. The US buy less oil from others and thus the price of oil drops. When you don't buy oil from Saudi Arabia or not look out for their geopolitical interests somehow there's still this expectation that US influence must still remain and for free. By nature you lose influence not gain it. Let's not forget also the Iran deal courtesy of the US that puts more oil on the market and somehow there's a conspiracy by Saudi Arabia and China from the future. China is just a customer of oil. Now you know the US's stake is far more than China. Hence the absurdity that China must fight ISIS in the Middle East because it buys oil. China is not seeking to control the economics and geopolitics of oil. I especially love how despite all sectors of America hating on Russia, there's still this belief the US and Russia would make natural partners against the rest of the world. Russia's economic problems are design by the US. And I'll bet they'll expect Russia to side with the US while still keeping sanctions because of Ukraine. Nothing in this article claims is a crime that's actionable. The irony is the US used it's economic influences in the world economy to punish Russia over Ukraine i.e. the billion dollar fining of BNP Paribas over a domestic not international law just to get France to kill the Mistral deal. That's no different from what the Saudis are doing when it comes to their sovereign right to increase oil production. Energy independence was suppose to keep the US safe from the problems of the Middle East. So why do they care about this?‎
 
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